NCLAT (2025.01.03) in J.C. Flowers Asset Reconstruction Pvt. Ltd. vs. Carnival Films Entertainment Pvt. Ltd. [Comp. App. (AT) (Ins) No. 1831 of 2024] held that;
Therefore, only in this context the date of default has been mentioned in the NeSL as 30.10.2020, otherwise the entire loan was recalled vide letter dated 12.07.2021 and the Corporate Debtor was given seven days time to pay the entire loan by 19.07.2021. Since the repayment has not been made, therefore, the said date of default has been taken by the Appellant in the application filed under Section 7 in Part IV.
Excerpts of the order;
(Hybrid Mode) [Per : Justice Rakesh Kumar Jain (Oral)] 03.01.2025 This appeal is directed against the order dated 30.07.2024 passed by National Company Law Tribunal, Mumbai Bench, Court-IV ('Tribunal') by which an application filed under Section 7 of the Insolvency & Bankruptcy Code, 2016 ('Code') by the Appellant (Assignee) for the resolution of an amount of Rs. 71,00,44,358.66/- outstanding as on 30.11.2023 has been dismissed on the ground that the date of default has been mentioned in NeSL certificate as 30.10.2020 is hit by Section 10 A of the Code.
# 2. In brief, Yes Bank advanced a loan of Rs. 50 Crores to Carnival Films Entertainment Pvt. Ltd. ('Corporate Debtor') in the year 2017.
# 3. The bank wrote a letter on 07.09.2020 to the Corporate Debtor in which it aver as under
"3. In the view of prevailing COVID-19 situation, the Borrower has availed the moratorium benefits in terms of RBI Circular and expressed its inability to make payment of the Accrued Interest Obligation on the due date and accordingly the Borrower has requested the Bank to provide additional time for repayment of the Accrued Interest Obligation to the bank. Accordingly, at the request of the Borrower, the Bank has agreed to provide additional time to the Borrower for the repayment of the Accrued Interest Obligation.
# 4. In consideration of the Bank agreeing to provide additional time for the repayment of the Accrued Interest Obligation, the Borrower has agreed to abide by certain additional term & condition stipulated by the Bank as contained in this binding letter ("Letter") including but not limited to payment of interest etc. on Accrued Interest Obligation for the additional time provided by the Bank for repayment of Accrued Interest Obligation.
# 5. Accordingly, the Borrower hereby absolutely, unconditionally and irrevocably agrees, undertakes and agrees as follows:
a) From the date of this Letter, the expression "Facilities" used in the Agreements shall also. include the Accrued Interest Obligation and accordingly, all representations, warranties, covenants, events of defaults captured in the Agreements shall also apply to Accrued Interest' Obligation.
b) The Accrued Interest Obligation shall carry interest at the rate of Applicable Rate of Interest as set out in Part - I of Annexure I attached hereto.
c) Unless otherwise agreed between the Parties, the Borrower shall repay the Accrued Interest Obligation in the manner stated in Part - I] of Annexure I attached hereto.
d) The Borrower hereby agrees and confirms that the Securities, if any, created for the Facilities shall ensure as a security for the due and prompt repayment of Accrued Interest Obligation (the same being part of the Facilities) together with interest, additional interest default interest, costs, charges and expenses and all other monies whatsoever due and payable by the Borrower to the Bank under this Letter, the Agreements and/or Transaction Documents.
e) The Borrower hereby agrees with the Bank(s) that it shall abide by the terms and conditions contained in the Facility Letters, Addendum Facility Letter, Agreements and this Letter as mentioned herein and further agrees to pay to the Bank its respective dues including interest, costs and expenses as agreed between the Bank and the Borrower.
f) The Borrower hereby also declares, covenants and agrees with the Bank, that all terms and conditions, covenants and obligations of the Agreements, shall be continuing and binding obligations and further the same shall be read and construed together with Facility Letters, Addendum Facility Letter and this Letter in all respects, save and except as specified herein for Accrued Interest Obligation under the Facilities."
# 4. As per the aforesaid letter, the expression facility used in the agreement was to include the Accrued Interest Obligation and because of COVID- 19 situation the bank gave additional time to the Corporate Debtor for repayment of the Accrued Interest Obligation.
# 5. The aforesaid letter was having the repayment plan and the amount was to be repaid w.e.f. 31.10.2020 onwards in instalments. The chart of the repayment plan is also reproduced as under :-
Part - II (Repayment of Accrued Interest Obligation)
# 6. According to the bank, the Corporate Debtor did not make any payment but it still gave some time to the Corporate Debtor to make the payment and in this regard it wrote a letter to the Corporate Debtor on 12.07.2021. It was clarified that credit facility aggregating to Rs. 50 Crores shall also include the amount of interest i.e., Rs. 2,61,05,294.93 as Funded Interest Term Loan ('FITL'). The letter dated 12.07.2021 is reproduced as under :-
# 7. The aforesaid letter was replied by the Corporate Debtor on the next date itself i.e., 13.07.2021 in which the Corporate Debtor accepted the liability and the fact that the payment has not been made according to the repayment plan. The letter is also reproduced as under:-
# 8. The bank however, uploaded the name of the debtor with the date of default on the National E-Governance Service Limited ('NeSL') also referring to the FITL moratorium. However, the date of default has been mentioned as 31.10.2020. The NeSL record is also reproduced as under :-
FORM D RECORD OF DEFAULT (RoD) (Issued by Information utility under sub-regulation (4) of regulation 21 of the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017) This Record of Default is issued to the Financial Creditor M/s YES BANK LIMITED in respect of the default of debt as per details given below :
(a) Name of Submitter : M/s YES BANK LIMITED
(b) Schedule - 2 Bank Y
(Y/N):
(c) Name of Corporate M/s CARNIVAL FILMS ENT
Debtor : P LTD POOL A/C
(d) Unique Debt Identifier AAACY2068D
Number : FITLMORTL11306867
(e) Registered Address: YES Bank House, Prabhat
Nagar, Off Western Express,
Highway, Santacruz- East,
MUMBAI - 400065
(f) Total Outstanding 25535784.00
Amount :
(g) Default Amount : 25535784.00
(h) Date of Default : 30-10-2020
(i) Status of AUTHENTICATED
Authentication of
Default :
Default Information
Date of default 30-10-2020
Total Outstanding 2,55,35,784.00
Default amount 2,55,35,784.00
# 9. However, the bank assigned its debt to the present appellant, namely, J.C. Flowers Asset Reconstruction Pvt. Ltd. by assignment deed dated 16.12.2022. Pursuant thereto, the application under Section 7 came to be filed by the assignee in which the Appellant made a specific averment in Part-IV of the application that the date of default is 19.07.2021 because in the letter dated 12.07.2021 a period of seven days was granted to the Corporate Debtor to make the payment which expired on 19.07.2021, therefore, the date of default was chosen as 19.07.2021. The relevant extract of Part IV of the application is also reproduced as under :-
# 10. Counsel for the Appellant has submitted that when the application under Section 7 was filed, an order was passed by the Tribunal on 22.05.2024 that Counsel for the Appellant could not explain the date of default and had taken two weeks time to seek instructions. The said order is also reproduced as under :-
"This matter is heard through Video Conference:
1. Ld. Counsel for the Financial Creditor present (VC).
2. Counsel for the Financial Creditor is unable to explain the date of default. He seeks two weeks' time to take instruction and explain the date of default in part-IV.
3. List this matter on 05.07.2024."
# 11. Counsel for the Appellant has submitted that on 30.07.2024 the Tribunal, while referring to the order dated 22.05.2024 dismissed the application filed under Section 7 of the Code only on the ground that since the date of default has been mentioned in NeSL record as 30.10.2020 which falls within the cut off period of 23.03.2020 and 25.03.2021, therefore it is hit by Section 10A of the Code and as such the application under Section 7 was not maintainable.
# 12. Notice in this appeal was issued. Reply has been filed. Counsel for the Respondent has supported the case of the Appellant contending that the date of default mentioned by the Appellant is correct in Part IV of the application filed under Section 7 of the Code.
# 13. Be that as it may, Counsel for the Appellant has submitted that though the date of default in the NeSL has been mentioned as 30.10.2020 but the said date is not sacrosanct because of continuing default on the part of the Corporate Debtor and as per letter dated 07.09.2020 the payment plan of the outstanding amount was specifically given to the Corporate Debtor in which the first date of repayment was 31.10.2020 which was not even adhered to by the Corporate Debtor.
# 14. Therefore, only in this context the date of default has been mentioned in the NeSL as 30.10.2020, otherwise the entire loan was recalled vide letter dated 12.07.2021 and the Corporate Debtor was given seven days time to pay the entire loan by 19.07.2021. Since the repayment has not been made, therefore, the said date of default has been taken by the Appellant in the application filed under Section 7 in Part IV.
# 15. It is submitted by the Appellant that no notice was issued in the application, therefore, the Respondent did not appear to admit or deny the date of default and the amount in question claimed in the application for the purpose of resolution.
# 16. It is submitted that all these documents were already on record but it could not be explained to the Learned Tribunal, therefore, the Impugned Order was passed against the Appellant, otherwise the date of default has rightly been placed before Tribunal in Part IV of application filed under Section 7 as 19.07.2021 which is beyond the period covered by Section 10A of the Code because that period expires on 25.03.2021 and the date of default has been chosen as 19.07.2021.
# 17. In support of his arguments Counsel for the Appellant has relied upon decision of this Court passed in Company Appeal (AT) (Insolvency) No. 784 of 2023 in the matter of Small Industries Development Bank of India Vs. Sambandh Finserve Private Limited decided on 05.07.2024.
# 18. We have heard Counsel for the Parties and after examining the aforesaid records, are of the considered opinion that though the date of default has been mentioned in NeSL as 30.10.2020 but that was mentioned in particular set of facts that the Corporate Debtor did not adhered to the repayment plan started from 31.10.2020.
# 19. Counsel for the Appellant has submitted that it appears that the date of default 30.10.2020 has wrongly been mentioned in the NeSL otherwise it should have been 31.10.2020.
# 20. The very fact that the NeSL record also reflect the reference of FITL a facility which has been given to the Corporate Debtor by virtue of the letter dated 07.09.2020 and there is a letter of recall dated 12.07.2021 in which the entire facility has been recalled by giving only a period of seven days to the Respondent and the application under Section 7 has been filed with date of default as 19.07.2021, we do not find any error on the part of the Appellant in mentioning the date of default as 19.07.2021 in the application filed under Section 7.
# 21. The Learned Tribunal has dismissed the application only because of the reason that the date of default could not have been explained properly by the Counsel appearing on behalf of the Appellant at that time, otherwise the Impugned Order could not have been passed only on the ground that the date of default as 30.10.2020 has been mentioned in the record of the NeSL.
# 22. In view of the aforesaid facts and circumstances the Impugned Order is hereby set aside, the C.P. (IB)/346(MB)2024 is restored to its original number and the matter is remanded back to the Tribunal to proceed with it in accordance with law.
# 23. The parties are directed to appear before the Tribunal on 16.01.2025.
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