Bookmark
PDF
Share
CaseIQ

Nailesh Dresswala v. MTC E-COM Pvt Ltd

National Company Law Tribunal

Aug 17, 2020

Judgment

Subsequent
References

CaseIQ

Smart Summary (Beta)

NCLT Mumbai Bench-IV (Special Bench) — CP (IB) 809/MB.IV/2020

Factual and Procedural Background

This Company Petition under section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) was filed by Mr Nailesh Dresswala (Financial Creditor) on 03.03.2020 seeking initiation of Corporate Insolvency Resolution Process (CIRP) against MTC ECOM Private Limited (Corporate Debtor). The Corporate Debtor is a private company incorporated on 08.12.2011 (CIN: U74999MH2011PTC224691) with registered office in Mumbai; this Bench had jurisdiction.

The petition alleges a default dated 30.07.2018 in respect of an outstanding principal of Rs. 1,00,00,000 and interest of Rs. 23,43,750 (total claim Rs. 1,23,43,750). The factual background in the petition, as set out by the Financial Creditor, is that the Corporate Debtor issued Optionally Convertible Debentures (OCDs) in April 2018; an investor, Mr Chandrasekhar Behal, received OCDs and later transferred them to the Financial Creditor by a Transfer Certificate dated 04.02.2020. The Financial Creditor claimed non-payment despite a demand letter dated 28.02.2020.

The petition included documentary exhibits (Exhibits A–C, bank statements at Exhibit H) and the Financial Creditor served the petition on the Corporate Debtor (receipt at p.114). On the first listing (13.03.2020), Mr Karan Behal (a Director) appeared and the court notice was deemed waived. The Corporate Debtor placed on record a Board resolution dated 09.03.2020 acknowledging filing of the petition and recording that the company would not oppose initiation of CIRP and would not file a reply.

The Financial Creditor proposed Mr Dilip Vasudeo Gupta as Interim Resolution Professional (IRP) and filed Form 2 and his registration certificate under rule 9(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

Legal Issues Presented

Whether the petition filed under section 7 of the IBC satisfies the statutory requirements and is complete for admission.
Whether a default, as defined under the IBC and exceeding the minimum threshold under section 4(1), was established such that CIRP should be initiated against the Corporate Debtor.

Arguments of the Parties

Financial Creditor's Position

The Financial Creditor relied on an Optionally Convertible Debenture transaction: OCDs originally issued to Mr Chandrasekhar Behal and later transferred to the Financial Creditor by Transfer Certificate dated 04.02.2020 (Exhibit F).
The Financial Creditor asserted that the Corporate Debtor defaulted in repayment of principal (balance Rs. 1,00,00,000) and interest, giving a total claim of Rs. 1,23,43,750 as on the date of default.
Documentary evidence was placed on record (Exhibits A–C, bank statements at Exhibit H). The Financial Creditor proposed the IRP and filed Form 2 with his registration certificate as required under the Rules.

Corporate Debtor's Position

Director Mr Karan Behal informed the Tribunal that the company had shut down operations and was not in a position to repay the sum due to the Financial Creditor.
The Board of Directors' resolution dated 09.03.2020 recorded that the company would not oppose the petition under section 7 and that the company did not wish to file any reply.
On appearance before the Tribunal, the Corporate Debtor waived the issue of court notice by having a director appear in person on 13.03.2020.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Tribunal heard submissions and examined the record. The court's analysis proceeded by reference to the statutory framework and the material placed before it:

The Tribunal found the application complete in all respects as required by law, noting that the Financial Creditor had filed the necessary documents and the proposed IRP had filed Form 2 along with his certificate of registration (rule 9(1)).
The Tribunal applied the statutory threshold under section 4(1) of the IBC (minimum amount due) and observed that the alleged default exceeded that threshold.
The Tribunal treated the Corporate Debtor's Board Resolution of 09.03.2020 and the director's statements as an unequivocal admission that restructuring should proceed under the IBC; on that basis the Tribunal concluded that the default stands established.
Having found the petition complete and the fact of default established, the Tribunal observed there was no reason to deny admission of the petition under section 7 and therefore admitted the petition and ordered initiation of CIRP.
The Tribunal implemented statutory consequences and directions provided under the IBC and its rules and regulations: appointment of the IRP, imposition of moratorium under section 14, requirement for public announcement under section 13 read with regulation 6, directions for management to vest in the IRP (section 17), deposit by the Financial Creditor to meet initial CIRP expenses, and communication of the order to the parties and the Registrar of Companies.

Holding and Implications

Petition Admitted; CIRP Initiated.

Direct consequences and operative directions flowing from the order (as recorded in the opinion):

The petition CP (IB) No.809/MB.IV/2020 filed under section 7 read with rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 is admitted and CIRP is ordered against MTC ECOM Private Limited.
A moratorium under section 14 of the IBC is declared from the date of the order until completion of CIRP or approval of a resolution plan under section 31(1) or liquidation under section 33. The moratorium prohibits institution or continuation of suits, transfer or disposal of assets, enforcement of security interests (including actions under SARFAESI), and recovery of property in the possession of the Corporate Debtor (subject to statutory exceptions noted in the order).
Essential supplies, if continuing, shall not be terminated during the moratorium, and specified transactions notified by Central Government/sectoral regulators are excepted from sub‑section (1) of section 14 as provided by statute.
Public announcement of the CIRP must be made immediately under section 13 read with regulation 6 of the CIRP Regulations.
Mr Dilip Vasudeo Gupta (Reg. No. IBBI/IPA-002/IP-N00765/2019-2020/12484) is appointed as Interim Resolution Professional to perform functions under the IBC (sections 15, 17–21 were referenced in the order).
The Financial Creditor is directed to deposit Rs. 3,00,000 with the IRP to meet initial expenses (subject to CoC approval), and the IRP is to submit periodical reports to the Adjudicating Authority.
The Registry was directed to communicate the order to the Financial Creditor, Corporate Debtor and IRP within two days; a copy of the order is to be sent to the Registrar of Companies, Maharashtra, Mumbai to update master data, with a compliance report due within seven days.

The opinion contains no statement that it sets any new legal precedent beyond applying the statutory scheme of the IBC to the facts of this case. Its practical effect is to commence CIRP against the Corporate Debtor and to vest management control in the IRP for the CIRP period.

This summary is based exclusively on the text of the provided opinion; no information has been added beyond what appears in that opinion.

Show all summary ...

Per: Rajasekhar V.K., Member (Judicial)

1. This is a Company Petition filed under section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) by Mr Nailesh Dresswala (Financial Creditor), an individual, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against MTC ECOM Private Limited (Corporate Debtor). IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-IV (Special Bench) CP (IB) 809/MB.IV/2020

2. The Corporate Debtor is a private company limited by shares and incorporated on 08.12.2011 under the Companies Act, 1956, with the Registrar of Companies, Maharashtra, Mumbai. Its Corporate Identity Number (CIN) is U74999MH2011PTC224691. Its registered office is 201-A, Pinnacle Corporate Park (2nd Floor), Building No.19, 'A' Wing, Bandra-Kurla Complex (BKC), Bandra (East), Mumbai 400051, within the State of Maharashtra. Therefore, this Bench has jurisdiction to deal with this petition.

3. The present petition was filed on 03.03.2020 before this Adjudicating Authority on the ground that the Corporate Debtor failed to make payment of a sum of 1,00,00,000.00 (Rupees one crore only) as principal and 23,43,750.00 (Rupees twenty-three lakh forty-three thousand seven hundred and fifty only) as interest as on 30.07.2018, which is the date of default.

4. The case of the Financial Creditor is as follows: - (a) Initially, the Corporate Debtor entered into an Optionally Convertible Debenture Agreement (OCDA) dated 07.04.2018 with Orios Venture Partners Fund-I, Mr Anupam Mittal and Mr Karan Behal. To this Agreement, 26.04.2018, an Addendum Agreement was entered into on 12.04.2018, whereby the Corporate Debtor was to issue 15,00,000 Optionally Convertible Debentures at the face value of 10/-, aggregating to 1,50,00,000/- to Mr Chandrasekhar Behal, who was identified as one of the investors. (b) On 30.04.2018, the OCDs were issued to Mr Chandrasekhar Behal. Subsequently, the Corporate Debtor repaid the principal sum in part to the extent of 50,00,000/- (Rupees fifty lakh only) along with interest thereon, leaving a balance amount of 1.00 crore as principal with interest thereon at the rate of 15% per annum. IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-IV (Special Bench) CP (IB) 809/MB.IV/2020 (c) The OCD was transferred by Mr Chandrasekhar Behal to the Financial Creditor under a Transfer Certificate dated 04.02.2020 placed at Exhibit F (pp.37-39). Thus, the Financial Creditor stepped into the shoes of Mr Chandrasekhar Behal, for a sum of 1,23,43,7850/-. (d) On 28,.02.2020, the Financial Creditor wrote to the Corporate Debtor seeking repayment of the sum of 1,23,43,750/-. But no repayment was forthcoming.

5. The underlying documents have been placed on record as Exhibit 'A, 'B' and 'C' at pp.7-33. The rate of interest charged is 15% per annum. Bank statements are also attached as Exhibit 'H' at p.41. The total debt due and payable to the Financial Creditor is 1,23,43,750.00 (Rupees one crore twenty-three lakh forty-three thousand seven hundred and fifty only), as mentioned at page 4 of the Petition.

6. The Financial Creditor has served copies of the petition on the Corporate Debtor vide letter dated 03.03.2020 sent by TrackOn Courier, and its receipt has been attached to the Petition at p.114.

7. I have heard the submissions of both sides and perused the records.

8. The matter was listed for the first time on 13.03.2020 for issue of court notice. However, on that date, Mr Karan Behal, Director of the Corporate Debtor appeared in person. Therefore, Court Notice was deemed to have been waived.

9. Mr Karan Behal, Director of the Corporate Debtor, stated that the Corporate Debtor had shut down its operations, and that they are not in a position to repay the sum owed to the Financial Creditor. Extracts of the Resolution passed by the Board of Directors of the IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-IV (Special Bench) CP (IB) 809/MB.IV/2020 Corporate Debtor at its meeting held on 09.03.2020 was placed on record. The Resolution notes the filing of petition to initiate insolvency proceedings against the Corporate Debtor. It was resolved that the Corporate Debtor shall not oppose the Company Petition filed under section 7 of the IBC and that Mr Karan Behal, Director, was to convey to this Adjudicating Authority that the Company has no objection to the initiation of CIRP against the Company. Mr Karan Behal also submitted that the Corporate Debtor does not wish to file any reply in the matter.

10. The Financial Creditor has proposed the name of Mr Dilip Vasudeo Gupta, Registration No.IBBI/IPA-002/IP-N00765/2019-2020/ 12484, as the Interim Resolution Professional (IRP) of the Corporate Debtor. He has filed his written communication in Form 2 as required under rule 9(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 along with a copy of his Certificate of Registration.

11. 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 in excess of minimum amount of one lakh rupees stipulated under section 4(1) of the IBC at the relevant time. The Corporate Debtor has unequivocally admitted, through the Board Resolution dated 09.03.2020, that any restructuring of the Corporate Debtor would be best achieved within the four corners of the Insolvency and Bankruptcy Code, 2016. Therefore, the default stands established and there is no reason to deny the admission of the petition. In view of this, this Adjudicating IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-IV (Special Bench) CP (IB) 809/MB.IV/2020 Authority admits this petition and orders initiation of CIRP against the Corporate Debtor.

12. It is, accordingly, hereby ordered as follows: - (a) The petition bearing CP (IB) No.809/MB.IV/2020 filed by Mr Nailesh Dresswala, the Financial Creditor, under section 7 of the IBC read with rule 4(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against MTC ECOM Private Limited [CIN: U74999MH2011PTC224691], the Corporate Debtor, is admitted. (b) There shall be a moratorium under section 14 of the IBC, in regard to the following:

(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;

(ii) Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;

(iii) 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 (Sarfaesi) Act, 2002; IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-IV (Special Bench) CP (IB) 809/MB.IV/2020

(iv) The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor. (c) Notwithstanding the above, during the period of moratorium,-

(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;

(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. (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 IBC, as the case may be. (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 of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (f) Mr Dilip Vasudeo Gupta, Reg. No.IBBI/IPA-002/IP-N00765/ 2019-2020/12484, having address at No.8, Ellora CHS Ltd, Behind Abhyudaya Co-Op Bank Ltd, Daftary Road, Malad (East), Mumbai, 400097 [email: ipdilipgupta@gmail.com], is hereby appointed as Interim Resolution Professional (IRP) of the IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-IV (Special Bench) CP (IB) 809/MB.IV/2020 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 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. (g) During the CIRP period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, 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. (h) The IRP/RP shall submit to this Adjudicating Authority periodical reports with regard to the progress of the CIRP in respect of the Corporate Debtor.

(i) The Financial Creditor shall deposit a sum of 3,00,000/- (Rupees three lakh only) 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). (j) In terms of section 7(5)(a) of the IBC, the Registry is directed to communicate this Order to the Financial Creditor, the Corporate Debtor and the IRP by Speed Post, email and WhatsApp immediately, and in any case, not later than two days from the date of this Order. IN THE NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH-IV (Special Bench) CP (IB) 809/MB.IV/2020 (k) A copy of this Order be sent 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. Sd/- Sd/-Rajasekhar V.K. Member (Judicial)