Kss Petron Private Limited, In Re

M.K. Shrawat, Member (Judicial):— The Petition under consideration was filed on 11 July, 2017 by invoking the provisions of section 10 of the Insolvency & Bankruptcy Code 2016 (hereinafter “The Code”) by the Corporate Debtor as a Petitioner. The Petitioner has filed this Petition as a Corporate Debtor seeking initiation of Corporate Insolvency Resolution Process against itself.

2. Facts in brief:—

i) Facts stated in the Petition are that the Petitioner/Corporate Debtor is incorporated on 19 July 2007 and engaged in the business of construction and management of construction, execution of EPC Projects etc. The admitted factual position is that the Petitioner had availed credit facilities from various Banks. There is a long list of Financial Creditors annexed along with the Petition. Names of the Banks, and the details of outstanding debt for which default of non-payment is not disputed is duly annexed with the Petition. The total amount of the Financial Creditors is stated to be Rs. 586,72,51,905 only. The main Financial Creditors are Axis Bank, Syndicate Bank, State Bank of India, Punjab National Bank, Canara Bank, Bank of India, Kotak Mahindra Bank, ICICI Bank, etc.

ii) The Debtor Company is managed by the following four Directors:— Mr. Sabit Zhanassov, Mr. Abylai Karibayev, Mr. Rakesh Tiwari and Mr. Shiv Mangal Singh.

iii) A Board Resolution was passed on 27 June 2017 by the Debtor Company and resolved that an Application is to be moved to initiate the Corporate Insolvency Resolution Process.

iv) In addition to the Financial Creditors as listed hereinabove, there is a long list of “Operational Creditors” annexed with the Petition running in several pages. The total amount of the Operational Creditor stated to be Rs. 126,34,26,653.

v) The Corporate Debtor had defaulted in repayment of the borrowings, therefore, the Financial Creditors declared the outstanding loan as “Non-Performing Asset” (NPA). The Banks have issued several letters intimating the default and thereafter declared the defaulter as NPA. A long list of evidence and notices demanding the outstanding debt are on record.

vi) In addition to the Financial Debt the Debtor had availed services from various parties. The Debtor had also purchased goods from various Suppliers. The Debtor had also defaulted in payment of salaries to its employees. The aggregate amount of the outstanding debt of the employees was Rs. 36,53,987.

2.1 The Petitioner/Debtor was awarded several projects by public sector Companies and State Government Departments. The Projects were not completed within the time agreed upon. Because of the delay, the financial positon of the Debtor Company was deeply disturbed. On the other hand, the Debtor's position was adversely impacted on account of non-receipt of payment from its clients. Some of the clients have invoked the Bank Guarantee in an unjustified manner, as alleged by the Petitioner.

2.2 As a result, finally the Board of Directors of the Corporate Debtor have held a meeting on 27 June, 2017 authorising to file application for initiation of Corporate Insolvency Resolution Process in terms of Section 10 of the Insolvency & Bankruptcy Code.

3. From the side of the Petitioner Learned Senior Counsel Mr. Freddie De'vitre appeared and explained that the Petitioner had complied with the requirements of section 10, hence the Petition deserves to be “Admitted”. He has explained that the Petitioner had no option but to take help of the newly enacted Code so that the Company can be revived by financial restructuring. According to him, the admitted factual position is that the Debtor Company had committed the “default” of non-payment of the outstanding debt as defined under section 3(12) of the Code. It is intimated that the name of the Resolution Professional is proposed, hence the Debtor Company is hopeful to get some solution of financial problem.

4. FINDINGS:— At this preliminary stage of “Admission”, it is not obligatory to discuss exhaustively the background of the Bank loans. It is also not expected to discuss each and every Trade Creditor vis-à-vis the goods supplied or services rendered. By keeping brevity in mind only basic facts are required to be discussed to record a satisfaction that the Petition under consideration is maintainable under section 10 of the Code. If prima facie the conditions as prescribed under section 10 are completed, then the petition deserves “Admission”.

4.1 This Section provides initiation of Corporate Insolvency by the Corporate Debtor itself. By the appointment of Insolvency Professional it is likelihood to resolve the financial disorder within a time-bound manner. The Management of the Debtor is also expected to cooperate with the Insolvency Professional so that the financial as well as operational creditors can be paid up their outstanding dues.

4.2 A provisional statement drawn as on 27 June, 2017 of Profit & Loss Account is annexed with the Petition. On careful perusal it is noticed that the total revenue generation from the business operation for the financial year 2015-2016 amounted to Rs. 10,48,88,045. As against that there was a drastic fall in revenue receipt in the next financial year as affirmed by the Learned Representative.

4.3 Provisions of Section 10 prescribes that where a Corporate Debtor has committed default of non-payment of debt can file an Application for initiating “Corporate Insolvency Resolution Process” with the Adjudicating Authority (NCLT). The applicant is required to file particulars of debt as appeared in “its” Books of Accounts. The requisite information pertaining to the Creditors as on date of filing the Application is also required to be filed, so that the IRP can take due steps for further necessary action. The term “its” has been dealt with in one of the judgement passed by this Bench in the case of Alpha & Omega Diagnostics (India) Limited v. ASSET Reconstruction Company of India Limited in TCP No. 1117/I & BP/NCLT/MB/MAH/2017 dated 10 July, 2017. While dealing the clauses of Moratorium as prescribed under section 14 of the Code, it was held as under:—

(i) On careful reading I have noticed that the term “its” is significant. The plain language of the Section is that on the commencement of the Insolvency process the ‘Moratorium’ shall be declared for prohibiting any action to recover or enforce any security interest created by the Corporate Debtor in respect of “its” property. Relevant section which needs in-depth examination is Section 14(1)(c) of the Code.

(ii) There are recognised canons of interpretation. Language of the Statute should be read as it existed. This is a trite law that no word can be added or substituted or deleted from the enacted Code duly legislated. Every word is to be read and interpreted as it exists in the statute with the natural meaning attached to the word. Rather in this Section the language is so simple that there is no scope even to supply ‘casus omissus’. I hasten to add that the doctrine of ‘Noscitur a Sociis’ is somewhat applicable that the associated words take their meaning from one another so that common sense meaning coupled together in their cognate sense be interpreted. As a result, “its” denotes the property owned by the Corporate Debtor. The property not owned by the Corporate Debtor do not fall within the ambits of the Moratorium. Even Section 10 is confined to the Book of the Accounts of the Corporate Debtor, due to the reason that Section 10(3) has specified that the Corporate Applicant shall furnish “its” Books of Accounts. This Bench has no legislative authority to expand the meaning of the term “its” even under the umbrella of ‘Ejusdem generis’.

(iii) The outcome of this discussion is that the Moratorium shall prohibit the action against the properties reflected in the Balance Sheet of the Corporate Debtor. The Moratorium has no application on the properties beyond the ownership of the Corporate Debtor. For the sake of completeness it is worth to refer that the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (the SARFAESI Act) may be having different criteria for enforcement of recovery of outstanding debt, which is not the subject matter of this Bench. Before I part with it is necessary to clarify my humble view that The SARFAESI Act may come within the ambits of Moratorium if an action is to foreclose or to recover or to create any interest in respect of the property belonged to or owned by a Corporate Debtor, otherwise not.

4.4 In the light of the foregoing discussion the Application moved under section 10 of the Code is pronounced as “Admitted”. The Moratorium shall come into operation as prescribed under section 14 of the Code.

4.5 The Applicant has proposed the name of the IRP viz. Vineet K. Chaudhary, C-140, Sector 51, Noida-201303, Email: ip.vineetchaudharv@Qmail.com Regn. No. IBBI/IPA-002/IPN-00103/2017-2018/10246. The Insolvency Professional has already furnished his consent and a statutory declaration on Form No. 2 (under Rule 9 of the Insolvency and Bankruptcy (Application) to Adjudicating Authority) Rule 16 that there is no Disciplinary Proceedings pending against him. The IRP shall take appropriate action such as Public Announcement etc. as prescribed under Section 18 of the Code wherein the duties are enlisted. He is expected to initiate the Process expeditiously. He is therefore directed to submit a Progress Report within one month's time from the time of commencement of Insolvency Resolution Process.

5. Having admitted the Application hereby announce the commencement of the Corporate Insolvency Resolution Process to be effective from the date of this Order.