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2024 Supreme(Online)(NCLAT) 1121
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Naresh Salecha, M (Technical)
Amit Kumar Kolay – Appellant
Versus
Bank of India – Respondent
Comp. App. (AT) (Ins) No. 161 of 2023 | I.A. No. 615, 616 of 2023 | CP (IB) No. 623/KB/2020
For the Appellants/Petitioners:Mr. Joy Saha, Sr. Advocate, Mr. Snehashish Chakraborty, Ms. Akanksha Kaushik
For the Respondents: Mr. Namit Suri, Mr. Ravi (CS)
The court upheld that a corporate debtor's failure to adhere to restructuring terms justifies classification as non-performing assets under the Insolvency and Bankruptcy Code.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 - Corporate Insolvency Resolution Process - Initiation of CIRP against Corporate Debtor by Financial Creditor for defaults on repayment - Corporate Debtor argued restructuring terms were violated by NPA declaration - It was found that default occurred as interest payments were due without moratorium; thus, debts were confirmed and the appeal was dismissed. (Paras 1, 39, 58)
(B) Conditions for declaring NPA - It was determined that due to continuous defaults and failure to adhere to the repayment schedule, including interest payments, the Corporate Debtor’s accounts were rightly classified as NPA based on RBI guidelines. (Paras 40, 56)
Facts of the case:
The Appellant filed an appeal against the admission of a Section 7 application for CIRP initiated due to defaults attributed to the Corporate Debtor, arguing improper classification of debts and ambiguity in the date of defaults.
Findings of Court:
The court noted that the Corporate Debtor failed to comply with agreed restructuring terms, confirming the legitimacy of the NPA classification.
Issues: The main issues addressed were the clarity of default dates and the appropriateness of declaring the loan accounts as NPA based on restructuring agreements.
Ratio Decidendi: The court maintained that the Corporate Debtor’s obligations under the restructuring agreement, particularly regarding interest repayments, were clear, leading to valid default claims.
Result: The Appeal fails and stand dismissed.
| Table of Content |
|---|
| 1. appeal filed against cirp initiation needs clarity on debt defaults. (Para 1 , 2 , 4) |
| 2. arguments concerning misconstrued restructuring clauses must be critically assessed. (Para 5 , 8 , 10 , 11 , 17) |
| 3. respondent refutes appellant's claims on accountability for defaults. (Para 25 , 32 , 36) |
| 4. evidence substantively supports bank's claim for correct npa classification. (Para 39 , 41 , 44) |
| 5. court findings conclude no error in admitting cirp based on debts. (Para 58 , 59) |
JUDGEMENT
(19.03.2024)
NARESH SALECHA, MEMBER (TECHNICAL)
1. The present Appeal i.e., Company Appeal (AT) (Insolvency) No. 161 of 2023 has been filed against the Impugned Order dated 10.01.2023 passed by the National Company Law Tribunal, Kolkata Bench, Court-I, Kolkata (in short ‘Adjudicating Authority’) in CP (IB) No. 623/ KB/ 2020 where the application of the Respondent No. 1- Bank of India ( in short ‘Financial Creditor’) under Section 7 of the Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) was admitted and the Corporate Insolvency Resolution Process (in short ‘CIRP’) was initiated.
2. Mr. Amit Kumar Kolay is the Appellant herein who was the Designated Partner of Suryadeep Multipurpose Cold Storage LLP (in short ‘Corporate Debtor’)
3. Heard the Counsel for the Parties and perused the records made available including the cited judgements.
4. The undisputed fact of the case is that the around 2012, the Corporate Debtor requested for credit facilities including the terms loan, cash credit facility and bank guarantee for an overall limit of Rs. 8.01 Crores from the Respondents which was sanctioned on 26.09.2012. It has been brought out that this overall credit facilities limit was enhanced/ renewed/ modified from time to time, based on the request of the Corporate Debtor and finally overall limit was sanctioned on 26.09.2019 of Rs. 20.78 Crores comprising of Terms Loan – I, Term Loan – II, cash credit limit and bank guarantee.
5. The Appellant stated that while utilising the credit facilities, business of the Corporate Debtor suffered due to recession and poor market conditions and therefore, the Corporate Debtor could not meet its liability towards the Respondents.
6. The Appellant also mentioned that the Corporate Debtor is MSME entity and is entitled to get benefit of restructuring of its loan accounts in terms of RBI Circular dated 17.03.2016 and according to the Corporate Debtor approached the Respondent for restructuring.
7. It is the case of the Appellant that after restructuring, the debt was not due on alleged default dates claimed by the Respondent, as such the admission of Section 7 application by the Adjudicating Authority was illegal and perverse.
8. It is also the case of the Appellant that the date of default has not been correctly reflected in the application filed under Section 7 of the Code by the Respondents and therefore, the application should have been summarily rejected. 9. The Appellant also stated that the letter of restructuring dated 30.03.2019 clearly indicated that the repayment schedule was to commence from December 2019 and was to end in march 2029 with moratorium period of 7 months and the interest was to be served on monthly basis as and when applied with regard to FITL, WCTL-I and WCTL-II facility, the repayment was to commence from May 2020 and end with 12 months moratorium period.
The Appellant pleaded that despite such clear terms of restructuring of loan accounts, the Respondent deliberately classified the loan accounts of the Corporate Debtor as Non-Performing Assets (in short ‘NPA’) on 30.09.2019 even when the repayment schedule, according to restructuring letter dated 30.03.2019, could commence only in December 2019. The alleged NPA on 30.09.2019 was incorrect and illegal since the repayment was to commence only in December 2019.
10. The next argument of the Appellant is regarding wrong date of defaults used by the Respondent. The Appellant stated that the Respondent is absolutely unclear about the dat
