Amit Kumar Kolay vs Bank Of India & Anr

Comp. App. (AT) (Ins) No. 161 of 2023 & I.A. No. 615, 616 of 2023

(Arising out of the Order dated 10.01.2023 passed by the National Company Law Tribunal, Kolkata Bench, Court-I, Kolkata in CP (IB) No. 623/KB/2020)

IN THE MATTER OF:

Amit Kumar Kolay Designated Partner of Suryadeep Multipurpose Cold Storage LLP Resident of 348/1, G.T. Road, Chatra, Serampore, Hooghly Pin - 712204. ...Appellant

Versus

1. Bank of India, Registered Office at: Star House, G Block, Plot No. C-5, Bandra Kurla Complex (East), Mumbai.

Howrah Zonal Office At 5, BTM Sarani, Kolkata - 700001. ...Respondent No. 1

2. Surya Kantasatapathy, Interim Resolution Professional of Suryadeep Multipurpose Cold Storage LLP Address : MMS Chamer, Room No. 12, 4A, Council House Street, Kolkata, West Bengal, 700001. ...Respondent No. 2

Present

For Appellant: Mr. Joy Saha, Sr. Advocate along with Mr. Snehashish Chakraborty & Ms. Akanksha Kaushik.

For Respondents: Mr. Namit Suri along with Mr. Ravi (CS), for R- 1. -2- Comp. App. (AT) (Ins.) No. 161 of 2023

JUDGEMENT

( 19.03.2024) NARESH SALECHA, MEMBER (TECHNICAL)

1. The present Appeal i.e., Company Appeal (AT) (Insolvency) No. 161 of

2023 has been filed against the Impugned Order dated 10.01.2023 passed by the

National Company Law Tribunal, Kolkata Bench, Court-I, Kolkata (in short

'Adjudicating Authority') in CP (IB) No. 623/ KB/ 2020 where the application

of the Respondent No. 1- Bank of India ( in short 'Financial Creditor') under

Section 7 of the Insolvency & Bankruptcy Code, 2016 (in short 'Code') was

admitted and the Corporate Insolvency Resolution Process (in short 'CIRP') was

initiated.

2. Mr. Amit Kumar Kolay is the Appellant herein who was the Designated

Partner of Suryadeep Multipurpose Cold Storage LLP (in short 'Corporate

Debtor')

3. Heard the Counsel for the Parties and perused the records made available

including the cited judgements.

4. The undisputed fact of the case is that the around 2012, the Corporate

Debtor requested for credit facilities including the terms loan, cash credit facility

and bank guarantee for an overall limit of Rs. 8.01 Crores from the Respondents

which was sanctioned on 26.09.2012. It has been brought out that this overall

credit facilities limit was enhanced/ renewed/ modified from time to time, based

on the request of the Corporate Debtor and finally overall limit was sanctioned on -3- Comp. App. (AT) (Ins.) No. 161 of 2023

26.09.2019 of Rs. 20.78 Crores comprising of Terms Loan - I, Term Loan - II,

cash credit limit and bank guarantee.

5. The Appellant stated that while utilising the credit facilities, business of the

Corporate Debtor suffered due to recession and poor market conditions and

therefore, the Corporate Debtor could not meet its liability towards the

Respondents.

6. The Appellant also mentioned that the Corporate Debtor is MSME entity

and is entitled to get benefit of restructuring of its loan accounts in terms of RBI

Circular dated 17.03.2016 and according to the Corporate Debtor approached the

Respondent for restructuring.

7. It is the case of the Appellant that after restructuring, the debt was not due

on alleged default dates claimed by the Respondent, as such the admission of

Section 7 application by the Adjudicating Authority was illegal and perverse.

8. It is also the case of the Appellant that the date of default has not been

correctly reflected in the application filed under Section 7 of the Code by the

Respondents and therefore, the application should have been summarily rejected.

9. The Appellant also stated that the letter of restructuring dated 30.03.2019

clearly indicated that the repayment schedule was to commence from December

2019 and was to end in march 2029 with moratorium period of 7 months and the

interest was to be served on monthly basis as and when applied with regard to -4- Comp. App. (AT) (Ins.) No. 161 of 2023

FITL, WCTL-I and WCTL-II facility, the repayment was to commence from May

2020 and end with 12 months moratorium period.

The Appellant pleaded that despite such clear terms of restructuring of loan

accounts, the Respondent deliberately classified the loan accounts of the

Corporate Debtor as Non-Performing Assets (in short 'NPA') on 30.09.2019 even

when the repayment schedule, according to restructuring letter dated 30.03.2019,

could commence only in December 2019. The alleged NPA on 30.09.2019 was

incorrect and illegal since the repayment was to commence only in December

2019.

10. The next argument of the Appellant is regarding wrong date of defaults

used by the Respondent. The Appellant stated that the Respondent is absolutely

unclear about the date of default, as at one place the Respondent mentioned the

date of default as 01.06.2019, whereas at another place he has mentioned the date

of default as 01.04.2019 and therefore, only on this ground, the Impugned Order

deserve to be set aside.

11. The Appellant amplified that the Adjudicating Authority has failed to note

that once the loan account has been restructured on 30.03.2019 the account was

automatically upgraded same day and thus the account could not have been

declared as NPA unless the subsequent stipulated period got over on account of

default.

-5-

Comp. App. (AT) (Ins.) No. 161 of 2023

12. The Appellant argued that servicing of monthly interest was also covered

under moratorium of 7 months so the same could arise only from December 2019

and not any time before, hence the Impugned Order is wrong and unlawful.

13. The Appellant stated that in interim period after restructuring approval on

30.03.2019, the Corporate Debtor made certain payments of interest on its own,

reflecting the Corporate Debtor's good intentions which cannot be held against it

presuming as acknowledgment of debts.

14. The another plea taken by the Appellant is regarding CIBIL Report which

was enclosed by the Respondent along with the application filed under Section 7

of the Code before the Adjudicating Authority, whereas it can be found that loan

account mentioned by the Respondent in the applications were standards till

August 2019.

15. The Appellant argued that it would be travesty of justice if the accounts of

the Corporate Debtor are declared as NPA one day after restructuring which will

hit the Corporate Debtor, a MSME entity, adversely which is not intent of the

Code.

16. The Appellant reiterated that considering the payment schedule mentioned

in the restructuring sanction letter as well as supplemental term loan agreements,

the payment could have commenced from December, 2019 and at best alleged the

default could have been taken place only after 30 days from 01.12.2019, thus the -6- Comp. App. (AT) (Ins.) No. 161 of 2023

date of default as claimed by the Respondent could not have been before January,

2020 and NPA therefore, could not have taken place before April 2020.

17. The Appellant assailed the Impugned Order which failed to appreciate that

in view of moratorium having been imposed by the letter of restructuring dated

30.03.2019 which was subsisting in September 2019 therefore the question of any

default having occurred in September 2019 cannot and does not arise.

18. Concluding his argument, the Appellant stated that the Appeal should be

allowed and the Impugned Order should be set aside since there was no debt and

the alleged date of defaults are misleading and incorrect.

19. Per Contra, the Respondent refuted all the averments made by the

Appellant treating these to be as misleading, mischievous, frivolous and without

any substantial basis.

20. The Respondent gave the sequence of various events of credit facilities

granted by him to the Corporate Debtor since 2012 and indicated that the

Respondent always facilitated the Corporate Debtor in order to help the Corporate

Debtor to sustain financially.

21. The Respondent vehemently denied that the Respondent intended to take

the Corporate Debtor into the CIRP illegally and mentioned that the various

restructuring proposals were approved by the Respondent, based on the request

of the Corporate Debtor.

-7-

Comp. App. (AT) (Ins.) No. 161 of 2023

22. The Respondent submitted that despite his accommodation and flexibility,

the Corporate Debtor failed miserably, time and again, to meet its financial

obligations and to protect his rights, being custodian of public money, the

Respondent was left with no alternative but to file the application under Section

7 of the Code before the Adjudicating Authority.

23. The Respondent gave the details of various restructuring proposals and

supplemental loan agreements along with the details of FITL, WCTL-I and

WCTL-II .

24. The Respondent clarified that in terms of restructuring sanction letter, there

was moratorium of payment of instalments towards principal amount, however,

the interest on existing terms loan was to continue as usual.

25. The Respondent mentioned that the Corporate Debtor failed to pay the

interest amount towards the said term loans as well as the cash credit facilities,

due to which the loan account of the Corporate Debtor were classified as NPA on

30.09.2019 in terms of RBI Prudential Norms.

26. The Respondent submitted that the Appellant is unnecessarily trying to

mislead this Appellate Tribunal by incorrect and wrong interpretation of the terms

and conditions of restructuring sanction letter dated 30.03.2019 qua the

moratoriums servicing of interest.

27. The Respondent strongly pleading that sanction letter is absolutely clear

with specific clauses which provided that "interest will be served on monthly basis -8- Comp. App. (AT) (Ins.) No. 161 of 2023

as and when applied" which makes it certain and specific that there was no

moratorium on interest payments and the interest was to be paid on monthly basis.

28. The Respondent submitted that the Appellant, although knew the exact

terms and conditions and its meaning/implications, however, due to wrong

intentions for not making payments, took shelter of so-called assumed

misinterpretations of moratorium on interest portion.

29. The Respondent brought out that although the Corporate Debtor failed to

meet terms and conditions as contained in the restructuring sanctioned letter dated

30.03.2019 but the Corporate Debtor in fact approached the Respondent again in

2020 vide its letter dated 19.10.2020 i.e., during pendency of the said company

petition bearing CP/IB/623/KB/2020 and admitted to the default on its part as

well as classification of account as NPA on 30.09.2019 and requested for further

restructuring of credit facilities which demonstrate that the objections raised by

the Appellant in the present Appeal are "sham argument" and only afterthought.

30. The Respondent submitted that the Corporate Debtor defaulted in

repayment of outstanding dues resulting in classification of its accounts as NPA

on 30.04.2018, however, on payment of over due amount by the Corporate

Debtor, the said loan accounts were upgraded to standard category.

31. The Respondent also submitted that the Corporate Debtor again failed to

maintain its financial discipline and defaulted from June 2018 onwards resulting

in classification of its account again on 30.09.2018 as NPA, however, on payment -9- Comp. App. (AT) (Ins.) No. 161 of 2023

of the over due amount by the Corporate Debtor, the said accounts of the

Corporate Debtor were again regularised as standard accounts.

32. The Respondent further submitted that yet again the Corporate Debtor

failed to meet its repayment obligations which resulted the loan accounts to be

classified as "Special Mention Account" (in short SMA) which converted to

SMA-I on 28.02.2019 with over due amount of Rs. 40 Lakhs in Terms Loan-I,

Rs. 66 Lakhs in Term Loan-II and Rs. 20 Lakhs in Cash credit facilities.

33. The Respondent elaborating that at the request of the Corporate Debtor

regarding One Time Settlement (in short 'OTS'), the Respondent agreed to

restructure the credit facilities of the Corporate Debtor vide sanction letter dated

30.03.2019 as per terms and conditions mentioned therein which was in

accordance with notification of RBI for MSME Sector-Restructuring of Finance

- dated 01.01.2019.

34. The Respondent clarified that the Corporate Debtor had executed two

supplemental terms loan agreement dated 30.03.2019 w.r.t. Term Loan-I and

Term Loan- II thereby admitting and acknowledging to pay interest of the term

loan accounts in terms of sanction letter dated 30.03.2019 at agreed rate of interest

of @11.15% p.a to be paid on monthly basis.

35. The Respondent also submitted that the Corporate Debtor also failed to pay

interest on cash credit account and default agreed on 20.04.2019. -10-

Comp. App. (AT) (Ins.) No. 161 of 2023

36. The Respondent submitted that due to continued failure of the Corporate

Debtor, the demand notice dated 04.02.2020 was sent to the Corporate Debtor

calling him to pay Rs. 19,21,23,253/-. However, despite giving flexibility of 14

days for such repayment, the Corporate Debtor failed to make any payment and

thereafter the Respondent was constrained to file Section 7 application before the

Adjudicating Authority.

37. Concluding the arguments, the Respondent submitted that the Impugned

Order has taken into account all the facts and legal position into consideration and

there was no ambiguity regarding defaults or date of default and as such the

defence of the Appellant are moon shine defence.

38. The Respondent requested this Appellate Tribunal to dismiss this Appeal

with exemplary costs.

Finding

39. We have already noted all the facts regarding the relationship between the

Corporate Debtor and the Financial Creditor i.e., the Respondent as such, we

would like to take these facts on record and not reiterate the same for the purpose

of brevity.

40. It is undisputed fact that various credit facilities were granted by the

Respondent to the Corporate Debtor from time to time including the restructuring

of loans and supplemental loan agreements were signed by the Corporate Debtor. -11-

Comp. App. (AT) (Ins.) No. 161 of 2023

Thus, the amount of debt is undisputed, therefore, we shall not go into these

aspects.

41. The defence has been taken by the Appellant as the Designated Partner of

Suryadeep Multipurpose Cold Storage LLP, the Corporate Debtor, is two fold,

namely, (i) there was no default as debt was not due to be paid by the Corporate

Debtor and (ii) there was unclear and uncertain dates of default for which the

application was filed by the Respondent under Section 7 of the Code hence the

Section 7 application should not have been the admitted.

42. We have through the letter of the Corporate Debtor dated 19.10.2020

written to the Respondent, where the Corporate Debtor again requested the

Respondent to help them by restructuring of unpaid interest and loan for next ten

years. In this letter, the Corporate Debtor admitted its default in repayment of

principal amount & interest and acknowledged the fact of its NPA as on

30.09.2019.

From this letter, it is quite clear that the Corporate Debtor had no doubt

about the debt due on account of both principal amount and interest and resultant

default by the Corporate Debtor.

43. We have also taken into consideration the vital letter dated 30.09.2019 of

the Respondent to the Corporate Debtor for restructuring of credit facilities of the

Corporate Debtor, which makes it clear that there was no moratorium on payment

of interest.

-12-

Comp. App. (AT) (Ins.) No. 161 of 2023

Similarly we note from the supplemental loan agreements dated 30.03.2019

that the moratorium was only on principal amount and not on interest.

44. We would like to go into Bank Statement for the Corporate Debtor

maintained by the Respondent for both the loan accounts. These are as under :-

For Term Loan - I -13- Comp. App. (AT) (Ins.) No. 161 of 2023 -14- Comp. App. (AT) (Ins.) No. 161 of 2023

For Term Loan - II -15- Comp. App. (AT) (Ins.) No. 161 of 2023

From above statements, it is quite clear that the Corporate Debtor kept

paying few instalments of interest to the Respondent during alleged moratorium

period of interest as claimed by the Appellant as such plea of the Appellant about

moratorium on interest payment is not tenable in view of above bank statements.

45. We have gone through one time policy guidelines dated 15.01.2019 on

MSME restructuring of the Respondent Bank applicable to all MSME customers

including the Corporate Debtor herein.

It is also worth mentioning that restructuring letter of the Respondent dated

30.03.2019 was in accordance with their policy letter.

46. From various documents noted above, we observe that the Corporate

Debtor requested for restructuring benefit being MSME and the Respondent

sanctioned the same vide sanction letter dated 30.03.2019 as per their guidelines

dated 15.01.2019 applicable to all MSME including the Corporate Debtor. We

have taken into consideration the pleadings of the parties and note that for

restructured Funded Interest Terms Loan ( in short 'FITL') and Working Capital

Term Loan ( in short 'WCTL'), moratorium was indeed allowed, however the

said moratorium was only for principal amounts and not for interests whereas the

Appellant has taken the plea that the moratorium was blanket for both principal

amount as well as for the interest component and therefore, the moratorium was

absolute.

-16-

Comp. App. (AT) (Ins.) No. 161 of 2023

47. We have taken into account that the loan accounts of the Corporate Debtor

were classified as NPA on 30.04.2018 due to defaults by the Corporate Debtor,

however, these accounts were regularised as standard loan accounts after payment

of overdue interest and the principal amount by the Corporate Debtor.

48. We have also seen from the documents placed before us that the Corporate

Debtor had acknowledged the credit facilities in their financial statements for the

financial year 2018-19 and also issued the confirmation letter to the Respondent

thereby admitting the debt.

49. As regard, the different date of default as alleged by the Appellant, both the

parties during the pleadings before us, brought out that the Adjudicating Authority

had asked the Respondent to file a supplemental affidavit which was filed on

16.04.2019 where the Respondent elaborated that the Corporate Debtor

committed first default in 2018 the loan accounts of the Corporate Debtor were

classified as NPA on 30.04.2018, however, on payment of over due amount the

account of the Corporate Debtor were upgraded to the standard category. We also

take into account that the Corporate Debtor again defaulted and accounts of the

Corporate Debtor were classified as NPA which were regularised after part

payment of over due amount. Similarly, the Corporate Debtor once again

defaulted and his loan accounts were classified as SMA-I on 28.08.2019 and

subsequently loan accounts were restructured on 30.03.2019. In the -17- Comp. App. (AT) (Ins.) No. 161 of 2023

supplementary affidavit, the Respondent further elaborated that the loan accounts

of the Corporate Debtor were last classified as NPA on 30.09.2019.

50. Thus, we note that the loan accounts, although were declared as sub-

standard accounts or NPA on different dates, however on making payments by

the Corporate Debtor, these loan accounts of the Corporate Debtor were

regularised as standard accounts in terms of RBI Prudential Norms as well as

banks policy. Therefore, the arguments of the Appellant about different dates

indicated as default dates by the Respondent is not convincing.

51. We also take into consideration that the Corporate Debtor has executed

supplemental term loans agreements on 30.03.2019 where it was categorically

agreed to pay interest followed by restructuring of the loan account of the

Corporate Debtor.

52. We observe after going through the Clause 3.3 and Clause 2.1.2 (ii) of the

RBI Prudential Norms which states that even if interest remain overdue for a

period of more than 90 days, the said loan account shall be classified as NPA and

cash credit is to be treated as out of order if the outstanding balance remains

continuously in excess of sanction limit.

The Corporate Debtor, having not deposited the interest from time to time,

defaulted and outstanding balance remained continuously in excess of sanction

limit, entitling the Respondent bank to classify the loan accounts of the Corporate

Debtor as NPA.

-18-

Comp. App. (AT) (Ins.) No. 161 of 2023

53. As regard the arguments of CIBIL Report, it has been clarified that the

account was standard till August 2019 and irregularity happened in September,

2019 when the account became sub-standard and the same is dully reflected in

CIBIL Report.

54. Therefore, we do not find any strength in the arguments of the Appellant

regarding alleged wrong date of defaults which has been consciously elaborated

in the Impugned Order.

55. As regard the issue of no default by the Corporate Debtor as claimed by the

Appellant, we note from the restructuring sanction letter dated 30.03.2019 that

for Term Loan-I and Term Loan-II, the instalments would start from December

2019 and end on March 2029 with the moratorium for 7 months and restructured

FITL, WCTL-I and WCTL-II were to commence on May 2020 with 12 months

moratorium. Significantly we have observed from the restructuring sanction

letter dated 30.03.2019 as well as from the pleadings that the restructuring letter

clearly stipulated that "interest will be served monthly basis as and when

applied" which is quite clear that there was no concept of moratorium for interest

and the moratorium was applicable only on principal amount.

56. We have already taken into consideration the supplemental loan

agreements of the Corporate Debtor where the following has been mentioned.

"The borrower doth hereby agree and undertake to repay to the Bank the balance of Rs. 2,28,86,696.99 outstanding in the -19- Comp. App. (AT) (Ins.) No. 161 of 2023

Term Loan Account with the Bank by the instalments and non the days mentioned in the schedule hereunder written together with interest from 01.03.2019 at the agreed rate of 11.15% p.a with monthly rests"

57. Thus, the grounds of the Appellant that there was no default whatsoever is

not found to be true in view of various loans agreements, restructuring approvals

letters, supplemental terms loan agreements, various statement of accounts

provided by the banks w.r.t to the Corporate Debtor. There was clear default on

the part of the Corporate Debtor to the Respondent Bank.

58. We do not find any error in the Impugned Order which has gone into details

of all the facts and came to the clear conclusion that there has been default on the

part of the Corporate Debtor.

59. In fine the Appeal fails and stand dismissed. No Costs. Interlocutory

Application(s), if any, are Closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

Sim