Mr. Ajay Agarwal vs Central Bank Of India And State Bank Of ...

Mr. Ajay Agarwal ...Appellant

Vs.

Central Bank of India and State Bank of India ...Respondents

Present: For Appellant: - Mr. Amit S. Chadha, Senior Advocate with Mr. Rajesh Bohra, Ms. Srishti Govil, Mr. Aditya Narayan, M.S Shanmuga Sundaram and Mr. Sahil Mongia, Advocates.

For Respondents: - Mr. Rajiv S. Roy, Avrojyoti Chatterjee, Mr. Abhijit S. Roy, Ms. Jayshree Saha, Advocates for Respondent No.1 Mr. Arnav Dash, Advocate for Respondent no.3. Mr. Abhishek Agarwal, Advocate for SBI.

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal has been preferred by Mr. Ajay Agarwal,

Director/shareholder of M/s. Ashok Magnetics Limited ('Corporate

Debtor') against the order dated 4th September, 2017 passed by

Adjudicating Authority (National Company Law Tribunal), Chennai in

Company Petition No. 551(IB)/CB/2017, whereby and whereunder the

application preferred by Respondents- the Central Bank of India and the

Company Appeal (AT) (Insolvency) No. 180 of 2017 2

State Bank of India ('Financial Creditors') under Section 7 of the

Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "I&B

Code") has been admitted, order of moratorium has been passed and

'Interim Resolution Professional' has been appointed with directions as

mentioned therein.

2. The main ground taken by the Appellant is that there is 'mismatch

of figures and dates of default', as apparent from the face of the

application and therefore, petition under Section 7 of the 'I&B Code'

preferred by the Respondents was fit to be rejected.

3. Learned counsel appearing on behalf of the Appellant submitted

that there is a 'mismatch of figures and dates of default' relating to dues

of 2nd Respondent- State Bank of India, as quoted below: -

1. STATE BANK OF INDIA (R2):

Description Amount

i. Part-IV, Form 1 at Pg. 95 Rs. 27,47,85,655.86 as on 19.10.15

ii. See SBI S.13(2), Sarfeasi Rs. 31,27,32,857.06 stated Notice to be amount due on (Pg.679 Vol. II dt. 19.10.15 19.10.15 @ Pg. 680

Also at Pg.681 outstanding on 19.10.15

iii. Also see Statement of account Rs. 27,37,67,069.81 of SBI (Pg.650) @ Pg. 652 Outstanding as on 19.10.15

Company Appeal (AT) (Insolvency) No. 180 of 2017 3

4. It was submitted that the aforesaid objection was raised in the

Ground XLV and the State Bank of India also accepted that the

outstanding amount was only ₹27,47,85,655.86/-. The statement of

account was also filed which reflects the balance sheet as on 19th

October, 2015.

5. It was further submitted that the State Bank of India also accepted

that after the account was classified as NPA on 17th January, 2015, no

payment has been made.

6. In so far as 1st Respondent- Central Bank of India is concerned,

learned counsel for the Appellant submitted that there is similar

'mismatch of figures and dates of default' including Cash Credit facility,

Letter of Credit facility, Fixed Deposit Credit etc. Following facts have

been highlighted:

" 2. CENTRAL BANK OF INDIA (R1) :

Description Amount

i. Part IV, Form 1 at Rs. 12,96,57,829.19 as on Pg. 95 30.11.16

ii. See SBI S.13(2), Rs.10,98,76,416.00 under 2 Sarfeasi Notice facilities namely: (Pg.177) dt. 17.12.15 CC - Rs.620,21,860 wherein NPA dt. Inland LC Devolved - 26.08.15 Rs.4,78,54,556

Company Appeal (AT) (Insolvency) No. 180 of 2017 4

2.1 For CC Facility:

Description Amount

 The breakup of the CC facility as Rs. 5,98,81,058.19 on Pg. 106, the balance outstanding amount on date of NPA (26.08.15)

 See Statement of Rs. 588,77,744.19 Account @ Pg. 222, the Outstanding amount filed by CBI on 31.08.15

 And on 19.08.15 Rs. 5,81,63,324.19

2.1 For Inland LC Facility Description Amount

 @Pg. 106 Balance Rs. 4,31,01,528 outstanding on NPA 26.08.15

 See Statement of Rs. 2,60,25,000 Account @ Pg.230, the Outstanding amount on 01.09.15

 Thereafter FD Credit of Rs. 6,24,791 and a Devolvement of LC Debit of Rs. 35,20,000 has been shown, which are both reflected @ Pg.231 of Statement of Account.

 Rs. 4,31,01,528 (-) Rs. 6,24,791

--------------------------- Rs. 4,24,76,737 (+) Rs. 35,20,000 --------------------------- Rs. 4,59,96,737"

Company Appeal (AT) (Insolvency) No. 180 of 2017 5

7. It was submitted that the amount as on 30th November, 2016 has

been calculated is based on the figure ₹5,98,81,058.19/- as on 26th

August, 2015, which figure itself does not match the statement of

account.

8. Learned counsel appearing on behalf of the Respondents explained

the difference and submitted that on 18th September, 2012, the 1st

Respondent along with other consortium members had advanced 'fund

based' and 'non-fund based' credit facility aggregating to ₹43.29 crores to

the 'Corporate Debtor'. Out of the said total limits, the 1st respondent had

sanctioned total credit facilities of ₹10.50 crores i.e. ₹5.00 crores in the

form of 'fund based' limits and ₹5.50 crores in the form of 'non-fund

based' limits.

9. According to Respondents, on account of several alleged envisaged

losses, the 'Corporate Debtor' filed a reference before the erstwhile 'Board

for Industrial and Financial Reconstruction' (BIFR) under the provision

of the Sick Industrial Companies (Special Provisions) Act, 1956 ("SICA")

(now repealed), based on its audited accounts for the financial year ended

on 31st March, 2015 was calculated. It was brought to our notice that the

Respondents have also taken steps under Section 13(2) of the SARFAESI

Act against the 'Corporate Debtor' as well as the guarantors to repay

entire outstanding as on 16th December, 2015. The parties have moved

before the Debt Recovery Tribunal-II, Chennai, being O.A. No. 114/2017,

Company Appeal (AT) (Insolvency) No. 180 of 2017 6

seeking recovery of the outstanding loan amount. The said matter is

pending before the Debt Recovery Tribunal. According to learned counsel

for the Respondents, the current dues on calculation was reflected in the

Form-1, which was filed under Section 7 of the 'I&B Code'.

10. Learned counsel appearing on behalf of the Appellant relied on

decision of this Appellate Tribunal in "M/s. Starlog Enterprises Limited

Vs. ICICI Bank Limited─ Company Appeal (AT) (Insolvency) No. 5 of

2017" , disposed of on 24th May, 2017 and submitted that there being a

mismatch of figures and date of default in the said appeal, this Appellate

Tribunal set aside the order initiating 'Corporate Insolvency Resolution

Process'. However, such submissions cannot be accepted as in the case

of "M/s. Starlog Enterprises Limited (supra)" this Appellate Tribunal

noticed that the 'Financial Creditor'-ICICI Bank Limited in their notice

issued under sub-rule (3) of Rule 4 of the 'Insolvency and Bankruptcy

(Application to Adjudicating Authority) Rules, 2016' shown different

claim whereas different claims were shown in the petition filed under

Section 7 (Form-1). Because of 'misleading statement', the Adjudicating

Authority reached to a conclusion of default which was contrary to the

application preferred by 'Financial Creditor'. Such 'misleading

statement' having been made by the 'Financial Creditor' in the said case,

this Appellate Tribunal interfered with the order impugned therein.

Company Appeal (AT) (Insolvency) No. 180 of 2017 7

11. In the present case, the Respondents have explained the difference

between the claim amount as made on 19th October, 2015 and as on the

date of filing in the year 2017, which has been calculated, taking into

consideration the interest payable in the meantime and the amount, if

any, recovered under other proceedings. Apart from the aforesaid fact, we

are of the view that mere mismatch of the figures will ipso facto not

invalidate the order initiating 'Corporate Insolvency Resolution Process'

under Section 7 of the 'I&B Code'.

12. The provisions of Sections 7 and 9 of the 'I&B Code' fell for

consideration before the Hon'ble Supreme Court in "M/s. Innoventive

Industries Ltd. Vs. ICICI Bank & Anr.─ 2017 SCC OnLine SC 1025",

wherein the Hon'ble Supreme Court observed and held:

"29. The scheme of Section 7 stands in contrast with

the scheme under Section 8 where an operational

creditor is, on the occurrence of a default, to first

deliver a demand notice of the unpaid debt to the

operational debtor in the manner provided in Section

8(1) of the Code. Under Section 8(2), the corporate

debtor can, within a period of 10 days of receipt of

the demand notice or copy of the invoice mentioned

in sub-section (1), bring to the notice of the

operational creditor the existence of a dispute or the

record of the pendency of a suit or arbitration

Company Appeal (AT) (Insolvency) No. 180 of 2017 8

proceedings, which is pre-existing - i.e before such

notice or invoice was received by the corporate

debtor. The moment there is existence of such a

dispute, the operational creditor gets out of the

clutches of the Code.

30. On the other hand, as we have seen, in the case

of a corporate debtor who commits a default of a

financial debt, the adjudicating authority has merely

to see the records of the information utility or other

evidence produced by the financial creditor to

satisfy itself that a default has occurred. It is of no

matter that the debt is disputed so long as the debt

is "due" i.e payable unless interdicted by some law

or has not yet become due in the sense that it is

payable at some future date. It is only when this is

proved to the satisfaction of the adjudicating

authority that the adjudicating authority may reject

an application and not otherwise."

13. The decision aforesaid makes it clear that in case a 'Corporate

Debtor' commits a default of a financial debt, the Adjudicating Authority

has merely to see the records of the information utility or other evidence

produced by the 'Financial Creditor' to satisfy itself that a default has

occurred. The Hon'ble Supreme Court further held that "it is of no

Company Appeal (AT) (Insolvency) No. 180 of 2017 9

matter that the debt is disputed so long as the debt is "due" i.e

payable unless interdicted by some law or has not yet become due

in the sense that it is payable at some future date."

14. In the present case, the Appellant raised dispute and pleaded

mismatch of debt amount, but it has not been disputed that some debt

is "due" and is payable to the 'Financial Creditor' and the 'Corporate

Debtor' has defaulted in making such payment.

15. For the reasons aforesaid, no interference is called for against the

impugned order dated 4th September, 2017 passed in Company Petition

No. 551/(IB)/2017.

16. We find no merit in this appeal. It is accordingly dismissed.

However, in the facts and circumstances of the case, there shall be no

order as to cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member(Judicial)

NEW DELHI

13th December, 2017

AR

Company Appeal (AT) (Insolvency) No. 180 of 2017