Manav Investment And Trading Company ... vs Srf Limited & Anr

(Arising out of the Order dated 05.05.2022 passed by the National Company Law Tribunal, Kolkata Bench, Kolkata in C.P. (IB) No. 250/KB/2021.)

IN THE MATTER OF:

Manav Investment & Trading Company Limited (shareholder of Birla Tyres Ltd.) A company incorporated under The Companies Act, 1956, Having its registered office at 9/1, R.N. Mukherjee Road, Kolkata - 700001. Through Mr. Jit Roy Choudhury Company Secretary of Manav Investment & Trading Company Ltd. E-mail : bbmanav@gmail.com ...Appellant

Versus

1. SRF Limited A company incorporated under the Companies Act, 1956, Having its registered office at The Galleria, DLF Mayur Vihar, Unit Nos. 236 and 237, 2nd Floor, Mayur Vihar Phase - I Extn., New Deohi - 110091. And its corporate office at Block 'C', Sector - 45 Gurgaon 122003, Haryana Email: cs@srf.com ...Respondent No. 1

2. Seikh Abdul Salam, Insolvency Resolution Professional Of M/s. Birla Tyres Ltd. Having registration No. IBBI/IPA-003/IPA-ICAI-N-00250/2019-20/12966) and having his office at 64J, Linton Street, Beniapukur P.S., -2- Comp. App. (AT) (Insolvency) No. 692 of 2022

Kolkata - 700014 E-mail ID : ipsalanmkol2019@gmail.com; Salam10695@gmail.com ...Respondent No. 2

Present

For Appellants: Mr. Ankit Virmani & Ms. Ruchika Agarwala, Advocates.

For Respondent: Mr. Abhijeet Sinha, Mr. Swankit Nand, Mr. Saikat Sarkar, Mr. Anuj Tiwari, for RP.

Mr. Kunal Vajani, Mr. Kunal Mimani, Mr. Kartikey Bhatt, Mr. Akshay Luthra, Mr. Abhinav Jain, for R1. JUDGEMENT

(17.11.2023) NARESH SALECHA, MEMBER (TECHNICAL)

1. The present Appeal i.e., Company Appeal (AT) (Insolvency) No. 692 of

2022 has been filed under Section 61 of the Insolvency and Bankruptcy

Code, 2016 (in short 'Code') against the order dated 05.05.2022 ("Impugned

Order") passed by the National Company Law Tribunal, Kolkata Bench,

Kolkata (in short 'Adjudicating Authority') in C.P (IB) No. 250/KB/2021.

2. An application was filed by the SRF Ltd. i.e., Respondent No. 1 as an

operational creditor being C.P (IB) No.250/KB/2021 under Section 9 of the

IBC, 2016 against the Corporate Debtor namely, Birla Tyres Ltd. (in short

'Corporate Debtor') which was admitted by the Adjudicating Authority

through Impugned Order dated 05.05.2022 and the Corporate Insolvency

Resolution Process (in short "CIRP") was initiated. The respondent no. 2 has

been appointed as the Interim Resolution Professional ("IRP") in respect of

the affairs of the corporate debtor.

-3-

Comp. App. (AT) (Insolvency) No. 692 of 2022

3. The Appellant herein is one of the shareholders of the corporate

debtor and being aggrieved by the impugned order for initiating CIRP

against the Corporate Debtor has filed the present appeal before this

Appellate Tribunal.

4. Heard Counsel for the Parties and perusal the record made available.

5. The appellant is one of the shareholders of the corporate debtor. The

appellant currently holds 1,40,00,063 number of equity shares in the

Corporate Debtor which is equivalent to 9.82% of the paid-up equity share

capital of the Corporate Debtor.

6. The Corporate Debtor has been, inter-alia, engaged in the business of

manufacture and trading of tyres. However, due to economic slowdown

arising out of covid, the Corporate Debtor suffered losses for few years. It is

noted that as on 30.11.2021, the outstanding fund-based debt of the

Corporate Debtor was approximately Rs.1057.87 crores and non-fund-based

debt stood at Rs.10.25 crores. In addition, thereto there are several

purported claims filed by some of the Unsecured Creditors of the Corporate

Debtor.

7. It has been the case of the Appellant that the Corporate Debtor

undertook the exercise of reconstruction of the business to overcome

financial problems and proposed the Corporate Debt Restructuring (in short

'CDR') in accordance with the provisions of sections 230 to 232 of the

Companies Act, 2013 for a Scheme of Arrangement and/or compromise with

its creditors and members.

-4-

Comp. App. (AT) (Insolvency) No. 692 of 2022

8. It has been brought out by the Appellant that the Corporate Debtor in

terms of Securities and Exchange Board of India (Listing Obligations and

Disclosure Requirements) (in short "SEBI LODR") had applied before the

National Stock Exchange of India Ltd. and BSE Ltd. for obtaining necessary

no objection letters from the Stock Exchanges. The Appellant stated that

before the corporate debtor could receive no objection letters from the

concerned stock exchanges, the Adjudicating Authority wrongly passed the

Impugned Order admitting the corporate debtor into CIRP.

9. The appellant stated that the tyre manufacturing factory of the

corporate debtor is situated at Balasore, Odisha and the corporate debtor

was suffering losses for last few years because of general economic

slowdown and due to the pandemic. In addition, there was huge labour

unrest in the vicinity of the factory of the corporate debtor in Balasore and

about 2000 workers engaged in the factory of the corporate debtor in

Balasore have been obstructing the factory premises of the Corporate Debtor

by staging dharnas and protests. This hampered the business of the

Corporate Debtor adversely.

10. The Appellant defended non-payment of dues to Respondent No. 1 by

the Corporate Debtor as the Corporate Debtor was not in a position to have

the access to its records for the purpose of enabling the corporate debtor to

deal with the claims lodged by few creditors which includes the purported

claim lodged by the Respondent No. 1 as an Operational Creditor. The

Appellant submitted that non-access of factory premises prevented the

Corporate Debtor to file its reply affidavit in the application filed by the -5- Comp. App. (AT) (Insolvency) No. 692 of 2022

Respondent under Section 9 of the Code. The corporate debtor was taking

steps to the best of its ability and was trying to arrive at an amicable

solution but Impugned Order stopped all such processes.

11. The Appellant applied to the Adjudicating Authority who failed to

appreciate the compelling circumstances which had caused the corporate

debtor not to submit its reply affidavit and that there was no deliberate

breach or disobedience on the part of the corporate debtor to disobey the

order of the Adjudicating Authority and passed the Impugned Order which

harmed interest of the Corporate Debtor as well as several investors

including the Appellant.

12. The Appellant undertaking his pleadings, regulated to allow his appeal

and set aside the Impugned Order.

13. Per Contra, the Respondents stated that all averments of the

Appellants are baseless, mischievous and frivolous and appeal is only to

derail the process of the CIRP.

14. The Respondents alleged that there was clear default on the part of

the Corporate Debtor and it was not denied by the Corporate Debtor. The

Respondents further alleged that in the guise of the CDR, the Corporate

Debtor wanted to get away with all the liabilities at the cost of creditors like

him.

15. Respondent No. 1 explained that he is engaged in the business of Tyre

Cord Fabric. The Corporate Debtor approached Respondent No. 1 to

purchase Tyre Cord Fabric ["Goods"]. The Respondent No. 1 agreed to -6- Comp. App. (AT) (Insolvency) No. 692 of 2022

supply Goods to the Corporate Debtor on the basis of the work orders to be

issued by the Corporate Debtor.

16. It is the case of the Respondent No. 1 that he raised various invoices

from time to time which were duly accepted by the Corporate Debtor without

raising any objection whatsoever and few payments were also made.

However, out of the these invoices, 44 invoices with respect to the supply of

the Goods remained outstanding. Respondent No. 1 called upon the

Corporate Debtor on several occasions to make payments of the sums due

and payable to the Respondent No. 1. The Corporate Debtor had in turn

from time to time not only acknowledged its liability to pay but also made

repeated assurances that payments would be made to cure the defaults.

Emails dated 11 April, 2020 and 30 June, 2020 are acknowledgments of

debt and default by the Corporate Debtor.

17. The Respondent No. 1 submitted that the Corporate Debtor had also

given a payment plan by its email dated 19.06.2020, however, the Corporate

Debtor failed to fulfil the same and only of Rs.10,00,000/- was received by

the Respondent No. 1 on 31.10.2020 from the Corporate Debtor. The same

has been adjusted against the outstanding dues. It is the case of

Respondent No. 1 that in the given circumstances, Respondent No. 1 issued

a demand notice under Section 8 of the Code on 17.07.2021 calling upon

the Corporate Debtor to make payments of its dues within 10 days of receipt

of the notice but no reply was received.

18. The Respondent No. 1 filed a petition under Section 9 of the Code

being CP(IB) No. 250/KB/2021 on 16.08.2021 as there was no payment of -7- Comp. App. (AT) (Insolvency) No. 692 of 2022

the unpaid and admitted operational debts by the Corporate Debtor to

Respondent No. 1.

19. It has been emphatically submitted by the Respondent No. 1 that

there was no pre-existence of dispute in respect of the claim of Respondent

No. 1 and this plea was never taken by the Corporate Debtor till date.

20. The Respondents submitted that the Corporate Debtor was given

ample opportunities to file its reply affidavit. The Corporate Debtor chose to

refrain from filing a reply affidavit or to bring on record the reasons for not

filing the same. It is only after when the matter was heard and reserved for

Orders by the Adjudicating Authority the Corporate Debtor decided to file a

supplementary affidavit and the same was rightly not allowed by the

Adjudicating Authority.

21. The Respondent No. 1 stated that the Appellant has no locus to prefer

the instant appeal and therefore, the question of the Appellant being

dissatisfied with the Impugned Order does not arise and on this ground

alone, the appeal is to be dismissed.

22. The Respondents submitted that the Corporate Debtor was having all

Information Technology back up including ERP System and all records were

available at the Head Office of the Corporate Debtor and it was sheer wilful

default of the Corporate Debtor that even Reply Affidavit was not filed

despite several opportunities given to the Corporate Debtor by the

Adjudicating Authority.

23. The Respondents stated that the Adjudicating Authority passed well

reasoned speaking order and appeal deserves to be dismissed with cost. -8-

Comp. App. (AT) (Insolvency) No. 692 of 2022

24. At this stage, this Appellate Tribunal will like to look into the relevant

portion of the Impugned Order about the issue of non-submission of the

counter affidavit by the Corporate Debtor as alleged by the Corporate

Debtor. This reads as under :-

"3. Before coming to merits of this CP it is relevant to record here;

a) When this matter came up for consideration on 20 October 2021, this Adjudicating Authority issued a notice to Corporate Debtor by speed post and e-mail. The notice was sent by the registry through speed post and e-mail. Next date was fixed for 22 December 2022.

b) As per the tracking report, the notice was received by the Corporate Debtor on 25 October, 2021 and by e-mail on 22 December 2021 along with the copy of Company Petition.

c) When the matter came up again for hearing on 22 December 2021, Counsel for the Corporate Debtor appeared and sought further three weeks' time to file reply affidavit.

d) It is evident as per the order dated 22 December 2021 passed by this Adjudicating Authority that a schedule for completion of pleadings was fixed on this date. Corporate Debtor was granted three weeks' time to file the reply affidavit and upon filing this affidavit the Operational Creditor was granted two weeks to file rejoinder, if any. The matter was directed to be listed on 28 February, 2022.

e) When the matter was taken for consideration on 28 February, 2022, Ld. Counsel appearing for the Corporate Debtor again sought further time to file its reply affidavit;

Two weeks further time was granted to file the reply -9- Comp. App. (AT) (Insolvency) No. 692 of 2022

affidavit and the matter was directed to be listed on 5 April, 2022.

f) On 05 April, 2022 when the matter came up for consideration the Corporate Debtor sought further time to file the affidavit. The Ld. Counsel for the Corporate Debtor stated that there was some Dharna at factory premises from 03 January, 2021 to 12 March, 2021 by workers demanding payment of workers of wages and other financial benefits and the proceedings were pending before the office of Divisional Labour Commissioner Balasore.

g) It was stated by Ld. Counsel for Corporate Debtor, that in view of this agitation by the workers, petition had been filed before SDM Balasore for promulgation of Section 144 of CRPC against the workers and their family members on 28 September, 2021. In view of these reasons the Corporate Debtor is unable to have access to the records in filing the reply affidavit in this application.

h) On 5 April, 2022, after considering the submissions of the Ld. Counsel for the Corporate Debtor for grant of further extension of time this Adjudicating Authority not satisfied with the reasons stated, declined to grant further time and the matter after hearing Counsel for operational creditor was reserved for orders.

i) No application/motion however has been filed before this Adjudicating Authority for seeking any further time.

j) There is nothing shown to us the relevant record for filling reply was/is lying in the factory premises and the same situation as in September 2021 continues in April 2022.

4. In view of the facts and circumstances based on record, we are of the considered opinion that it was a very casual attempt made by the Corporate Debtor to seek further -10- Comp. App. (AT) (Insolvency) No. 692 of 2022

adjournment for the 4th time consecutively since October, 2021 and reference to agitation by workers and families in September, 2021 was merely an attempt by the Corporate Debtor to prolong the proceedings. Keeping in view, this matter under Insolvency and Bankruptcy Code, 2016 wherein the very object of the Code is to finalize the Insolvency proceedings in a time bound manner for maximization of value of assets, granting adjournment after another and that too without any basis cannot be permitted by this Adjudicating Authority and this Adjudicating Authority thus declined to further extend the time for filling reply affidavit by Corporate Debtor.

5. From the above fact on record, it is clear that the Corporate Debtor was afforded reasonable opportunity to file its Affidavit-in-Reply, however, the Corporate Debtor has failed to file the Affidavit-in-Reply despite repeated opportunities."

25. From above, it is clear that the Adjudicating Authority gave all

possible opportunities to the Corporate Debtor to present his case but the

Corporate Debtor miserably failed to do so. Therefore, the allegations on

this account by the Appellant herein are not sustainable.

26. We observe that the notice under section 8 (1) of Code was duly served

by the Respondent No. 1 upon Corporator Debtor on 23.07.2021 and the

Corporate Debtor did not reply to the demand notice.

27. We also observe that the Operational Creditor raised 44 invoices for

the supply of Tire Cord Fabric to the Corporate Debtor, during 2018-2019 -11- Comp. App. (AT) (Insolvency) No. 692 of 2022

arising out of work order dated 06.04.2018, which remained unpaid by the

Corporate Debtor.

28. We note that through E-mail dated 03.06.2020, the Corporator Debtor

admitted the sum of Rs.10.18 Crore due and payable to Respondent No. 1

and also that through an E-mail dated 19.06.2020, the Corporate Debtor

gave payment plan to the Respondent No. 1 which also failed.

29. It is significant to observe that there is no record to show any pre-

existing dispute.

30. In view of above, it is clear that there was established debts and

defaults and the Adjudicating Authority passed the Impugned Order after

analysing all facts and considering provisions of the Code and therefore we

do not find any error in the Impugned Order.

31. The Appeal fails and stand dismissed. No Cost. Interlocutory

Application(s), if any, are Closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

Sim