Judgment
As delivered
IN THE NATIONAL COMPANY LAW TRIBUNALMUMBAI BENCH, COURT-VCP(IB) 1058 MB 2022Under section 7 of the Insolvency andBankruptcy Code, 2016IN THE MATTER OFSREI Equipment Finance Limited“Vishwakarma”, 86C, Topsia Road(South), Kolkata - 700046.... Financial CreditorV/s.R S Kamthe InfrastructureDevelopers Private Limited208, Ganraj Market, 2nd Floor, Opp.Union Bank of India, Gate No. 2,Gultekadi Market Yard, Pune,Maharashtra - 411037.… Corporate DebtorOrder delivered on :- 02.11.2023Coram:Hon’ble Shri Kuldip Kumar Kareer, Member (Judicial)Hon’ble Smt. Anuradha Sanjay Bhatia, Member (Technical)Appearances:For the Financial Creditor : Adv. Rohan AgrawalFor the Corporate Debtor : Adv. Rohit GuptaCP(IB) 1058 MB 2022ORDERPer: - Kuldip Kumar Kareer, Member (Judicial)1. This Company petition is filed by SREI Equipment FinanceLimited (hereinafter called “the Petitioner”) seeking toinitiate Corporate Insolvency Resolution Process (CIRP)against R S Kamthe Infrastructure Developers PrivateLimited (hereinafter called “Corporate Debtor”) allegingthat the Corporate debtor committed default in makingpayment to the Petitioner. This petition has been filed byinvoking the provisions of Section 7 Insolvency andbankruptcy code, 2016 (hereinafter called “Code”) on theground that the Corporate Debtor has failed to makepayment of a sum of Rs. 7,28,54,918/- as on 12.08.2022.The submissions by the Financial Creditor: -2. The Financial Creditor states that the default is continuingin nature. The Corporate Debtor has failed and neglected torepay the outstanding amounts due and payable to theFinancial Creditor. The Financial Creditor states that everymonth, the payment schedule by way of an instalment isfailing due and even though the instalment amounts are tobe paid, the Corporate Debtor has failed to pay theinstalments and in fact Section 10A of the Insolvency andBankruptcy Code, 2016 does not extinguish the aspect ofDebt and Default in the eye of law.3. The Petitioner and Corporate Debtor executed two MasterFacility Agreement (collectively referred to as “the MFAs”)being Loan Agreement No. 178747 dated 01.07.2019 (“theFirst Loan Agreement”) and Loan Agreement No. 180822CP(IB) 1058 MB 2022dated 28.09.2019 (“the Second Loan Agreement”). By way ofthese MFAs, the Corporate Debtor availed from thePetitioner and the Petitioner agreed to disburse largeamounts to the Corporate Debtor, subject to certain rights,liabilities, terms and conditions set out thereunder. Infurtherance to these agreements, the Petitioner disbursedthe agreed amounts and the Corporate Debtor agreed toabide by the payment schedule pre-agreed upon, whichschedule was contained in the said MFAs. It was alsoagreed in the MFAs, that any inability of failure to make thepayments as per the payment schedule under the MFAswould constitute to be an Event of Default; andconsequently, the Petitioner would be entitled to request theCorporate Debtor to pay the entire outstanding dues underthe MFAs. In lieu of this, the Petitioner disbursed theamounts under the relevant MFAs.4. The Petitioner further submits that in terms of the saiddisbursement as agreed upon by and between the parties,the Corporate Debtor and the Financial Creditor hadentered and executed various agreements thereby securingthe loan amount disbursed by the Financial Creditor to theCorporate Debtor.i. Loan Agreement No. 178747 dated 01.07.2019.ii. Loan Agreement No. 180822 dated 12.08.2019.iii. Deed of Personal Guarantee dated 01.07.2019 forLoan Agreement No. 178747 executed by Mr.Nandkishor Shankar Kamthe in favor of Petitioner.CP(IB) 1058 MB 2022iv. Deed of Hypothecation dated 12.08.2019 for LoanAgreement No. 180822.v. Deed of Personal Guarantee dated 01.07.2019 forLoan Agreement No. 180822 executed by Mr.Nandkishor Shankar Kamthe in favor of Petitioner.vi. RoC Charge Certificates for registration of chargescreated for security under the Loan Agreements.5. Despite mutually agreed and executed terms under theMFAs and after disbursal of amounts by the Petitioner, theCorporate Debtor has admittedly defaulted on itsrepayment obligations set out under the MFAs. As clearlyand undeniably evidenced in the Statement of Accounts,the Corporate Debtor has defaulted in making the paymentunder the aforesaid MFAs on 15.04.2021. The Petitionersubmits that there is a continuous default on account ofthe Corporate Debtor, till date. There is no denial by theCorporate Debtor that there is a persistent default on andafter 15.04.2021.6. The Petitioner submits that the CIBIL Report clearlydemonstrates that there is continuous default on part of theCorporate Debtor to repay the amounts under the MFAs.7. The Petitioner submits that the National E-GovernanceServices Limited- Record of Financial Information underForm C (NeSI) also records the default and date of default.8. The Petitioner has also issued a Demand Notice dated24.12.2021 to the Corporate Debtor calling upon theCorporate Debtor to make payments to the PetitionerCP(IB) 1058 MB 2022towards the overdue amounts. However, the CorporateDebtor has failed to make payment to the Petitioner. Hence,the Petition.The submissions by the Corporate Debtor: -9. The Respondent submits that the present Company Petitionfiled by the Applicant is unsustainable as the presentCompany Petition fails to satisfy the necessary ingredientsof Section 7 of the IBC, 2016 and, therefore, the presentCompany Petition deservers to be dismissed.10. At the outset the Corporate Debtor has submitted thatthere is no debt or default for maintaining the Petition.However, if the version of the Petitioner is to be acceptedthat there was actually debt which was disbursed and thereexists the debt, then in that case also, the Petition is liableto be dismissed as it is hit by Section 10A of IBC, 2016 asthe default as per own showing of the Applicant hasoccurred during the time when there was moratoriumunder the legislation and no petition can be maintained forthe default which has occurred during that period.11. The Applicant has conveniently stated the wrong date ofdefault and filed the Petition. In fact, action should beinitiated against the officers of the Applicant for providingfalse and incorrect information as to the date of default. TheApplicant was conscious that the default had occurredduring the period prescribed under Section 10A anddeliberately stated the date after the period came to an endto mislead this Hon'ble Tribunal.CP(IB) 1058 MB 202212. The Applicant herein had advanced loans to one RithwikProjects Pvt. Ltd. It is in order to recover these liabilitiesthat these transactions were undertaken. The Applicanthas, in order to resolve its own problem, duped the presentRespondent.13. The Applicant, in order to sell the machinery owned by itand machinery hypothecated to it for the dues of itsborrower where the default had occurred, agreed to grantthese loans and transfer the assets. On one hand, it isclaimed that the loans are sanctioned and disbursed, butadmittedly the assets were not transferred till the accountcame in default (as per Applicants version). In thesecircumstances, to contend that the Respondent is liable topay the loan amount but not entitled to the machinerypurchased from the loan disbursed is wholly illegal anduntenable.14. This act on the part of the Applicant clearly demonstratesthe fraud played by the Applicant on the Respondent. TheApplicant claims interest under the loan transaction and atthe same fails in complying with its obligation to transferthe asset for which the loan was granted. This transactionis not a transaction of financial debt.15. The Respondent further submits that the Loan Account No178737 was sanctioned for an amount of Rs. 2,95,00,000/-(Rupees Two Crores and Ninety-Five Lakhs Only) as theRespondent was to utilize the said amounts towardspurchasing heavy machineries and equipment's from M/s.Rithwik Projects Private Limited. The amount, therefore,CP(IB) 1058 MB 2022was returned. However, the transfer of machine physicallynever took place.16. The Respondent submits that, for the purpose of said LoanAccount bearing No 180822, the Applicant had sanctionedan amount of Rs. 2,74,50,000/- (Rupees Two CroresSeventy-Four Lakhs and Fifty Thousand Only) vide MasterFacility Agreement dated 28th September 2019 ("MFA 2").However, the Applicant has failed to demonstrate the fact ofdisbursement of the said sanctioned amount to theRespondent. Therefore, the principal aspect of default beingcommitted by the Respondent does not arise as theRespondent has not been disbursed the said sanctionedamount in itself thereby resulting in no alleged default bythe Respondent occurring whatsoever.17. The amount, as stated above, is appropriated by theApplicant itself without actually obtaining mandate andtransferring it to the Respondent. Assuming that suchdisbursement is permissible, then in that event also, theassets which were underlying transaction ought to havebeen forthwith transferred. The money cannot beconsidered to be disbursed till the time asset istransferred.
18. The Applicant has falsely claimed that the Respondent has committed default when, in fact, the date of default as claimed by the Applicant i.e., 15th April 2021 is much prior to the issuance of the invoices dated 16th August 2021. Furthermore, the invoices have only been issued in respect of 8 out of 9 assets as were required to be transferred by CP(IB) 1058 MB 2022 the Applicant to the Respondent thereby confirming that the Applicant itself is in default in so much so that the Applicant has not only failed to disburse the sanctioned amount but has also not transferred all the assets to the Respondent thereby resulting in no alleged default being committed by the Respondent.
19. In the end, the Respondent has prayed for the dismissal of the Petition.
20. We have heard Counsel for the parties and gone through the records.
21. In this case the only defence raised by the Corporate Debtor is that the Petition is barred by Section 10 of the Code, 2016. In this regard, the Counsel for the Corporate Debtor has argued that as per the case of the Petitioner, the first default in respect of Contract No. 178737 took place on 15.01.2021, whereas in respect of Contract No. 180822 the default took place on 15.02.2021. The Counsel for the Corporate Debtor has further argued that the Petitioner has wrongly claimed the date of default in respect of both the Contracts as on 15.04.2021 without any basis. Counsel for the Corporate Debtor has further urged that the Petition is liable to be dismissed on this ground alone.
22. On the other hand, the Counsel for the Petitioner has argued that it is case of continuing default on the part of the Corporate Debtor. The Counsel for the Petitioner has further referred to NeSL report which shows the date of CP(IB) 1058 MB 2022 default as 15.04.2021 and, therefore, according to the Counsel for the Petitioner, the Petition cannot be said to be barred u/s 10 of the Code, 2016.
23. Having weighed the contentions raised by the Counsel for the parties, we are of the considered view that it has been specifically pleaded by the Petitioner himself in Part IV of the Petition that in respect of Contract No. 178737 the default occurred on 15.01.2021 while in respect of Contract No. 180822 it occurred on 15.02.2021. It is a well settled proposition of law that for the purpose of Section 7 and 9 of the Code, 2016, the first default in repayment is to be taken into account for the purposes of initiating proceedings u/s 7 or 9 of the Code, 2016. This proposition of law cannot be bypassed by claiming that the default is of continuing nature one. As stated above, since the default took place on 15.01.2021 and 15.02.2021 and in respect of both these dates the default is said to have occurred during the period covered u/s 10A of the Code, 2016 which provides that no proceedings u/s 7 or 9 shall ever be filed for initiation of Corporate Insolvency Resolution Process of a Corporate Debtor for the default occurring during the 10A period i.e. 25.03.2020 to 24.03.2021.
24. So far as, the NeSL report is concerned, no doubt the date of default therein is mentioned as 15.04.2021. However, considering the fact that it is the admitted case of the Petitioner itself that the default took place on 15.01.2021 and 15.02.2021, it has to be held that the date of default in the NeSL report is not correctly stated nor the same can be relied upon.
CP(IB) 1058 MB 2022 25. In the light of the above discussion, we hold that this Petition is barred u/s 10A of the Code and is, therefore, dismissed. However, this order will not preclude the Petitioner from pursuing other remedies for the recovery of the disputed amount, if any, as per law as the debt cannot be said to have extinguished merely because the Petition is barred u/s 10A of the Code, 2016.
Sd/- Sd/- ANURADHA SANJAY BHATIA KULDIP KUMAR KAREER Member (Technical) Member (Judicial)
