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TMI Blog2021 (8) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... e") read with Rule 4 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Submissions made by the Petitioners: 2. The Petition reveals that the State Bank of India ("Original Lender") had extended various credit facilities to the Corporate Debtor at the requests made by the Corporate Debtor vide its Sanction Letters, the details of which are extracted below: 3. The Counsel for the Petitioner submits that the above mentioned credit facilities were secured by the Personal and Corporate Guarantees of various individuals and one Corporate namely M/S. Perfect Engineering Products Ltd. vide the following Deeds of Guarantee: * Guarantee Agreement dated 11.12.2008 * Guarantee Agreement dated 15.12.2008 * Guarantee Agreement dated 30.05.2009 * Guarantee Agreement dated 23.03.2010 * Guarantee Agreement dated 31.03.2011 4. The Counsel for the Petitioner submits that the Corporate Debtor entered into the following Agreements for Hypothecation of Goods and Assets with the Original Lender in relation to the above mentioned credit facilities extended: * Agreement of Hypothecation of Goods and Assets dated 11.12.2008 * Supplemental Agreement of Hypotheca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the Original Application and issued the Recovery Certificate also. 9. The Counsel for the Petitioner further submits that it addressed a Restructuring Letter dated 30.06.2017 for restructuring the loans of the group of companies (including the Corporate Debtor). The Restructuring Letter confirmed the terms and conditions provided that the combined dues of all three companies shall be payable as follows; a. Rs. 77.50 Crores repayable from operational cash flows of the company as per the schedule provided in Annexure I. b. The possession of land (admeasuring 9,048 sq. mtrs.) and building at Wagle Industrial Estate; Thane (Thane Property) has been taken by EARC and the Promoter shall assist in sale of the property. The estimated value of the Thane property is Rs. 60 crores. c. The possession of Land Parcel admeasuring 14,100 sq. mtrs. at Chikalse, Pune has been taken by EARC and EARC may sell the property under SARFAESI and adjust the proceeds against the dues of PEPL. The promoter shall assist in scouting buyers for the property. The estimated value of the property is Rs. 2.48 crores. d. Equity shares for 13.5% stake in equity in Perfect Engineering Products Limited (48,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable by the Corporate Debtor to the Petitioner: Reply by the Corporate Debtor: 14. The Counsel for the Corporate Debtor contended that: a. The present Petition is not maintainable per se as the claim of the Petitioner is barred by limitation applicable to proceedings under the Code. The Petitioner herein has attempted to trigger a fresh round of limitation on the basis of a restructuring package which is not permissible. There is no fresh default under the said restructuring package as alleged by the Petitioner and hence, there is no cause or occasion for filing the present Petition on the basis of the said package. b. The Corporate Debtor along with another group concern namely Perfect Engineering Private Limited (PEPL) were granted credit facilities by State Bank of India (Original Lender) against several common securities including the security of Thane Land. SARFAESI Notice u/s. 13(2) dated 13 February 2013 issued by State Bank of India was addressed to PEPL and another guarantor company namely Perfect Infrastructure Private Limited (PIPL). The said Thane Property was a common collateral security for the facilities of PEPL. c. All the statement of accounts also date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and continued to act pursuant to the SARFAESI notices issued by the State Bank of India well before assignment of the debt to the Petitioner herein. It is therefore submitted that all along the account of the Corporate Debtor continued to be in 'default status'. f. The Petitioner had also filed an Original Application bearing No. 01/2014 before the Debt Recovery Tribunal (DRT). The Petitioner, even after the approval of the restructuring package, continued to prosecute the said recovery application without placing on record the factum of the restructuring package. Not only that, on or about 22nd November, 2016, the Petitioner went on to secure a recovery certificate from DRT, Pune for entire amount of claim without any reference to the said restructuring package. It is thus evident that the said recovery certificate was obtained pursuant to the original liability in default and the restructuring package made no impact on the default status of the account. In any event, it is a settled law that once recovery proceedings are filed in DRT on the basis of a default, it is not permissible to recompute limitation for the purpose of the proceedings before this Tribunal from a subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o other condition was changed. The said revised letter of approval also mentioned about the compliances of the earlier sanction till then effectuated by the Corporate Debtor and its group concern named above. Yet again, the revised schedule of yearly repayments was illustrative in nature having been based upon the revised estimates of EBIDTA and operating cash flow. Yet again, there was no stipulation of induction of any funds by the promoters in case of shortfall of the operating cash flow. i. There has been no allegation of the Application against the Corporate Debtor, its associates or its management that any part of the EBIDTA or the operating cash flow has been diverted for any purpose other than what was stipulated in the above OTS package and the revised OTS package. There is no insinuation in any contemporaneous correspondence or in the present application, and rightly so, that there was any obligation on the promoters of the Corporate Debtor to induct any funds. There is no allegation that there was any delay or demur on the part of the Corporate Debtor, its associates or its management from complying with the other terms and conditions of the OTS package. On the contrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration only and interest had to be paid in case of delay. m. The present Petition has been filed by the Petitioner on the basis that there was a default qua the restructuring package and the Petitioner has sought to compute limitation on the basis thereof. The Corporate Debtor and its associates employed by it workers whose wages are paid up to date. The Corporate Debtor is the registered MSME and produces OEMs which included large corporates like Cummins India Ltd., Bajaj Auto Ltd, Tata Motors Ltd., Tata Companies Ltd. and others. n. The Corporate Debtor being the MSME protected by the rigours of the Code. Section 240 A of the Code incorporates the special provision of the code. The government has gone to the extent of saying that MSME may be exempted from the CIRP by prohibiting filing of an application against the MSME under Section 7 of the Code, MSME being bedrock of the Indian economy cannot be put to liquidation. o. The Corporate Debtor further contended that while the restructuring package was approved on 07.11.2014, the Petitioner continued with the recovery application filed by the predecessor SBI before Debt Recovery Tribunal (DRT). The Petitioner obtained the Reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Code. Findings: 15. The question which arises for consideration are as follows; a. Whether the Petition is barred by Limitation? b. Whether the Petitioner has waived his statutory right by restructuring the loan on 07.11.2014 and 30.06.2017? c. Whether there is any default on the part of the Corporate Debtor in view of the restructuring of the loan? 16. The present Petition is filed for initiation of CIRP against the Corporate Debtor for nonpayment of outstanding dues of Rs. 226,77,83,051/-. The Petitioner has been assigned the debt from the Original Lender, i.e., SBI vide Deed of Assignment dated 19.03.2014. The Original Lender, i.e., SBI had extended the loan facility to the Corporate Debtor has vide sanction letters more particularly mentioned below; 17. The said credit facility was secured by execution of personal and corporate guarantees, agreement of hypothecation of goods, registered mortgaged deeds etc. The Petitioner declared the Date of Default as on 31.09.2009 and NPA as on 30.06.2009. The Corporate Debtor acknowledged the outstanding liabilities as balance confirmation letters in favor of the SBI on 31.03.2010, 31.03.2011 and 31.03.2012. The Original Lender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entions that there was no condition required that the Corporate Debtor to induce additional funds for funding payment of installment of the Petitioner. 22. The Corporate Debtor contended that the Petitioner has sanctioned the 2nd restructuring package as on 30.06.2017 which captured the schedule of repayment based on revised estimation of projected operating cash flow. There were no indication about payment of monies by the promoter in case of shortfall of operating cash flow. The Petitioner revoked the restructuring package on 01.06.2018 and the Corporate Debtor immediately objected to the revocation of restructuring package and brought to the notice of the Petitioner that several critical steps being followed post the restructuring and that the company was in no element of willful default. No diversion of funds and the infusion of funds by the Investor commenced in the year 2015-16. 23. The Corporate Debtor further claimed that there was no fresh default on the part of the Corporate Debtor pursuant to the restructuring of the said loan as on 30.06.2017. The Letter dated 14.06.2018 further narrated the compliances made by the Corporate Debtor and there is no default as follows; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner granted a restructuring on 07.11.2014 and 30.11.2017 the restructuring package is as follows. The restructuring package as on 30.06.2017 is as follows; a) The restructuring package categorically contained a clause wherein the outstanding dues was repayable from operational cash flows. b) It also contains conditions wherein the possession of land admeasuring 900 sq.mts. at Wagle Industrial Estate thane has been taken over by the Petitioner. The estimate value of Thane property is Rs. 60 crores. The possession of land parcel at Chikalase, Pune was taken over by the Petitioner and the Petitioner may sell the property at SARFAESI. There will be a transfer of equity shares of 13.5 stakes in the company of Corporate Debtor. c) The restructured debt would not carry any interest but would carry an interest when there is a default. 27. The Petitioner however unilaterally invoked the restructuring package dated 30.06.2017. The Corporate Debtor strongly rebutted by Letter dated 14.06.2018, wherein the Petitioner was categorically informed that the restructuring package was acted upon and several steps were taken pursuant to the restructuring package was carried out. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng immediately objected/rebutted by the Corporate Debtor. In strict interpretation of law of Contracts, it seems that there was no consensus ad idem and the unilateral revocation was strongly objected by the Corporate Debtor who pointed out that there is no default and payments will have to be made only from operational cash flows. It is relevant to refer to Section 3(12) of the Code, which defines default as follows: "Default means no-payment of debt when whole or any part or instalment of amount of debt has become due and payable and is not paid by the debtor or the corporate Debtor as the case may be" Therefore, this Bench finds it difficult to construe that default has occurred in the present case. 30. This Bench is of the considered view that the cause of action arose as on 31.03.2009/ 28.06.2012. However, the Petitioner was filed on 08.08.2020 which is beyond three years as contemplated in judgment of Hon'ble Supreme Court in B.K. Educational services Private Limited Vs Parag Gupta and Associates wherein it is categorically held that the Article 137 of the Limitation Act, 1963 mentioned that the right to sue accrues by the Default occurs, the default has occurred over thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the restructuring package, wherein a mechanism is prescribed for payment of outstanding dues, cannot now enforce its statutory rights when there is no default in payment by the Corporate Debtor. 34. The Corporate Debtor and its group are OEM suppliers having interdependent operations. The said OEM's include Companies like Cummins India Limited, Bajaj Auto Limited, Tata Motors Limited, Kirloskar Oil Engines Limited, Indian Railways etc. and that the Corporate debtor and its associates has 600 employees on its rolls and accreditations which may fall by initiation of CIRP proceedings. The intention of IBC is maximization of assets of Corporate Debtor and initiating CIRP against the Corporate Debtor. The objective of the Code is to aid organizations which are insolvent and are unable to pay its debts and are consistently defaulting. However, in the instant case, there is no default and payment of installments is linked to operating cash flows. 35. In view of all the above facts, circumstances of the case and observations made, this bench is of the opinion that the Petitioner has not been able to demonstrate default of non-payment of monies under the restructuring package and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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