R.P. Nagrath, Judicial Member.
1. The petitioner has also impleaded the directors and guarantors as respondents No. 2 to 9 in the Memo of Parties, but being not necessary parties in the matter, their names are ordered to be struck off from array of respondents.
2. Punjab National Bank the 'Financial-Creditor', a body corporate constituted under the Banking Companies (Acquisition & Transfer of Undertakings Act. 1970) having its registered office at No. 7, Bhikhaji Cama Place, New Delhi through its Branch Office at Amritsar has filed this application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (to be herein-after referred to as the Code) for initiating the insolvency resolution process in respect of M/s. Concord Hospitality Pvt. Ltd. the Respondent-Corporate Debtor. The application has been filed in Form No. 1 prescribed under rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity, the 'Rules'). This petition has been filed through Ms. Richa Malhotra, Officer of the 'Financial Creditor' on the basis of General Power of Attorney dated 17.05.2016 (Annexure A-1) issued in her favour by the bank. The Circle Head of the bank also authorised Ms. Richa Malhotra for initiating the insolvency resolution process under the 'Code' against the 'Corporate Debtor', vide letter dated 15.05.2017 (Annexure A-2).
3. 'Corporate-Debtor' was incorporated on 29.09.2005 having authorised share capital of Rs. 7,00,00,000/- (Rupees seven crores only) and paid up capital of Rs. 5,85,42,010/- (Rupees five crores eighty-five lacs forty-two thousand and ten only). It has been allotted CIN No. U55100PB2005PTC29009. The registered office of the 'Corporate-Debtor' is at Amritsar and thus the matter falls within the territorial jurisdiction of this Tribunal.
4. The 'Financial-Creditor' also proposed the name of C.A. Navneet Gupta, #1598, Level-I, Sector 22-B, Chandigarh, Email: email@example.com. as Interim Resolution Professional to satisfy the requirement of Section 7(3)(b) of the 'Code' Mr. Navneet Gupta, CA has filed the written communication in Form No. 2 (Annexure A-44) which is found in order.
5. It is stated that the total loan granted to the Corporate-Debtor' was Rs. 25,00,00,000/- (Rupees twenty-five crores only) with details of disbursement mentioned at Annexure A-3 (colly), These are different term loans and working capital (cash credit facility). The Term Loan No. I was for Rs. 13.00 crores; Term Loan No. II for Rs. 4.50 crores; Term Loan No. III for Rs. 5.00 crores and CC limit of Rs. 2.50 crores.
6. The 'Financial-Creditor' has also relied upon various documents of loan. In respect of the Term Loan No. I, the documents are at Annexure A-9 to 15. Annexure A-9 is the loan application; the sanction letter dated 23.11.2006 Annexure A-10; resolution of Board of Directors of the 'Corporate-Debtor' of the year 2006 Annexure A-12; document of hypothecation of assets Annexure A-13 dated 01.12.2006; the agreement of term loan of December, 2006 Annexure A-14 and guarantee agreement Annexure A-15 (colly).
7. Similarly, various documents of Term Loan No. II are from Annexure A-16 to A-21 of the year 2011 and for Term Loan No. III at Annexure A-22 to A-28. In respect of the working capital loan the documents are from Annexure A-29 to A-33 comprising of the sanction letter dated 31.01.2012, hypothecation deed, guarantee agreement and the renewal letter of the year 2015. The 'Financial-Creditor' also placed on record copies of Statements of Account in respect of all the four loan facilities. These are from Annexures A-36 to A-39.
8. It is further disclosed that the 'Corporate-Debtor' along with its directors/guarantors mortgaged the below mentioned property in favour of applicant by way of deposit of various sale deeds along with all the movable property, plant, machinery, machinery spares, tools and accessories, office equipments, computers furniture and fixtures both present and future.
DESCRIPTION OF PROPERTIES MORTGAGED
(a) 1st pari pasu charge over fixed assets of the company present and future including Land & Building situated at Ajnata Road Opposite Amritsar international Airport, Amritsar.
(b) Extension of charge over the SCO No. 166 Sector 38 C & D Chandigarh.
(c) Extension of charge over the SCO No. 205 Sector 36D, Chandigarh.
(d) Extension of charge over the SCO No. 167 Sector 38 C & D, Chandigarh.
(e) Extension of charge over the COMMERCIAL LAND AND BUILDING AND LAND AT G.T. Road, Amritsar
(f) Extension of charge over the residential property bearing No. 21, Block L, Birch Court, Nirwana Country, South City 2, Phase II Gurgaon Haryana.
(g) Extension of charge over the residential property bearing No. 30, Road No. 64, Village Madipur West Punjabi Bagh New Delhi.
(h) Exclusive charge of Property bearing Pt No. 75, 76, 77, Khasra No. 22/120 Min situated at Rakba Village Sichandar, Tehsil & distt. Amritsar Vide Sale Deed 9803 dated 10.10.2006.
Entries were made in the relevant register of the Bank in proof of creation of equitable mortgage by deposit of title deeds. These entries are at Annexure A-34 (colly) from pages 622 to 625 of the Paper Book. The Certificate of Registration of Charge entered in the record of Registrar of Companies is at Annexure A-6 (colly).
9. It is further stated that due to continuous default committed by the 'Corporate-Debtor' the account of the 'Corporate-Debtor' was declared as Non-Performing Asset (NPA) on 14.07.2016 and the petitioner bank issued the recall notice dated 31.01.2017 Annexure A-4, The 'Corporate-Debtor' is said to have defaulted for an amount of Rs. 13,34,38,741.78 as on 01.07.2016 plus the interest w.e.f. 01.07.2018 and according to 'Financial-Creditor' the amount of default up to 30.04.2017 comes to Rs. 14,76,36,740.34.
10. When the matter was listed for the first time before the Tribunal on 11.07.2017 it was noticed that statements of account of the 'Corporate-Debtor' relied upon by the Financial-Creditor' were not certified under the Bankers' Books Evidence Act. Notice of this defect was issued to the petitioner and learned counsel for the petitioner present accepted the notice. It was directed to make compliance within a period of seven days. Notice of this petition was also directed to be issued to the respondent The 'Financial-Creditor' also filed fresh account statements duly certified under the Bankers' Books Evidence Act with the affidavit of Authorised Signatory of the bank.
11. The 'Corporate-Debtor' has also filed the objections in writing. It is stated that the petition deserves to be dismissed as the petitioner did not comply with paragraph-7 of Part-V of the application prescribed under the rules, requiring copies of the Entries in a Banker's Book in accordance with the Bankers Books Evidence Act. 1891. It is averred that the 'Financial-Creditor' had not submitted the copies of Entries in a Banker's Book in accordance with the aforesaid Act, The defect having been noticed by the Adjudicating Authority when the matter was listed on 11.07.2017 seven days time was granted to the petitioner to furnish the required documents. The defect could be removed on or before 18.07.2017 and there is thus violation of the mandatory requirement of proviso to sub-section (5) of Section 7 of the Code. It was further stated that notice of the petition issued to the respondent for 21.07.2017 was received by the 'Corporate-Debtor' on 18.07.2017 The Tribunal directed the counsel for petitioner to supply certain documents/affidavit to respondent No. 1 but the compliance has not been made.
12. On merits it was stated that the petitioner has concealed important and relevant facts from the Tribunal in as much as the Corporate-Debtor' was sanctioned various loan facilities by the consortium comprising of three banks i.e. State Bank of India, IDBI Bank and Punjab National Bank (petitioner). The lead bank is State Bank of India but no approval to file this petition was obtained from either the State Bank of India or IDBI Bank. However, the factum of grant of loan facilities and that the 'Corporate-Debtor' committed default in making repayment of debt has not been disputed. It was rather stated that on 26.07.2017 the 'Corporate-Debtor' submitted an application to the petitioner bank for review-cum-restructuring proposal which was received by the Chief Manager of the bank. The 'Corporate-Debtor' also proposed to deposit an amount of Rs. 125 lacs. After some discussion it was verbally conveyed by the officials of Bank that on such deposit by the 'Corporate-Debtor' the bank would restructure the loan facilities by withdrawing the present application. It was further stated that the 'Corporate-Debtor' was in the process of arranging funds and to deposit the aforesaid amount with the bank.
13. We have heard learned counsel for the parties and have perused the record with their able assistance.
14. It was contended by learned counsel for the 'Corporate-Debtor' that the loan facilities were granted by the consortium of three banks, with State Bank of India as the lead bank, the present application would not be maintainable without getting approval of the other two banks. We find no substance in this contention. The petitioner bank is undoubtedly a 'Financial-Creditor' qua the loans granted by it and entitled to make an application for initiating corporate insolvency process in terms of Section 7(1) of the Code which reads as under-
"A financial creditor either by itself or jointly with other financial creditors may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has been occurred.
Explanation: For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor."
15. The other submission of the 'Corporate-Debtor' that a proposal has been made to the petitioner bank requesting to restructure the loan by proposing to deposit Rs. 1,25,00,000/- cannot be accepted as the account of the petitioner has been declared N.P.A. whereupon recall notice dated 31.01.2017 (Annexure A-4) was issued. We are of the view that there cannot be any preferential treatment to the petitioner in comparison with the claims of other financial-creditors as all would be constituting the "Committee of Creditors", in the event of an order of admission.
16. The other contention of learned counsel for the 'Corporate-Debtor' was that as per paragraph 7 of Part-V of Form No. 1 the 'Financial Creditor' is required to attach copies of the entries in accordance with the Bankers' Books Evidence Act. This defect was noticed by the Tribunal when the matter was listed on 11.07.2017 and seven days time was granted for removal of the same. However, the petitioner bank filed the fresh account statements in the Tribunal on 20.07.2017 i.e. more than seven days from 11.07.2017 and therefore, the application may be rejected. This contention of the learned counsel is based on proviso to Section 7(5) of the 'Code' which reads as under:-
"Where the Adjudicating Authority is satisfied that-
(a) a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application; or
(b) default has not occurred or the application under sub-section (2) is incomplete or any disciplinary proceedings is pending against the proposed resolution professional, it may, by order, reject such application:
Provided that the Adjudicating Authority shall, before rejecting the application under clause (b) of sub-section (5), give a notice to the applicant to rectify the defect in his application within seven days of receipt of such notice from the Adjudicating Authority."
17. Leaned counsel for the 'Financial-Creditor" however, submitted that though all the particulars of application in Form No. 1 were complete, yet as an abundant caution the petitioner's counsel filed application for condonation of delay of two days in filing the statement of account duly certified under the Bankers' Books Evidence Act, on the ground that the counsel for the applicant bank was admitted in the hospital on 14.07.2017 and had undergone surgery of intestine on 15.07.2017.
18. Having given thoughtful consideration, we are of the view that as per paragraph 7 Part-V of Form No. 1 the bank is required to file copies of the Entries in the Banker's Books maintained in accordance with the Bankers Books Evidence Act, 1891 which the 'Financial-Creditor' had furnished but to make the said statements admissible per se necessary certificate was appended on the statements of account furnished with the affidavit dated 19.07.2017 of the Authorised Signatory of the bank as noticed in the order dated 11.07.2017. The requirement of the Paragraph 7 Part-V of Form No. 1 precisely is that the bank has to file copies of the account statements which should be maintained as per the Bankers Books Evidence Act, 1891 and to attach copies thereof. The same were accordingly attached with the application originally. The 'Corporate-Debtor' being in default in depositing the financial debt was not in fact disputed rather attempt was made for restructuring of the loan by offering to deposit an amount of Rs. 125 lacs which is not permissible as already observed.
19. In view of the above discussion and perusal of the record, we are satisfied that the 'Financial-Creditor' has proved by overwhelming evidence that default has occurred, which meets the requirement of Section 3(11) & 12 read with Section 7(3)(a) and Section 7(5) of the Code. The 'Corporate-Debtor' in fact has not disputed that it is in default of making repayments. We further find that the application is complete in all respects as the Insolvency Professional, Mr. Navneet Gupta, CA has also been proposed.
20. As a sequel to the above discussion, this petition is admitted and Mr. Navneet Gupta, CA, # 1598, Level-I, Sector 22-B, Chandigarh whose name also figures in the latest list of Insolvency Professionals issued by the Insolvency & Bankruptcy Board of India is appointed as an Interim Resolution Professional.
21. In pursuance of Section 13(2) of Code, we direct that public announcement shall be immediately made by the Interim Resolution Professional with regard to admission of this application under Section 7 of the Code. We also declare moratorium in terms of Section 14 of the Code. A necessary consequence of the moratorium flows from the provisions of Section 14(1)(a), (b), (c) & (d) and 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 corpor
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ate 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 properly by an owner or lessor where such property is occupied by or in the possession of the corporate debtor." 22. It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government or the supply of the essential goods or services to the Corporate Debtor as may be specified is not to be terminated or suspended or interrupted during the moratorium period. 23. The Interim Resolution Professional shall perform all his functions religiously and strictly which are contemplated, inter alia, by Sections 15, 17, 18, 19, 20 & 21 of the Code. It is further made clear that all the personnel connected with the 'Corporate-Debtor', its promoters or any other person associated with the Management of the 'Corporate-Debtor' are under legal obligation under Section 19 of the Code to extend every assistance and cooperation to the Interim Resolution Professional as may be required by him in managing the affairs of the 'Corporate-Debtor'. In case there is any violation the Interim Resolution Professional would be at liberty to make appropriate application to this Tribunal with a prayer for passing an appropriate order. The Interim Resolution Professional shall further protect and preserve the value of the property of the 'Corporate-Debtor' as a part of its obligation imposed by Section 20 of the Code and perform all his functions strictly in accordance with the provisions of the Code. 24. The Petition is disposed of in the above terms.