Allowed

In the matter of Pegasus Retail India Private Limited Tp 104 of 2019 [(Mp) Cp(Ib) 613 of 2018]

NCLT14 Oct 2022(MP) CP(IB) 613 of 2018

Case brief

AI extract

What is this about?

The NCLT Indore Bench admitted a petition under Section 7 of the Insolvency and Bankruptcy Code filed by a financial creditor against a corporate debtor for unpaid inter-corporate deposit, declared a moratorium, and appointed an Interim Resolution Professional to conduct the CIRP after finding the debt valid and non-barred by limitation.

What did the court decide?

The application is admitted; moratorium is declared; Mr. Navin Khandelwal is appointed as the Interim Resolution Professional; financial creditor directed to pay Rs. 1 lakh advance to the IRP.

In the matter of Pegasus Retail India Private Limited Tp… — Insolvency and Bankruptcy | NCLT (2022)

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IN THE NATIONAL COMPANY LAW TRIBUNAL INDORE BENCH COURT NO. 1

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ITEM No.301

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TP 104 of 2019 [CP(IB) 613 of 2018]

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Proceedings under Section 7 IBC

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IN THE MATTER OF: VRR Financial Services Pvt Ltd ........Applicant V/s Pegasus Retail India Ltd ........Respondent

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Order delivered on 14/10/2022

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Coram:

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Dr. Madan B. Gosavi, Hon’ble Member(J) Kaushalendra Kumar Singh Hon’ble Member(T)

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PRESENT:

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For the Applicant : For the Respondent :

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ORDER

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The case is fixed for pronouncement of order.

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The order is pronounced in open Court vide separate sheet.

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KAUSHALENDRA KUMAR SINGH DR. MADAN B. GOSAVI MEMBER (TECHNICAL) MEMBER (JUDICIAL)

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Braj Mohan

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BEFORE THE NATIONAL COMPANY LAW TRIBUNAL INDORE BENCH

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TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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(Under Section 7 of the Insolvency and Bankruptcy Code, 2016 r.w. Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016)

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In the Matter of:

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M/s VRR Financial Services Private Limited

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43, Jati Colony, (Ram Baugh) Near Khare Coaching Classes, Indore (MP)-452001.

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Applicant/ Financial Creditor

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Versus

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M/s Pegasus Retail India Private Limited

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Flat No. 501, Princess Empire, Race Course Road, Indore, (MP)–452001.

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Respondent/ Corporate Debtor

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Order reserved on: 22.09.2022 Order pronounced on: 14.10.2022

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Coram: Dr. Madan B. Gosavi, Member (J) Kaushalendra Kumar Singh, Member (T)

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Present: For the Applicant : Ld. Adv. Mr. Manoj Munshi a.w. Ld. Adv. Mr. Chiranjeev Saboo (Physical) For the Respondent : Ld. Adv. Mr. Jatin Sehgal (Physical)

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ORDER

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The instant Application is filed by M/s VRR Financial Services Private Limited (‘ Applicant ’) through its director Mr. Rajesh Vyas, under section 7 of the Insolvency and Bankruptcy Code, 2016 ( ‘Code’ ) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, for initiation of Corporate

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NCLT Indore Bench TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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Insolvency Resolution Process ( CIRP ) against M/s Pegasus Retail India Private Limited ( Corporate Debtor ) for the default amount of Rs.37,17,582/- (Rupees Thirty Seven Lakh Seventeen Thousand Five Hundred Eighty Two) which includes interest up to July 2018.

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The averments made by the Applicant/Financial Creditor are summarized hereunder:

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(i) The financial creditor granted inter-corporate deposit to the corporate debtor @ 8% per annum interest, however, no agreement/contract was ever executed in writing between the financial creditor and the corporate debtor for such intercorporate deposit.

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(ii) The financial creditor granted inter-corporate deposit of Rs. 25,00,000/- to the corporate debtor on 22.03.2013. On receipt of the said amount, the corporate debtor in the year 2014 credited interest of Rs. 2,00,395/- and deducted TDS of Rs. 20,040/-. Further, in the year 2015 the corporate debtor credited interest amounting to Rs.2,14,823/- and deducted TDS amounting to Rs.21,482/-. Therefore, the principal amount with unpaid interest after deduction of TDS amounts to Rs.28,73,696/- as on 31.03.2015.

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(iii) The financial creditor deals only in stock market of shares and invest surplus fund in inter-corporate deposit to earn by way of interest. Further, the financial creditor was not a registered dealer under VAT Act, which was mandatory for a trader to claim tax. In case of consignment sale (sale patti) the consignee agent is required to obtain registration under VAT Act, and in the absence of such registration the financial creditor cannot enter into trading activity.

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NCLT Indore Bench TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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(iv) The audited balance sheets of the financial creditor for the year 2014-15 to 2018-19 clearly depicts that the financial creditor was never engaged in trading activity and that there was no purchase or sale of mobile phones, its accessories or any other commodity or products by the financial creditors.

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Further, the corporate debtor has borrowed the inter-corporate deposit of Rs.25,00,000/- from the financial creditor and has recorded the same in their balance sheets as an inter-corporate deposit under the heading unsecured loan.

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(v) The account statement of the financial creditor issued by Yes Bank Limited reflects the payment of Rs.25,00,000/- to the corporate debtor on 22.03.2013.

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(vi) Since, the corporate debtor failed to make the payment of outstanding amount along with interest and did not even disputed the claim of the financial creditor, the financial creditor filed a petition on 21.01.2016, under section 433(e) read with section 434 of the Companies Act, 1956 before the Hon’ble High Court of Madhya Pradesh, Bench at Indore, for the winding up of the corporate debtor. However, due to enactment of Insolvency and Bankruptcy Code, 2016 the financial creditor withdrew the said petition with liberty to approach the Adjudicating Authority.

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(vii) A certificate from Chartered Accountant is placed on record certifying that the financial creditor was engaged in the business of trading shares through stock exchange and investment by way of inter-corporate deposits to other companies and was never engaged in trading activity of goods/commodities.

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NCLT Indore Bench TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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The certificate dated 21.01.2020 of the Chartered Accountant certifying the business of the financial creditor is reproduced herein below:

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“………. We have verified the books of accounts, Memorandum of Association and other relevant records to ascertain the nature of business being carried by the company over the years from 2012-13 to 2018-19. Our scrutiny and the verification reveal that the company is engaged in the business trading of shares through Stock Exchange and investment by way of Inter Corporate Deposits to other companies. The company has never been engaged in the trading of mobile phones and its accessories or any other goods/commodity in any of these years. The company is not a registered dealer with Sales Tax/ Commercial Tax/ VAT/ GST Authorities to enable it to engage in any trading activity of goods/commodities. A summary of Trading Account of the company is annexed herewith. The figures and the amount stated in the summary reconciles with the audited balance sheet of the respective years.”

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(viii) The name of the Interim Resolution Professional (IRP) Mr. Navin Khandelwal having registration No. IBBI/IPA-001/IPP00703/2017-2018/11301 is proposed and the consent of the IRP is also placed on record.

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The objections raised by the Respondent/Corporate Debtor are summarized hereunder:

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(i) The corporate debtor is engaged in the business as an authorized dealer of different mobile company including iphones, ipads, ipods and their accessories. On the request of the financial creditor, the corporate debtor supplied said goods to the financial creditor on consignment basis, wherein, the financial creditor was to receive commission @ 10% on the sale generated.

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NCLT Indore Bench TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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(ii) The financial creditor lifted the said goods from the premises of the corporate debtor against which delivery challans were issued. The financial creditor being consignee agent deposited an advance as security deposit in favour of the corporate debtor for which interest was charged, which was supposed to be adjusted against the commission on sale.

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(iii) After selling the said goods and on receipt of the sale notes/sale patti from the financial creditor, the consignee account was to be credited by adjustment entries in the deposit account. However, no such sale notes/sale patti was given by the financial creditor despite of several reminders and therefore, the security deposit given by the financial creditor stood as a credit entry while the goods supplied stood as a debit entry being stock in the hands of the consignment agent.

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(iv) The said contract was a consignment contract and not the financial contract. There was no liability of the corporate debtor to refund the security deposit of the financial creditor, since the same was to be adjusted against the sale amount recovered by the financial creditor against the goods supplied by the corporate debtor.

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(v) The financial creditor filed a petition before the Hon’ble High Court after 2 years and 10 months from the date of the deposit. Further, after withdrawing the said petition from High Court, the financial creditor filed the present application after 1 year 3 months. Therefore, after excluding the time exhausted for availing alternate remedy before the Hon’ble High Court, the period of three years as per section 12 of the Limitation Act is expired and the present application is barred by limitation.

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NCLT Indore Bench TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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We have heard the learned counsel for the financial creditor as well as for the corporate debtor and perused the relevant documents available on record. It is an undisputed fact that Rs.25,00,000/- was given by the financial creditor to the corporate debtor on 22.03.2013. The audited balance sheet and the certificate of Chartered Accountant of the financial creditor certify that the financial creditor was never engaged in the business of trading activities and the purchase or sale of mobile phones and its accessories were never carried out by the financial creditor.

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It is noted that the corporate debtor has recorded the amount of Rs.28,78,628/- in the name of financial creditor as inter corporates under the head unsecured loans in their audited balance sheet as at 31.03.2015. Further the said audited balance sheet contains a clause wherein it is stated that the unsecured loans from director and inter corporates are repayable on or after March 2018 and the rate of interest at the year end is 8%.

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Considering the above, the corporate debtor committed default of the financial debt of Rs.37,17,582/- which is within the threshold as per Section 4 of the IBC, since the application was filed on 03.10.2018 and the amendment to section 4 was w.e.f 24.03.2020. The Financial Creditor has established the existence of financial debt payable by the corporate debtor and its default by the corporate debtor. This application is filed within limitation and is defect free.

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In view of the above, we admit this application and pass the following order as under:

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(i) The Corporate Debtor M/s Pegasus Retail India Private Limited is admitted in Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016.

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NCLT Indore Bench TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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(ii) The moratorium under Section 14 of Insolvency and Bankruptcy Code, 2016 is declared for prohibiting all of the following in terms of Section 14(1) of the Code.

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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;

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b. transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein;

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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;

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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.

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(iii) The order of moratorium shall have effect from the date of this order till the completion of the Corporate Insolvency Resolution Process or until this Adjudicating Authority approves the Resolution Plan under sub-section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33 of the Insolvency & Bankruptcy Code, 2016, as the case may be.

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(iv) We hereby appoint Mr. Navin Khandelwal, Registration No. IBBI/IPA-001/IP-P00703/2017-2018/11301, having address at: 206, Navneet Plaza, 5/2, Old Palasia, Indore, to act as an Interim Resolution Professional under Section 13(1)(c) of the Code. He

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NCLT Indore Bench TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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shall conduct the Corporate Insolvency Resolution Process as per the provisions of Insolvency and Bankruptcy Code, 2016 r.w. Regulations made thereunder.

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(v) The IRP shall perform all his functions as contemplated, inter-alia, by Sections 17, 18, 20 & 21 of the Code. It is further made clear that all personnel connected with Corporate Debtor, its Promoter or any other person associated with management of the Corporate Debtor are under legal obligation under Section 19 of the Code extending every assistance and co-operation to the Interim Resolution Professional. Where any personnel of the Corporate Debtor, its Promoter or any other person required to assist or co-operate with IRP, do not assist or co-operate the IRP is at liberty to make appropriate application to this Adjudicating Authority with a prayer for passing an appropriate order.

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(vi) This Adjudicating Authority directs the IRP to make a public announcement of initiation of Corporate Insolvency Resolution Process (CIRP) and call for submission of claims under Section 15 as required by Section 13(1)(b) of the Code.

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(vii) It is further directed that the supply of goods/service to the Corporate Debtor Company, if continuing, shall not be terminated or suspended or interrupted during the moratorium period.

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(viii) The IRP shall be under duty to protect and preserve the value of the property of the ‘Corporate Debtor’ and manage the operations of the Corporate Debtor as a going concern as a part of obligation imposed by Section 20 of the Insolvency & Bankruptcy Code, 2016. The Financial Creditor is directed to pay an advance of Rs.1,00,000/- (Rupees One Lakh Only) to the IRP

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NCLT Indore Bench TP 104 of 2019 [(MP) CP(IB) 613 of 2018]

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within two weeks from the date of receipt of this order for the purpose of smooth conduct of Corporate Insolvency Resolution Process (CIRP) and IRP to file proof of receipt of such amount to this Adjudicating Authority along with First Progress Report. Subsequently, IRP may raise further demands for Interim funds, which shall be provided as per Rules.

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(ix) The Registry is directed to communicate a copy of this order to the Financial Creditor, Corporate Debtor and to the Interim Resolution Professional and the concerned Registrar of Companies, after completion of necessary formalities, within seven working days and upload the same on website immediately after pronouncement of the order.

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8. Accordingly, TP 104 of 2019 [(MP) CP(IB) 613 of 2018] stands admitted.

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Kaushalendra Kumar Singh Dr. Madan B. Gosavi Member (Technical) Member (Judicial)

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Swati-LRA/Braj Mohan

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