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TMI Blog2021 (12) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... ered Head Office at Plot No. C-5, G Block, Bandra Kurla Complex, Bandra east, Mumbai-400051, Maharashtra and carrying on its Banking business through diverse branches and in particular a branch named, Guwahati SME Branch, Killa Building 1st Floor, Christian Basti, G.S. Road, Guwahati, P.O- Dispur and District- Kamrup (M), PIN- 781005, Assam and is represented by the Assistant General Manager, Zonal Office, bank of India, Saikia Commercial Complex, Sreenagar, Christian Basti, Guwahati-781005. TAN of the Guwahati SME Branch is SHLB02711C. 3. The Corporate Debtor/Guarantor namely AKJ Fincap Limited was incorporated on 08.08.1995 under the provisions of the Companies Act, 1956 vide CIN: U67190DL1995PLC071546 having its Registered Office at C-8, Greater Kailash-I, South Delhi Area, New Delhi, Pin- 110048. 4. It is submitted by the Petitioner that the Total defaulted amount in the Term Loan account including uncharged interest calculated up to 27.12.2019 stands at Rs. 11,34,30,136.00 (Rupees Eleven Crores Thirty-Four Lakhs Thirty Thousand One Hundred Thirty-Six Only) as on 27.12.2019. 5. It is also submitted that the loan account became Non-Performing Asset (NPA) on 30.04.2018 and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Attendance Register for oral Assent on 25.03.2013 and Memorandum of Deposit dated 25.03.2013, as security for repayment of the loan facilities. However, the said property had since been sold by the Financial Creditor under the provisions of the SARFAESI Act, 2002 on 12.02.2019 for an amount of Rs. 1,91,00,000.00 (Rupees One Crores Ninety-One Lakhs Only) and the said amount stood adjusted in the Term Loan account of the Agnipa Energo Pvt. Ltd. Agnipa Energo Pvt. Ltd (Borrower) had also registered the charge over the secured properties (hypothecated and mortgaged properties) with the Registrar of Companies and relevant document have been filed therein. 11. Further, the Agnipa Energo Pvt. Ltd (Borrower), Corporate Guarantor and the personal guarantors had also signed and executed Acknowledgment of Debt dated 24.03.2016 for the Term Loan in favor of the Financial Creditor, thereby confirming that all the security documents executed by them in favor of the Financial Creditor besides the Balance Sheets for the years 2017 and 2018 reflecting the dues and the guarantee respectively and also covered by creation of Equitable Mortgages. 12. It is also submitted that since the Agnipa Energ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2011. (Annexures I-V and I-V.1) c. Equitable Mortgage created by Corporate Guarantor (AKJ FINCAP LTD.) over the entire 2nd Floor with one servant room and WC on the terrace and roof rights, part of property bearing No. E-320, Greater Kailash, Part-I, New Delhi-110048 for a measuring area 208 sq. yards, along with 1/3rd undivided proportionate share in the land underneath and use of common passage, common staircase etc. by deposit of Registered Title Deed (Being Deed No. 10519, Book No. 1, Volume No. 948 of 1996 dated 29.10.1996) (Annexure I-X). However, the said property had since been sold by the Financial Creditor under the provisions of the SARFAESI Act, 2002 on 12.02.2019 for an amount of Rs. 1,91,00,000.00 (Rupees One Crore Ninety-One Lakhs Only) and the said amount stood adjusted in the Term loan account of the M/s Agnipa Energo Pvt. Ltd. d. The Corporate Guarantor and the Personal Guarantors have executed security documents including Deed of Guarantee dated 25.03.2013 (Annexure I-U) and the M/s Agnipa Energo Pvt. Ltd and the Corporate Guarantor has also created equitable mortgage by deposit of title deeds in favor of the Financial Creditor. Extracts of the Attendance R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. GMCB/GD/12-13 dated 23.03.2013 for revision of the rate of interest of the credit facilities issued by the Financial Creditor to the Agnipa Energo Pvt. Ltd (Borrower) (Annexure I-K). v. Record of Default as Available with any Credit Information Company: Credit Information reports as generated from Trans Union CIBIL (Annexures I-AA and I-AA.a). vi. Entries in a Bankers Book in accordance with the Bankers Book Evidence Act, 1891 (18 of 1891) (Annexure I-D). vii. List of documents attached to the application in order to prove the Existence of Financial Debt, the amount and date of default: a. Demand Promissory Notes both dated 25.03.2013 for Rs. 10.00 Crores and Rs. 65.00 Lacs executed by the Agnipa Energo Pvt. Ltd. (Borrower) in favor of the Financial Creditor. (Annexures I-N and I-O). b. Hypothecation cum Loan Agreement dated 25.03.2013 executed by the Agnipa Energo Pvt. Ltd (Borrower) in favor of the Financial Creditor. (Annexure I-T). c. Loan Bearer Letters both dated 25.03.2013 for Rs. 10.00 Crores and Rs. 65.00 Lacs executed by the Agnipa Energo Pvt. Ltd (Borrower) in favor of the Financial Creditor. (Annexure I-P and I-Q). d. Instalment Letter dated 25.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. It is submitted by the Learned counsel of Respondent that the Section 7 Application came up for hearing for the very first time on 10.02.2020 and Notice was issued to the M/s AKJ Fincap Ltd. returnable on 25.02.2020; on 25.02.2020 the Adjudicating Authority observed that the Notice sent to the Respondent herein, had returned with an endorsement 'insufficient address' and directed issuance of fresh Notice and also directed the Petitioner herein to serve copy of the same upon the Respondent and the matter was posted for Hearing on 18.03.2020. While so, on 15.03.2020, the Adjudicating Authority had directed that apart from matters which require urgent Hearing, it would not take up matters listed from 16.03.2020 to 27.03.2020 on account of the Covid situation; the Respondent became aware of the pendency of the Section 7 Application only when the Counsel came across the same on the website; the Respondent was proceeded ex-parte on 18.03.2020 solely on the basis of the submissions of the Petitioner that the Notice has been served upon them. 17. Thereafter, aggrieved by that Order, I.A. No. 45 of 2020 in CP (IB) No. 04/GB/2020 was filed by M/s. AKJ Fincap Limited, Respondent herein, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Admission has been passed and it was only an Order setting the Appellant herein ex-parte. 11. Having regard to the fact that 18.03.2020 falls during the Covid-19 period and the restrictions imposed by the Government read together with the Notice issued by the Learned Adjudicating Authority on 15.03.2020 that matters posted during the period 16.03.2020 to 27.03.2020 would be adjourned, except for urgent matters, keeping in view Principles of Natural Justice, we are of the considered opinion that an opportunity may be given to the Appellant herein to file his Reply and take part in the proceedings. Further, it is an admitted fact that the Appellant before the Adjudicating Authority is a guarantor of Agnipa Energo Private Limited whose Petition is already pending before the Adjudicating Authority. Therefore, the Order setting the Appellant herein ex parte is set aside. Though we are of the considered view that the Adjudicating Authority had the power to set aside an ex-parte Order provided, it is satisfied that there was sufficient cause with respect to service of Notice, as provided in Rule 49(2) of the NCLT Rules, 2016, it is noted that the Appellant herein is silent about the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lvency Code, there is an enabling Section 239 which enshrines "Power to make Rules" to the Central Government wherein it is specifically inserted Sub section (2)(zk) empowering the Central Government to make Rules in the matter of proceedings prescribed u/s. 227 of the Code to formulate the manner of conducting Insolvency & Liquidation Proceedings. iii. Exercising the powers as enshrined in the Insolvency Code 2016, the Ministry of Corporate Affairs/Central Government has issued "Notification" on 15.11.2019 by formulating the Rules called as "Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019". These Rules shall apply to such "Financial Service Providers" (in short FSP) or "Categories of Financial Service Providers" as notified by Central Government u/s 227 of the Insolvency Code for the purpose of their Insolvency and Liquidation proceedings under these Rules. For the purpose of conducting Insolvency process an "Administrator" is to be appointed as defined U/r 3 means an Individual appointed by the Adjudicating Authority under Rule 5(a)(iii) to exercise the powers and functions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial service provider to engage in the business of providing financial services shall not be suspended or cancelled during the interim-moratorium and the corporate insolvency resolution process. Explanation- For the purposes of this clause, "interim moratorium" shall have the effect of the provisions of sub-sections (1), (2) and (3) of Section 14. (c) Advisory Committee- (i) the appropriate regulator may, where deemed necessary, constitute an Advisory Committee, within 45 days of the insolvency commencement date, to advise the Administrator in the operations of the financial service provider during the corporate insolvency resolution process; (ii) the Advisory Committee shall consist of three or more Members, who shall be persons of ability, integrity and standing, and who have expertise or experience in finance, economics, accountancy, law, public policy or any other profession in the area of financial services or risk management, administration, supervision or resolution of a financial service provider; (iii) the terms and conditions of the Members of the Advisory Committee and the manner of conducting meetings and observance of rules of procedure shall be suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority, however, till such facility is made available, the Applicant may submit the documents in a legible portable format in a data storage device such as Compact Disc or a USB Flash Drive acceptable to the Adjudicating Authority. viii. Most importantly, the respondent would like to draw attention of this Hon'ble Tribunal on a Notification dated 18.11.2019 which was issued in exercise of the powers conferred u/s 227 of the Code in consultation with RBI, reproduced below for ready reference: "MINISTRY OF CORPORATE AFFAIRS NOTIFICATION, New Delhi, the 18th November, 2019 SO. 4139(E)- In exercise of the powers conferred by section 227 of the Insolvency and Bankruptcy Code, 2016 31 OF 2016, the Central Government in consultation with the Reserve Bank of India hereby notifies as under: The insolvency resolution and liquidation proceedings of the following categories of financial service providers shall be undertaken in accordance with the provisions of the Insolvency and Bankruptcy Code 2016 read with the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 (in this not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, Sri Anil Jaina and Sri Gaurav Jaina in favor of the Financial Creditor, covering the loan facilities. iv. Further, Corporate Debtor Agnipa Energo Pvt. Ltd had also created Equitable Mortgage over Leasehold right period (32 years) over a piece or parcel of land measuring 0.815 hectares at Pahumara Irrigation Scheme, Village-Laugaon, District-Baksa, Assam by deposit of Registered Lease Agreement No. 139/11 dated 28.06.2011 and also confirmed the same by signing and executing the Attendance Register for Oral Assent on 25.03.2013 and Memorandum of Deposit dated 25.03.2013, as security for repayment of the loan facilities. v. Similarly, the Corporate Guarantor/Debtor [AKJ Fincap Ltd] had also created Equitable mortgage over the entire 2nd Floor with one servant room and WC on the terrace and roof rights, part of property bearing No. E-320, by deposit of Registered Title Deed (Being Deed No. 10519, Book No. 1, Volume No. 948 of 1996 dated 29.10.1996) and also confirmed the same by signing and executing the Attendance Register for oral Assent on 25.03.2013 and Memorandum of Deposit dated 25.03.2013, as security for repayment of the loan facilities. However, the said property had si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commencement of Commercial Operation (DCCO) of the project and which resulted in modification of terms during internal review of the project for which loan facility was sanctioned. xi. The Agnipa Energo Pvt. Ltd. (Borrower) failed to maintain the Term Loan account (A/C No. 505565410000001) maintained by the Financial Creditor as it failed to pay the installments as per terms and conditions. The Term loan account was classified as NPA on 30.04.2018. Thereafter, having no other alternative, the Financial Creditor had issued a Reminder Letter dated 14.03.2018 to the Agnipa Energo Pvt. Ltd (Borrower), to pay the interest and the loan installments. Thereafter, the Financial Creditor had also initiated action under SARFAESI Act, 2002 by issuing Demand Notices dated 11.05.2018 to the Agnipa Energo Pvt. Ltd (Borrower), Corporate Guarantor AKJ Fincap Limited and the personal guarantors under Section 13 (2) of the said Act but they failed to pay the same. However, on receipt of the said Notice, the Director of the Agnipa Energo Pvt. Ltd (Borrower) submitted a Representation dated 06.07.2018 raising certain objections but admitting the liability and in response to the said Representation, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Guarantor) falls under the category of financial Service Provider as defined under Section 227 of IBC, 2016 read with Section 239 of the Code and as per the MCA Notification dated 15.11.2019, however in terms of the MCA Notification dated 18.11.2019, the service provider has to have assets over Rs. 500.00 Crores and above and in the instant case, the CD (AKJ Fincap), as per last Balance Sheet for the Financial Year from 01.04.2019 to 31.03.2020 (submitted with ROC and downloaded from MCA site), it is found that the total Asset of the CD (AKJ Fincap) stands at Rs. 15,62,60,505.00 as on 31.03.2020. Therefore, it is abundantly clear that the CD (AKJ Fincap Limited) is not at all eligible. (Annexure-VII, VIII and IX). xiv. The statements made the Corporate Guarantor in Paragraphs are not correct and the FC denies the same. There are no fatal defects or infirmities as claimed by the CD. There is no legal requirement to make the borrower party in the instant Section 7 Application filed against the Corporate Guarantor/Corporate Debtor and pendency of CIRP proceedings is not a bar to initiate separate proceeding under the Code against the Corporate Guarantor/Corporate Debtor as Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Providers and Application to Adjudicating Authority) Rules, 2019 (in this notification referred to as the 'Rules') and the applicable Regulations Sl. No. Category of Financial Service Provider (rule 2 of the Rules) Appropriate Regulator [clause (a) of sub-rule (1) of rule 3 of the Rules] Dealing with third-party assets (rule 10 of the Rules) (1) (2) (3) (5) 1 Non-banking finance companies (which include housing finance companies) with assets size of Rs. 500 crores or more, as per last audited balance sheet. Reserve Bank of India To be notified separately 26.5 Thus vide this Notification "Non-Banking Finance Companies" including "Housing Finance Companies" with assets size of 500 Crores or more, the proceedings shall be undertaken in accordance with the provisions of IB Code 2016 to be read along with these Rules by the appropriate Regulator through Administrator and in this case Reserve Bank of India is designated. 26.6 Hence, it is evident from the said Notification that the said Rules shall apply to such Financial Service Providers of categories as may be notified by the Central Government under Section 227 of the IB Code, 2016 from time to time and pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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