Delhi District Court
Smt. Sadhna Sacdeva vs Allahabad Bank on 26 November, 2011
IN THE COURT OF SH. GAUTAM MANAN,
INSOLVENCY JUDGE (Central): DELHI.
Insolvency Case No. 07/2002
Id. No. 02401C0480632002
Smt. Sadhna Sacdeva,
(for self & also as proprietor of M/s. Tulips)
w/o Sh. Pavan Sachdeva,
35B, Pocket FG1,
blockF, Vikaspuri,
New Delhi110018
.........Petitioner/Debtor
V E R S U S
1 Allahabad Bank
2, Netaji Subhash Road,
Calcutta 700 001
2 Canara Bank
112, J.C.Road,
Bangalore560 002 (Karnataka)
3 Industrial Development Bank of India
IDBI Tower, Cuffe Parade,
Mumbai 400 006
4 Bank of Madura Ltd.
758, Anna Salai,
Chennai 600 002
5 Industrial Finance Corporation of India Ltd.
IFCI Tower, 61, Nehru Place,
New Delhi - 110 119
6 UTI Bank ltd.
Maker Tower "F",
13th floor,
Cuffe Parade, Colaba,
Mumbai 400 005
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7 State Bank of Indore,
yaswant Niwas road,
indore - 452 003
8 State Bank of Travancore
New Administrative Complex,
Puzhapura,
Trivandrum - 695 012
9 Oriental Bank of Commerce
Harsha Bhawan, 'E' Block,
Connaught Circus,
New Delhi 110 001
10 Bank of Baroda
3, Walchand Hirachand Marg,
Ballard Estate,
Mumbai - 400 038
11 State Bank of Patiala,
The Mall,
Patiala 147001
12 Global Trust Bank Ltd.
303483,Sardar Patel Road,
Secunderabad 500 003
13 Tourisum Finance Corporation of India Ltd.
IFCI Tower,Nehru Place,
New Delhi 110 19
14 PNB Asset Management Co. Ltd.,
Jeevan Bharti Building,
TowerII, Level3,
Connaught Circus,
New Delhi110 001.
15 M/s MS Shoes East Ltd.,
35B, Pocket FG1,
BlockF, Vikaspuri,
New Delhi 100 018
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PETITION UNDER SECTION 7 AND 10,11, AND 29 OF THE
PROVINCIAL INSOLVENCY ACT. 1920 FOR ADJUDICATING
THE PETITIONER AS INSOLVENT.
J U D G M E N T
1 This is a petition under Sections 7 and 10,11 and 29 of the Provincial Insolvency Act, preferred by petitioner to declare her as insolvent. The case of the petitioner is that she is Sole proprietor of the firm M/s. Tulips, and was carrying on business of import and Export under the said name and style of 'Tulips' till the end of 1995, thereafter the said firm was closed.
2. The petitioner's firm had under normal business transactions availed of financial assistance from respondent No. 11 and 12 and also during the course of export business got bank sanctioned limits for (i) discounted the export bills wherein Global Trust Bank ltd. had discounted the export bills invoiced to Schon Fab collection from time to time till November, 1995 under the insurance cover of ECGC and personal guarantee of Smt. Sadhna Sachdeva and (ii) packing credit etc. granted by State Bank of Patiala from time to time till November, 1994 under the insurance Cover of ECGC and personal guarantee of Smt. Sadhna Sachdeva. :3: Insolvency No.7/2002
3. The petitioner being a director stood as guarantor to Banks against credit facilities given to the companies/firms annexed in the list of documents. The petitioner is the owner of 3422853 equity shares of MS. Shoes East ltd. which she pledged with respondent nos. 3,5,13 & 14 as she stood guarantor against the loans given to MS. Shoes East ltd. detailed as under: No. of Shares Pledged with 2465353 Industrial Development Bank of India 241500 Industrial Finance Corpn. Of India Ltd. 546000 Tourisum Finance Corpn. Of India Ltd.
170000 PNB Asset Management Co. Ltd.
3422853 TOTAL
4. It is stated that the respondent nos. 1 to 13 had filed Recovery proceedings before the Debt Recovery Tribunal (DRT), Rajindra Place, New Delhi & respondent No. 14 had filed a civil suit against the petitioner. The decree was passed by DRT had been passed in favour of Allahabad Bank & Canara Bank and the others suits are pending decision before DRT/Court. The petitioner's firm "Tulips" discounted the bills to the tune of Rs. 5,35,81,986.00 with Global Trust Bank ltd. Vide their various invoices under Bills of Exchange, during the :4: Insolvency No.7/2002 period 1995, which were accepted by the overseas customer for payment on due dates and State Bank of Patiala granting packing credit etc. under ECGC cover. The petitioner had very good experience with the overseas customer, M/s Schon Fab collection and had done business of Rs. 44.78 crores during 19931994 and 19941995 when the payments of the overseas customer were regular. The overseas customer, M/s Schon Fab collection, being unable to pay due to their other prospective customer, who suffered bankruptcy/insolvency proceedings and the petition had proceeded with the Bankruptcy court in Germany where an official liquidator was appointed by the German Court & the last order of German Court distributed the claim raised by the petitioners and Global Trust Bank ltd. and State Bank of Patiala in which no amount has been awarded.
5. The petitioner had also given the loans, from time to time, during the period 19931995 to Direct Finance & Investment ltd. amounting to Rs. 86.60 Crore but the said company M/s Direct Finance & Investment ltd. had also gone in liquidation/bankrupt. The amount payable to the creditors of petitioner as mentioned in list attached amounts to Rs. 74.61 Crores due to respondent nos. 11,12 & 15 as against Debts of :5: Insolvency No.7/2002 Rs. 94.74 Crores. For others respondents the petitioner was only a guarantor being a director of various companies/firm to whom these respondents had granted loans wherein the petitioner had also pledged its own shares to respondents nos. 3,5,13 & 14.
6. The petitioner was only a guarantor in her individual capacity to all the respondents. The petitioner has averred that she has no property at all not has capacity to pay the debts which are more than Rs. 500/ hence she be declared insolvent. The petitioner has annexed the list of her assets as Annexure B with the petition.
7. The respondents No. 2,3,4,5,7,8,9,10,11,12,13,14 & 15 in the written statement have stated that present petition has been filed with malafide intent to defraud the creditors and to drive advantage where none can exist. Present petition deserves to be dismissed on the ground that the same is an abuse of the process of law. The petitioner has further failed to show prima facie ground and prima facie proof and/or to satisfactorily show that she is unable to pay her debts. :6: Insolvency No.7/2002
8. The petition was admitted vide orders dated 28/02/2002. The following issues were framed on 31/10/2002: ISSUES 1 Whether petitioner has not come to the court with clean hands? O.P.R. 2 Whether the petitioner is liable to be adjudged as an insolvent? O.P.P. 3 Relief.
9. The petitioner in an order to prove her case has examined herself as PW1. Petitioner tendered her examination in chief by way of an affidavit. The petitioners proved the certified copy of the orders dated 13.01.1998, 22.11.2000 and 10.12.2001 passed by Debt Recovery Tribunal in the original application filed by the Allahabad Bank, Canara Bank and IDBI as exhibit PW 1/A, B & C. The petitioner proved the copy of order dated 1.03.2002 passed DRT in original application filed by Oriental Bank of Commerce as exhibit PW 1/D. The petitioner deposed on the lines of her petition.The petitioner deposed said that she has to receive a sum of Rs. 86.60 crores from M/s Direct Finance and Investment Ltd. but the said amount is not recoverable as the Managing Director of the said Company is absconding and she has already file a criminal :7: Insolvency No.7/2002 complaint the said company. The petitioner deposed that she has also to receive a sum of Rs. 8.14 crores from M/s Schon Fab Collection but the said firm has become bankrupt. It has been deposed that petitioner is liable to pay that other liabilities for more than Rs. 500 which she unable to met and as such she is entitled to be adjudged as in solvent.
10. The petitioner was crossexamined at length by the Counsel for respondent No. 4, 7 ,9,10,11and 14. During her cross examination the petitioner maintained that she had no source to pay the outstanding loan.
11. The respondent No. 10, Bank of Baroda examined Shri Ramesh Kumar, Senior Branch Manager of the Company who tendered his examination in chief by way of an affidavit which is Ex R - 10. In his testimony the R10 W 1 deposed that petitioner stood guarantor for the repayment of facilities granted by their Bank to M/s International to the extent of Rs. 1320 lacs. The witness deposed that the petitioner did not file any detail or document pertaining to the Income Tax and during the inquiries, it has been revealed for the petitioner is :8: Insolvency No.7/2002 having 4 other properties. However, during his cross examination the R10 W 1 deposed that he had no personal knowledge regarding of properties mentioning by him in para - 5 of his affidavit. The witness did not produce any document on record in order to sustain his allegations that the petitioner is owning the 4 properties.
12. The respondent No. 3 IDBI examined S. Bala Subramanium, Deputy General Manager as R 3 W 1 and this witness also tendered his examination in chief by way of an affidavit. This witness deposed that the petitioner has failed to make the payment of the outstanding dues to their Bank of more than Rs. 8 Crores. However, this witness did not produce any document on record.
13. The respondent No. 4 examined Shri G.C. Jagadeesan, Chief Manager of Bank of Madura Ltd. (ICICI Bank) who deposed in his affidavit that the petitioner has stood guarantor for loan of Rs. 6 crores given by the respondent Bank to MS Shoes East Ltd. in her personal capacity and the Bank has instituted proceedings before the DRT for recovery. :9: Insolvency No.7/2002
14. The Oriental Bank of Commerce examined Senior Manager Sh. Chacko Epan who tendered his affidavit by way of an affidavit. The witness deposed that the petitioner executed an agreement of guarantee for the loan facilities granted to M/s Euro Exports and the liability of the petitioner is co extensive and continuous. This witness deposed that the petitioner has although deposed that she gave loan of Rs. 86.6 crores and Rs. 8.14 crores to M/s Director Finance and Investment Ltd and M/s Schon Ltd. but this is a sham transaction to diverge the funds and the petitioner did not take any steps to recover the loans from the said Companies. The witness deposed that they already instituted original application against the petitioner for recovery of the amount.
15. The respondent No. 13, Tourism Finance Corporation of India Ltd. examined RN Jha Manager of the company who deposed that on the request of MS Shoes East Ltd. they advanced loan of Rs. 1700 lacs to the said Company and the petitioner vide agreement dated 6.09.1994 pledged 5,46,000 equity shares and the petitioner failed to make the payment of dues and in this regard, they have already instituted an original application for the recovery of the :10: Insolvency No.7/2002 outstanding amount.
16. I have heard the arguments and have also perused the record and the evidence led therein. The issue wise findings are as under:
Issue no.2: Whether the petitioner is entitled to be adjudged as insolvent?
17. For a petitionerdebtor to succeed to his petition, she has to satisfy the conditions laid down in Section 10 of the Provincial insolvency Act. Which are as under: (1) She is unable to pay his debts; and (2) Her debts amount to Rs. 500/ or more or (3) She is under arrest or imprisonment in (4) If an order of abatement in execution of such a decree has made and is subsisting against his property.
18. The scope of Section 10 was considered in "K.R.K.K. Krishnappa Chettiar Vs. V.V.R. Kasivishwanathan Chettiar & Ors." AIR 1966 Madras 331 wherein it was held that for adjudicating a debtor as insolvent, the court must see whether there is compliance of provisions of Section 10 of the :11: Insolvency No.7/2002 Provincial Insolvency Act. 1920. When all the conditions specified in Section 10 are satisfied, the debtor is entitled to an order of adjudication. The matter does not depend on the discretion of the Court, but it is a statutory right of which he cannot be deprived by the court on the ground of abuse of process. At the time of the initiation of the proceedings, the court has only to be satisfied that the essential conditions for adjudication as provided under the Act are present. There is a stage at which the court can visit on the petitioner its due consequences of misconduct, i.e. When the application for discharge comes before the Court. The same view has been taken in "A.K. Kaimal Vs. Sudersen Trading Co. Ltd. Mysore & Anr." AIR 1976 Knt 203.
19. Similarly, in "Karnakam V Jayaseelam Chettiar & Ors."AIR 1977 Madras 250, it was held that when the petition for being adjudged an insolvent is made by a debtor, the Court has under Proviso to Section 24(1) (a) of the Provincial insolvency Act. 1920 to be satisfied, prima facie, that the petitioner is unable to pay his debts and on being so satisfied, it is not bound to hear any further evidence on the opulence or the ability of the petitioner to pay his debts. It was further observed that the provisions of provincial Insolvency Act 1920 :12: Insolvency No.7/2002 do not enable the Court to dismiss the petition for insolvency on superficial enquiry to come to a conclusion that the petition is not a bona fide one and if any such situation arises, the stage at which the court can visit the petitioner for any alleged consequences of any misconduct of the debtor of which the debtor applies for discharge and not at the initial stage when an application under the Act. is made by a debtor himself to be adjudged an insolvent. If such an enquiry was contemplated, the Act. should have specifically provided for it. The reasons for this appear to be obvious as the Official Receiver who comes into picture after adjudication and who represents the body of creditors, would necessarily investigate into the question for the benefit of the creditors and if any assets have been screened by the debtors, he would bring the same into the pool for purpose of division of the same amongst the body of creditors. The verdict of Hon'ble High Court of Madras in "K.Krishnan Vs. Ayyathurai & Ors." AIR 1979 Madras 82 is also to the effect that the debtor must satisfy the Court, prima facie, about his inability to pay his debts and it is not necessary for the Court to go into further details as to he bonafides of the claims of the petitioner. Similar are the observations made in "Pathuri Dharma Rao Vs. Vatluru Cooperative Bank & Ors." AIR 1978 AP 4197.
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20. From the testimony of the petitioner, it is clearly established that there exists debts of more than Rs. 500/ against the petitioner and she does not have assets to meet her liability. As per Section 6 Clause (1) SubClause (f) of the provincial Insolvency Act, a debtor commits an act of insolvency if she petitions to be adjudged an insolvent. Thus, the petitioner has proved all the requirements U/S 10 of the Provincial Insolvency Act to be adjudged as insolvent. The issue is decided in favour of the petitioner.
21. R E L I E F : In view of the findings on issue No. 2, the petitioner is declared insolvent in terms of Section 27 Clause (1) of Provincial Insolvency Act. 1920 and she is directed to apply for discharge within a period of two years from the date of this Order. In terms of Section 28 Clause (2) of Provincial Insolvency act, the whole of the properties of the insolvent shall now vest in the Official Receiver Sh. Rajender Arya, attached to this court and shall be divided amongst the Creditors in terms of the provisions of the Provincial Insolvency Act. The Official Receiver shall take necessary steps as per the provisions of Insolvency Act and the rules framed thereunder and shall submit his report by 8th March 2012. The petitioner :14: Insolvency No.7/2002 shall appear before the official receiver on 19/01/2012. In terms of Section 30 of the Provincial Insolvency Act. Notice of the Order of adjudication stating the name, address and description of insolvent, the date of adjudication, the period within which the debtors shall apply for discharge and the Court by which adjudication is made shall be published in Official Gazette Notification, and in the "Mahamedha" and "Virat Vaibhav" daily newspaper at the expenses of the petitioner.
The file be now put up on 08/03/2012.
The copy of this order be also sent to the Official Receiver for compliance.
Announced in open Court on 26th November, 2011.
GAUTAM MANAN
INSOLVENCY JUDGE
(CENTRAL)DELHI
:15: Insolvency No.7/2002
Insolvency No.7/2002
Sadhna Sachdeva Vs. Allahabad Bank
26/11/2011
Present: None
Vide separate judgment,the petitioner is declared insolvent in terms of Section 27 Clause (1) of Provincial Insolvency Act. 1920 and she is directed to apply for discharge within a period of two years from the date of this Order. In terms of Section 28 Clause (2) of Provincial Insolvency act, the whole of the properties of the insolvent shall now vest in the Official Receiver Sh. Rajender Arya, attached to this court and shall be divided amongst the Creditors in terms of the provisions of the Provincial Insolvency Act. The Official Receiver shall take necessary steps as per the provisions of Insolvency Act and the rules framed thereunder and shall submit his report by 8th March 2012. The petitioner shall appear before the official receiver on 19/01/2012. In terms of Section 30 of the Provincial Insolvency Act. Notice of the Order of adjudication stating the name, address and description of insolvent, the date of adjudication, the period within which the debtors shall apply for discharge and the Court by which adjudication is made shall be published in Official Gazette Notification, and in the "Mahamedha" and "Virat Vaibhav"
daily newspaper at the expenses of the petitioner.
The file be now put up on 08/03/2012. The copy of this order be also sent to the Official Receiver for compliance.
GAUTAM MANAN INSOLVENCY JUDGE (CENTRAL)DELHI/26.11.2011 :16: Insolvency No.7/2002