TMI Blog2019 (4) TMI 1732X X X X Extracts X X X X X X X X Extracts X X X X ..... or stand fulfilled. In that regard, the application is complete as per the requirements of Section 7 (2) of the Code and other conditions prescribed by Rule 4 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is overwhelming evidence to prove default and name of the resolution professional has also been clearly specified. Petition admitted - moratorium declared. - C.P.No (IB)-938(PB)/2018 - - - Dated:- 16-4-2019 - MR M. M. KUMAR, PRESIDENT AND DR. DEEPTI MUKESH, MEMBER (J) For The Petitioner : Mr Kunal Tandon, Ms. Richa Sindaliya, Girdhar Singh and Ms. Niti Jain, Advocates For The Respondent : Mr Ankit Virmani, Chandra Sekhar M, Ms. Rinkel Singh, Tanmaya Mehta, Ms. Nimisha Nat Narayan, Advocates JUDGMENT M. M. KUMAR, PRESIDENT Indian Overseas Bank has filed the instant application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity the Code ) read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity the Rules ) with a prayer to trigger Corporate Insolvenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The pleaded case of the Financial Creditor is that it sanctioned various financial facilities to the Corporate Debtor on various occasions since 2005 which were in the form of Cash Credit Limit amounting to ₹ 40.00 crores, WCTL ₹ 3.91 crores, Term Loan I ₹ 4.63 crores, Term Loan II ₹ 5.00 crores, FITLI ₹ 0.62 crores, FITL II ₹ 1.37 crores, Letter of Guarantee ₹ 0.12 crore, Standby Letter of Credit (Inland) ₹ 3.93 crores. The said financial facilities were further increased in the year 2010-12 from ₹ 2 Crores to ₹ 20 Crores and subsequently reduced vide sanction letter dated 03.05.2016 from ₹ 59.58 crores to ₹ 52.76 crores however, same was not acted upon. It is submitted that the total facilities granted by the Financial Creditor are to the tune of ₹ 59.46 crores. 7. The Corporate debtor executed several documents towards availing the aforesaid financial facilities. It is highlighted that Mr. Shrivats Rathi and Mr. Arun Kumar Rathi furnished their personal guarantees. Both of them have guaranteed the obligations of the Corporate Debtor under the aforesaid financial facilities. It is als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiate the present legal proceedings under the Code. It is also submitted that the affidavit has been verified by Mr. Menon, POA holder on 25.07.2018 though the date of notarization is 27.07.2018. Thus, it is patent that the deponent has not signed in front of the notary and such notarization is of no consequence and is bogus. 2. The application filed by the Financial Creditor lacks in material particulars and is contrary to the provisions of the Code and its Rules made thereunder which mandates that the application be supported by particular and workings of amount claimed to be due. 3. The account of the Respondent is no longer classified as NPA, the Financial Creditor is guilty of gross suppression of facts. 4. The dispute qua the debt amount and its legality is pending adjudication before the Ld. Debt Recovery Tribunal, New Delhi. 5. The Financial Creditor is trying to take advantage of its own wrongs and that no debt whatsoever, is due and payable in favour of the Bank. 6. The demand raised by the Financial Creditor seeking the personal guarantee of Ms. Uma Rathi was wholly arbitrary. The conseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an application being C.A. No. 1185(PB)/2018 has been filed by the Corporate Debtor along with the copies of the RBI Circular dated 12.02.2018 (Annexure-A), a Writ Petition (C) bearing No. 10861/2018 and an order dated 10.10.2018 passed in the said Writ Petition by the Hon ble High Court of Delhi. It is highlighted in the application that as per aforesaid circular the RBI has contemplated a graded and segmented approach of timelines to initiate insolvency actions, starting with the largest exposure, and then proceeding top-down. Placing reliance on the aforesaid circular, it was contended that the act of the Financial Creditor is discriminatory against the Respondent wherein it has adopted a pick and choose approach though larger exposures of the Financial Creditor are there which are in default and the default of the Respondent is comparatively much smaller compared to other debtors. A reference has also been invited to Writ Petition (C) bearing No. 10861/2018which is awaiting disposal before Hon ble High Court of Delhi and a request was made that till the disposal of the said Writ Petition order be kept in abeyance. 16. Reply to this application has been filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanctioned, disbursed and the loan agreements were properly executed. Respondent company utilized and enjoyed the loan facilities. The Financial Creditor has placed on record several balance and security confirmation letters duly signed by the respondent in acknowledgment of the debt. Additionally, the Financial Creditor has placed on record demand promissory notes executed by the Respondent Company. Apart the Financial Creditor has relied upon the letters of respondent company confirming creation of mortgage by deposit of title deeds in order to secure the loan. 21. In addition, the Financial Creditor has filed the relevant statement of accounts duly certified in accordance with Banker s Books Evidence Act, 1891 as per the requirement of Form 1 Part V Column 7 of the application. True copy of statement of accounts submitted by the Financial Creditor pertaining to various loan facilities, kept during the course of banking business, basing on which the claim has been raised, can be termed as sufficient evidence of the financial debt. 22. Section 4 of the Bankers Books Evidence Act, 1891 provide for mode of proof of entries in bankers books and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a Non Performing Asset Account w.e.f. 01.01.2016, continuously violated the terms of the sanction letter in relation to maintaining the account within the drawing limit/ sanctioned limit and by non-submission of stock statement. It is submitted that the amount claimed in Part-IV of the application is based on the statement of Accounts maintained by the Bank in its ordinary and usual course of business and in accordance with the banking systems. 27. Needless to say, that an application under Section 7 of the Code is acceptable so long as the debt is proved to be due payable; and there has been occurrence or existence of default. What is material is that the default is for at least ₹ 1 Lakh. In view of Section 4 of the Code, the moment default is of Rupees one Lakh or more, the application to trigger Corporate Insolvency Resolution Process under the Code is maintainable. The Corporate Debtor has failed to show that there is no debt or default in existence so as to avoid the provisions of the Code. 28. It has also been alleged that the application is defective. In this connection it is appropriate to mention that the present ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. Learned counsel for the petitioner has referred to the footnote 8 in the RBI circular and argued that the Financial Creditor is free to file insolvency petition under the Code against the borrower even before the expiry of timelines, or even without attempting a resolution plan outside the Code. According to the learned counsel the RBI circular has carved out an operational route for the lenders to follow which cannot be considered as abdication of a Parliamentary statue like Insolvency and Bankruptcy Code. He has maintained that the RBI circular has been issued as a piece of policy guidelines under Section 35AA of the Banking Regulations Act, 1949 and is necessarily a piece of subordinate legislation which cannot override the remedy provided by the Code. 34. Having bestowed our thoughtful consideration on the submissions made by learned counsel for the parties, we find that RBI Circular dated 12.02.2018 has now been declared illegal and ultra vires of Section 35AA of the Banking Regulations Act, 1949. 35. It is pertinent to mention here that aforesaid circular of the RBI dated 12.02.2018 was challenged before Hon ble the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for large accounts referred under IBC a pecuniary limit has been fixed and only the accounts with aggregate exposure of the lenders at ₹ 20 billion and above as on or after 01.03.2018 were to be referred for final proceedings under Section 7 of IBC. In light of above the Respondent cannot take advantage of the aforesaid circular and it cannot be concluded that these proceedings were initiated only because of the RBI circular. In the present case the defaulted amount is far less than 2000 crores (20 billions). It is only ₹ 75,52,68,314.29/- (just over 75 crores). 37. It is thus patent that all requirements of Section 7 of the Code for initiation of Corporate Insolvency Resolution Process by a Financial Creditor stand fulfilled. In that regard, the application is complete as per the requirements of Section 7 (2) of the Code and other conditions prescribed by Rule 4 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is overwhelming evidence to prove default and name of the resolution professional has also been clearly specified. 38. The provisions of Section 7 (2) and Section 7 (5) of IBC stand sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following prohibitions are imposed which must be followed by all and sundry: (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. 43. It is made clear that the provisions of moratorium shall not apply to (a) such transactions which might be notified by the Central Government in consultation with any financial regulator; (b) a surety in a contract of guarantor to a Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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