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TMI Blog2024 (7) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... payment post-September 2020. Additionally, the Respondent acknowledged that initiating the Corporate Insolvency Resolution Process (CIRP) would be beneficial, supporting the Appellant s case for insolvency proceedings. Changing of default date - Allowable or not? - HELD THAT:- The Appellant, SIDBI, has clearly demonstrated that the Respondent, Sambandh Finserve Private Limited, has ongoing defaults on its loan repayments. Each missed installment constitutes a fresh default, as evidenced by the statement of accounts. This ongoing failure to meet repayment obligations justifies the initiation of insolvency proceedings - it is clear that each failure of the Respondent to pay an instalment in terms of the repayment plan could be treated as a fresh default in payment of the loan amount. Interpretation of Section 10A vis-a-vis Admissibility of Fresh Default - HELD THAT:- In the present case, there is a clear case of debt and default, which has been admitted by the Respondent in its Counter Affidavit before the Adjudicating Authority - in the judgment of the Hon ble Delhi High Court in KOTAK MAHINDRA BANK LTD. VERSUS ANUJ KUMAR TYAGI [ 2015 (12) TMI 1903 - DELHI HIGH COURT] , it was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablished on 02.04.1990 under an Act of the Indian Parliament, serves as the Principal Financial Institution for the Promotion, Financing, and Development of the Micro, Small, and Medium Enterprise (MSME) sector. It is also responsible for coordinating the functions of similar institutions. 3. The Respondent Company- Sambandh Finserve Private Limited- incorporated on 03.07.1996 under the Companies Act 1956, is a private entity registered with the ROC Cuttack. Initially an NBFC, its license was canceled by the Reserve Bank of India, and an Administrator has been appointed to oversee its operations. 4. Despite repeated opportunities the Respondent did not file any reply. Heard Counsel of the Appellant and also perused the documents on record including the reply of the Respondent before the AA. 5. At the request of the Respondent, the Appellant sanctioned two Term Loans of Rs. 20 Crores and Rs. 30 Crores via Letters of Intent dated 21.02.2019 and 23.10.2019, respectively. The Respondent's Board of Directors passed resolutions on 22.02.2019 and 23.10.2019, accepting the terms and conditions of these loans. 6. Subsequent to the Board Resolutions, Loan Agreements were executed on 26.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 10A of the IB Code. This Tribunal gave liberty to the Appellant to file fresh Application in accordance with law, vide order dated 12.01.2023, and passed the following order: "….There being clear categorical statement in Part-IV that date of default is 15.12.2020 which is a period during which Section 10-A had operation we thus are of the view that no error has been committed by the Adjudicating Authority rejecting Application filed under Section 10-A. However, ends of justice will be served in giving liberty to the Appellant to file fresh Application in accordance with law. We make it clear that we are not expressing any opinion in merits of the Application. It is for the Adjudicating Authority to consider the application if so filed and decide in accordance with law. The Appeal is dismissed with the above liberty…." Filing of Fresh Application before the AA: 15. A fresh application under Section 7 of the IBC was filed as CP(IB) No. 27/CB/2023, reflecting the default date of 10.07.2021. The Respondent admitted both the debt and default in their counter affidavit, emphasizing that initiating insolvency proceedings would be beneficial. 16. The Adjudicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion which was dismissed on 22.11.2022 prior to this default date. These discrepancies are not properly explained. 7. The petitioner filed this petition changing the date of default from 15.12.2020 to 10.07.2021. On the petitioner side unable to justify/explain how the date of default is fixed as 10.07.2021. The Apex court in "Ramesh Kymal Vs. Siemens Gamesa Renewable Power Pvt. Ltd., (2021) 3 SCC 224" held that the date of default cannot be changed. Of course, the supra citation is relating to section 9 of IBC 2016. 8. No petition under section 7,9 and 10 IBC 2016 can be filed for the default falls between 25.03.2020 to 24.03.2021 in view of specific bar provided under section 10A of IBC 2016. Proviso to Section 10A runs as follows: Provided that no application shall ever be filed for initiation of corporate insolvency resolution process of a corporate debtor for the said default occurring during the said period. 9. The proviso made it clear that once the date of default falls within the period set out in Section 10A, initiation of CIRP is totally barred forever. In this case in respect of the debt mentioned in the petition, petition already filed by the petitioner ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany Petition. The existence of continuing defaults by the Respondent is clear from the Appellant's statement of account, with each unpaid installment constituting a fresh default. The Respondent categorically admitted its default and did not oppose the initiation of the Corporate Insolvency Resolution Process (CIRP). 18. Appellant claims that the Adjudicating Authority's dismissal of the fresh company petition is unjustified and requests to set aside the Impugned Order dated 08.05.2023 and to initiate the Corporate Insolvency Resolution Process against the Respondent in accordance with the provisions of the IBC. 19. Appellant claims that amendment of pleading in an application under Section 7 of the IBC can be allowed and even the date of default in Part IV of Form 1 can be amended and relies on the following two judgements: Hon'ble Supreme Court in 'Dena Bank Versus C. Shivakumar Reddy & Anr.' (2021) 10 SCC 330; (142) [AUGUST 04, 2021] NCLAT's judgement in 'Abhijeet Infrastructure Ltd. Versus State Bank of India' Company Appeal (AT) (Insolvency) No. 1403 of 2023. [02.11.2023] 20. Appellant has also relied upon the following legal precedents: 20.1 M. Suresh Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 16/09/2021 which was granted to the Corporate Debtor for carrying out NBFC-MFI activities. Furthermore, it is submitted that the Corporate Debtor had stopped all its NBFC-MFI activities since October, 2020 after the incidence of financial irregularities due to internal corporate fraud came to the fore. 5. That it is humbly reiterated that the corporate debtor has in fact defaulted in making payment to the Section-7 Application. Since the present case mostly revolves on documentary proof which shows that the Corporate Debtor has in fact defaulted in making payment to the Financial Creditor for the loan taken from the Financial Creditor. the Corporate Debtor Cannot run away from the fact that it has defaulted from making payment of the loan to the financial creditor and as such the contentions raised in Section-7 Application are admitted. As On date, the principal amount due to the Financial Creditor from the Corporate Debtor amounts to Rs. as on 31.03.2023 which is exclusive of interest till 31/03/2023. 6. That it would be extremely relevant to mention that the Corporate Debtor company is not in the best Of financial health and it is not in a position to repay the debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent in non-payment of instalment and interest thereon amounts to fresh cause of default and event of default as per the General Conditions of the Loan Agreement. d) Defaults continued to occur on 10.04.2021, 10.05.2021, 10.06.2021 and on 10.07.2021, amounting to a total more than threshold of Rs. 1 crore on the date of default of 10.07.2021. This is evident from the Statement of Accounts of Appellant on record which shows that the instalments were due on 10.04.2024 and was not paid and also the subsequent instalments were also not paid. These defaults are new, independent events of default, separate from those covered under Section 10A. These fresh defaults justify the initiation of CIRP, as they occurred after the suspension period and meet the threshold for filing under the IBC. While in respect of the defaults covered under Section 10A certainly no petition may ever be filed, these defaults are beyond the said period and a petition is maintainable on the basis of these defaults. These are noted at page no. 113 of the Appeal Paper Book. e) The Appellant, SIDBI, has clearly demonstrated that the Respondent, Sambandh Finserve Private Limited, has ongoing defaults on its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings in an application under Section 7 of the IBC, or to the filing of additional documents, apart from those initially filed along with application under Section 7 of the IBC in Form-1. Appellant's case is strongly supported by this "Dena Bank" (supra) judgement. j) The Appellant has also relied on 'Mr. Manmohan Singh Jain (supra) wherein this Tribunal had observed that "the non-mentioning of the date of default in Col. IV is not fatal to the application and on the sole ground, the application cannot be rejected merely taking a technical impediment as held by the Hon'ble Supreme Court that 'it is only a directory'. This may not be that relevant as the Appellant had mentioned the dates of default and also the earlier petition default falls in 10A period. But in later petition, for fresh defaults the other dates outside the 10A period will be of assistance for determination of debt and default. k) Appellant also gets support from this Tribunal in 'Abhijeet Infrastructure Ltd.' (supra) wherein it was held : "..insofar as allowing Amendment Application I.A. No. 127/CB/2023, we are of the view that the Adjudicating Authority did not commit any error in allowing the Amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "the right to sue would occur, in my opinion, each time when, there is a default in payment of an EMI on its due date." Therefore, it supports the case of the Appellant that each failure of the Respondent to pay an instalment in terms of the repayment plan could be treated as a fresh default in payment of the loan amount. 27. Similar issue was adjudicated by this Tribunal in Company Appeal (AT) (Insolvency) No.444 of 2023 in NuFuture Digital (India) Limited vs Axis Trustee Services Ltd. which was upheld by the Hon'ble Apex Court in Civil Appeal No. 4016/2023 on 03.07.2023. For bringing clarity on the issue, the relevant portions are extracted hereinunder : ".. 2. The Hon'ble Supreme Court in "Ramesh Kymal versus Siemens Games Renewable Power Private Ltd." (supra) had noticed the objects and purpose of enactment of Section 10A. In the case before the Hon'ble Supreme Court in "Ramesh Kymal versus Siemens Games Renewable Power Private Ltd.", the application under Section 9 was filed by the Operational Creditor on 11.05.2020. An ordinance was passed on 05.06.2020 by which Section 10A was inserted in the I&B Code. The Corporate Debtor sought dismissal of Section 9 applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said default occurring during the said period". The expression "shall ever be filed" is a clear indicator that the intent of the legislature is to bar the institution of any application for the commencement of the CIRP in respect of a default which has occurred on or after 25 March 2020 for a period of six months, extendable up to one year as notified. The explanation which has been introduced to remove doubts places the matter beyond doubt by clarifying that the statutory provision shall not apply to any default before 25 March 2020. 28. The substantive part of Section 10A is to be construed harmoniously with the first proviso and the explanation. Reading the provisions together, it is evident that Parliament intended to impose a bar on the filing of applications for the commencement of the CIRP in respect of a corporate debtor for a default occurring on or after 25 March 2020; the embargo remaining in force for a period of six months, extendable to one year. Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the GCC dated 25.10.2019 governing Loan Agreement dated 26.02.2019 and 25.10.2019, the loan was repayable in 36 equal monthly instalments, and that default to pay the principal or interest amount at each instalment amounted to a separate and independent default. Thus, each default of the Respondent in non-payment of instalment and interest thereon amounts to fresh cause of default and event of default as per the General Conditions of the Loan Agreement and it could be a sufficient ground to file fresh application. Therefore, in situations of fresh default as in the present case, wherein the default is occurring after the 10A period, insolvency proceedings under section 7 of the IBC are justified. Conclusion : 29. In light of the above arguments and legal precedents, this Tribunal is of the view that the Appellant, SIDBI, has established a clear case of continuous defaults by the Respondent, Sambandh Finserve Private Limited, post the suspension period of Section 10A of the IBC. The Respondent's admission of debt and default and the consistency of the default date of 10.07.2021 in the fresh application substantiate the Appellant's claim. Order : 30. Accordingly, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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