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NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Arun Baroka, Member (Technical)
Milind Kashiram Jadhav Suspended Director of Jabalpur MSW Pvt. Ltd. – Appellant
Versus
State Bank of India – Respondent
Company Appeal (AT) (Insolvency) No. 1589 of 2023|Company Appeal (IB) No. 417/ND/2021
Certainly. Based on the provided legal document, the key points are as follows:
The appeal concerns the initiation of insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the Corporate Debtor, Jabalpur MSW Pvt. Ltd., by the Financial Creditor, State Bank of India (!) .
The primary dispute revolves around the correct "date of default" for the purpose of initiating insolvency proceedings. The Appellant argues that the default occurred only after receiving the Loan Recall Notice on 11.08.2020, and that prior payments made after the NPA classification should be considered to have cured the default, thus making the proceedings barred under the period specified in Section 10A of the IBC (!) (!) .
The Respondent maintains that the default date is the date of the NPA declaration, which was on 27.09.2019, as this date signifies the point at which the entire outstanding debt became due and payable due to continued non-payment beyond the prescribed period (!) (!) .
The classification of the loan account as an NPA is a regulatory measure based on the borrower’s failure to service the debt for 90 days, which automatically renders the entire outstanding amount due and payable, establishing a default under the law (!) (!) .
Despite the classification as NPA, the borrower continued to make payments, but the accounts were never regularized or brought back to a standard status, meaning the default persisted from the NPA date onward (!) (!) .
The Loan Recall Notice issued on 11.08.2020 was an opportunity for the borrower to settle the outstanding dues, but it did not constitute or accelerate the default itself. The default was already in existence since the NPA classification date, and the notice was merely a reminder or further opportunity, not a trigger for default (!) (!) (!) .
The application filed under Section 7 did not comply with the legal requirements for establishing a default, as it lacked proper evidence such as records recorded with an information utility or certified account entries, and the statement of accounts indicated ongoing payments, which did not conclusively establish a default (!) (!) (!) .
The evidence and records support that the default continued from the NPA classification date, and the default was not cured by subsequent payments or actions, thereby validating the date of NPA as the default date under the law (!) (!) (!) .
The proceedings and the decision to admit the application for initiating CIRP were upheld, as the default was established in accordance with legal provisions, and the appeal was dismissed accordingly (!) .
Overall, the legal order confirms that the date of NPA classification is the appropriate and valid date of default for initiating insolvency proceedings, and the appeal's arguments to the contrary are not supported by the facts or legal principles (!) .
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| Table of Content |
|---|
| 1. initiation of insolvency proceedings (Para 1 , 2 , 3 , 4) |
| 2. cure periods and events of default (Para 5 , 6 , 7 , 8 , 9 , 10 , 12 , 18) |
| 3. implications of npa classification (Para 11 , 20 , 21 , 39 , 46) |
| 4. nature of defaults and rights of creditors (Para 14 , 19 , 22 , 23) |
| 5. final decision on default dates and insolvency (Para 50 , 51 , 52 , 72 , 74) |
JUDGMENT
(Hybrid Mode)
[Per: Arun Baroka, Member (Technical)]
The present Appeal has been preferred under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the (“IBC Code”) against the Impugned Order dated 14.09.2023 (hereinafter referred to as “Impugned Order”) passed by the Hon’ble National Company Law Tribunal (NCLT), New Delhi – Bench-VI in the matter titled as “State Bank of India Vs. Jabalpur MSW Pvt. Ltd.” [CP (IB) No. 417/ND/2021], inter alia, admitting the Application filed by the Respondent No. 1 i.e. State Bank of India under Section 7 of the IBC Code (hereinafter referred to as “ Application”) against Jabalpur MSW Private Limited (hereinafter referred to as “Corporate Debtor”). The Appeal has been filed by Mr. Milind Kashiram Jadhav, the Suspended Director of the Corporate Debtor: Jabalpur MSW Private Limited.
Brief facts of the case
2. The Respondent, a Financial Creditor, filed an Application with the NCLT seeking insolvency proceedings against the Appellant, a Corporate Debtor, alleging a default exceeding Rs. 46.80 crores. The Respondent argued that the default date was September 27, 2019, when the loan became classified as a Non-Performing Asset (NPA) and issued the recall notice on 11.08.2020.
3. The Appellant contested this, asserting that the default occurred on August 18, 2020, after receiving a loan recall notice. They further argued this fell within a period where initiating insolvency proceedings was barred under the IBC under Section 10A .
4. The Respondent No. 2 is the Interim Resolution Professional of the Corporate Debtor appointed by the Adjudicating Authority vide the Impugned Order and confirmed as the Resolution Professional vide the order dated 27.10.2023.
Submissions of the Appellant / Milind Kashiram Jadhav Suspended Director of Jabalpur MSW Pvt. Ltd.
5. The total amount due, as stated in Part IV of Form-I, was approximately Rs. 46.80 crores as of 28.02.2021, consistent with the amount mentioned in the recall notice.
6. Considering the Corporate Debtor’s consistent payments of interest and other amounts between 27.09.2009 and the date of recall, the date of default should be deemed as the date of the recall notice. If 11.08.2020 is considered the date of default, it falls under Section 10A , rendering Section 7 inadmissible.
7. The loan sanction letter outlines events of default and provides for a cure period, which was not afforded to the Corporate Debtor. Examination of these default events and remedies under the agreement suggests that a cure period was mandatory, and the loan could not be accelerated from the declaration of NPA date.
8. Without going into the details of past lending history we are focussing on relevant current lending history which caused the debt and default. On 04.08.2014, the Financial Creditor issued a Sanction Letter to the Corporate Debtor, sanctioning credit facilities of Rs. 54,00,00,000/- for part-financing the Municipal Solid Waste (MSW) treatment plant of 580 TPD capacity for Waste To Energy (WTE) conversion at Jabalpur on Design, Build, Own, Operate, and Transfer (DBOOT) basis. The contractual terms between the Corporate Debtor and the Financial Creditor are governed by the terms of this sanction letter dated 04.08.2014.
9. Clause 16 of the sanction letter outlines the conditions constituting "Events of Default" concerning the Corporate Debtor’s obligations as per the Sanction Letter. In the event of any remediable default occurrence, a suitable cure period shall be provided from the date of such event.
10. The relevant part of the Clause 16 is reproduced herewith:
“Events of
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