National Company Law Appellate Tribunal Manmohan Singh Jain vs State Bank Of India on 22 November, 2021 NATIONAL COMPANY LAW APPELLATE TRIBUNAL AT CHENNAI (APPELLATE JURISDICTION) Company Appeal (AT) (CH) (INS) No. 97 of 2021 (Under Section 61 of the Insolvency and Bankruptcy Code, 2016) Arising out of the Order dated 27.04.2021 in IBA/45/2020 passed by the Adjudicating Authority, (National Company Law Tribunal, Division BenchII, Chennai Bench) In the matter of: Mr. Manmohan Singh Jain AH 216, 2nd Street, 8th Main Road, Shanthi Colony, Anna Nagar, Chennai 600 040. Shareholder and Suspended Director of Kiran Global Chems Limited ...Appellant V 1.M/s. State Bank of India Stressed Assets Management Branch, Red Cross Building, 2nd Floor, No32, Montieth Road, Egmore, Chennai. ...Respondent No.1 2.M/s. Kiran Global Chems Limited (Represented by Interim Resolution Professional) No.42, New Avadi Road, Kilpauk, Chennai10. ...Respondent No.2 Present: For Appellant : Mr. Aalok Jagga, Advocate and Mr. R. Swarnavel, Advocate Mr. R. Ramkumar, Advocate For Respondent No.1/Caveator: Mr. Satish Parasaran, Sr. Advocate For Mr. Vipin Warrier, Advocate Comp App (AT) (CH) (INS) No. 97 of 2021 Page | 1 For Respondent No.2 : Mr. S. Sathiyanarayanan, Advocate Coram : Mr. Justice M. Venugopal Member (J) Mr. Kanthi Narahari Member (T) JUDGMENT (VIRTUAL MODE) Per: Kanthi Narahari Member (T) 1) The present Appeal is filed aggrieved by the Order dated 27th April 2021 passed by the Adjudicating Authority (National Company Law Tribunal, Division BenchII, Chennai) in IBA/45/2020, whereby the Adjudicating Authority admitted the application and initiated the Corporate Insolvency Resolution Process (CIRP). Appellant's Submissions : 2) The Learned Counsel for the Appellant submitted that the Appeal is preferred by a shareholder of the 'Corporate Debtor' holding 50.210% of shares and also a Suspended Director of the 'Corporate Debtor'. He submitted that the Respondent herein i.e. the State Bank of India filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the 'Adjudicating Authority' for initiation of 'CIRP' against the Corporate Debtor on the ground that the Corporate Debtor had defaulted in repaying an amount of Rs.52,28,93,796/. 3) It is submitted that the 'Impugned Order' passed by the Learned 'Adjudicating Authority' has created an inequitable and legally unsustainable position that the 'Corporate Debtor' resultantly suffered a huge financial and Comp App (AT) (CH) (INS) No. 97 of 2021 Page | 2 business losses along with adversely affecting the lives of families of around 500 workers of MSME Unit. 4) It is submitted that the Learned 'Adjudicating Authority' without appreciating the mandate of law including the debt on which the default occurred, the 'letter of law' as well as law settled by the Hon'ble Supreme Court of India. 5) It is submitted that the 'Corporate Debtor' had availed Working Capital credit facilities under Working Capital Arrangement Consortium Agreement from Consortium of Banks i.e. State Bank of India, Axis Bank Ltd., IDBI Bank Ltd. and Karur Vysya Bank Limited along with executing joint consortium documents with consortium of banks. The 1st Respondent was leader of consortium and Axis Bank Ltd. was second leader of this Consortium of Banks. All securities were pledged/hypothecated in favor of Consortium of Banks with pari passu charge of each consortium bank member, without providing any exclusive security to Respondent or other consortium bank for securing working capital consortium advances with IDBI and KVB as member banks, as also mentioned in fact sheet enclosed along with application by the Respondent bank. 6) It is submitted that the working capital facilities availed from consortium banks, turned irregular and resultantly were declared as NonPerforming Assets (NPA) along with starting recovery proceedings against the Corporate Debtor by consortium through State Bank of India, in the capacity as authorized lead lender of consortium. Notice under Section 13(2) of SARFAESI Act, 2002 was issued by the Bank for demanding outstanding debt of consortium amounting to Rs.128,45,69,581.34 along with giving reference therein of joint consortium Comp App (AT) (CH) (INS) No. 97 of 2021 Page | 3 security documents executed jointly with the consortium by the Corporate Debtor and guarantors along with mentioning wrong date of NonPerforming Assets (NPA) as 27112018, instead of correct date of NONPERFORMING ASSETS (NPA