Sainsons Pulp and Papers Ltd v. State Bank of India

CORPORATE INSOLVENCY RESOLUTION PROCESS Chandigarh

by

A petition was filed under rule 7 of the Insolvency and Bankruptcy Code for initiating corporate Insolvency resolution process. Petitioner was involved in manufacturing of pulp, paper, duplex board etc.The corporate applicant was declared Non- Performing Asset (NPA) after the sanctioning of loan on 31.3.2011. State Bank of India had issued a notice on 28.5.2011 u/s 13(2) of SARFAESI Act and the pending amount on part of corporate debtor was Rs. 10169.57 lakhs (secured loan). It was also asserted that Rs. 1710 lakhs were recovered from sale of assets. Apart from the secured loan, the corporate applicant has made default in payment of unsecured loan of Rs. 3,86,20,000/-

This post is regarding the case of Sainsons Pulp and Papers Ltd v. State Bank of India. The case is filed by the corporate debtor itself for the dissolution of his company as it was declared as non-performing asset (NPA) and thus, the company with the approval of its promoters, Directors, creditors and shareholders has decided to move ahead with the dissolution of the company to pay for the loan amounts of the respondent. Let’s have a glance over the facts and issues of the case.

Also read: SUSPENSION OF FRESH BANKRUPTCY PROCEEDINGS FOR A YEAR

  1. Party Name –

Complainant- Sainsons Pulp and Paper Limited

Respondent- State Bank of India

  1. Date of Decision – 3.3.2020
  2. Court Name- National Company Law Tribunal, Chandigarh Bench, Chandigarh
  3. Complaint no.- CP (IB) No. 486/Chd/Hry/2019
  4. Facts of Case-
  5. Petition filed by the corporate debtor i.e. M/s Sainsons Pulp and Paper Ltd, under Rule 7 of Insolvency and Bankruptcy (application to Adjudicating Authority) for initiating Corporate Insolvency Resolution Process u/s 10 of the IBC, 2016
  6. Petition is filed by Ramesh Kumar Saini (Director) vide Board Resolution on 9.8.2019 and supported with his affidavit and complete information of Promoters and Directors.
  7. Petitioner was involved in manufacturing of pulp, paper, duplex board etc.
  8. The corporate applicant had approached SBI for sanction of Term Loan and working Capital financial facilities.
  9. The corporate applicant was declared Non- Performing Asset (NPA) after the sanctioning of loan on 31.3.2011.
  10. State Bank of India had issued a notice on 28.5.2011 u/s 13(2) of SARFAESI Act and the pending amount on part of corporate debtor was Rs. 10169.57 lakhs (secured loan). It was also asserted that Rs. 1710 lakhs were recovered from sale of assets.
  11. Apart from the secured loan, the corporate applicant has made default in payment of unsecured loan of Rs. 3,86,20,000/-
  12. The total amount of default in case of operational creditor was of Rs. 4,86,958/- (inclusive of remuneration of director and operational debt)
  13. When the matter was heard on 25.9.2019 certain defects were mentioned in the order which were to be corrected within 7 days.
  14. The petitioner filed an affidavit on 1.10.2019 attaching all the listed documents mentioned in the order and notice of petition was issued to the respondent i.e. SBI
  15. All the necessary documents mentioned u/s 10 (3) and 10(4) to admit the application are placed by the petitioner. The petitioner has also suggested a Registered Resolution Professional i.e. Mr. Adesh Kumar Singla (registered Insolvency Professional with IBBI).
  16. The petitioner has also filed copy of Extra Ordinary General Meeting of shareholders for seeking the approval and initiating the Corporate Insolvency Resolution Process u/s 10 of IBC.

Also read: NCLT Chandigarh Bench Insolvency Case against SRS Ltd by SBI

  1. Petitioner’s Prayers –
  2. As per the facts mentioned above, is clear that the petitioner has no assets available with the company and company has also become almost dysfunctional and deserves to be liquidated.
  3. Thus, the petitioner pleads for dissolution of company as it has failed to pay its debt to the respondent and committed default.
  4. Respondent’s contention-
  5. The notice of the current petition was surfaced to all the financial as well as operational creditors of State Bank of India and is mentioned in the affidavit dated. 8.11.2019.
  6. After the secured loan was sanctioned to the corporate applicant, the accounts of the petitioner was declared NPA on 31.3.2011.
  7. Notice was issued by State Bank of India on 28.5.2011 u/s 13(2) of the SARFAESI Act stating the default amount Rs. 10169.57 lakhs. Later it was mentioned that Rs 1710 lakhs were recovered from sale of assets of the company.
  8. On last date of hearing, the counsel on behalf of State Bank of India stated that financial creditors have no objection regarding the admission of the petition.

Also read: PROCEDURE FOR INSOLVENCY IN CHANDIGARH NCLT BENCH

  1. Evidence lead-
  2. The corporate applicant has obtained aforesaid loan and credit limit by hypothecation of stocks and book debt and other company’s asset including land and building along with plant and machinery mentioned under Sanction Letters. The details of personal guarantees and third-party guarantees were also submitted at time of sanctioning loan and mentioned in Annexure I(J) of petition.
  3. In accordance with clause (a) of section 10(3) of the Code, the petitioner has placed all the necessary documents to prove the existence of financial/operational debt. The documents presented were Copy of Sanction Letters (Annexure I(A), I(C), I(E), I(G)), Agreement of Loan, Hypothecation agreements, Deposit of Title Deeds (Annexure I(B), I(D), I(F), I(H)), Document of Collateral Security (Annexure I(I)) are the part of record.
  4. The petitioner even provided the financial year(s) 2017-18, 2018-19 and provisional balance sheet from 1.4.2019 to 10.8.2019 under Annexure V(A), V(B), V(C) of petition.
  5. As per clause (b) of Section 10(3), the corporate supplicant is bound to suggest the name of Registered Resolution Professional (Official Liquidator). The communication under Form no. 2 Annexure III furnished by Mr. Adesh Kumar Singla (registered Insolvency Professional with IBBI). He has given his written consent and stated that presently he is serving as Interim Resolution Professional for the petitioner.
  6. 1710 was recovered from sale of assets by the bank. The letters confirming sale of plant and machinery and other collateral securities are mentioned under Annexure I(T), I(U), I(V).
  7. The special resolution dated 9.8.2019 passed in Extra Ordinary General Meeting of shareholders of Corporate Applicant to initiate corporate insolvency mentioned in Annexure VII (G).

Also read: Corporate INSOLVENCY Resolution PROCESS Chandigarh Bench NCLT

  1. Judgments Quoted-
  2. Horseshoe Entertainment & Hospitality Private Limited, Company Appeal (AT (Insolvency) No.214 of 2017)
  3. Gaja Trustee CompanyPvt. Ltd. &Ors. Vs. Haldia Coke and Chemicals Pvt. Ltd.&ors. – Company Appeal (AT) (Insolvency) No.137 of 2017
  4. Award-
  5. As per the above documents mentioned by the petitioner it can be made clear that the corporate applicant has failed to pay his debts to the respondent and has committed default. Thus, the applicant is initiating insolvency process of the company and the loan amount will be secured by the financial creditors by sale of assets of the company mentioned under Sanction letter.
  6. Looking into the above facts, petition of the applicant is submitted and NCLT declares Moratorium in term of Section 14(1) of the Code as under-
  7. the institution of suits or continuation of pending suits or any proceeding against corporate debtor
  8. transferring, alienating or disposing of any of assets, beneficial interest of corporate debtor.
  • Any action to foreclose, recover or enforce any security interest created by corporate debtor with respect to his property
  1. Recovery of property by owner or lessor which is in possession or occupied by the corporate debtor.

Also read: Benefits of Insolvency Law for Corporate

  1. It is further instructed that the supply of essential goods and services to corporate debtor as specified shall not be terminated or suspended during the moratorium period.
  2. The provision of Section 14(3) shall not apply to transactions which may be notified by the Central Government in consultation with any financial sector regulator and to surety in contract of guarantee to corporate debtor.
  3. The order of moratorium shall have effect from date of this order till order of completion of corporate insolvency resolution process or until this Bench approves the resolution plan u/s 31 (1) or passes an order for liquidation of corporate debtor under section 33 as case may be.
  4. The law Research Associate of Tribunal has found nothing adverse against Mr. Adesh Kumar Singla and appointed as Insolvency Professional.

For case specific advice on Corporate matters related to insolvency and bankruptcy, one may contact top/best expert IBC Lawyers in Chandigarh Panchkula Mohali Zirakpur Derabassi Kharar Mullanpur Baltana.

This post is written by Rhea Banerjee. More on 99888-17966. 

Call Us