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In the matter of Highland Automobiles Private Limited [Company Petition No.(IB)-119(CH) -2019]

NCLT15 Feb 2024Company Petition No.(IB)-119(CH) -2019

Case brief

AI extract

What is this about?

The Tribunal considered an application by Punjab National Bank to initiate CIRP against Highland Automobiles Private Limited for financial default. It rejected the argument of limitation bar, noting multiple statutory acknowledgments extending the period, and admitted the application while appointing an Interim Resolution Professional.

What did the court decide?

The application was admitted under Section 7(5) of the IBC; moratorium was declared under Section 14; Mr. Arvind Kumar was appointed as Interim Resolution Professional.

In the matter of Highland Automobiles Private Limited… — Insolvency and Bankruptcy | NCLT (2024)

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NATIONAL COMPANY LAW TRIBUNAL CHANDIGARH BENCH (COURT-I)

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Company Petition No.(IB)-119(CH) /2019

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IN THE MATTER OF:

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Punjab National Bank, Body Corporate,

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Having its Head Office at Plot No.4, Sector 10, Dwarka, New Delhi-110075, and one of its Branch Offices at Amira Kadal, Lal Chowk, Srinagar, Jammu, and Kashmir - 190001 Through its Attorney, Sh Sanjeev Kumar, Senior Manager

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…Applicant

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VERSUS

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Highland Automobiles Private Limited having its registered office at Ansari Complex, Sonawar, Srinagar, Jammu & Kashmir-190001

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…Respondent

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Section : 7 of IBC, 2016

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Order Delivered on: 15.02.2024

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CORAM

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SH. HARNAM SINGH THAKUR, HON’BLE MEMBER (J) SH. L. N. GUPTA, HON’BLE MEMBER (T)

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PRESENT:

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For the Petitioner : Mr D. K. Gupta, Advocate Ms. Garima Gupta, Advocate

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For the Respondent : Ex-parte (vide order dated 01.01.2024)

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CP No.(IB)-119(CH) /2019

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Page 1 of 19

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Punjab National Bank vs Highland Automobiles Private Limited

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ORDER

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Per : Sh. L. N. GUPTA, M (T) & Sh. HARNAM SINGH THAKUR, M (J)

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Punjab National Bank Ltd. (for brevity, the “Applicant”) has filed the present application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ( for brevity, the ‘IBC, 2016’ ) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 with a prayer to initiate the Corporate Insolvency process against M/s Highland Automobiles Private Limited (for brevity, the “Respondent”).

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The Respondent namely, M/s Highland Automobiles Private Limited is a Company incorporated on 25.09.1996 vide Certificate of Incorporation dated 25.09.2006, w ith CIN U35912JK1996PTC001574 under the provisions of the Companies Act, 1956 having its registered office at Ansari Complex, Sonawar, Srinagar, Jammu & Kashmir, PIN 190001, which is within the territorial jurisdiction of this Bench. The Authorized Share Capital of the Respondent Company is 2,00,00,000/- and the Paid-up Share Capital of the Company is Rs. 1,00,00,000/- as per the Master Data of the Company annexed as Annexure A-3 of the Application.

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It is submitted by the Applicant that the Respondent has defaulted in repayment of the loan amount of Rs 33,64,46,005/advanced to it by the Applicant.

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Page 2 of 19

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The particulars of the unpaid Financial Debt claimed including

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the total amount of default and the date of default are mentioned in

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Part IV of the application, which reads thus:

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As per Part IV of the application (ibid), the Applicant has claimed

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an outstanding financial debt of Rs. 33,64,46,005/- and relied on 31.12.2008 as the ‘date of default’.

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Page 3 of 19

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The Applicant Bank has relied on the following documents to

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substantiate its claim:

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i. Copy of sanction letters dated 15.12.2006 & 29.03.2007 along with a copy of financial contracts.

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ii. Copy of the charge registration of the properties by ROC in favour of the Applicant.

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iii. Copy of Legal Notice dated 25.01.2010 served by the Applicant upon the respondent requesting the latter for payment of entire dues.

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iv. Copy of Notice by Applicant u/s 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, served upon Respondent along with guarantors demanding an amount of Rs 30,69,35,155.54/- as on 31.10.2017 with further interest w.e.f. 01.11.2017 and other charges, d ated 15.12.2017 along with postal receipts and tracking reports.

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v. Copy of CIBIL Report dated 02.01.2019.

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vi. Copy of Statement of account as of 18.02.2019 duly certified under Bankers' Books Evidence Act, 1891, and computer certificate.

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Based on the facts and documents mentioned above, the Applicant has prayed for the initiation of CIRP against the Respondent.

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CP No.(IB)-119(CH) /2019

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Page 4 of 19

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Punjab National Bank vs Highland Automobiles Private Limited

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As there was no representation on behalf of the Respondent, it was proceeded ex-parte vide order dated 01.01.2024. However, on the date of final hearing on 18.01.2024, Proxy counsel appeared on behalf of the Respondent and stated that they had already filed their Short - Written Submissions and Reply.

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Accordingly, we refer to the reply filed by the Respondent vide Diary no 2786 dated 31.05.2019, the written synopsis filed under Diary No. 01188/2 dated 20.12.2022, as well as the written submissions filed under Diary No. 01188/7 dated 22.01.2024. The Respondent has primarily contended the following;

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9.1. The application is liable to be dismissed as it has been filed after the expiry of the period of limitation. The date of default was 31.12.2008, when the account of the Respondent slipped into NPA and therefore, there has been a delay of more than 10 years in filing the application, wherein no sufficient cause has been pleaded for the condonation of such delay.

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9.2. The Respondent availed a credit facility from the Applicant Bank to conduct automobile business. Though the account/cash credit facility was initially operated by the Respondent regularly, however, due to ill luck, the operation of the said account became irregular owing to the downfall in the business activities of the respondent due to the turmoil causing catastrophic floods in the valley in the years 2008, 2010 and 2014 and thereafter in 2016.

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Page 5 of 19

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9.3. The present application under Section 7 is not maintainable as the Respondent-corporate debtor is solvent and is ready to pay the amount of Rs. 12.50 Crore agreed upon by the financial creditor in a one-time settlement (OTS) that took place earlier wherein out of the agreed amount, Rs. 50 Lakh were paid.

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9.4. Due to the insufficient reserve and surplus, the Respondent tied up with Jammu and Kashmir Bank for sanctioning an OTS amount in favor of the Respondent by way of a letter of approval. The said bank was ready to release the amount in favour of the applicant. During the process of OTS, the applicant by way of communication to the Regional Director of Reserve Bank of India Jammu, requested them to freeze the operations of the accounts and close all fixed deposits of the Respondent company lying before Jammu and Kashmir Bank branch Air Cargo Rajbagh, Srinagar.

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9.5 The Applicant has already filed a civil suit before the Ld. Additional District Judge Bank case at Srinagar for the recovery of the loan amount to the tune of Rs 15,22,64,081 with interest @15 percent per annum and thus, the present application filed by the petitioner doesn't stand as per the IBC, 2016.

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9.6 There is already a case pending against the Applicant filed by Respondent wherein the notice issued by the Applicant under section 13(4) of SARFAESI has been kept in abeyance till date by the court of First Additional District and Sessions Judge at Srinagar.

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Page 6 of 19

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Punjab National Bank vs Highland Automobiles Private Limited

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We have heard the Applicant and gone through the pleadings and written submissions placed by both the parties on record. The Applicant has primarily relied upon the date of NPA i.e., 31.12.2008 as the date of default.

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From the record, it is observed that the Applicant has recalled the loan vide its “Loan Recall and Demand Notice” dated 25.01.2010, placed as Annexure A-12 of the Application (Pg. 122 onwards).

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Since the ‘date of default’ mentioned by the Applicant is 31.12.2008 and the present Application is filed on 18.02.2019, we would like to examine - Whether the present Application is filed

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within the period of Limitation .

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In this context, during the hearing, the Applicant relied upon the Balance Sheets of the Respondent Company for the financial years 2008-09 to 2016-17 filed vide IA No. 2335 of 2023 to demonstrate the acknowledgment of debt made by the Respondent.

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In order to substantiate acknowledgment of loan/debt on behalf of the Respondent, Ld. Counsel for the Applicant first referred to page no 37 of the Audited balance sheet dated 31.03.2011 for the FY 201011 which reads as below:

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Page 7 of 19

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From the above, it is evident that there is an entry of secured loan in

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the balance sheet of the corporate debtor.

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Page 8 of 19

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Next, Ld. Counsel for the Applicant referred to page no 70 of the

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Audited balance sheet ending 31.03.2014 for the FY 2013-14 which

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reads as below:

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From the above, it is evident that there is an entry of secured loan in

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the balance sheet of the corporate debtor.

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Page 9 of 19

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Next, Ld. Counsel for the Applicant referred to page no 92/93 of

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the Audited balance sheet ending 31.03.2017 for the FY 2016-17, which reads as below:

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From the balance sheet statement (ibid), it is evident that there is an

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entry of secured loan in the balance sheet of the corporate debtor.

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Page 10 of 19

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Further, we notice that a reference has been made regarding the OTS by the Corporate Debtor in its letter dated 09.12.2017 addressed to the Sr. Manager PNB (page no. 38 under Annexure R-2 of the Reply filed by the Corporate debtor vide Diary No 2786 dated 31.05.2019), the relevant page depicting the date of signing reads thus:

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Admittedly, the Respondent had also deposited an amount of Rs. 50 Lakhs with the Applicant Bank which tantamounts to acknowledgment of debt.

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Page 11 of 19

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On perusal of the above-mentioned documents, we find that the present application filed by the Applicant Bank is well within the limitation in the following manner:

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S.No.	Documents	Dated	Period of Limitation till
1.	Date of NPA/default (as per Part IV of Application)	31.12.2008	30.12.2011
2.	Balance sheet of the CD for the FY 2010-11 (page 37 of the IA 2335/2023)	31.03.2011	30.03.2014
3.	Balance sheet of the CD for the FY 2013-14 (page 70 of the IA 2335/2023)	31.03.2014	30.03.2017
4.	Letter dated 09.12.2017 from Director/CEO of CD addressed to the Sr. Manager PNB reg. OTS etc.	09.12.2017	08.12.2020
5.	Date of filing of Present pe	tition	18.02.2019

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Accordingly, we find that the present Application being filed on 18.02.2019 is well within the Limitation.

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Furthermore, from the pleadings, we also notice that the Respondent Company has repeatedly taken the plea of one-time settlement of its dues, which in terms of the judgment of the Hon’ble Supreme Court in “Dena Bank (now Bank of Baroda) vs. C. Shivakumar

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Page 12 of 19

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Reddy and Anr.” is an acknowledgment of debt. The relevant para of

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the judgment (supra) dated 04.08.2021 reads thus:

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“141. Section 18 of the Limitation Act cannot also be construed with pedantic rigidity in relation to proceedings under the IBC. This Court sees no reason why an offer of One Time Settlement of a live claim, made within the period of limitation, should not also be construed as an acknowledgment to attract Section 18 of the Limitation Act. In Gaurav Hargovindbhai Dave (supra) cited by Mr. Shivshankar, this Court had no occasion to consider any proposal for one time settlement. Be that as it may, the Balance Sheets and Financial Statements of the Corporate Debtor for 2016-2017, as observed above, constitute acknowledgement of liability which extended the limitation by three years, apart from the fact that a Certificate of Recovery was issued in favour of the Appellant Bank in May 2017. The NCLT rightly admitted the application by its order dated 21st March, 2019”.

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(Emphasis placed)

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Thus, in terms of the abovementioned discussion, we find that the petitioner Bank has been able to successfully establish the debt and default beyond doubt on the part of the Respondent in repayment of its financial debt.

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In the sequel to the above and the given facts and circumstances, the present Application being complete and the Applicant having established the default on the part of the Respondent in payment of the Financial Debt for an amount being above the minimum threshold limit, the present Application is admitted in terms of Section 7(5) of the IBC and accordingly, the Moratorium is declared in terms of

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Section 14 of the Code . As a necessary consequence of the Moratorium in terms of Section 14(1) (a), (b), (c) & (d), the following prohibitions are imposed, which must be followed:

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“(a) The institution of suits or continuation of pending suits or proceedings against the Respondent 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 Respondent 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 Respondent in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; and

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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 Respondent.”

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As proposed by the Applicant, this Bench appoints Mr. Arvind

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Kumar as Interim Resolution Professional (IRP) having Registration No. IBBI/IPA-001/IP-P00178/2017-18/10357, Email ID: [email protected]. The antecedents of the proposed IRP have been verified by the Legal Research Associate of this Adjudicating Authority. This Adjudicating Authority further orders that:

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22.1 Mr. Arvind Kumar, as an IRP having Registration No. IBBI/IPA001/IP-P00178/2017-18/10357, E-mail ID: [email protected] is directed to take charge of the CIRP of the Respondent with immediate

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effect. The IRP is further directed to take the steps as mandated under the IBC specifically under Sections 15, 17, 18, 20, and 21 of IBC, 2016.

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22.2 The term of appointment of Mr. Arvind Kumar, as an IRP shall be in accordance with the provisions of Section 16(5) of the Code;

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22.3 In terms of Section 17 of the Code, from the date of this appointment, the powers of the Board of Directors shall stand suspended and the management of the affairs of CD shall vest with the Interim Resolution Professional and the officers and the managers of the Corporate Debtor shall report to the Interim Resolution Professional, who shall be enjoined to exercise all the powers as are vested with Interim Resolution Professional and strictly perform all the duties as are enjoined on the Interim Resolution Professional under Section 18 and other relevant provisions of the Code, including taking control and custody of the assets over which the Corporate Debtor has ownership rights recorded in the balance sheet of the Corporate Debtor, etc. as provided in Section 18 (1) (f) of the Code. The Interim Resolution Professional is directed to prepare a complete list of the inventory of assets of the Corporate Debtor;

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22.4 The Interim Resolution Professional shall strictly act in accordance with the Code, all the rules framed thereunder by the Board or the Central Government, and in accordance with the Code of Conduct governing his profession and as an Insolvency Professional with high standards of ethics and morals;

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22.5 The Interim Resolution Professional shall cause a public announcement within three days as contemplated under Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 of the initiation of the Corporate Insolvency Resolution Process in terms of Section 13 (1) (b) of the Code read with Section 15 calling for the submission of claims against Corporate Debtor;

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22.6 It is hereby directed that the Corporate Debtor, its Directors, personnel, and the persons associated with the management shall extend all necessary cooperation to the Interim Resolution Professional in managing the affairs of the Corporate Debtor as a going concern and extend all cooperation in accessing books and records as well as assets of the Corporate Debtor;

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22.7 The Suspended Board of Directors is directed to give complete access to the Books of Accounts of the corporate debtor maintained under section 128 of the Companies Act. In case the books are maintained in the electronic mode, the Suspended Board of Directors are to share with the Resolution Professional all the information regarding Maintaining the Backup and regarding Service Provider kept under Rule 3(5) and Rule 3(6) of the Companies Accounts Rules, 2014 respectively as effective from 11.08.2022, especially the name of the service provider, the internet protocol of the Service Provider and its location, and also address of the location of the Books of Accounts maintained in the cloud. In case accounting software for maintaining

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the books of accounts is used by the corporate debtor, then IRP/RP is to check that the audit trail in the same is not disabled as required under the notification dated 24.03.2021 of the Ministry of Corporate Affairs. The statutory auditor is directed to share with the Resolution Professional the audit documentation and the audit trails, which they are mandated to retain pursuant to SA-230 (Audit Documentation) prescribed by the Auditing and Assurance Standards Board ICAI. The IRP/Resolution Professional is directed to take possession of the Books of Account in physical form or the computer systems storing the electronic records at the earliest. In case of any non-cooperation by the Suspended Board of Directors or the statutory auditors, he may take the help of the police authorities to enforce this order. The concerned police authorities are directed to extend help to the IRP/RP in implementing this order. For retrieval of relevant information from the systems of the corporate debtor, the IRP/RP may take the assistance of Digital Forensic Experts empanelled with this Bench for this purpose. The Suspended Board of Directors is also directed to hand over all user IDs and passwords relating to the corporate debtor, particularly for government portals, for various compliances. The Interim Resolution Professional is also directed to make a specific mention of noncompliance, if any, in this regard in his status report filed before this Adjudicating Authority immediately after a month of the initiation of the CIRP.

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22.8 The Resolution Professional is directed to approach the Government Departments/ Banks/ Corporate Bodies/ other entities with requests for information/documents available with those authorities/institutions/others pertaining to the corporate debtor which would be relevant in the CIR proceedings. The Government Departments, Banks, Corporate Bodies and other entities are directed to render the necessary information and cooperation to the Resolution Professional to enable him to conduct the CIR Proceedings as per law.

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22.9 The Interim Resolution Professional shall after collation of all the claims received against the Corporate Debtor and the determination of the operational position of the Corporate Debtor constitute a Committee of Creditors and shall file a report, certifying the constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene the first meeting of the Committee within seven days of filing the report of the constitution of the Committee; and

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22.10 The Interim Resolution Professional is directed to send a regular progress report to this Tribunal every fortnight.

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The Petitioner is directed to deposit Rs.5,00,000/- (Five Lakhs) only with the IRP to meet the immediate expenses. The amount, however, will be subject to adjustment by the Committee of Creditors as to be duly accounted for by IRP and shall be paid back to the Applicant.

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A copy of this Order shall immediately be communicated to the Petitioner Bank, the Respondent Company, and the IRP named above by the Court Officer/Registry of this Tribunal.

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