Central Bank of India Vs Superfine Profile and Extrusions Pvt. Ltd. (NCLT Mumbai)
In a significant legal development, the National Company Law Tribunal (NCLT) in Mumbai rendered a crucial judgment in the case of Central Bank of India vs. Superfine Profile and Extrusions Pvt. Ltd. The core issue under consideration revolves around the determination of the date of default concerning corporate guarantors and its pivotal role in initiating the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC).
Background of the Petition: Central Bank of India initiated legal proceedings under Section 7 of the IBC, seeking the commencement of the Corporate Insolvency Resolution Process (CIRP) against Superfine Profile and Extrusions Private Limited, the designated corporate debtor. The crux of the matter lies in a Corporate Guarantee Agreement dated 22.08.2015 and 18.11.2016, which served as the legal foundation for credit facilities extended to the principal borrower.
Debt and Default Details: The Financial Creditor, Central Bank of India, asserted a substantial debt amounting to INR 66,21,05,008/-. The identified default date crucial to the proceedings was recorded as 06.03.2023.
Financial Creditor’s Submissions: The Financial Creditor presented a compelling case, highlighting the existence of a Corporate Guarantee Agreement that secured credit facilities for the principal borrower. This agreement was backed by security interests created over movable and immovable properties. Notably, the default was substantiated through a NeSL report, and a demand notice was issued on 06.03.2023.
Corporate Debtor’s Counterarguments: The Corporate Debtor, in its defense, raised several counterarguments. It claimed that the petition was time-barred under Section 10A of the IBC. Moreover, it contended that certain credit facilities did not exist in 2015 and 2016, asserting that the guarantee was wrongly invoked and presented an incomplete set of documents.
NCLT Findings on Limitation: The NCLT emphatically clarified the concept of the date of default for a corporate guarantor. It highlighted that in cases of corporate guarantors, the date of default is when the guarantor is demanded to pay. The Tribunal ruled that the petition was not barred by limitation, as the demand notice was served on 06.03.2023.
Independence of Date of Default: A pivotal aspect of the NCLT’s ruling was the affirmation that the date of default for a corporate guarantor is independent and distinct from that of the principal borrower. In rejecting the argument of being barred by Section 10A, the Tribunal underlined the autonomy of the corporate guarantor’s default date.
Verification of Corporate Guarantee Relevance: The NCLT meticulously scrutinized the records to establish the relevance of the Corporate Guarantee Agreement. The records substantiated the existence of credit facilities before 2019, challenging the Corporate Debtor’s assertion that the guarantee deeds dated 22.08.2015 and 18.11.2016 were not relevant to transactions in 2019.
Compliance with IBC and Supreme Court Order: The Tribunal acknowledged the constitutional validity of the Insolvency and Bankruptcy Code, 2016. It emphasized the absence of scope for raising a ‘dispute’ in a Section 7 petition. The admission of the petition was based on the establishment of debt and default.
Appointment of Interim Resolution Professional: Mr. Jitendra Ramesh Palande was appointed as the Interim Resolution Professional (IRP), tasked with overseeing the Corporate Insolvency Resolution Process. The suspended board of directors was directed to cooperate with the IRP for the seamless functioning of CIRP proceedings.
Moratorium and CIRP Initiation: The NCLT invoked a moratorium under Section 14, bringing a halt to various actions against the Corporate Debtor. The IRP was instructed to issue a public notice, and the initiation of CIRP was ordered. The management of the Corporate Debtor was vested in the IRP during this period.
Financial Creditor’s Deposit and Compliance: To facilitate the CIRP process, the Financial Creditor (Central Bank of India) was directed to deposit INR 5,00,000 for public notice expenses. The compliance report was mandated from the Registrar of Companies, Maharashtra.
Conclusion: The NCLT Mumbai’s comprehensive judgment in Central Bank of India vs. Superfine Profile and Extrusions Pvt. Ltd. elucidates the intricate considerations surrounding the date of default for corporate guarantors. This detailed analysis underscores the legal and procedural intricacies, emphasizing the NCLT’s stance on the autonomy of the corporate guarantor’s default date. The implications of this ruling on the initiation of the Corporate Insolvency Resolution Process (CIRP) align with the constitutional validity of the IBC, as upheld by the Supreme Court.
FULL TEXT OF THE NCLT JUDGMENT/ORDER
1. This Company Petition is filed under section 7 (“the Petition”) of the Insolvency and Bankruptcy Code, 2016 (IBC) by Central Bank of India (“the Financial Creditor”), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Superfine Profile and Extrusions Private Limited (“the Corporate Debtor”).
2. The Corporate Debtor is a private company limited by shares incorporated on 10.04.2001 under the Companies Act, 1956, with the Registrar of Companies, Maharashtra, Pune. Its registered office is at Gat No. 58/1, Nagar Kalyan Roada/P Bhalwani, TalParner MH-4 14103. Therefore, this Bench has jurisdiction to deal with this petition.
3. The present Petition was filed on 29.07.2023 before this Tribunal for claiming a sum for a Secured Loan for a sum of INR 66,21,05,008/- (Rupees Sixty-Six Crore Twenty-One Lakh Five Thousand and Eight Rupees only) vide a Corporate Guarantee Agreement dated 22.08.2015 and 18.11 .2016 for the Aggregate debt of INR 73,61,00,000/- (Seventy-Three Crore and Sixty-One Lakh Only) including the outstanding principal and interest. The Date of Default as per part IV was on 06.03.2023.
Submissions made by the Financial Creditor:
4. The Financial Creditor submits that a corporate guarantee deed was entered into on 22.08.2015 and 18.11.2016 between Central Bank of India i.e. the Financial Creditor and Superfine Profile and Extrusion Pvt. Ltd. i.e. the Corporate Debtor in respect of all credit facilities “as may be agreed from time to time between the bank and the borrower”. Thus, the corporate guarantor had provided a corporate guarantee in favour of bank, for securing the credit facilities granted to the principal borrower i.e. Superfine Metals Private Limited on 22.08.2015 & 18.11.2016 for an amount of Rs. 66,21,05,008/- /- (Rupees Sixty-Six Crore Twenty-One Lakh Five Thousand and Eight Rupees only) which is disbursed in the following nature:
