Guruprasad V Hishobkar Vs Aashraya Souhard Credit Society Limited (NCLAT)
NCLAT held that that the Adjudicating Authority rightly rejected the Resolution plan as the same didn’t complied with the provisions of Section 29A(G) read with Section 240A of the Insolvency and Bankruptcy Code, 2016.
Facts- This appeal is filed by the Appellant who is the Promoter / Shareholder of Corporate Debtor. The First Respondent is a Co-operative Society registered under the ‘Karnataka Co-operative Societies Act, 1959’ and subsequently got registered under ‘Karnataka Souharda Sahakari Act, 1977’ and changed its name to ‘Shree Aashraya Souhard Credit Society Limited’. The Corporate Debtor is a Company which is engaged in the business of Real Estate and Construction, having few Common Directors with the Petitioner’s Society based on which the Petitioner (‘Financial Creditor’) had provided Secured Cash Credit Facility to the tune of Rs. 14 Crores, prior to 1997 and thereafter extended Cash Credit Facilities. It was averred that the loan amount was disbursed in several tranches and since the management of the Financial Creditor and the Corporate Debtor is the same, the Corporate Debtor was able to pool in huge investments from a large number of small investors. The Corporate Debtor did not create a charge on the assets of the Corporate Debtor.
The Financial Creditor issued various loans calling upon the Corporate Debtor to repay the loan amount for which the Corporate Debtor issued Reply letters but never made the payments. The Financial Creditor also got issued a Legal Notice on 01/03/2018 which was returned on 10/03/2018 with an endorsement ‘Not Claimed’.
The Depositors of the Society approached the Registrar of the Co-operative Society and expressed their grievance before him, after which the Registrar appointed a Special Officer to facilitate the holding of Elections in the Society and to appoint a new Board of Directors to regularise the operations of the Financial Creditor. Thereafter, the Liquidator was appointed on 14/01/2019 to recover the pending dues and settle the dues of a large number of individual investors.
It is said that as on 31/03/2020, the money due and payable for the Corporate Debtor stood at Rs. 12,09,45,192/- and the Balance Sheet of the Corporate Debtor for the year ending 31/03/2018 makes it very clear that the Corporate Debtor is commercially insolvent and is unable to pay its debts. Hence the Financial Creditor preferred Section 7 Application seeking to initiate ‘Company Insolvency Resolution Process’ (‘CIRP’) in respect of the Corporate Debtor.
Conclusion- In the instant case, the record establishes that there is a ‘debt’ and a ‘default’ and the Application is complete and the Adjudicating Authority has rightly admitted the Application under Section 7 of the Code.
It is pertinent to mention that the Adjudicating Authority has rejected the Resolution plan, though approved by the CoC, on the ground that it does not satisfy the provisions of Section 29A(G) read with Section 240 A of the Code. This Tribunal in Company Appeal (AT) (CH) (Ins) No. 110 of 2023 dealing with the Impugned Order dated 28/02/2023 in IA No. 192 of 2022 has upheld the Order of the Adjudicating Authority in rejecting the Resolution Plan filed by the Appellant and the Suspended Directors. It passes beyond one’s comprehension as to how the Appellant who is assailing the ‘Section 7 Admission Order’ under the ‘IBC Code’ has emboldened himself to present the Resolution Plan.
FULL TEXT OF THE NCLAT JUDGMENT/ORDER
1. This Appeal is filed by the Appellant who is the Promoter! Shareholder of the Corporate Debtor under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘Code’), against the Impugned Order dated 06/04/2021, passed by the National Company Law Tribunal, Bengaluru Bench, Bengaluru in C.P.(IB) No. 196/BB/2020, by which Order, the Adjudicating Authority has admitted the Section 7 Application preferred by the 1st Respondent ! Financial Creditor ! Shree Aashraya Souhard Credit Society Limited.
2. The facts in brief as arrayed in the Company Petition are that the Petitioner / First Respondent is a Co-operative Society registered under the ‘Karnataka Co-operative Societies Act, 1959’ and subsequently got registered under ‘Karnataka Souharda Sahakari Act, 1977’ and changed its name to ‘Shree Aashraya Souhard Credit Society Limited’. The Corporate Debtor is a Company which is engaged in the business of Real Estate and Construction, having few Common Directors with the Petitioner’s Society based on which the Petitioner (hereinafter referred to as the ‘Financial Creditor’) had provided Secured Cash Credit Facility to the tune of Rs. 14 Crores, prior to 1997 and thereafter extended Cash Credit Facilities on 08!05!2000, 24!01!2008, 29!08!2009 and 02!04!2010 It was averred that loan amount was disbursed in several tranches and since the management of the Financial Creditor and the Corporate Debtor is the same, the Corporate Debtor was able to pool in huge investment from large number of small investors. The Corporate Debtor did not create a charge on the assets of the Corporate Debtor. The Financial Creditor issued various loans dated 22/08/2016, 19/04/2017 calling upon the Corporate Debtor to repay the loan amount for which the Corporate Debtor issued Reply letters dated 22/09/20 16 and 02/05/20 17, but never made the payments. The Financial Creditor also got issued a Legal Notice on 01/03/20 18 which was returned on 10/03/20 18 with an endorsement ‘Not Claimed’. The Depositors of the Society approached the Registrar of Co-operative Society and expressed their grievance before him, subsequent to which the Registrar appointed a Special Officer to facilitate the holding of Elections in the Society and to appoint a new Board of Directors to regularise the operations of the Financial Creditor. Thereafter, the Liquidator was appointed on 14/01/2019 to recover the pending dues and settle the dues of a large number of individual investors.
3. It is said that as on 31/03/2020, the money due and payable for the Corporate Debtor stood at Rs. 12,09,45,192/- and the Balance Sheet of the Corporate Debtor for the year ending 31/03/2018 makes it very clear that the Corporate Debtor is commercially insolvent and is unable to pay its debts. Hence the Financial Creditor preferred Section 7 Application seeking to initiate ‘Company Insolvency Resolution Process’ (‘CIRP’) in respect of the Corporate Debtor.
4. Submissions of the Learned Company Secretary Dr. K.S. Ravichandran:
