Deepa Krishan JUDGMENT
M.M. Kumar, C.J. (President)
1. The 'Financial Creditor'-Central Bank of India has filed the instant application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code') with a prayer to
trigger the Corporate Insolvency Resolution Process in the matter of NCML Industries Limited. It is appropriate to mention that the 'financial creditor' is a body corporate constituted by and under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (for brevity 'Banking Companies Act'). The 'financial creditor' had its head office at Chandermukhi, Nariman Point, Mumbai-400021. The identification number of the financial creditor is BSR Code 283869 and its branch office is at Mid Corporate Finance Branch, GF (Right Wing), Link House, 3, Bahadur Shah Zafar Marg, New Delhi-110002.
2. Mr. Ashwani Kumar Arora has been authorized by the power of attorney dated 08.09.2016 (Annexure-A1) to sign and submit the petition.
3. The Corporate Debtor-NCML Industries Limited was incorporated on 26.09.1996. The identification number of the Corporate Debtor is U65923BL1996PLC082284 and its registered office is situated at 1818, Naya Bazar, New Delhi-110006. Its authorised share capital is Rs. 23,55,00,000/- (Rupees Twenty three crores fifty five lacs) and the paid up share capital is Rs. 23,54,85,000/- (Rupees Twenty three crores fifty four lacs eighty five thousand) as per details of guarantee clause as well as Memorandum of Association.
4. In the application, the Financial Creditor has given the details of financial debt granted to the 'Corporate Debtor' with the dates of disbursement. A perusal of part IV of the application has highlighted the following particulars of financial debt:
The aforesaid details would show that fresh working capital limit (FLC) of Rs. 40 crores was extended to the Corporate Debtor on 17.09.2012 and subsequently it was renewed. Further debt was granted upon review-cum-enhancement proposal whereby FLC limit was increased to Rs. 50 crores on 13.11.2013 and fresh limit as CC (Hypothecation) for a sum of Rs. 7 crores was granted. The details concerning dates of disbursement under the aforesaid facilities have been annexed (Annexure A-2).
5. As per the averments of the 'Financial Creditor', the principal amount in default under CC (Hypothecation) limit as on 25.07.2017 is claimed to be Rs. 9,93,34,797 (Rupees nine crores ninety three lacs thirty four thousand seven hundred and ninety seven). In addition, the default amount towards LC development as on 25.07.2017 is claimed to be Rs. 47,03,02,370 (Rupees forty seven crores three lacs two thousand three hundred seventy). A copy of computation of amount of default and date of default has been placed on record (Annexure A-3).
6. The 'financial creditor' has placed on record an overwhelming evidence to prove the amount advanced and secured by Corporate guarantees. The details of the security held by, or created for the benefit of 'financial creditor'- Central Bank of India have been given in Part V which are set out below:-
"CC (Hypothecation) facility granted by Central Bank of India, Mid Corporate Finance Branch, 3, Bahadur Shah Zafar Marg, New Delhi-110002
First charge shared pari passu amongst the Lenders, (including the Forward contract limit on the Lenders as per their respective Sanction Letter, outside the consortium limit) over the entire current assets of the Company (present and future) including but not limited to:
(i) Book debts, bills receivables, commissions, revenues, claims, demands, bills, receipts, monies, guarantees, letters of credit, contracts, engagements and stocks, shares, notes, bounds, warrants and other securities of any kind belonging to or held by the Company, and all those in action which may rise to any debt, revenue or monetary claim which are now due and owing or accruing and which may at any time hereafter during the continuance of this Deed become due and owing or accrue to the Company and the benefits of any security, guarantee or other rights in relation to any of the foregoing;
(ii) Stocks of raw materials, consumables, general stores, of whatsoever nature and wherever arising finished and semi-finished goods, goods in process and stores, which are now lying or stored in or which may become consumable hereafter from time to time during the continuance of this Deed by lying or stored in or brought into or be in or about the factories and godowns of the company or warehouses, wherever situated;
(iii) Accounts receivable, operating cash flows, treasury income, deposits of the Company with third parties, and any other revenues or whatsoever nature and wherever arising, present and future;
LC (Development) facility granted by Central Bank of India
First charge shared pari passu amongst the Lenders, (including the Forward contract limit on the Lenders as per their respective Sanction Letter, outside the consortium limit) over the entire current assets of the Company (present and future) including but not limited to:
(i) Book debts, bills receivables, commissions, revenues, claims, demands, bills, receipts, monies, guarantees, letters of credit, contracts, engagements and stocks, shares, notes, bounds, warrants and other securities of any kind belonging to or held by the Company, and all those in action which may rise to any debt, revenue or monetary claim which are now due and owing or accruing and which may at any time hereafter during the continuance of this Deed become due and owing or accrue to the Company and the benefits of any security, guarantee or other rights in relation to any of the foregoing;
(ii) Stocks of raw materials, consumables, general stores, of whatsoever nature and wherever arising finished and semi-finished goods, goods in process and stores, which are now lying or stored in or which may become consumable hereafter from time to time during the continuance of this Deed by lying or stored in or brought into or be in or about the factories and godowns of the company or warehouses, wherever situated;
(iii) Accounts receivable, operating cash flows, treasury income, deposits of the Company with third parties, and any other revenues or whatsoever nature and wherever arising, present and future"
7. The Financial Creditor also placed on record the Personal Guarantees of the Corporate Debtor namely Mr. Mohan Lal Jain, Ms. Suman Jain, Ms. Kamla Jain and Ms. Sangeeta Jain. All of them executed deed of guarantee namely 'form of guarantee for advances & credits generally' dated 31.03.2014, inter alia, guaranteeing that in the event of default by the Corporate Debtor, they were to be liable to make the payment of the dues under the CC and LC limits granted by the Financial Creditor. A copy of deed of guarantee dated 31.03.2014 has been placed on record (Annexure A-4).
8. The Corporate Guarantor namely N.M. Industries Private Limited, which is sister concern of Corporate Debtor, vide deed of guarantee dated 31.03.2014 (Annexure A-5) furnished the Corporate guarantee, inter alia, guaranteeing that Corporate Guarantor shall be liable to secure the repayment of dues payable by the Corporate Debtor. A copy of deed of corporate guarantee dated 31.03.2014 has also been placed on record (Annexure A-5). Further Corporate Debtor has also placed on record omnibus counter guarantee (Annexure A-6) of Manish Jain (HUF) for the letter of credit dated 31.03.2014.
9. As per the financial creditor the estimated value of the aforementioned securities is approximately 1000 crores (Rupees one thousand crores) as on 31.12.2015.
10. The Financial Creditor further asserted that Original Application No. 533 of 2017 has been filed by State Bank of India as Consortium Leader with the Financial Creditor as a joint plaintiff which is pending consideration of Debt Recovery Tribunal-I, New Delhi.
11. The Financial Creditor has also attached the financial contracts with respect to the CC (Hypothecation) facility and LC facility. Those documents are as under:-
1) A copy of the Inter se agreement dated 08.02.2013 between the Consortium members including Financial Creditor has been annexed as Annexure A-8.
2) A copy of Joint deed of hypothecation dated 24.04.2014 has been annexed as Annexure A-9.
3) A copy of Composite deed of hypothecation dated 31.03.2014 has been annexed as Annexure A-10.
4) A copy of agreement of hypothecation of current assets dated 31.03.2014 has been annexed as Annexure A-11.
5) A copy of letter of undertaking not to encumber assets dated 31.03.2014 has been annexed as Annexure A-12.
6) A copy of agreement of non diversion of funds dated 31.03.2014 has been annexed as Annexure A-13.
7) A copy of application and agreement of letter of credit (Foreign) dated 31.03.2014 has also been annexed as Annexure A-14.
12. A record of default is also available with the Credit Information Companies like the status classification report of the 'Corporate Debtor' issued by the Trans Union CIBIL dated 03.08.2017 (Annexure A-15). Likewise, Entries in Bankers Book in accordance with the Bankers Books Evidence Act, 1891 has also been placed on record which relate to CC and LC Devolvement facility, depict the closure balance as on 25.07.2017 in respect of both two facilities (Annexure A-16).
13. The 'financial creditor' has then attached a list of other documents to the application to prove the financial debt, the total amount due and the date of default. Those documents are as under:-
a) A copy of letter of interest variation dated 31.03.2014.
b) A copy of letter of waiver dated 31.03.2014.
c) A copy of letter of continuity dated 31.03.2014.
d) A copy of undertaking dated 31.03.2014.
e) A copy of consent letter by company dated 31.03.2014.
f) A copy of legal notice dated 23.01.2017 issued by SBI acting as a Consortium leader on behalf of other Consortium members incorporated the dues of the Financial Creditor.
g) A copy of reply dated 15.02.2017 issued on behalf of the Corporate Debtor.
h) A copy of demand notice dated 25.02.2017 issued by Financial Creditor to the Corporate Debtor and its Directors/Guarantors demand a sum of Rs. 56,96,37,167/- (Rupees fifty six crores ninety six lacs thirty seven thousand one hundred sixty seven only) within 5 days failing which appropriate legal action will be taken against the Corporate Debtor including filing of the present application.
The copy of the aforementioned documents proving existence of 'financial debt' and default have also been annexed (Annexure A-17, 18, 19, 20, 21, 22, 23 & 24).
14. The 'corporate debtor' has opposed the admission of the application by arguing that the petition is incomplete as no statutory details required in part IV of the prescribed form have been given. It is appropriate to mention that the proforma has been prescribed by Rule 4 of the Rules known as Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. In part IV two columns are mentioned namely (1) total amount of debt granted with date(s) of disbursement (2) amount claimed to be in default and the date on which the default occurred.
The petitioner has given the particulars of financial debt in part IV satisfying all the aforesaid requirements and the same read as under:-
A perusal of the aforesaid table would show that the total amount of debt granted and disbursed has been elaborately explained and for further details reference has been made to Annexure A-2 which shows that CC facility was given by disbursing Rs. 7 crores on 04.04.2017. Another facility described as LC-4 A/cs account Rs. 50 crores was given and the amount was disbursed on 02.03.2015. Likewise, the amount of default has also been elaborately given along with the dates which can be ascertained by referring to Annexure A-3. Therefore, we do not find any substance in the objection raised by the Corporate Debtor.
15. Another objection raised by the Corporate Debtor is that the petition was not maintainable without joining the lead Bank. This objection would not detain us as Section 7 of the Code itself shows that a financial creditor either by itself or jointly with other financial creditor may file an application for initiating Corporate Insolvency Resolution Process against a Corporate Debtor when a default has occurred. Therefore, there is no obligation to join the lead Bank. The rational for the argument put forth by the Corporate Debtor is that Section 7 must be interpreted harmoniously with the Rules framed by the Reserve Bank of India under Banking Regulation Act and Section 7 is wide enough to cover the requirements of formation of Joint Lenders Forum (for brevity 'JLF'). The argument is wholly devoid of merit because Section 238 of the Code expressly provides that the provision of the Code have to effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Hon'ble the Supreme Court in the case of M/s. Innoventive Industries Limited v. ICICI Bank & Anr., Civil Appeal No. 8337-8338 of 2017 decided on 31.03.2017 has concluded that Section 238 is a later non-obstante clause of the Parliamentary enactment which would prevail over the limited non-obstante clause. The Banking Regulation Act to which reference has been made is also much earlier to the enactment of the Code and the non-obstante clause which is in the widest terms possible under Section 238 of the Code must prevail. Hon'ble the Supreme Court also dealt with a cognate argument that under the Maharashtra Relief Undertakings (Special Provisions Act), 1958 even if there was a promise to infuse funds into the Corporate debtor then it would not make any difference if no fund were actually infused. The observations made in para 59 of the judgment are direct answer to the argument raised on behalf of the Corporate Debtor. Para 59 of the aforesaid judgment read as under:-
"59. The obligation of the corporate debtor was, therefore, unconditional and did not depend upon infusing of funds by the creditors into the appellant company. Also, the argument taken for the first time before us that no debt was in fact due under the MRA as it has not fallen due (owing to the default of the secured creditor) is not something that can be countenanced at this stage of the proceedings................"
16. The 'financial creditor' has proposed the name of Mr. Anil Kohli as an Insolvency Professional but subsequently vide Diary No. 3287 dated 17.10.2017 request was made to withdraw the name of earlier proposed Insolvency Professional namely Mr. Anil Kohli and in his place name of Mr. Gian Chand Narang was proposed as Insolvency Professional. A certificate of registration dated 14.09.2017 issued to Mr. Gian Chand Narang by the Insolvency and Bankruptcy Board of India has been placed on record vide aforesaid diary number. His registration number is IBBI/IPA-002/IP-N00362/2017-18/11031. He has also made declaration and filed a written communication dated 17.10.2017 in terms of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 along with the aforesaid diary number. According to the declaration made by Mr. Gian Chand Narang, no disciplinary proceedings are pending against him nor he is a related party to 'Financial Debtor' namely NCML Industries Limited nor he is an employee of the NCML Industries Limited. Accordingly, he satisfies the requirement of Section 7(3)(b) of the Code.
17. For the reasons, aforementioned this petition is admitted. Shri Gian Chand Narang who is duly registered with Insolvency and Bankruptcy Board of India IBBI/IPA-002/IP-N00362/2017-18/11031 is hereby appointed as an Interim Resolution Professional.
18. In pursuance of Section 13(2) of the Code we direct that public announcement shall be made by the Interim Resolution Professional immediately (3 days as prescribed by Regulations) with regard to admission of this application under Section 7 of the Code. We also declare moratorium in terms of Section 14 of the Code. The necessary consequences of imposing the moratorium flows from the provisions of Section 14(1)(a), (b), (c) & (d). Thus, the following prohibitions are imposed:
"(a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
(b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;
(c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor."
19. It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government or the supply of the essential goods or services to the Corporate Debtor as may be specified, are not to be terminated or suspended or interrupted during the moratorium period.
20. The Interim Resolution Professional shall perform all his functions contemplated, inter-alia, by Sections 15, 17, 18, 19, 20 & 21 of the Code and transact proceedings with utmost dedication, honesty and strictly in accordance with the provisions of the 'Code', Rules and Regulations. It is further made clear that all the personnel connected with the Corporate Debtor, its promoters or any other person associated with the Management of the Corporate Debtor are under legal obligation under Section 19 of the Code to extend every assistance and cooperation to the Interim Resolution Professional as may be required by him in managing the day to day affairs of the 'Corporate Debtor'. In case there is any violation, the Interim Resolution Professional would be at liberty to make appropriate application to this Tribunal with a prayer for passing an appropriate order. The Interim Resolution Professional shall be under duty to protect and preserve the value of the property of the 'Corporate Debtor' as a part of its obligation imposed by Section 20 of the Code and perform all his functions strictly in accordance with the provisions of the Code.
21. The Petition is disposed of in the above terms.
22. The office is directed to communicate a copy of the order to the Financial Creditor and the Corporate Debtor at the earliest possible but not later than seven days from today.
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