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TMI Blog2019 (9) TMI 1566X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to the assignment of the debt by the lender. The rest of the allegations that Financial Creditor filed this petition with mala fide intention, that Financial Creditor suppressed material facts are all found not worthy for consideration. In an application of this nature, this Adjudicating Authority is bound firstly to consider as to whether there is existence of default from the records and information utility or based on other evidence furnished by the Financial Creditor. If the Financial Creditor succeeds in proving default of which the claim put forward by the Financial Creditor and satisfy Section 7(5)(a) of the I B Code, this Adjudicating Authority is bound to admit the application. Application admitted - moratorium declared. - TIBA/9/KOB/19 and CP No. 1312 of 2018 - - - Dated:- 20-9-2019 - Ashok Kumar Borahand Veera Brahma Rao Arekapudi, JJ. For Appellant: Dua Associates and Vijay V. Paul, Adv. For Respondents: Ramasubramaniam, Advocate ORDER 1. The Asset Reconstruction Company (India) Limited filed this Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 [ IB Code for short] read with Rule 4 of the Insolvency and Bankr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Borrower company in respect of the term loan facility granted by the Bank. Two other guarantors, i.e., Directors of Principal borrower company, have also entered into guarantee agreement. They are jointly and severally liable to repay the dues recoverable by the Bank. 5. The Corporate Debtor executed Hypothecation Agreement dated 10.10.2009, letter of lien dated 10.102009, Deed of guarantee dated 10.10.2009 etc.. in favour of the Bank in consideration of the Term Loan facility. The principal borrower had defaulted in making the repayment of the above Term Loan-II; therefore, the account of the principal borrower's company was restructured under CDR mechanism and was approved on 25.09.2012. As per the default committed by the principal borrower in conducting the account, the account was classified as Non-Performing Assets ('NPA') as per the guidelines of Reserve United Bank of India and therefore, the Bank issued Recall Notice upon the Guarantors, i.e., the Corporate Debtor and call upon them to pay outstanding amount, due and payable in the account of the Principal borrower company. The Corporate Debtor/guarantors also did not pay the amount due to the Bank. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Bank on 25.09.2012 in accordance with the directives and guidelines of the RBI. 10. The Bank, in view of the approval of CDR mechanism, restructured the account of principal borrower to the tune of total limit of ₹ 11.31 Crores with its sub limit: (i) Term Loan of ₹ 10.64 Crore and (ii) FITL of ₹ 0.67 Crore and issued the sanction letter dated 29.03.2013 of restructure of loan as per the terms and conditions. The above loans were guaranteed/obtained by the Corporate Debtor from the Bank. The Bank has then assigned the aforesaid debts (disbursed to the principal borrower) to the Financial Creditor in regards of the Assignment Agreement dated 13.08.2018 was executed and registered by the Bank in favour of the Financial Creditor. 11. Therefore, a demand notice dated 06.02.2015 under Section 13(2) of the Securitization and Reconstruction of financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI') was issued to the principal borrower and the principle borrower have failed to comply with the same. 12. The counsel also submitted through his petition that they have issued notice on 19.12.2018 to the registered office o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cilities from either ARCIL or its predecessor entity, i.e., the Bank. It was further stated that the ARCIL never raised any demand notices upon Palm Lagoon which proves the point that Palm Lagoon is not the Corporate Debtor for ARCIL. 17. The learned counsel have also defended against the evidence submitted by the Financial Creditor as Annexures. The counsel claims that ARCIL is not in a possession of original documents and certification of documents from non-primary sources are not valid, the petition may be rejected. 18. The learned counsel further claimed that by the notice dated 06.02.2015, UBI have classified principal borrower's debt as NPA, however, ARCIL has failed to show that this letter was duly served upon Palm Lagoon. Since assignment agreement is dated 13.08.2018, ARCIL could not have declared the account NPA before 13.02.2019, which was illegal and in violation of RBI directives. The counsel further stated that the Bank should have obtained permission of local authority before accepting agricultural land as mortgage from Palm Lagoon, the same is obligatory under Revenue Laws. Therefore, the mortgaged assets to the Bank is not valid. 19. The counsel submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rantee is invoked wherein a guarantor ('Corporate Debtor') becomes a 'Corporate Debtor' in terms of the Code. The guarantee was invoked on notices dated 06.02.2015 and 25.06.2018. Therefore, as per Section 5(7) of the Code, the Financial Creditor, as an assignee of the Bank, would become a Financial Creditor if it owed a financial debt. 22. In reply of the next averment raised by the Corporate Debtor, Financial Creditor stated that the Bank validly assigned the debt of the principal borrower on 27.09.2017 and an agreement was thereafter executed and registered on 13.08.2018. The communication dated 20.01.2018 has also been sent in pursuant to the aforesaid assignment and there is no illegality as alleged by the Corporate Debtor. They also stated that the original loan and security documents are in the safe custody of the Financial Creditor. 23. In defence to the Corporate Debtor's another contention, the counsel further submitted that the demand notice dated 06.02.2015 issued under the provisions of SARFAESI Act and the notice invoking guarantee dated 25.06.2018 was duly served upon the Corporate Debtor and once the account is classified as an NPA, the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is due i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise. 27. In the case in hand the principal borrower admitted its defaults vide its letters dated 16.08.2012, 24.03.2012 and 02.09.2014. Truly its admission is not to the Financial Creditor but to the Assignor of Financial Creditor, i.e., United Bank of India. Being admitted a debt is due to the Bank from whom the Corporate Debtor availed loan the limited question in a case of this nature is to ascertain as to whether the Financial Creditor is a Financial Creditor as alleged and whether there is existence of default from the evidence furnished by the Financial Creditor as provided under section 7(4) of code. 28. The Ld. Counsel for the Corporate Debtor mainly challenged that there is no privity of contract by and between Financial Creditor and the Corporate Debtor. According to him the Annexure 5 is not a legally executed assignment deed and hence Financial Creditor cannot file an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a Bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 31. So, a Financial Creditor falls under section 5(7) can file an application for initiating corporate insolvency resolution process against a Corporate Debtor before this Adjudicating Authority when the default has occurred. No doubt the debt claimed is a financial debt as defined under section 5(8) of I B Code. Herein this case Annexure 5 is found a legally executed assignment agreement. It is a registered document, stipulating all the terms and conditions. Annexure 5 proves that Financial Creditor is an assignee comes under the purview of section 5(7) of I B code. Pursuant to Annexure 5, the assignee herein has got right to enforce such security interest, pledges, and/or guarantees and appropriate the amount realized their form towards repayment of loan and to exercise all the rights of Assignor Bank in relation to such security interest, pledges and guarantees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we have no hesitation in holding that Financial Creditor is a 'Financial Creditor' comes under the definition of section 5(7) of Code. 33. The rest of the allegations that Financial Creditor filed this petition with mala fide intention, that Financial Creditor suppressed material facts are all found not worthy for consideration. In an application of this nature, this Adjudicating Authority is bound firstly to consider as to whether there is existence of default from the records and information utility or based on other evidence furnished by the Financial Creditor. If the Financial Creditor succeeds in proving default of which the claim put forward by the Financial Creditor and satisfy Section 7(5)(a) of the I B Code, this Adjudicating Authority is bound to admit the application. The procedure adopted for the disposal of this application is summery in nature. This petition has been filed by the Financial Creditor on 12/10/2018. Financial Creditor has succeeded in proving existence of default. Annexure 12 dated 16.08.2012 and Annexure 23 dated 24.03.2012 strengthen the Financial Creditor's contention that Corporate Debtor admitted its default. The Corporate Debtor in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Central Government in consultation with any financial sector regulator. (4) The order of moratorium shall affect the date of such order till the completion of the corporate insolvency resolution process. 37. Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of Corporate Debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order. 38. Mr. Shri R. VELU, having Registration No: IBBI/IPA-001/IP-P00127/2017-18/10269 and address is New No. 28, Old No. 22, Menod Street, Purasawalkam, Chennai- 600 007 having email id: [email protected] is hereby appointed as Interim Resolution Professional. . Necessary public announcement as per section 15 of the I B Code, 2016 may be made. Let the copy of the order be communicated to the Financial Creditor/Operational Creditor as well as Corporate Debtor, and I.R.P. by way of E-mail and speed post forthwith. 40. Communicate a copy of this order to the Financial Creditor, Corporate Debtor and to the Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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