TMI Blog2018 (12) TMI 1815X X X X Extracts X X X X X X X X Extracts X X X X ..... been occurrence of existence of default. It is reiterated that the material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the huge outstanding loan amount - the present application is complete in all respect and the applicant financial creditors are entitled to claim their outstanding financial debts from the corporate debtor and that there has been default in payment of the financial debt. In terms of Section 7 (5) (a) of the Code, the present application is admitted - Application admitted - moratorium declared. - COMPANY PETITION (IB) NO. 373 (PB) OF 2018 - - - Dated:- 11-12-2018 - Chief Justice M.M. Kumar, President And S.K. Mohapatra, Technical Member For the Applicant : Kunal Tandon and Ms. Niti Jain, Adv. For the Respondent : Amit Dhull and Neeraj Malik, Advs. ORDER S.K. MOHAPATRA, TECHNICAL MEMBER 1. 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 ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the requirement of Section 7 (3) (b) of the Code. 6. It has been stated in the application that the applicant financial creditor, Indian Overseas bank, has filed the present application as a lead bank of the consortium with State Bank of India (SBI), Punjab National Bank (PNB), Union Bank of India (UBI), Dena Bank and Central Bank of India (CBI). 7. It is the case of applicant IOB that various financial facilities were sanctioned to the respondent company by the applicant bank since 2004, as stated in detail in the application and the last of the sanction letter was issued on 28.06.2014. It has been stated that pursuant to various sanction letters the corporate debtor was sanctioned loan facility to the tune of ₹ 203.43 Crores by Indian Overseas Bank. 8. It is also submitted that various consortiums of banks were formed from time to time. The last of the consortium amongst IOB, SBI, PNB, CBI, UBI and Dena Bank was also formed for working capital dated 28.09.2013 along with the following inter se agreement: i. Supplemental working capital consortium agreement ii. joint deed of hypothecation iii. deed of guarantee, iv. joint deed of mortgage, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r securing machineries/ vehicles/ goods/ book-debts dated 28.06.2014 executed by Corporate Debtor. Copy of Deed of hypothecation of book-debts dated 28.06.2014 executed by Corporate Debtor. Copy of Letter of Hypothecation in case of open advances only dated 28.06.2014 along with Consent-cum-authorization letter dated 28.06.2014 for disclosure of names in case of default executed by Corporate Debtor. Copy of Consent-cum-Authorization Letter dated 28.06.2014 for disclosure of names in case of default executed on behalf of Corporate Debtor. Copy of Demand Promissory Note dated 28.06.2014 for ₹ 32 crores executed by Corporate Debtor. Copy of Demand Promissory Note dated 28.06.2014 for ₹ 42 crores executed by Corporate Debtor. Copy of Demand Promissory Note dated 28.06.2014 for ₹ 18 crores executed by Corporate Debtor. Copy of Supplementary deed of hypothecation dated 28.06.2014 executed by Corporate Debtor. Copy of Deed of Guarantee for Loans, cash credit etc. dated 28.06.2014. Copy of Consent-cum-authorization letter dated 28.06.2014 for disclosure of names in case of default executed by Corporate Debtor. Copy of Deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of Loan Agreement dated 05.12.2011 executed between the Corporate Debtor and State Bank of India. Copy of Letter dated 05.12.2011 regarding the grant of individual limits within the overall limit executed between Corporate Debtor and State Bank of India. Copy of Agreement of Hypothecation of Goods and Assets dated 05.12.2011 executed between the Corporate Debtor and State Bank of India. Copy of Deed of Guarantee dated 05.12.2011 executed by Defendant Nos. 2, 3, 4, 5, 6 and 10 in favour of State Bank of India. Copy of Deed of Corporate Guarantee dated 05.12.2011 executed by the Corporate Guarantor in favour of State Bank of India. Copy of Deed of Corporate Guarantee dated 13.04.2012 executed by Defendant No. 9 in favour of State Bank of India. Copy of the sanction letter for renewal dated 01.06.2013. Copy of Declaration regarding term loan facilities dated 06.02.2014 executed by Corporate Debtor. Copy of General undertaking dated 06.02.2014 executed by Corporate Debtor. Copy of Letter of Continuity dated 06.02.2014 executed by Defendant Nos. 2 and 3. Copy of the letter dated 31.03.2014. Copy of Board Resolution execute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee dated 29.09.2014 Copy of Agreement of Personal Guarantee dated 29.09.2014 executed by Defendant Nos.4 and 6. Copy of Agreement of hypothecation of current assets dated 29.09.2014 executed by Corporate Debtor. Copy of the sanction letter dated 05.07.2012. Copy of Board Resolution executed by Corporate Debtor. Copy of Power of Attorney dated 09.02.2013 executed by Corporate Debtor in Favour of the CBI. Copy or Consent clause executed by Corporate Debtor. Copy of Letter of Hypothecation of block assets (excluding vehicles and assets specifically charged) and all current assets (present and future) dated 09.02,2013 executed by Corporate Debtor along with Board Resolution dated 05.02.2013. Copy of Letter of Undertaking dated 09.02.2013 executed by Corporate Debtor, Copy of Omnibus Counter Guarantee for letter of credit facility dated 09.02.2013 executed by Corporate Debtor. Copy of General Counter Guarantee and indemnity covering several guarantees within the sanctioned guarantee limit dated 09.02.2013 executed by Corporate Debtor. Copy of Demand Promissory Note for a sum of ₹ 2.50 crores along with letter for rate of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period ended 31st March, 2015. Certificate under Banker's Book of Evidence Act for IOB. Certificate under Banker's Book of Evidence Act for SBI. Certificate under Banker's Book of Evidence Act for PNB. Certificate under Banker's Book of Evidence Act for Dena Bank. Certificate under Banker's Book of Evidence Act for UBI. Certificate under Banker's Book of Evidence Act for CBI. Original Form-2 dated 05.04.2018 along with certificate of registration dated 30.05.2017. 12. It is submitted in part IV of the application that ₹ 792.35 crores was sanctioned to the corporate debtor by consortium banks. There is a claim that ₹ 1046,80,76,395.30/- is outstanding from the corporate debtor as on 31.03.2016 along with future interest @ 16.5% p.a. The outstanding amount due in respect of each bank is detailed below: (Amount in crores) Total Amount due IOB Dena Bank PNB SBI CBI UBI 1046.80 290.11 147.81 263.86 168.28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record voluminous and overwhelming evidence in support of the claim as well as to prove the default. 20. It is pertinent to mention here that the Code requires the Adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. The material on record clearly goes to show that respondent had availed the loan facilities which was duly disbursed and has committed default in repayment of the outstanding loan amount. 21. As regards allegation of excessive charging of interest, applicant has stated in its rejoinder that the interest has been charged in accordance with the terms of sanction letter from time to time. It is stated that the Corporate Debtor since 01.04.2013 till the date of declaration of the account as a Non-Performing Asset account, 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 petition is based on the statement of Account maintained by the Bank in its ordinary and usual course of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned to the Borrower. b. The Members of the Consortium do hereby agree to execute in favour of the Lead Bank a Power of attorney or other authorization as maybe deemed appropriate for constituting the Lead Bank as their true and lawful attorneys for them, in their name and on their behalf to do, execute and perform all acts deeds and things as the Lead Bank may deem appropriate necessary or expedient in the given circumstances as the Leader of the IOB Consortium and to take credit decisions for and on behalf of the Consortium and communicate the same in the general interest of the IOB Consortium. The Member banks do hereby agree to ratify and confirm whatever all acts, deeds and things lawfully and bona fide done, taken or effected by the Lead Bank as such attorneys in exercise of the powers, authorities and liberties hereby conferred upon, under and by virtue of this Agreement. 3(f)(i) Any action for the enforcement of the said securities against the Borrower shall be taken by the Lead Bank, in consultation with the other Members of the IOB Consortium and the IOB as the Lead Bank shall be at liberty to take any steps to realize or enforce the said securities agreed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor. There appears to be no infirmity in the application form, being complete in all respect. 27. It is also the case of the respondent that the account of the corporate debtor has been wrongly declared as NPA. While dealing with application under Section 7 of the Code, it is immaterial to see as to when the account was declared as NPA. In Section 7 application, it is only to be considered as to whether there is a debt due in law and facts and whether there has been a default in paying the financial debt. 28. Hon'ble National Company Law Appellate Tribunal in the Case of Ranjit Kapoor v. Asset Reconstruction Company (India) Ltd. [Company Appeal (AT) (Insolvency) No. 410 of 2018, dated 30-10-2018] has held that the provision of NPA relates to SARFAESI Act, 2002 and has nothing to do with Code. Therefore, the objection of the respondent that consortium banks have not acted in terms of circular and guidelines of RBI and determined the account as NPA illegally; cannot be a ground to reject the application preferred by financial creditors under Section 7 of the Code, there being default in payment of financial debt. 29. In connection with the objection regarding pende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the consortium banks had sanctioned and disbursed the loan amount recoverable with applicable interest by entering into loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facility against payment of interest as agreed between the parties. The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing. Moreover the debt claimed in the present application includes both the component of outstanding principal and interest. In that view of the matter not only the present claim comes within the purview of 'Financial Debt' but also the applicant can clearly be termed as 'Financial Creditor' so as to prefer the present application under Section 7 of the Code. 36. The application filed by the applicant financial creditor under sub-section 5 (a) of Section 7 of the code, has to be admitted on satisfaction that: i. Default has occurred; ii. Application is complete, and iii. No disciplinary proceeding against the proposed IRP is pending. 37. Hon'ble Supreme Court in the case of Mobilox Innovations (P.) Ltd. v. Kirusa Software (P.) Ltd. [2017] 85 taxmann.com 292/144 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as prescribed by the IBBI Regulations) with regard to admission of this application under Section 7 of the Insolvency Bankruptcy Code, 2016. 43. We also declare moratorium in terms of Section 14 of the Code. The necessary consequences of imposing the moratorium flows from the provisions of Section 14 (1) (a), (b), (c) (d) of the Code. Thus, the following prohibitions are imposed: (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 Securitization 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. 44. It is made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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