TMI Blog2022 (11) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... me, it can be reviewed, by the Appropriate Authority concerned. In the Section 7 Application (Form I of the Code), under Part IV (Particulars of Financial Debt), it was mentioned that the Amount claimed to be in Default was Rs.146,93,93,281.78 as on 31.01.2019, on which, includes Principal of Rs.113,37,61,348.78 and interest of Rs.33,56,31,933. The Total Outstanding was Rs.146.93 Crore and the Date of Default on 20.10.2016 when the Account of the Respondent / Corporate Debtor, became an irregular one. The Date of NPA was on 17.01.2017. A perusal of the CIBIL Report of the Appellant / Bank shows that the Borrower / Delinquent Outstanding, was Rs.1,13,37,61,349/-. Further, the Statement of Account of the Appellant / Bank, in respect of the Respondent / Corporate Debtor from 02.12.2015 to 31.12.2016, shows that the Balance was Rs.1,23,53,90,795.03. A perusal of the contents of the Letter of the Appellant / Bank dated 18.05.2009, addressed to the Respondent / Corporate Debtor mentions that the Sanction of Rs.50 Crore Credit Facilities (Cash Credit Proposed Limit Rs.10.00 Cr., Total FBWC NFB Rs.10.00 Cr., Letter of Credit Rs.40.00 Cr., Total Non-Fund Based Rs.40.00 Cr. and in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ror, in traversing upon the merits of the matter and he is not supposed to examine / go into the each and every aspects of the Default, much less in issuing directions to the Parties to Reconcile / Scrutinise the Default, with reference to Entry by Entry with the Accounts, maintained by the Appellant / Bank, with the Bills raised / Transaction undertaken, in respect of all the Working Capital Facilities, provided to the Respondent / Corporate Debtor. This Tribunal, in the light of foregoing detailed qualitative and quantitative deliberations, on a careful consideration of respective contentions, considering the facts and circumstances of the instant case, in an integral and conspectus manner and on going through the impugned order dated 22.12.2020 in CP(IB) No. 112/BB/2019, passed by the Adjudicating Authority (National Company Law Tribunal, Bengaluru Bench), comes to a consequent conclusion that the exercise of discretion, by the Adjudicating Authority, in not Admitting, the Section 7 Application in CP (IB) No. 112/BB/2019, filed by the Appellant / Bank and Issuing Observations / Directions (as mentioned in the Paragraph 42 of the impugned order), is not based on sound legal pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the `Petitioner / Respondent / Corporate Debtor , are only a ruse to delay and derail the proceedings of the instant `Appeal . Further, the documents sought to be produced, in any event, does not save the `Petitioner / Respondent / Corporate Debtor , from the only conclusion that there is a `Default of a `Financial Debt and the `Corporate Insolvency Resolution Process , ought to be initiated `qua the `Petitioner / Respondent / Corporate Debtor . 3. In view of the fact that the Petitioner / Respondent / Corporate Debtor, has come out with a plea that the two additional documents sought to be produced in IA No.1284 of 2021 in Comp. APP (AT) (INS) No.80 of 2021 are very much vital and of great relevance to the matter at hand, to find out the truth and for arriving a just and proper decision in the instant `Appeal , this `Tribunal , in furtherance of `substantial cause and justice , allows the IA No.1284 of 2021 in Comp. APP (AT) (INS) No.80 of 2021, but without costs. JUDGMENT (Virtual Mode) Justice M. Venugopal, Member (Judicial): Company Appeal (AT) (INS) No. 80 of 2021: Background: 4. The Appellant / Bank has preferred the instant Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y scrutiny of the accounts of the Corporate Debtor from 2012 to 2016 as against the LC and other charges levied and payments made / adjusted. This would also require comprehensive scrutiny and reconciliation with the Bank records, available correspondence and decisions taken with regard to the settlement / golden handshake etc. 34. The above gap could be either on account of the Corporate Debtor s perception that when it cleared the loan in 2012 and paid Rs.10.63 crore and adjusted its FDRs in 2016, its entire Working Capital Account got liquidated. Alternatively, the charges levied by the Financial Credit towards LC charges etc. were incorrectly charged as against the facilities actually availed and full credit was not given for the same. But it does appear strange to us that when the loan and other facilities availed from the CC Account had been entirely paid on the above two occasions, as it appears from the accounts, still huge debit balance still remains. If this is on account of the LC charges, then it appears even more surprising since the Non fund based facility itself was a maximum of Rs.112.22 crore in 2015. Even if fully utilised, the amounts payable against this fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate Debtor in his objections, indicating that the debt had been cleared or that the FC had no further issues of recovery with the Corporate Debtor with regard to recovery of debt. 37. On the other hand, we also find that during the hearing on 19.06.2019 the MD of the Respondent Corporate Debtor stated that if any dues were payable in spite of all the payments made, then he can settle the dues, provided the correct amount is worked out after proper reconciliation. 38. We also find from the objections filed by the Corporate Debtor that the Corporate Debtor is not an insolvent company that has lost its substratum, cannot engage in business and earn revenue, or pay its debts. As mentioned by the Corporate Debtor, it had stocks and receivables of around Rs.138 crore, the market value which was around Rs.215 crore. It is stated to be holding stocks and receivables, personal guarantees and immovable assets worth around Rs.406 crore, the present value of these is more than Rs.500 crore. These claims have not been opposed by the Financial Creditor. The valuation reports submitted by the Financial Creditor with the Petition corroborate this claim, at least in respect of immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of home buyers stands invested and is at stake. 41. In view of the foregoing, we are not satisfied that a case has been made out by the Financial Creditor for initiating CIRP against the Corporate Debtor, as of now. The disputes raised, the lack of clarity of the actual figures of debt, if any, and whether after the settlements offered by the Corporate Debtor and the payments made since 2012, and its belief that its entire CC account of Rs.45 crore had been liquidated after the payment of Rs.10.63 crore and adjustment of its FDs, require a detailed scrutiny and audit of the demand raised on account of both Fund based and Non-Fund based facilities and the amounts paid / settled, which cannot be conducted in these summary proceedings. We may mention here that this Tribunal is not a dispute resolution forum. If any disputes exist on the issues mentioned above, which appear to be present, they will have to be sorted out in some other forum. Also, in view of the present economic scenario compelling a liberal approach by the Government and suspension of IBC, the Corporate Debtor s willingness to pay any dues once the entries are reconciled, and given also the fact that the Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had passed an `erroneous order , in directing an `Audit , of the `Amounts Due , and `liable to be paid , by the `Respondent , which is clearly outside the ambit of the ingredients of Section 7 of the I B Code, 2016. 8. The Learned Counsel for the Appellant points out that the `Adjudicating Authority , is not empowered at the `pre-admission stage , to venture into matters, in respect of the `Value of the Assets of the Corporate Debtor , or its `Business , or the possibility of attracting a `Viable Resolution Plan , under the Code. 9. Advancing his argument, the Learned Counsel for the Appellant takes a stand that, while dealing with an `Application , under Section 7 of the I B Code, 2016, an `Adjudicating Authority , cannot take into account of `any purported defence of the Corporate Debtor , that its `Assets far in `Excess of the `Underlying `Financial Debt in `Default . 10. The other contention projected on the side of the Appellant / Bank is that the `Adjudicating Authority , had failed to appreciate that the Appellant / Bank, had continued to honour the `Letter of Credit Payments , to the `Beneficiaries of the `Respondent , on the respective `due dates , and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 179, wherein at Paragraphs 31 34, it is observed as under: 31. On a bare reading of the provision, it is clear that both, clauses (a) and (b) of sub-section (5) of Section 7, use the expression it may, by order while referring to the power of the Adjudicating Authority. In clause (a) of sub-section (5), the Adjudicating Authority may, by order, admit the application or in clause (b) it may, by order, reject such an application. Thus, two courses of action are available to the Adjudicating Authority in a petition under Section 7. The Adjudicating Authority must either admit the application under clause (a) of sub-section (5) or it must reject the application under clause (b) of sub-section (5). The statute does not provide for the Adjudicating Authority to undertake any other action, but for the two choices available. 34. The Adjudicating Authority has clearly acted outside the terms of its jurisdiction under Section 7(5) of the IBC. The Adjudicating Authority is empowered only to verify whether a default has occurred or if a default has not occurred. Based upon its decision, the Adjudicating Authority must then either admit or reject an application respectively. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the aforesaid document clearly exhibit the same. In this regard, the stand of the `Appellant / Bank is that, the `Adjudicating Authority , does not have any jurisdiction, to enter into the merits of the matter i.e., the `Adjudicating Authority , is not to examine the each and every aspect of `Default . 19. The Learned Counsel for the Appellant refers to the decision of the Hon ble Supreme Court of India in M/s. Tarapore Co. Madras v. V.O. Tractors Export, Moscow Another, reported in (1969) SC Page 233 at Spl Pg: 239, wherein at paragraph 12, it is observed as under: It is often made a condition of a mercantile contract that the buyer shall pay for the goods by means of a confirmed credit, and it is then the duty of the buyer to procure Iris bank, known as the issuing or originating bank, to issue an irrevocable credit in favour of the seller by which the bank undertakes to the seller, either directly or through another bank in the seller's country known as the correspondent or negotiating bank, to accept drafts drawn upon it for the price of the goods, against tender by the seller of the shipping documents. The contractual relationship between the issuing ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , `without any objections . 23. The Learned Counsel for the Appellant proceeds to point out that the instant `Section 7 Application , under the I B Code, 2016, was filed before the `pandemic and there is no prohibition for initiating `Corporate Insolvency Resolution Process , against the `Respondent . 24. The Learned Counsel for the Appellant contends that the facts of the instant case, are completely different from the decision of the Hon ble Supreme Court of India in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. (vide Judgment dated 12.07.2022 in Civil Appeal No. 4633 of 2021), because of the fact, in the present case, the `Appellant / Bank , by means of numerous documents had exhibited that the `Respondent / Corporate Debtor , is clearly an `Insolvent , and unable to pay its `Debt , its operations are shut with no possibility of payment, and that apart, there are no expected significant receivables, in future, as in Vidarbha s case. Appellant s Decisions: 25. The Learned Counsel for the Appellant relies on the decision of the Hon ble Supreme Court of India in Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co., reported in (2007) 8 SCC at Pages 110 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant . 27. The Learned Counsel for the Appellant / Bank seeks in aid of the decision of the Hon ble Supreme Court of India in Sesh Nath Singh Anr. V. Baidya Bati Sheoraphuli Co-operative Bank Ltd. Anr. (2021) 7 SCC at Page 313 at Spl Pg: 345, wherein at paragraphs 86 87, it is observed as under: 86. An Adjudicating Authority under the IBC is not a substitute forum for a collection of debt in the sense it cannot reopen debts which are barred by law, or debts, recovery whereof have become time-barred. The adjudicating authority does not resolve disputes, in the manner of suits, arbitrations and similar proceedings. However, the ultimate object of an application under Section 7 or 9 IBC is the realisation of a debt by invocation of the Insolvency Resolution Process. In any case, since the cause of action for initiation of an application, whether under Section 7 or under Section 9 IBC, is default on the part of the Corporate Debtor, and the provisions of the Limitation Act 1963, as far as may be, have been applied to proceedings under the IBC, there is no reason why Section 14 or 18 of the Limitation Act would not apply for the purpose of computation of the period of lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editor fails to provide evidence as required, the Adjudicating Authority shall be at liberty to take an appropriate decision. If the application is incomplete, it can return the same to the Financial Creditor for rectifying the defect. This has to be done within 7 days of the receipt of notice from the Adjudicating Authority. However, the I B Code does not envisage a pre-admission enquiry in regard to proof of default by directing a forensic audit of the accounts of the Financial Creditor , Corporate Debtor or any financial institution . Viewed thus, the impugned order cannot be supported. Application under Section 75 of the I B Code on behalf of the Corporate Debtors cannot be permitted to frustrate the provisions of the I B Code when the matter is at the stage of admission. Section 75 is a penal provision which postulates an enquiry and recording of finding in respect of culpability of the Applicant regarding commission of an offence. The same cannot be allowed to thwart the initiation of Corporate Insolvency Resolution Process unless in a given case forgery or falsification of documents is patent and prima facie established. 30. The Learned Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under subsection (7), the adjudicating Company Appeal (AT) (Ins) No.441 of 2019 authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. 15. From the above, it is clear that at the stage of admission of Application under Section 7, the requirement is to give limited Notice and the considerations would be to see whether or not satisfaction by Adjudicating Authority could be reflected on the basis of Sub-Section (5) of Section 7. If there is a financial debt, which is more than Rs.1 Lakh and there is a default and if the Application is complete, the Application would have to be admitted. The Corporate Debtor is entitled to point out that a default has not occurred in the sense that the 'debt' which may include a disputed claim is not due. Corporate Debtor may point out that the debt is not due by showing that it is not payable in law or in fact. 31. The Learned Counsel for the Appellant relies on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature. Respondent s Submissions: 33. The Learned Counsel for the Respondent submits that in Vidarbha Industries case, the Hon ble Supreme Court of India, had noted that the Existence of a `Financial Debt and `Default , in payment thereof, only gave the `Financial Creditor , the right to `Apply for an initiation of `Corporate Insolvency Resolution Process and that the `I B Code, 2016 , intended on conferring a `Discretion , with the `Tribunal , to `Admit or `Reject an `Application , filed under Section 7 of the Code, 2016, by a `Financial Creditor , thereafter. Also, according to the Respondent, the Hon ble Supreme Court had observed that the `Tribunal has a `Discretionary Power , under Section 7 (5) (a) of the I B Code, 2016, to keep an `Admission of an `Application of a `Financial Creditor , in abeyance as per decision of the Hon ble Supreme Court of India in Vidarbha Industries Power Ltd. v. Axis Bank Limited (Civil Appeal No. 4633 / 2021 dated 12.07.2022 vide Paragraphs 75 to 77). 34. According to the Respondent, it is a `solvent company , paying all taxes, statutory payments, salaries to the Employees, Phone Bills, Electricity Bills, etc., withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent points out that the Respondent /Company, had requested for a `Golden Hand Shake , through its Letter dated 06.10.2016 and payment of Rs.10,63,00,000/- to the Bank and after the said payment, the outstanding balance of the Respondent Account was only Rs.8,77,41,619/- which is evident from the True Copy of the Ledger Account dated 07.10.2016 of the Respondent / Corporate Debtor in State Bank of India (Appellant / Bank) vide Page 45 of the objection dated 08.04.2021 of the Respondent (Diary No. 26690 dated 09.04.2021), the Respondent further requested the appellant vide its letter dated 07.10.2016 to adjust the said outstanding CC balance of Rs.8,77,41,619/- from the Respondent s FD a/c of Rs.11,19,53,633/- in order to clear the `entire outstanding payment , and to transfer Rs.110 Crores LC facilities to `South Indian Bank . 40. It is the version of the Respondent / Company, the `Appellant had not responded to the request made by the Company and hence, filed W.P.No.63350-51 of 2016 (GM) against State Bank of India on 09.12.2016, seeking a direction to the `Bank , to issue a `No Objection Certificate , to migrate to the other `Bank , etc., and further, a complaint i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignature of the said Rao, which clearly establishes that the said photocopies of `Letters of Credit , are `Forged and `Fabricated . In short, the `Appellant / Bank , is claiming the whole `Debt and `Default , based on the aforesaid photocopies of the created / concocted / forged and purported `Letters of Credit . 46. The Learned Counsel for the Respondent / Company points out that a `Forensic Audit Report , submitted by `Ernst and Young was a `biased and an `arbitrary one, because the `Forensic Audit Company , itself mentions in its `Report , that the accuracy and authenticity of all the information, furnished by the `Appellant / Bank could not be confirmed, since it had solely relied upon the documents and informations submitted by the `Appellant / Bank . Therefore, it is the contention of the Respondent / Company that `CIBIL Report , prepared on the footing of such a `Forensic Report , cannot be a `Valid one. 47. According to the Respondent / Company, when the sanctioned amount is Rs.20 Crores and the Principal and Interest outstanding is ZERO, the Appellant / Bank had not given any explanation as to how the Appellant / Bank had arrived at the `Outstanding Sum and Ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises an arguments that the case of the Appellant / Bank, is hit by the `Rule of Acquiescence and `Rule of Estoppel and hence, requires an elaborate evidence and a `Trial in O.A. No. 725 of 2018, Also that, there is a serious `Dispute between the Appellant / Bank and the Respondent before the other Courts and in fact, it is clear case of `Forgery , `Manipulation of alleged `Letter of Credits , in question. 52. The submission of the Learned Counsel for the Respondent is that, the facts and circumstances of the instant case, clearly prove that there exists a serious `Dispute in regard to the alleged `Debt and `Default and on the footing that `Multiple Cases , are pending before the `Courts / `Tribunals , for an `Adjudication . Therefore, on the side of the Appellant / Bank, a request is made before this `Tribunal , to dismiss the instant `Appeal , filed by the Appellant with heavy costs in the interest of `Justice and `Equity . Respondent s Citations: 53. The Learned Counsel for the Respondent refers to the Judgment of the Hon ble Supreme Court of India in Vidarbha Industries Power Ltd. v. Axis Bank Limited (vide Civil Appeal No. 4633 of 2021 dated 12.07.2022), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the application of the Financial Creditor in abeyance, unless there is good reason not to do so. The Adjudicating Authority may, for example, admit the application of the Financial Creditor, notwithstanding any award or decree, if the Award/Decretal amount is incapable of realisation. The example is only illustrative. 54. The Learned Counsel for the Respondent cites the decision of this `Tribunal in Park Energy Pvt. Ltd. v. Syndicate Bank Anr. 2020 SCC Online NCLAT 637, wherein at Paragraphs 12 29, it is observed as under: 12. While referring to Section 7 of the IBC and also which has been interpreted by the Hon'ble Supreme Court in Innoventive Case (Supra) where it has been categorically held that default on the part of the Corporate Debtor sine qua non of an application under Section 7. 'Default' is defined in section 3 (12) as non-payment of debt when whole or any part of instalment of the amount of debt has become due and payable and is not paid by the debtor or the Corporate Debtor as the case may be. 29. We have carefully perused the record of the case, argument advanced on behalf of the parties and gone through the written submissions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Bank (lead bank) vide letter dated 27.12.2018 the Respondent No. 1 failed to comply the decision taken on meeting dated 05.12.2018 and filed an Application under Section 7 of the IBC which was mechanically allowed by the Ld. Adjudicating Authority. The Ld. Adjudicating Authority overlooked the facts and also Judgment of the Hon'ble Supreme Court in the case of Innoventive Industries Ltd. Vs. ICICI Bank Anr. (2018) 1 SCC 407. In the face of ample and weighty evidence on record, it cannot be said that the Corporate Debtor is under no obligation to discharge its liability in respect of the 'Financial Debt' payable to the 'Financial Creditor' but the mere fact of debt being due and payable in law is not enough to justify initiation of Corporate Insolvency Resolution Process at the instance of Financial Creditor unless it establishes default on the part of the Corporate Debtor in regard to the debt. The onus of proof of default on the part of Corporate Debtor lies on the Financial Creditor and it has to demonstrate that default has occurred on account of failure on the part of Corporate Debtor to discharge its liability. In the instant case, Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... else. In the inter-se dispute of Financial Creditors, Respondent No. 1 may have faced discrimination as regards release of money from TRA Account but that would not render the Corporate Debtor accountable for default. In these circumstances, triggering of Corporate Insolvency Resolution Process at the instance of Respondent No. 1 is unwarranted. This is not the case where the Corporate Debtor is invoking Inter Creditor Agreement to wriggle out of its liability. The Corporate Debtor having performed his part of the contract by placing its entire collection in the Trust Retention Account (TRA) in accordance with the terms of the agreement cannot be said to be in default. Release of the amount due to Respondent No. 1 in terms of the 'Punjab National Bank Consortium Inter-se Agreement' read together with Trust Retention Account (TRA) Agreement is an in house contractual arrangement inter-se the Creditors for which the Corporate Debtor cannot be blamed. Initiation of Corporate Insolvency Resolution Process in the facts and circumstances, as noticed, cannot be appreciated as the same falls foul of the mandate of Section 7 of the I B Code. Viewed thus, the impugned order c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2016 as of Buyer- Seller. In an Application under Section 7 of Insolvency and Bankruptcy Code, 2016 it is not possible in the summary jurisdiction to enter into detailed analysis at the instance of a party that real transaction is different. Such exercise may be possible in a suit when there is dispute regarding the real nature of transaction. This however, is not possible in summary proceeding under Insolvency and Bankruptcy Code, 2016, the main object of which is not recovery of money but to see if Resolution of a Corporate Debtor is necessary. 57. The Learned Counsel for the Respondent falls back upon the decision of the Hon ble Supreme Court of India, in Radha Exports (India) Pvt. Ltd. V. K.P. Jayaram, reported in 2020 (10) SCC at Page 538, wherein at Paragraph 39, it is observed as under: 39. There are, as observed above cogent records including letters signed by the Respondents 1 and 2 which evince that on 6-10-2007, Respondent2 resigned from the Board of the Appellant Company and at that time the Respondent2 requested the Appellant Company to treat the share application money of Rs.90,00,000 as share application money of Mr. M. Krishnan and to issue shares for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is a `Miscarriage , in the exercise of the same, it can be reviewed, by the `Appropriate Authority concerned. Application under Sec.7 of I B Code, 2016: 63. It is relevantly pointed out that filing of an `Application under Section 7 of the I B Code, 2016, it to be considered by an `Adjudicating Authority , on its own merits, taking into consideration of the relevant materials on record. 64. Under the I B Code, 2016, the `Shift is from `inability to pay , to an `existence of Default . Although, a `Debt , is disputed, if the `Sum is `more than Rupees One Lakh , an `Application under Section 7 of the Code, is `per se maintainable . 65. In reality, the period of 14 days, which is permitted to an `Adjudicating Authority , to render a `Decision , is only `Directory and not a `Mandatory one. 66. A `Corporate Debtor , is entitled to point out that a `Default , had not occurred Viz., that `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 Fact . The `Adjudicating Authority , is not enjoined with any duty, to determine the `Sum of Default . 67. It is to be remembered that in `Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Seventy Eight Paise only) 31/01/2019 as on which includes Principal Rs.113,37,61,348.78 (Rupees One Hundred Thirteen Crore Thirty Seven Lakh Sixty One Thousand Three Hundred Forty Eight and Seventy Eight Paise only) and interest of Rs.33,56,31,933 (Rupees Thirty Three Crore Fifty Six Lakh Thirty One Thousand Nine Hundred Thirty Three only). Account No. Principal Amount (Cr.) Interest (Cr.) Total Outstanding (Cr.) 30770234121 Rs.113.38 33.56 146.93 71. It is pointed out that the `Date of Default , was 20.10.2016 (Account became irregular) and the `Date of Non Performing Asset as on 17.01.2017. Furthermore, the Appellant / Bank, had obtained a `copy of confirmation of `Deposits of Title Deeds dated 21.05.2009, 07.01.2011, 20.03.2012 and 04.06.2015 from the Respondent / Corporate Debtor. Also, the `Appellant / Bank , had obtained the `Copy of Memorandum confirming the extension of `Deposit of Title Deed dated 06.01.2011, 19.03.2012, 29.03.2012, 25.03.2015. 72. The Respondent / Corporate Debtor had executed an ` ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted `OD Penal Interest , for five months from 31.01.2016 to 31.05.2016, are as under: (i) Rs.92,550/- on 31.01.2016 (ii) Rs.1,25,025/- on 29.02.2016 (iii) Rs.1,22,270/- on 31.03.2016 (iv) Rs.1,00,738/- on 30.04.2016 (v) Rs.1,16,438/- on 31.05.2016 and in short, the `Total Sum of Rs.5,57,021/- is debited from the Corporate Debtor s Account without any `Default or `Irregularity of the `Corporate Debtor . In this regard, a specific contention was raised by the Respondent / Corporate Debtor, in the `Counter Claim , filed before the `Debts Recovery Tribunal in OA No. 725 of 2018. 76. On behalf of the Respondent, it is brought to the notice of this `Tribunal , that the `Appellant / Financial Creditor , had debited 0.30% as `Acceptance Charges , which was not applicable to `Bills drawn under Branches own `Letter of Credits . Furthermore, the `Appellant / Bank , had charged Rs.4,24,634/- towards the LC Opening of Rs.7,68,57,500/-. On 20.02.2016, the Bank had also charged Rs.2,90,148/- on 25.02.2016 towards LC Opening of Rs.7,50,82,500/-. These aspects, were raised in the Counter Claim in OA No. 725 of 2018, on the file of the `Debts Recovery Tribunal . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up its reputation. Moreover, the Corporate Debtor had cleared of entire Rs. 45 Crore of Cash Credit Facilities as on 07.10.2016 and it is evident from the Bank Records that the entire payment of Rs.259,23,56,889/- was paid by the Corporate Debtor from 01.04.2014 to 13.10.2016. There was no `Default or `Dues , from the `Corporate Debtor , as on 13.10.2016, when there was no `Letter of Credit issued by the `Financial Creditor , after 13.10.2016. 82. The contention advanced on behalf of the Respondent is that, the `Application filed by the Appellant / Financial Creditor was a premature one and in any event, the Appellant / Bank is not entitled to get its Section 7 Application, filed before the `Adjudicating Authority , to be admitted, for initiating `Corporate Insolvency Resolution Process , since it had indulged in misuse and abuse of different `Judicial Forums . 83. The Appellant / Bank in its `Rejoinder dated 13.04.2021 (in CA AT INS No. 80 of 2021 (TA No. 38 of 2021), had mentioned that the Respondent had addressed numerous communications pursuant to the `Sanction / `Grant of Credit Facilities dated 05.10.2016 and in fact, a `Letter of Credit is an unconditional prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,49,27,200.00 28.09.2016 0505316LC0000902 0505316LU0001321 19.12.2016 10,24,67,200.00 05.10.2016 0505316LC0000919 0505316LU0001354 26.12.2016 10,84,04,000.00 85. According to the Appellant / Bank, the Respondent / Corporate Debtor was availing `Credit Facilities from the Bank from the year 2009 onwards and the availability of certain `Board Resolution dated 25.06.2014 or any subsequent thereto would have no relevance to the determination of `Default , by the `Respondent / Corporate Debtor . 86. In the Section 7 Application (Form I of the Code), under Part IV (`Particulars of Financial Debt ), it was mentioned that the `Amount claimed to be in `Default was Rs.146,93,93,281.78 as on 31.01.2019, on which, includes Principal of Rs.113,37,61,348.78 and interest of Rs.33,56,31,933. The Total Outstanding was Rs.146.93 Crore and the Date of Default on 20.10.2016 when the `Account of the `Respondent / Corporate Debtor , became an irregular one. The Date of NPA was on 17.01.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2016, enclosing the Balance Sheet of the Respondent / Corporate Debtor for the Financial Year 2015-2016. As a matter of fact, in the `Notes to Financial Statement for the year ended 31.03.2016 , under the Caption `Total of Short Term Borrowings (`Particulars ), the following was mentioned: Particulars 31.03.2016 31.03.2015 Security details, Interest Rate Repayment terms SBI 8,05,27,411 7,19,87,039 Interest rate : 11.05% Security included with other Credit Facilities extended by SBI Primary Security of Hypothecation of all Stocks, receivables and Other Current Assets Collateral Security. Personal Guarantee of Mr. Dayananda, Managing Director, Other Directors. Corporate Guarantee of M/s. Bharath Infra-Tech Pvt. Ltd. 90. The Respondent / Corporate Debtor s Standalone Financial Statements for the period from 01.04.2016 to 31.03.2017, is filed by the Appellant / Bank s side, to show that the `Respondent / Corporate Debtor , had admitted and acknowledged the `Debt , owed to the `Bank , on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is debited from our account as stated above which can help in smooth settlements. 93. In the aforesaid Letter dated 06.10.2016, of the Respondent / Corporate Debtor, addressed to the Appellant / Bank, it was mentioned that the Respondent / Corporate Debtor is having a `Sanction of Rs.157.22 Crore Credit Facilities through the Bank s Sanction Letter dated 23.03.2015, etc. 94. Besides the above, the Respondent / Corporate Debtor in its Letter dated 03.11.2016, addressed to the `Asst. General Manager of the Appellant / Bank, on the subject `Regarding opening of LCs on Bharath Infra Exports and Imports Limited (with reference to Bank s Letter dated 20.10.2016, 02.11.2016 and 03.11.2016 and the Respondent s Letter dated 06.10.2016, 13.10.2016, 18.10.2016, 25.10.2016 and 27.10.2016) had stated as under: Since it is very difficult for us, to recover payments from our customers due to the incomplete supply of their respective orders, we requested many times to open our LC s at 10% Margin, as per the terms of the sanction letter which is in force. But without opening LC s on our suppliers, you are pressurising for the payment of devolved LC s Dated 20.10.16, 26.10.16 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk of India norms, which is not accepted by the `Respondent / Corporate Debtor . 99. According to the Respondent / Corporate Debtor, when the `Forensic Audit company itself states that the `Accuracy and `Authenticity of all the information, provided by the `Appellant /Bank , could not be confirmed, then the `CIBIL Report , prepared on the basis of such `Report , is not a `Valid one, etc. 100. The contention of the Respondent /Corporate Debtor is that the `Tribunal , had disposed of the main `Petition CP(IB) No.112/BB/2019, filed by the `Appellant / Bank , by issuing `Directions , for a detailed `Joint Scrutiny and `Reconciliation of Accounts and the `Demands , raised by the `Appellant / Bank , in a timebound manner and as expeditiously as possible. Further, in the instant case on hand, no `Debt exists, if it is not liable to be paid in `Law . 101. Not resting with the above, the Respondent / Corporate Debtor in their `Objection , filed before the `Tribunal , (dated 09.4.2021, vide Diary No.26690 has averred that `the Respondent, has resources and is also willing to pay any such `Outstanding Amount , which arises after `Reconciliation and `Scrutiny of Accounts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dayanand and with personal guarantee of legal heirs of Late Mr. Thimma Reddy. (g) Increase in LC margin from existing 10% to 15%; The above facilities were sanctioned with the following conditions: (i) No further investments in Associates and Subsidiaries to be made without prior approval of the Bank; (ii) Completion of proper due diligence on suppliers; (iii) Penal Interest is applicable for delay in submission of audited balance sheet. 106. On 04.11.2016, the Appellant / Bank, had informed the Managing Director of the Respondent / Corporate Debtor, in regard to the `Devolvement of LCs : irregularity in Cash Credit Account . 107. On 28.11.2016, the Appellant / Bank s Asst. General Manager, had inter alia mentioned that the present Balance in Respondent s Account was Rs.78,94,20,873.03, it was irregular by Rs.58,94,20,873.03. The Account was irregular from 20.10.2016 and the irregularity was continuing, despite the Bank s repeated requests for Regularisation. 108. The Appellant / Bank, had filed OA No. 725 of 2018, before the Debts Recovery Tribunal, Bengaluru, against the Respondent / Corporate Debtor and others (Defendants), wherein, the Bank ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority, at Paragraph 39 of the `impugned order , had observed that ` we have to take notice of the impact of the present financial distress caused by the global Novel Corona virus pandemic necessitating a nationwide lockdown in the last about 8 months that has paralysed businesses across the country. Major decisions have been taken to protect industry from its effects, to inject economic stimulus and to revive the economy, on 24.03.2020, the minimum threshold of default was increased from Rs.1 Lakh to Rs.1 Crore etc. Modifications and suspension of various provisions of the Code have been initiated so that companies facing financial stress due to the pandemic can be supported rather than be pushed into CIRP, else in the present scenario they may end up in liquidation and lose value further, which is not the objection of the Code. IBC itself has been suspended. Debts are being restructured as per Government guidelines. In this scenario, it cannot be ascertained as to what value the assets of the Corporate Debtor and its running business would have in the open market so as to attract a viable resolution applicant and whether it would be a fruitful exercise to pus the Corporate Debtor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt , within 14 days. In fact, as per Section 7 (5) (a) of the Code, an `Adjudicating Authority , is either to `Admit an `Application or `Reject the `Application , as per Section 7 (5) (b) of the `Code . 121. As far as the instant case is concerned, the Respondent / Corporate Debtor had committed the `Default of the Debt , arising on `Devolvement of Letters of Credits , and in fact, the Respondent / Corporate Debtor s Statement of Accounts (from 02.12.2015 to 31.12.2016; 01.01.2017 to 21.03.2018 and the Total Due as on 31.01.2019, evidences the `Default in respect of Account No.30770234121). Also, the `CIBIL Report , clearly exhibits the `existence of Debt , by the Respondent / Corporate Debtor. 122. The Respondent / Corporate Debtor had acknowledged the `Debt / `subject Letters of Credits , in their Statements dated 07.10.2016 and 09.11.2016. The Balance Sheet for the years 2015-2016, 2016-2017, 2017-2018 of the Respondent / Corporate Debtor unerringly points out the `Admission and the `Acknowledgement of `Debt , to be paid to the `Appellant / Bank , on account of the `Devolvement of Letters of Credits . 123. In reality, the Respondent / Corporate Debtor, in its Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect of `Letters of Credits , were not countersigned by the Authorised Representative (Dr. D.C. Mohan) of the Respondent / Corporate Debtor, this `Tribunal , pertinently points out that from 17.01.2015 to 03.02.2015, the Seven LCs were opened and signed by the said Dr. D.C. Mohan (Authorised Signatory) and they were honoured and paid by the Respondent, without any demur. In short, the said Dr. D.C. Mohan (Authorised Representative), had signed the subject Ten LC Documents. In short, through the `Board Resolution , the `Authorised Signatory Dr. D.C. Mohan was authorised by the Respondent / Corporate Debtor, to sign the Documents pertaining to the `Letters of Credit . Therefore, the contra plea taken on behalf of the Respondent / Corporate Debtor, is `unworthy of acceptance . 128. One cannot brush aside the prime fact that the `Letters of Credits , were availed by the Respondent / Corporate Debtor from 28.07.2016 to 05.10.2016 and they were honoured later on their respective due dates. In Law, the Appellant / Bank, is duty bound to honour the `Letters of Credits , subject to its terms. When the fact of the matter is, that the Respondent / Corporate Debtor had availed the `Lette ..... X X X X Extracts X X X X X X X X Extracts X X X X
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