Sri Munisuvrata Agri International Ltd vs Bank Of Baroda & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI

Company Appeal (AT) (Insolvency) No. 84 of 2019 [Arising out of Order dated 15th November, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata in C.P.(IB) No.615/KB/2018]

IN THE MATTER OF: Sri Munisuvrata Agri International Pvt. Ltd. Through its Authorised representative Mr. J.K. Jain Having its registered office at: 16, British India Street, 2nd Floor, Kolkata-700069. .... Appellant Vs 1. Bank of Baroda, Having its Branch Office at 4, India Exchange Place, Kolkata 700 001. 2. State Bank of India Having its Commercial Branch Office at 24, Park Street, Kolkata 700 016. 3. Allahabad Bank Having its Branch office at 2, Netaji Subhas Road, Kolkata. and also at 7, Red Cross Place, Kolkata 700001. 4. Indian Overseas Bank Having its Branch Office at F-47, Malhotra Building, Janpath, New Delhi 110 001. 5. Corporation Bank Having its Branch Office at WatchelMolla Mansion, 8, Lenin Sarani, Dharamtalla Street, Kolkata 700 013. 6. UCO Bank Having its Branch Office at BTM Sarani and 2, India Exchange Place, Ground Floor, Kolkata 700 001.

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 1 of 12 7. Standard Chartered Bank Having its Branch Office at 19, Netaji Subhas Road, Kolkata 700 001.

8. Canara Bank Having its Branch Office at 7, Kyd Street, Kolkata 700 016. 9. Punjab National Bank Having its Branch Office at A-8, Connaught Place, New Delhi 110 001. 10. Punjab & Sind Bank Having its Branch office at 14 & 15, Hemanta Basu Sarani, Kolkata 700 001.

11. Sleepwell Industries Company Limited Having its place of business at Lakerajada Business Complex, 28th Floor, 193/116, Rachandagisek Road, Klongtoy, Bangkok - 10110, Thailand.

12. Swiss Singapore Overseas Enterprises Pte. Ltd. Having its office at 14-01 Shenton House, 3, Shenton Way, Singapore - 068805.

13. Suresh Kumar Jain Residing at Flat 3A, 26B, Camac Street, Kolkata - 700 016.

14. Smt. Sunita Jain Wife of Suresh Kumar Jain Residing at Flat 3A, 26B, Camac Street, Kolkata - 700 016.

15. Centrum Financial Services Limited Having its registered office at 2nd Floor, Bombay Mutual Building, Dr. D.N. Road, Fort, Mumbai - 400 041.

16. Basudev Chandra Mallick, Director of Sri Munisuvrata Agri International Limited Residing at 58, Munirka Enclave, New Delhi - 110 067. ....Respondents

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 2 of 12 Present:

For Appellant: Mr. Ajeet Sinha, Senior Advocate with Mr. Vikas Sethi, Advocate.

For Respondents: Mr. Pankaj Vivek, Bidyarani, Advocate.

Mr. Aaditya Vijay Kumar and Ms. Ayushi Kumar, Advocates.

Mr. P. Nagesh, Mr. Soumya Dutta and Mr. Shailendra Jain, Advocates for Respondent No.11.

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appellant Sri Munisuvrata Agri International Limited/ Corporate

Applicant moved an application under Section 10 of the of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as the 'I&B Code') for

initiating 'Corporate Insolvency Resolution Process' for it on the ground that

it could not conduct the business due to RBI Circular dated 13th March,

2018.

2. In the said application, number of objections were filed by different

parties challenging the maintainability. The Adjudicating Authority (National

Company Law Tribunal), Kolkata Bench, Kolkata by impugned order dated

15th November, 2018 accepted the objections and allowed the applications

preferred by the Objectors-Respondents and dismissed the application under

Section 10 of the I&B Code. The Adjudicating Authority has held that in

absence of any decision of the shareholders, the application under Section

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 3 of 12 10 was not maintainable and the Appellant failed to prove existence of

default.

3. The case of the Appellant is as follows: -

"9. The corporate debtor, having lost opportunities for export contracts to be executed/ implemented, and having faced with difficulties in doing business due to the recent financial sector turmoil, has filed this application under Section 10 of the I & B Code. The corporate debtor submits that prior to a consent award dated January 3, 2013, the overall control and management of the corporate debtor was with Mr. Suresh Kumar Jain, the eldest brother of the present directors, who held 51% shares in the Company and who, according to the corporate debtor, had generated a lot of debts/ liabilities during his tenure, which have passed on to the present directors (under the said award) making it difficult for them to run the company. The said award is being executed before the Calcutta High Court (Annexure A-8).

10. With regard to the financial creditors, the total debt raised is Rs.544,00,00,000/- and the amount in default is Rs.536,92,00,000/- as per the list of financial creditors provided as Annexure A-5. The list of Operational Creditors along with their respective amounts outstanding as shown in Annexure A-16 (though disputed) is given as follows: -

Sl. Name of the Date Amount Submission by the No. Operational Outstanding Corporate Debtor Creditor (Rs.) 01 Sleepwell 30/08/2013 a) 3,94,78,064/- SLP has been filed Industries Co. by the Corporate Ld. Debtor challenging the rejection of the application u/s. 48 of the Arbitration &

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 4 of 12 Conciliation Act, 1996 before the Calcutta High Court.

b) 80,64,083/- Application u/s. 48 of the Arbitration & Conciliation Act, 1996, disputing the amount claimed, has been filed before the Calcutta High Court by the Corporate Debtor.

02 Swiss 20/02/2013 a) 2,81,36,186/- An appeal to a civil Singapore suit, filed by the Overseas Corporate Debtor, Enterprises challenging the Pte. Ltd. amount claimed as foreign award, is pending before the Calcutta High Court.

10/04/2013 b) 59,26,060/- An appeal to a civil suit, filed by the Corporate Debtor, challenging the amount claimed as foreign award, is pending before the Calcutta High Court.

03 Sovarex S.A. 05/03/2014 20,98,00,966/- A civil suit, filed by the Corporate Debtor, challenging the amount claimed as foreign award is pending before the Calcutta High Court.

04 Sifandros 31/08/2015 5,69,18,280/- Application u/s. 48 Carriers Ltd. of the Arbitration and Conciliation Act, 1996, disputing the amount claimed, has been filed before the Calcutta High Court by the Corporate Debtor.

05 Ajit Kumar 07/09/2015 95,92,564 Annexure A-18 Patni

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 5 of 12 06 Gati Kinetsu 31/12/2014 2,11,991/- Annexure A-19 Express Pvt. Ltd. 07 Income Tax Dept. (Assessment Years) Demand notices a) 2007-08 31/03/2014 2,06,852,369/- raised by the IT b) 2008-09 22/03/2014 41,188,240/- authorities upon the c) 2009-10 19/12/2011 1,59,695,650/- Corporate Debtor for d) 2009-10 08/09/2016 38,771,310/- the A.Y. 2010-11 to e) 2010-11 28/03/2013 49,618,590/- 2016-17 show a f) 2011-12 31/03/2014 34,920,250/- sum of g) 2012-13 31/03/2015 448,960/- Rs.1,67,05,21,949/- h) 2010-11 31/12/2017 13,92,378,970/- An appeal was filed i) 2011-12 31/12/2017 48,421,840/- by the Corporate j) 2012-13 31/12/2017 95,421,840/- Debtor to challenge k) 2013-14 31/12/2017 16,908,580/- the said demand, l) 2014-15 31/12/2017 1,07,127,920/- wherein an order m) 2015-16 31/12/2017 9,606,950/- was passed by the n) 2016-17 31/12/2017 702,377/- Commissioner of Income Tax, Kolkata dated March 16, 2018 (Annexure A- 14) which ordered the Company to pay Rs.15,60,22,736/- and stayed the balance demand of IT Authorities. IT Authorities exercising its powers u/s. 220(3) of the IT Act, 1961, also attached various bank accounts of the Corporate Debtor and issued the attachment orders upon various banks (Annexure A-15) Total Rs. 256,01,92,031/- (approximately)

4. The Sleepwell Industries Company Limited (Respondent No.11), an

'Unsecured Creditor' objected on the ground that the application under

Section 10 was filed to defraud its creditors and to frustrate the orders

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 6 of 12 passed by the Hon'ble Supreme Court of India in SLP (C) No.540 of 2018

dated 20th April, 2018. It is alleged that for non-payment of value of goods

an Arbitral Award was passed, for which two Execution Applications were

filed against LMJ International Ltd. (Now known as Sri Munisuvrata Agri

International Ltd.). By order dated 4th December, 2014, a composite order

was passed by the Hon'ble High Court of Calcutta holding that the Awards

were enforceable. The Appellant earlier known as LMJ International Ltd.,

then preferred two appeals before the Division Bench of Calcutta High Court,

which were disposed of on 1st December, 2015. Thereafter, the Appellant

filed formal applications under Section 48 of the Arbitration and Conciliation

Act before the Calcutta High Court in Execution Cases of 2013 praying that

the Awards be held unenforceable, which were ultimately dismissed by

orders dated 22nd August, 2017 and 9th July, 2018. Thereafter, LMJ

International Ltd. (now Appellant) preferred SLP being Special Leave Petition

(Civil) No.540 of 2018 against the judgment and order dated 22nd August,

2017. In the SLP, approximately Rs.1.78 crores were remitted in favour of

Sleepwell Industries Company Limited by the Registrar, in compliance of the

order of the Hon'ble Supreme Court dated 5th January, 2018. The Hon'ble

Supreme Court passed further order dated 20th April, 2018 allowing

Sleepwell Industries Company Limited encashment of 50% of the bank

guarantee amount, which had been furnished by the Allahabad Bank.

5. Further, according to the Sleepwell Industries Company Limited

(Respondent No.11), it is only after the order passed by the Hon'ble Supreme

Court, suddenly LMJ International Ltd. changed its name as Sri Munisuvrata

Agri International Ltd. (Corporate Applicant herein) and moved an

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 7 of 12 application under Section 10 of the I&B Code with an ulterior and malicious

motive and to defraud its creditors.

6. The other application was filed by Swiss Singapore Overseas

Enterprises Pvt. Ltd., a Singaporean Company, requesting for leave to

intervene alleging that the application under Section 10 was filed with

malicious intent to defraud its creditors. It alleged that Singapore

International Arbitration Centre passed a partial award dated 20th February,

2013 and a final award dated 10th April, 2013 in relation to dispute between

the parties, and therefore, thereafter filed execution of the two awards before

the Hon'ble Calcutta High Court being E.C. No.322 of 2013 and E.C. No.353

of 2017. It was further alleged by Swiss Singapore Overseas Enterprises Pvt.

Ltd. that the 'Corporate Debtor' had changed its name from LMJ

International Pvt. Ltd. to Sri Munisuvrata Agri International Ltd. and also

changed its registered address surreptitiously without intimating the

creditors and to ensure that 'Corporate Insolvency Resolution Process' is

initiated against itself without informing them.

7. Two Shareholders of the 'Corporate Applicant' (Appellant) also moved

applications opposing the initiation. They have submitted that initially, the

shareholders in the Company, being members of the Jain family were

carrying on their business jointly. However, due to subsequent differences,

the dispute was referred to the Arbitral Tribunal, which passed Award upon

consent of the parties on 3rd January, 2013. The aforesaid Shareholders/

Applicants being the 'Party of the First Part' have complied with their

obligation under the Award, but the 'Other Part', which was to be complied

by the MLJ Group (Main Group - Corporate Debtor) had defaulted in

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 8 of 12 complying with their part of obligation. Therefore, an Execution Application

being EC No.873 of 2015 was filed before the Calcutta High Court for seeking

enforcement of the said Award, wherein, inter alia, an interim Award was

passed on 4th March, 2015. Further, according to the aforesaid

Shareholders/ Applicants, one of the Companies of the Jain family namely

LMJ Project Pvt. Ltd. has been allotted to the aforesaid Shareholders/

Applicant's group but the said land is still in possession of MLJ group

('Corporate Applicant'). The said Company has a huge property, which

belong to the Shareholders/ Applicants as per Award, which has been

illegally and unlawfully leased out behind their back by one Smt. Ekta Jain

of the MLJ Group to the Applicant of the proceeding namely Sri Munisuvrata

Agri International Ltd.

8. The Shareholders/ Applicants further took a plea that as per Award

dated 3rd January, 2013, the MLJ Group, the main Shareholder ('Corporate

Applicant) failed to comply with their obligation to pay a sum of

Rs.10,82,50,000/- for the default committed as per clause 14 of the said

Award.

9. Similar allegations were made by one Centrum Financial Services Ltd.,

who claimed to be 'Financial Creditor', alleging fraud on the part of the

Applicant in preferring the application under Section 12.

10. Bank of Baroda (1st Respondent) submitted that it has extended credit

facility to the 'Corporate Applicant' and entered into a "Working Capital

Consortium Agreement" dated 15th February, 2018. The Appellant started

committing defaults since 28th February, 2018. The Consortium Members

exchanged information regarding the account of Appellant, wherein it was

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 9 of 12 recorded that the account was in default since 28th February, 2018. The

Bank of Baroda has supported the application filed under Section 10 by the

'Corporate Debtor' on the ground that default was committed. The Bank of

Baroda, who is the lead banker of the Consortium of Banks did not oppose

the said application.

11. It is also brought to our notice that pursuant to the Demand Notice

under Section 13(2) of the SARFAESI Act, 2002, on 9th July, 2018 the default

having been committed, the account of the Appellant was declared NPA.

Since the amounts were not paid, the Bank of Baroda, as a lead Bank has

moved application under Section 7 of the I&B Code, 2016 for initiation of

'Corporate Insolvency Resolution Process' being CP (IB)-1541(KB)/2018.

12. Sleepwell Industries Company Limited (Respondent No.11) brought to

our notice that name of LMJ International Limited was suddenly changed on

23rd April,2018 to "Srimunisuvrata Agri International Limited" ('Corporate

Applicant'). The Registered Office was changed on 26th April, 2018 from LMJ

House, 15-B, Hemanta Basu Sarani, Kolkata - 700001 to 16, British India

Street, 2nd Floor, Kolkata - 700069, while other Companies are still running

from LMJ House. It is further stated that immediately after change of

Registered office on 26th April, 2018, the application under Section 10 was

filed before the Adjudicating Authority (National Company Law Tribunal),

Kolkata Bench on next day, i.e., 27th April, 2018.

13. This Appellate Tribunal asked the Appellant, whether the Shareholders

of the 'Corporate Applicant' had taken decision in its Extra Ordinary General

Meeting to move an application under Section 10 of the I&B Code. Pursuant

to such query, the Appellant enclosed a document to show that Shareholders'

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 10 of 12 permission were taken on 10th April, 2018. The aforesaid document was not

brought on record by the 'Corporate Applicant' before the Adjudicating

Authority. The 02nd Extraordinary General Meeting of the 'Corporate

Applicant' shown to be held in the Registered Office of the Company on

10th April, 2018 at 15-B, Hemanta Basu Sarani, 5th Floor, Kolkata and the

Minutes were signed by the Chairman on 16th April, 2018. The Respondents

have shown irregularity in the document and stated that the aforesaid

document is a forged document, which is subsequently manufactured and

brought on record before this Appellate Tribunal and the same was not filed

before the Adjudicating Authority (National Company Law Tribunal).

14. As per Section 12(3) of the Companies Act, 2013, it is a necessary for

a Company to write name of the Company along with its former name, so

changed during the last two years. But in the present case, the Appellant

purposely suppressed the former name in Form-6 as well as in the affidavit

verifying the petition filed under Section 10 of the I&B Code.

15. Centrum Financial Services Limited - Respondent No.15 brought on

record a Tabular Chart and audited statement to show that the 'Corporate

Applicant' was solvent and self-sustained Company and immediately before

the petition was filed, the Appellant serially siphoned off money. In support

of it a Tabular Chart has been enclosed.

16. However, we are not inclined to give any finding on the question of fact

as to whether the Appellant is a 'solvent Company' and any amount is

siphoned or not. If that be so, it will be open to the parties to move on the

aforesaid facts before the Registrar of Companies and Regional Director of

the Companies, Eastern Region with such allegations.

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 11 of 12

17. The stand as taken by the parties, suggest that the application under

Section 10 of the I&B Code was filed by the 'Corporate Applicant' fraudulently

with malicious intent and not for 'Resolution' or 'Liquidation' and may attract

Section 65 of the I&B Code for penal action. However, as no such order has

been passed by the Adjudicating Authority (National Company Law Tribunal)

under Section 65 imposing penalty, we are not passing any penal order under

Section 65. However, we hold that the application under Section 10 was not

maintainable.

18. However, order passed in this Appeal, will not come in the way of the

Bank of Baroda, lead Bank of the Consortium of Banks, who has already

moved application under Section 7 of the I&B Code. The Adjudicating

Authority is free to decide the application under Section 7 preferred against

the 'Corporate Debtor', or any application preferred by the 'Financial

Creditors'/ Operational Creditors uninfluenced by order dated

15th November, 2018 passed by the Adjudicating Authority (National

Company Law Tribunal) and this Appellate Tribunal, if not yet passed.

19. The Appeal is dismissed with the aforesaid observations. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial) NEW DELHI

24th January, 2020

Ash

Company Appeal (AT) (Insolvency) No. 84 of 2019 Page 12 of 12