Allowed

In the matter of Vatavruksha Entertainment Private Limited Cp (Ib) 407-MB-2022

NCLT19 Jan 2023

Case brief

AI extract

What is this about?

This judgment admits a petition filed by a Financial Creditor under Section 7 of the Insolvency and Bankruptcy Code, 2016 to initiate Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor. The Tribunal found debt and default established and ordered moratorium and appointment of an Interim Resolution Professional.

What did the court decide?

Admitted the petition, initiated CIRP, declared moratorium under Section 14, and appointed Mr. Pawan Kumar Bhattiprolu as Interim Resolution Professional.

In the matter of Vatavruksha Entertainment Private… — Insolvency and Bankruptcy | NCLT (2023)

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP (IB) 407/MB/2022

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Under section 7 of the Insolvency and Bankruptcy Code, 2016

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In the matter of

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SAMATA NAGARI SAHKARI PATSANSTHA MARYADIT [Reg.No:ANR/K.P.G./RSR(C.R)/651/8 6 dated 20.03.1986]

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Samata Marg, Khandaknal, Main Road, Kopargaon, Dist. Ahmednagar - 423601

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… Financial Creditor /Petitioner

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Versus

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VATAVRUKSHA ENTERTAINMENT PRIVATE LIMITED [CIN: U74999PN2014PTC150962] Office No 102, SR 925A FC Road, Shivaji Nagar, Opp: Dinday, Pune - 411016. … Corporate Debtor /Respondent

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Order Delivered on: 19.01.2023

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Coram:

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Hon'ble Member (Judicial) : Justice P. N. Deshmukh (Retd.) Hon'ble Member (Technical) : Mr. Shyam Babu Gautam

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Appearances:

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For the Financial Creditor : CA Raghunath Sarangapani. For the Corporate Debtor : None present.

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ORDER

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Per: Justice P. N. Deshmukh, Member (Judicial)

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This is a Company Petition filed under section 7 (“ the Petition” ) of the Insolvency and Bankruptcy Code, 2016

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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(IBC) by Mr. Sachin Bhattad, General Manager, Samata Nagari Sahkari Patsanstha Maryadit, Kopagaon, is a Co-op. Society Registered under Maharashtra Co-operative Societies Act, 1960 (Rule No.24 of Maharashtra Co-operative Societies Rule 1961 Section 9(1) dated 20.03.1986 ("the Financial Creditor"), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Vatavruksha Entertainment Private Limited ("the Corporate Debtor ").

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The Corporate Debtor is a Private Company limited by shares and incorporated on 12/03/2014 under the Companies Act, 1956, with the Registrar of Companies, Maharashtra, Pune. Its registered office is at Office No.102, SR 925A FC Road, Shivaji Nagar, Opp: Dinday Pune - 411016 Mh. Therefore, this Bench has jurisdiction to deal with this petition.

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Submissions made by Financial Creditor by way of Application/ Petition:

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I. EXISTENCE OF FINANCIAL DEBT AND DEFAULT

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The Financial Creditor submits that the amount claimed to be in default in Part IV of the Petition is Rs.1,58,62,738/- (Rupees One Crore Fifty-Eight Lakhs Sixty-two Thousand Seven hundred and thirty only) as on 30.11.2021. The date of default has been stipulated as November 30, 2021. The debt thus, is not time-barred. The liability of the Corporate Debtor a on 31.03.2021 was Rs.1,50,05,753/- and the same is reflected in the Balance Sheet as on 31.03.2021 under the head “Long

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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Term Borrowings” copy of which is annexed at page 188 to the Company Petition.

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The Corporate Debtor made an application on 11.03.2019 for sanction of the credit facility seeking Term Loan of Rs.1,25,00,000/- (Rupees One Crore Twenty-Five lakhs only). The Financial Creditor considered the application received from the Corporate Debtor and approved the same vide its Resolution No.4 dated 24.03.2019. The Corporate Debtor thereupon executed the Deed of Mortgage dated 30.3.2019 for an additional amount of Rs.25,00,000/- (Twenty-five lakhs only) in favour of the Financial Creditor in continuation of original mortgage deed for an amount of Rs.1,00,00,000/-. Copy of both the Mortgage Deeds for original amount and additional amount is annexed to the Company Petition (Pgs. 100-117 & 137-159).

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Details of the credit facilities sanctioned and disbursed by the Financial Creditor are as under:

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Sr. No.	Date of sanction	Particulars	Amount in (Rs)	Interest rate per annum	Amount outstanding as on 17.02.2020 (including interest) in Rs.
1.	24.03.2019	Working Capital Term Loan	1,25,00,000	17% p.a.	1,45,50,719.00

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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The Loan amount of Rs.1,25,00,000/- was disbursed on 30.03.2019. The Amount shown in the Balance Sheet as on 31.03.2019 is Rs.1,25,11,644/-.

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7. Details of the Default in original loan:

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Sr.	Type of Loan	Due date of	Date of
No.		instalment	Default
1.	Working	30/04/2019	01.05.2019
	Capital Term Loan

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8. Primary and Collateral Securities for the Original Loan:

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The Financial Creditor has executed the Collateral Securities and created the charge on the Securities.

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Sr. No.	Name of the Corporate Debtor	Description of Security	Value of Security
1.	Vatavruksha Entertainment Pvt. Ltd.	Agricultural Land	Rs.17,90,00,000/-
	Description of Mortgag	ed Property
	Open agricultural plot	in old Sr.No.1	6 hissa No.2+3/1,
	new Sr. No.16/2A (Par	t), West side	of Braveria society,
	on Baner to Balewadi R	oad, At Balew	adi Taluka-Haveli,
	District-Pune-FMs V o	f Property –	Rs.17,90,00,000/-
	(Rupees Seventeen cro	res Ninety La	khs only) (As per
	Valuation Report of S.M	. Bhutada dat	ed 08.03.2019)

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9. Details of the legal proceedings initiated for the Original Loan:

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The Financial Creditor submits that the Corporate Debtor defaulted in the repayment of the credit facilities and interest

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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thereon, whereupon the Applicant sent final demand notice dated 29.07.2019 giving an opportunity to make the payment and also the summons were published in the newspaper Prabhat on 25.01.2020. Copies of the Demand Notice and summons published in the newspapers dated 25.01.2020 are annexed to the Company Petition (Pages 220-223 & 225-226). The Corporate Debtor has neither replied to the Demand Notice nor made the payment.

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Therefore, on 12.03.2020, the Financial Creditor herein filed an application being CP(IB) 907 of 2020 under Sec.7 of the IBC, 2016, read with rule 4 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 for initiating the CIRP against the Corporate Debtor for the default committed by it on 01.05.5019.

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Subsequently, the Corporate Debtor approached the Financial Creditor for renewal of credit facilities i.e. Working Capital Term Loan aggregating to Rs.1,50,00,000/- (Rupees One crore Fifty lakhs only) for expansion of its business on 15.03.2021. The company is engaged in the entertainment business. The Financial Creditor extended the credit facility bearing interest @14% p.a. with the duration of the loan being 60 months payable in 60 instalments i.e. from 31.3.2021 to 31.3.2026, the 1^st Instalment being due on 30.04.2021. The terms of the credit facility are made very clear in the relevant Clause 5 on Page 67 of Working Capital Agreement annexed to the Company Petition on pages 64-71 .

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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The Financial Creditor resolved to restructure the loan by extending further loan for an amount of Rs.1,50,00,000/- to the Corporate Debtor, by closing the old loan account and extending the restructured facility under a new loan account number. On such closure of the earlier loan account, the Financial Creditor filed an application being IA No.44 of 2021 under Rule 8 of the Insolvency and Bankruptcy (Adjudicating Authority) Rules 2016, for withdrawal of the Company Petition being CP No.907 of 2020 and the same was allowed by this Tribunal on 02.09.2021. Copy of the withdrawal Application, copy of Demand Notice and withdrawal Order passed by this Tribunal is annexed to Company Petition ( Pages 227-230; 231; & 236-243). Also copy of the Order passed by this Tribunal is annexed to its written submissions as Exh. A.

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The Financial Creditor sanctioned the Credit Facility i.e. Working Capital Term Loan on 26.03.2021 duly approved in its Board Meeting held on 26.03.2021 and disbursed the same on 31.03.2021 approving the said loan repayable over a period of 60 months from the date of disbursal. Copy of the said Board Resolution is annexed to this Company Petition (Page 81).

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The Corporate Debtor committed default in the repayment of the said facility on 30.04.2021. Consequently, the Financial Creditor filed an Application being CP(IB) 407 of 2022 under Sec.7 of IBC, 2016 read with rule 4 of the Insolvency and Bankruptcy (Application to the Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolutions Process (CIRP) in respect of Corporate Debtor under Sec.7 of the

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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Insolvency and Bankruptcy Code, 2016 on 01.04.2022 before this Tribunal.

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As directed by this Hon’ble Tribunal, the Financial Creditor on 05.04.2022 intimated the Corporate Debtor about the next date of hearing being 12.05.2022 by Speed Post and delivered to the Corporate Debtor on 08.04.2022. The Financial Creditor has filed the proof of service before the Hon’ble Tribunal in this respect on 19.04.2022. Record reveals that on 12.05.2022 time was granted as a last chance to file affidavit in reply. None was present for the Corporate Debtor on that date. On 21.07.2022 due to paucity of time matter could not be taken up hence next date 25.08.2022 was granted for further consideration and hearing but None was Present for the Corporate Debtor. On 25.08.2022 due to paucity of time, the matter could not be taken up hence next date being 22.09.2022 was granted but on that date also no one was present for Corporate Debtor. The next date 12.10.2022 was granted but due to paucity of time matter could not be taken up but no one was present for Corporate Debtor. On 07.11.2022 also no one was present for Corporate Debtor. Time was given to place on record the written submissions. The Financial Creditor has filed its written submissions, whereas no written submissions were filed by the Corporate Debtor. Hence, the matter was Reserved for Order.

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That on 01.07.2022, a notice had been published by the Financial Creditor in two newspapers i.e. one in Financial Express, Pune Edition and another in Navrashtra, Pune Edition notifying the Corporate Debtor about the next date of

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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hearing of the said matter being listed on 21.07.2022. Copy of the said notices as published are annexed to the Affidavit of proof of Service and as Exh. A (colly) . The Financial Creditor also intimated the Corporate Debtor the said next of hearing vide email is annexed to the proof of Service as Exh - B .

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A Recall Notice dated 17.07.2021 was issued by the Financial Creditor to the Corporate Debtor demanding the amount due i.e. Rs.1,56,30,990/- (Rupees One Crore Fifty-Six Lakhs Thirty Thousand Nine Hundred and Ninety only) to be paid within 15 days from the date of receipt of the said Notice, failing which recovery proceedings under Section 101 will be initiated.

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The Financial Creditor submits that the amount claimed to be in default in Part IV of the Petition is Rs.1,58,62,738/- (Rupees One Crore Fifty-Eight Lakhs Sixty-two Thousand Seven hundred and thirty only) as on 30.11.2021. The date of default has been stipulated as November 30, 2021. The debt thus, is not time-barred. The liability of the Corporate Debtor a on 31.03.2021 was Rs.1,50,05,753/- and the same is reflected in the Balance Sheet as on 31.03.2021 under the head “Long Term Borrowings” copy of which is annexed at page 188 to the Company Petition.

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The Financial Creditor submits that the Petition is within the period of limitation.

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The Corporate Debtor was directed vide Order dated 07.11.2022, one week’s time was granted to the Corporate Debtor to place on record Affidavit in Reply, the Corporate

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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debtor chose not to file the same. Hence, matter is taken on merits and proceeded ex-parte against the Corporate Debtor.

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Findings:

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We have heard the arguments of Financial Creditor and perused the records.

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Record reveals that by Order of this Bench dated 07.11.2022, one week’s time was granted to the Corporate Debtor to place on record Affidavit in Reply by duly serving a copy to the Counsel appearing on behalf of the Financial Creditor. Despite the same, the order of this Bench has not been complied with by the Corporate Debtor. The matter was listed on Board on many occasions; multiple opportunities were given to appear before his Tribunal and plead his case. The Corporate Debtor chose not to appear before this Tribunal and plead or file his reply on record. Therefore, the Corporate Debtor set ex-parte and the matter is taken on its merit. However, liberty was given to the Corporate Debtor to place on record short written submissions, if they so desire to place the same on record, within a period of one week from the last date of hearing on 07.11.2022. However, no written submission has been filed by the Corporate Debtor.

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Upon perusal of records, it is further noted that the Financial Creditor and the Corporate Debtor enter in Working Capital Loan Agreement dated 31.03.2021 and though duration of repayment was 60 months parties vide Agreement clause 6 it was agreed that “if continuously 3 instalments or the amount equal to 3 instalments is not paid then the society will have right to recover

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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it at one stroke” . In the backdrop of the above this Bench is of the considered opinion that the Corporate Debtor is in default of debt and owes money to the Financial Creditor.

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We also consider the facts of the case in the lights of the Order passed by Hon’ble Supreme Court in Swiss Ribbons Pvt. Ltd. & Ors. Vs. Union of India & Ors. [Writ Petition (Civil) No. 99 of 2018] upholding the Constitutional validity of IBC, the position is very clear that unlike Section 9, there is no scope of raising a ‘dispute’ as far as Section 7 petition is concerned. As soon as a ‘debt’ and ‘default’ is proved, the adjudicating authority is bound to admit the petition.

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The Financial Creditor has proposed the name of Mr. Pawan Kumar Bhattiprolu, having address Flat No.304A, Paigah Plaza, Basheerbagh, Hyddrabad, Telangana - 500029 Registration No. IBBI/IPA-002/IP-N00762/20182019/12371, as the Interim Resolution Professional of the Corporate Debtor. He has filed his written communication in Form 2 as required under rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 along with a copy of his Certificate of Registration. Hereto annexed as (pg. 14-18 of CP)

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The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable, and the default is more than minimum amount stipulated under section 4(1) of the IBC. Therefore, the debt and default stands established and there is no reason to deny the admission of the

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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Petition. In view of this, this Adjudicating Authority admits this Petition on merits and orders initiation of CIRP against the Corporate Debtor.

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It is, accordingly, hereby ordered as follows: -

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(a) The Petition bearing CP (IB) 407/MB/2022 filed by SAMATA NAGARI SAHKARI PATSANSTHA MARYADIT, KOPAGAON, the Financial Creditor, under section 7 of the IBC read with rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against VATAVRUKSHA ENTERTAINMENT PRIVATE LIMITED [CIN: U74999PN2014PTC150962], the Corporate Debtor, is admitted .

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(b) There shall be a moratorium under section 14 of the IBC, regarding the following:

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(i) 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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(ii) 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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(iii) Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002;

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(iv) The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.

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(i) The supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period;

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(ii) The provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any sectoral regulator;

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(d) The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IB Code.

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(e) Public announcement of the CIRP shall be made immediately as specified under section 13 of the IBC read with regulation 6 of the Insolvency & Bankruptcy Board

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

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(f) Mr. Pawan Kumar Bhattiprolu, having address at Flat No.304A, Paigah Plaza, Basheerbagh, Hyddrabad, Telangana - 500029 Registration No. IBBI/IPA-002/IPN00762/2018-2019/12371, is hereby appointed as Interim Resolution Professional (IRP) of the Corporate Debtor to carry out the functions as per the IBC. The fee payable to IRP or, as the case may be, the RP shall be compliant with such Regulations, Circulars and Directions issued/as may be issued by the Insolvency & Bankruptcy Board of India (IBBI). The IRP shall carry out his functions as contemplated by sections 15, 17, 18, 19, 20 and 21 of the IBC.

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(g) During the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or the RP in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within a period of one week from the date of receipt of this Order, in default of which coercive steps will follow.

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(h) The Financial Creditor shall deposit a sum of Rs.3,00,000/- with the IRP to meet the expenses arising out of issuing public notice and inviting claims. These expenses are subject to approval by the Committee of Creditors (CoC).

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IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH, COURT-I

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CP(IB) 407/MB/2022

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(i) Registry is directed to communicate this Order to the Financial Creditor, the Corporate Debtor and the IRP by Speed Post and email immediately, and in any case, not later than two days from the date of this Order.

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(j) IRP is directed to send a copy of this Order to the Registrar of Companies, Maharashtra, Mumbai, for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of this order.

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Sd/-

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Sd/-

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SHYAM BABU GAUTAM JUSTICE P. N. DESHMUKH Member (Technical) Member (Judicial)

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19.01.2023 SAM/Jenny

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