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2020 (3) TMI 1131

..... for admission of the application where the Adjudicating Authority is satisfied that (a) a default has occurred ; (b) the application under sub-section (2) of section 7 is complete ; (c) there is no disciplinary proceedings pending against the proposed resolution professional. The satisfaction of the three conditions is being examined: The first condition is that a default has occurred. The default in repayment of debt is supported by account statements filed by the bank at annexure P7 and certificate under section 2A(a) and 2A(b) of the Bankers' Books Evidence Act, 1891 in support of the account statements appended with the petition. It is the case of the respondent-corporate debtor that the account of the respondent-corporate debtor was wrongly declared as non- performing asset while one time settlement proposal was kept pending by petitioner-bank. It is stated by the petitioner-bank that no payment has been made towards the settled amount and the bank has revocated such proposal accordingly. Thus, we do not see any merit in the contention of the respondent-corporate debtor and pendency of any one time settlement cannot be an embargo in triggering the provisions under the Code .....

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..... hereinafter referred to as the "respondent" or "corporate debtor"). The petition is submitted on behalf of the financial creditor, by Mr. Mohd. Hanief Kirmani, Assistant Vice-President Law, Jammu and Kashmir Bank Ltd. A copy of special power of attorney dated March 30, 1994 in favour of Mr. Mohd. Hanief Kirmani to be true and lawful attorney of the said bank is annexed as annexure P1 of the petition. Vide C. A. No. 594 of 2018, the petitioner-financial creditor has placed on record board resolution dated November 26, 2018 wherein Mr. Mohd. Hanief Kirmani, has been authorized to do all acts necessary for filing Form 1, under the Code. 3. The respondent-corporate debtor is a company incorporated under the Companies Act, 1956 with authorized share capital of ₹ 2,00,00,000 and paid-up capital of ₹ 6,00,000. The CIN of the respondent-corporate debtor is U27141JK2009PTC002973 and its registered office is situated Srinagar, Jammu and Kashmir and therefore, the matter falls within the territorial jurisdiction of this Tribunal. 4. The facts of the case, briefly stated, are that the petitioner-financial creditor is a banking company incorporated under the Jamm .....

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..... bit balance (outstanding balance) as follows : Sl. No. Credit facility Outstanding as on 30-6-2018 (Rs.) 1. Cash credit 13.65 lakhs 2. WCTL 5.08 lakhs Copy of the statement of accounts depicting outstanding balance as on June 30, 2018 is attached as annexure P7 of the petition. As per Part IV of Form 1, the total amount due towards the corporate debtor is ₹ 18.73 crores and further, interest at 15.25 per cent. per annum from January 1, 2016 until recovery of the aforesaid outstanding dues amounting to ₹ 18.73 crores. 7. In Part IV of Form 1, the particulars of security held are given. It is stated that the credit facilities are secured primarily by hypothecation of stocks in trade, godown/in transit, movables and book debts and collaterally by mortgage of houses and lands in Jammu and Kashmir. 8. The loan accounts of the respondent-corporate debtor became irregular and the respondent-corporate debtor, in spite of repeated requests and demands, failed to regularize its credit facility accounts. On failing to receive any payment against the outstanding demand from the respondent-corporate debtor, the petitioner-financial creditor declared the account of the respondent-cor .....

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..... s annexure P6 of the reply. It is also submitted that an agreement to sell was executed by the promoters of M/s. Mir Steel Rolling Mills P. Ltd., who represented themselves to be the partners of M/s. Buildtech Industries Unit-I. The agreement relates to take over of three companies by these promoters and it is stated that the purchasers of the company M/s. Buildtech Industries had applied for credit facilities with the petitioner-bank. It is the contention of the respondent that the petitioner-bank was aware of the agreement to sell and never raised any objection with regard to the execution or the sanctity of the said agreement, while considering the proposal submitted by M/s. Buildtech Industries for take over and purchase of the company. It is also submitted that one time settlement proposal from the side of the respondent was moved before the petitioner-bank and ₹ 84 crores was finalized as full and final settlement of Mir Groups and Associate Accounts. Copy of the one-time settlement proposal letter dated August 5, 2017 is at annexure R4 of the reply. It is also informed that during the pendency of the one-time settlement proposal, on October 27, 2017 a letter by the pet .....

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..... fdar Ali Wani were the prospective purchasers of the unit and there was never any settlement between the parties to the suit filed by Bilal Hussan Anima and Safdar Ali Wani, before sub- judge Pulwama, which resulted in any execution of the agreement to sell and it is also stated that the agreement was never duly stamped nor registered and the matter is still pending adjudication before the Sub- Judge, Pulwama. 15. We have heard learned counsel for the petitioner and learned counsel for the respondent and have carefully perused the records. 16. The hon'ble Supreme Court in the case of Innoventive Industries Ltd. v. ICICI Bank [2017] 205 Comp Cas 57 (SC) ; [2018] 1 SCC 407, held as under (page 87 of 205 Comp Cas) : "The scheme of the Code is to ensure that when a default takes place, in the sense that a 'debt' becomes due and is not paid, the insolvency resolution process begins. Default is defined in section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of 'debt', we have to go to section 3(11) which in turn tells us that a de .....

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..... t the stage of section 7(5), where the Adjudicating Authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the 'debt' which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the Adjudicating Authority is satisfied that a default has occurred, the application must be admitted unless it is complete, in which case it may give notice to the applicant to rectify the defect within seven days of receipt of a notice from the Adjudicating Authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within seven days of admission or rejection of such application, as the case may be. The scheme of section 7 stands in contrast with the scheme under section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in section 8(1) of the Code. Under section 8(2), the corporate debtor can, within a period of 10 days of rece .....

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..... is the case of the respondent-corporate debtor that the account of the respondent-corporate debtor was wrongly declared as non- performing asset while one time settlement proposal was kept pending by petitioner-bank. It is stated by the petitioner-bank that no payment has been made towards the settled amount and the bank has revocated such proposal accordingly. Thus, we do not see any merit in the contention of the respondent-corporate debtor and pendency of any one time settlement cannot be an embargo in triggering the provisions under the Code. 20. The respondent-corporate debtor mainly contended that there was a pre-existing dispute between the parties, basing on two civil suits, pending against the applicant-bank. It was further contended that in view of the interim orders passed in the said suits, the petitioner cannot initiate the instant CIRP proceedings. The civil original suit filed by the respondent- corporate debtor (plaintiff No. 3 in the suit) along with Mir Steel Rolling Mills P. Ltd. and others (annexure R11 at page 45 of the reply) was filed seeking a declaration that the revocation of sanction of one time settlement proposal is null and void and for other consequen .....

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..... bruary 22, 2019 was stayed by the Principal District Judge, Pulwama, in an appeal filed by the applicant-bank and also for the above referred reasons, the pendency of the said suit also cannot be treated as a predicament to initiate CIRP. 25. The second condition is that the application under section 7(2) is complete. We have discussed the contents of the application above and we conclude that the application is complete. 26. The third condition is that there are no disciplinary proceedings pending against the proposed resolution professional. In the present case, Shri Neeraj Bhatia, IBBI/IPA-001/IP-P00824/2017-18/11400, has been proposed as interim resolution professional. Form 2 filed by the proposed interim resolution professional is at page 374A of the petition. Shri Neeraj Bhatia has certified that there are no disciplinary proceedings pending against him with the Board or Indian Institute of Insolvency Professional of ICAI. He has also affirmed that he is eligible to be appointed as a resolution professional in respect of the corporate debtor in accordance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporation Persons) Regulations, 20 .....

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..... e in accordance with the provisions of section 16(5) of the Code ; (iii) In terms of section 17 of the Code, from the date of this appointment, the powers of the board of directors shall stand suspended and the management of the affairs shall vest with the interim resolution professional and the officers and the managers of the corporate debtor shall report to the interim resolution professional, who shall be enjoined to exercise all the powers as are vested with interim resolution professional and strictly perform all the duties as are enjoined on the interim resolution professional under section 18 and other relevant provisions of the Code, including taking control and custody of the assets over which the corporate debtor has ownership rights recorded in the balance-sheet of the corporate debtor, etc., as provided in section 18(1)(f) of the Code. The interim resolution professional is directed to prepare a complete list of inventory of assets of the corporate debtor ; (iv) The interim resolution professional shall strictly act in accordance with the Code, all the rules framed thereunder by the Board or the Central Government and in accordance with the Code of conduct governing hi .....

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