Heena Nandlal Thakkar vs Karnataka Bank Limited & Anr

IN THE MATTER OF: Heena Nandlal Thakkar ...Appellant Versus Karnataka Bank Ltd. & Anr. ...Respondents Present: For Appellant : Mr. Kunal Godhwani, Ms. Dipika Panchmatia, Advocates For Respondents : Ms. Meghna Rao, Mr. Yahya Batatawala, Advocates

ORDER

02.05.2023: Heard Mr. Kunal Godhwani, Ld. Counsel for the Appellant.

2. The present appeal has been preferred under Section 61 of the Insolvency

and Bankruptcy Code, 2016 (herein after referred to as 'Code') against an order

dated 24.03.2023 passed by the National Company Law Tribunal, Mumbai

Bench, Court-II (herein after referred to as 'NCLT') in CP No. (IB) 619/MB/2022.

By the said order Ld. NCLT has admitted the application filed under Section 7 of

the Code which was filed by the 'Financial Creditor' namely Karnataka Bank Ltd.

The Financial Creditor in view of the default in payment of financial debt to the

tune of Rs. 15,81,63,867/- (Rupees Fifteen Crore Eighty one lakhs sixty three

thousand eight hundred and sixty seven only) had filed application for initiation

of Corporate Insolvency Resolution Process (herein after referred to as 'CIRP').

3. As evident from the record, it appears that total sum of amount of Rs.

17,45,00,000/- (Rupees Seventeen Crores forty five lakhs only) was disbursed to

the corporate debtor. The appellant is the Suspended Director of the corporate

debtor. Since the account remained irregular, on 01.05.2019 the said account

was declared as Non-Performing Asset (NPA). Since debt was not cleared the CA (AT) (Ins) No. 553 of 2023 2

financial creditor filed an application under Section 7 of the Code before the

NCLT. From the order impugned, it is evident that despite valid service of notice

on corporate debtor, the corporate debtor preferred not to appear before the

NCLT. This fact has also not been disputed by the Ld. Counsel for the Appellant

during hearing of the appeal before this Appellate Tribunal. Since, despite valid

service of notice the corporate debtor didn't appear and considering the fact that

the application was filed within the period of limitation and there was

outstanding financial debt of Rs. 15,81,63,867/- by the impugned order Ld.

NCLT admitted the application and CIRP has been initiated. Against the said

impugned order the present appeal has been preferred.

4. Ld. Counsel for the Appellant though has not disputed the fact that despite

valid service of notice the corporate debtor didn't participate in the proceeding

before the NCLT, a plea was taken that in a proceeding before the DRT (Debt

Recovery Tribunal) the corporate debtor was persuading the matter and

thereafter to the extent of about Rs. 4,42,00,000/- (Rupees Four Crores Forty

two lakhs only) amount was already paid. However, those facts were not reflected

in the impugned order nor financial creditor bothered to inform the NCLT.

5. Ld. Counsel for the Appellant has also drawn our attention to page 361 of

the Memo of Appeal, Vol-II to persuade the court that the appellant/corporate

debtor in respect of loan/liability of other financial creditor had taken steps and

thereafter no due certificates were issued.

6. Ld. Counsel for the Appellant has drawn our attention to page 358 and

359 of Vol-II, of the Memo of Appeal to persuade the court that the appellant had

CA (AT) (Ins) No. 553 of 2023 3

made communication to the Karnataka Bank/financial creditor with a prayer to

allow him to regularize the loan account. According to the Ld. Counsel for the

Appellant, out of the total financial debt about 28% amount was paid and as

such it was submitted that notice may be issued to the Respondent so that steps

may be taken for settling the dispute.

7. Ms. Meghna Rao, Ld. Counsel on instruction of the bank has appeared,

however till date no vakalatnama has been filed.

8. Be that as it may, fact remains that the appellant despite service of notice

preferred not to participate before the NCLT and as such the order impugned

was passed ex-parte. It is also reflected from the material on record that on the

date of filing of the application under Section 7 there was total debt of an

aggregate amount of Rs. 15,81,63,867/-. It is clear from the chart below:

Details Amounts Term Loan-I Rs. 9,00,00,000/- (Rupees Nine Loan Account No. Crore Only) 5187001600027001 Dated 19th August 2015 Term Loan-II Rs. 2,00,00,000/- (Rupees Two Crore Loan Account No. Only) 5187001600028101 Dated 29th February 2016 Term Loan-III Rs. 3,75,00,000/- (Rupees Three Loan Account No. Crore Seventy five Lakhs Only) 5187001600028701 Dated 2nd August 2016 Term Loan-IV Rs. 2,20,00,000/- (Rupees Two Crore Loan Account No. Twenty Lakhs Only) 5187001600028801 Dated 4th August 2016 Overdraft Facility Rs. 50,00,000/- (Rupees Fifty Lakhs Facility Account No. Only) 5187000600013701 Dated 31st March 2018

CA (AT) (Ins) No. 553 of 2023 4

It is evident from the aforesaid chart which has been extracted from the

impugned order that the loan was sanctioned to the appellant since the month

of August, 2015 and said facility continued up to 31.03.2018. However, since

the account of the appellant was irregular in the month of May 2019, the account

was declared NPA and within the prescribed period of limitation the application

under Section 7 of the Code was filed.

9. The financial creditor in view of none clearance of the debt amount was

constrained to file application under Section 7 of the Code in which notice was

issued to the Corporate Debtor. However, despite valid service of notice, the

appellant preferred not to participate in the proceeding before the NCLT. In such

view of the matter the NCLT was left with no option but to pass order on the

basis of materials available on record.

10. Before the NCLT, the debt was not disputed and the application was filed

within the period of limitation and as such the Ld. NCLT has rightly passed the

order for initiation of the CIRP.

11. We don't find any apparent error in the impugned order warranting

interference, however since the appellant is making submission that they are

still ready to settle the dispute, liberty can be granted to the appellant to

approach the financial creditor for settling the dispute. We hope that if the

appellant approaches the financial creditor i.e. Karnataka Bank with reasonable

proposal, the financial creditor may take appropriate decision in accordance with

law so that the dispute may come to its logical end.

CA (AT) (Ins) No. 553 of 2023 5

12. With above observation, the appeal stands disposed of.

[Justice Rakesh Kumar] Member (Judicial)

[Dr. Alok Srivasatava] Member (Technical)

sr/rr

CA (AT) (Ins) No. 553 of 2023