Canara Bank Vs S.S. Aluminium Private Limited (NCLT Cuttack)
Conclusion: Application filed by Canara Bank under Section 7 of the Code read with Rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating CIRP citing the default payment of a debt amount beyond Rs. 1 Crore as evident from the Form-C and Form-D of the NeSL certificate, from the loan account statement of S.S. Aluminium Private Limited, Corporate Debtor maintained by the Financial Creditor and from the acknowledgement of debt instrument executed by the Respondent was admitted.
Held: The present application was filed by Canara Bank (‘Financial Creditor’) under Section 7 of the Code, 2016 (‘the Code’) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of Corporate Insolvency Resolution process (‘CIRP’) against S.S. Aluminium Private Limited (‘Respondent/ Corporate Debtor’) for default amount of Rs.15,88,33,394.26/-. The Financial Creditor sanctioned credit facilities, including a Cash Credit of and a Term Loan-I of Rs. 5,44,00,000, in favour of Respondent for the modernization and expansion of the existing aluminium plant at Haldiapada, as the respondent was in the process of starting a project for an aluminium extrusion manufacturing unit. Subsequently, the respondent sought an additional loan from the financial creditor to finance modernization and expansion of the existing plant, which required higher capital expenditures. As a result, the Financial Creditor approved a further credit of Rs. 88,64,000/-, as Term Loan Il. Additionally, Respondent requested an increase in the Cash Credit facilities by Rs. 1,50,00,000/-, which the Financial Creditor approved by increasing the limit to Rs. 5,00,00,000/- as per its sanction letter dated 23.03.2016. Furthermore, Respondent approached the Financial Creditor to issue a bank guarantee in favour of M/s National Small Industries Corporation Limited, and the Financial Creditor issued Bank Guarantee to the tune of Rs. 50,00,000/- in favour of M/s. National Small Industries Corporation Limited, for Rs. 50,00,000/-.The said Bank Guarantee was invoked by the beneficiary. The Financial Creditor then executed a debt restructuring agreement with the respondent. Financial Creditor additionally approved Rs. 17,33,000/- as Term Loan – III and Rs. 1,50,00,000 for the working capital term loan. Respondent approached the Financial Creditor for an increase in the loan amount, and the Financial Creditor, through its sanction letter, approved a Covid Funded Interest Term Loan of Rs. 34,32,390/- and a working capital of Rs. 2,00,00,000/- under the GECL scheme in favour of the respondent vide its sanction letter. Upon continued default, the loan accounts were classified as “Non-Performing Asset” in accordance with the Reserve Bank of India’s Prudential Accounting Norms. The Financial Creditor, in the meantime, initiated proceedings under the SARFAESI Act, 2002 and after that the Respondent sought One Time Settlement (OTS) of Rs, 4 crores, Rs. 5 crores, and IRS. 6 crores, respectively, thereby admitting liability towards the outstanding debt. The Financial Creditor issued a notice under Section 13(4) of the SARFAESI Act, followed by a Sale/ Auction Notice of the mortgaged properties, which failed due to a lack of bidders. Applicant submitted that there was an existence of financial debt disbursed by it, and the default of Respondent in relation to such debt was apparent and stood established from the aforesaid OTS communications. As regards the plea raised by Respondent relating to the alleged disbursement, the same was a matter to be examined by the Resolution Professional at the stage of claim verification and not at the stage of admission of the Corporate Insolvency Resolution Process before this Adjudicating Authority. Applicant further argued that, according to the Framework for Revival and Rehabilitation of MSMEs, it was Respondent’s responsibility to provide authenticated and verifiable documents proving its status as an MSME under the MSMED Act, 2006, at the time of classifying the account as NPA. It was held that Respondent failed to disclose or prove its MSME status when its account was classified as NPA. The claim of being an MSME, raised belatedly in these proceedings, was therefore unfounded and appeared to be an attempt to hinder the process under the Insolvency and Bankruptcy Code, 2016. The total amount of loans defaulted by Respondent, exceeding Rs 1 Crore after the time limit specified in Section 10A of the Code, meets the minimum requirement for initiating proceedings under Section 7 of the Code. Additionally, although the initial defaults in the remaining loan accounts occurred within the Section 10A period of the IBC, 2016, this was irrelevant since the defaults continued beyond that Section 10A period. It was evident from Form-C and Form-D of the NeSL certificate and from the loan account statement from 01.01.2021 to 16.03.2024, maintained by the Financial Creditor, and from the Debt Restructuring Agreement executed between the Financial Creditor and the respondent, that the respondent has defaulted on the payment of the borrowed amount. This was never disputed by Respondent during the pendency of the matter. Therefore, it was conclusively established that the default occurred regarding the financial debt extended by the Financial Creditor to the Respondent. It was conclusively established that the Respondent has in fact defaulted in payment of a debt amount i.e. beyond Rs, 1 Crore as evident from the Form-C and Form-D of the NeSL certificate, from the loan account statement of the respondent maintained by the Financial Creditor and from the acknowledgement of debt instrument executed by Respondent and the present application had been filed within the period of limitation as per Section 18 of the Limitation Act, 1963. Hence, the application filed under Section 7 of the Code read with Rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating CIRP of S.S. Aluminium Private Limited, Corporate Debtor was admitted.
