Delhi District Court
Smt Krishna Sachdeva vs Canara Bank on 26 November, 2011
IN THE COURT OF SH. GAUTAM MANAN
INSOLVENCY JUDGE (Central): DELHI.
Insolvency Case No. 08/2002
Smt Krishna Sachdeva,
(for self & also as proprietor of M/s. Euro Exports)
w/o Late Sh. Madan Lal Sachdeva,
35B, Pocket FG1,
BlockF, Vikaspuri,
New Delhi110018 .........Petitioner/Debtor
V E R S U S
1 Canara Bank
112, J.C. Road,
Bangalore560 002 (Karnataka)
2 Industrial Development Bank of India
IDBI Tower, Cuffe Parade,
Mumbai 400 006
3 Bank of Madura Ltd.
758, Anna Salai,
Chennai 600 002
4 Industrial Finance Corporation of India Ltd.
IFCI Tower, 61, Nehru Place,
New Delhi - 110 119
5 UTI Bank ltd.
Maker Tower "F",
13th floor, Cuffe Parade, Colaba,
Mumbai 400 005
6 State Bank of Indore,
Yaswant Niwas Road,
indore - 452 003
7 State Bank of Travancore
New Administrative Complex,
Puzhapura, Trivandrum - 695 012
:1: Insolvency No.08/2002
8 Oriental Bank of Commerce
Harsha Bhawan, 'E' Block,
Connaught Circus, New Delhi 110 001
9 Global Trust Bank Ltd.
303483,Sardar Patel Road,
Secunderabad 500 003
10 M/s MS Shoes East Ltd.,
35B, Pocket FG1,
BlockF, Vikaspuri,
New Delhi 100 018 ......Respondent/Creditors
PETITION UNDER SECTION 7, 10, 11 & 29 OF THE
PROVINCIAL INSOLVENCY ACT. 1920 FOR ADJUDICATING
THE PETITIONER AS INSOLVENT.
INSTITUTION OF PETITION : 07.02.2002
ORDER RESERVED ON : 03.11.2011
JUDGMENT PRONOUNCED ON : 26.11.2011
J U D G M E N T
1. The petitioner has preferred the present petition under Section 7, 10, 11 & 29 of the Provincial Insolvency Act, 1920 for adjudicating the petitioner as insolvent on avernments that she was the sole proprietor of firm M/s. Euro Exports till end of 1995. Thereafter, the said firm was closed. The petitioner had a normal business transactions and availed financial assistance from respondents no.8 & 9 and also during course of export business got sanction limits for discounting of export bills from respondents no.8 & 9.
:2: Insolvency No.08/2002
2. The petitioner being director also stood as guarantor to bank against the credit facilities given to the firm and is stated to be owner of 1321406 shares of M/s. MS Shoes East Ltd. and she stood as guarantor against loan given to M/s. M S Shoes East Ltd.
3. It is stated that respondents no.1 to 9 have filed the recovery proceedings before the Debts Recovery Tribunal (DRT) and an Order dated 22.11.2000 was passed in favour of the respondent no.1. The respondents no.8&9 had also filed recovery proceedings before DRT for Rs.7,46,26,258.00 and Rs. 1,52,56,869.00 respectively and the same are pending disposal.
4. It is stated that the petitioner discounted the bills to the tune of Rs.7,46,26,258.00 with Global Trust Bank Ltd and Rs.1,31,34,339.00 with Oriental Bank of Commerce vide their various invoices under bills of exchange, during the period 1995, which were accepted by the overseas customer for payment on due dates.
:3: Insolvency No.08/2002
5. The petitioner had very good experience with the overseas customers and had done business of Rs.54.21 Crores during year 1993 to 1995 with M/s. Schon Fab Collection but the said firm suffered bankruptcy proceedings and the petitioner had proceeded with the Bankruptcy Court in Germany where official liquidators was appointed by the German Court and the last order of German Court distributed the claim raised by the petitioner and Global Trust Bank Ltd. but no amount was awarded.
6. It is stated that since the bank of the petitioner did not sanction requisite limits of import, the petitioner arranged the import letter of Credit from M/s. Adani Export Ltd and paid an amount of Rs.4,55,92,860 to Gujarat Small Industries Corporation through M/s. Adani Export Ltd by the said firm did not render the delivery of the goods to the petitioner and as such the petitioner has filed a suit before Hon'ble High Court of Delhi and also a Criminal Complaint against M/s. Adani Export Ltd, who is liable to pay the duty amount of Rs.3 Crores & 06 Lacs on the goods retained by them. It is stated that M/s. Adani Export Ltd did not deliver the goods in spite of complete payment made by the petitioner.
:4: Insolvency No.08/2002
7. The petitioner had also given a loan to Direct Finance & Investment Ltd amounting to Rs.21.81 Crore but the said company has also gone into liquidation and official liquidator has already been appointed by the Hon'ble High Court of Delhi.
8. It has also stated that the petitioner's firm had a factory shed at the tenanted premises and the stock lying at the said place were disposed off in a recovery proceedings. The petitioner had also pledged 10,000 Bonds of State Bank of India of Rs.1,000/ each aggregated Rs.1 Crore in the name of petitioner's firm with Global Trust Bank Ltd as security for the bill discounting facility granted to the petitioner but these bonds have been wrongfully got transferred in the name of respondent no.1 without any Court direction. The petitioner had two fix deposits accounts at Oriental Bank of Commerce but the said fix deposits have not been further renewed by the bank and the Canara Bank has also wrongfully detained an amount of Rs.4,50,220.62 lying in Saving Bank Account against the liability of the M/s M S Shoes East Ltd. It is stated that amount payable to the creditors as per the list of amount :5: Insolvency No.08/2002 of Rs.13.80 Crores due to respondents no.8 to 10 as against debts of Rs.38.92 Crores . It is stated that on account of genuine failure of the petitioner, she has become heavily indebted and no tangible assets and in no position to pay her debts as such she be declared as insolvent.
9. The respondent no.1 in the written statement stated that the petitioner has filed a false petition rather she is maintaining a rich lifestyle and is owning expensive cars and is living in a large house. It is stated that the petitioner is utilized public money and acquired assets in crores of rupees and the creditors of the petitioner cannot be denied their rights to recover their dues from the petitioner.
10. 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 grounds and proof and/or to satisfactorily show that she is unable to pay her debts.
:6: Insolvency No.08/2002
11. 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? OPR.
2 Whether the petitioner is liable to be adjudged as an insolvent? OPP 3 Relief.
12. The respondents no. 5 & 10 were proceeded ex parte and the matter between petitioner and the respondent no.4 is stated to be settled.
13. The petitioner in an order to prove her case has examined herself as PW 1. Petitioner tendered her examination in chief by way of an affidavit. The petitioner 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 Ex PW 1/A,B & C. The petitioner proved the copy of order dated 1.03.2002 passed by DRT in original application filed by Oriental Bank of Commerce as Ex PW 1/D. The petitioner :7: Insolvency No.08/2002 deposed on the lines of her petition. She deposed that she has further to pay more than 65 crore to respondent No. 15. 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 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.
14. 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.
15. The respondent No. 10, Bank of Baroda examined Shri Ramesh Kumar, Senior Branch Manage of the Company as R10 W 1 who tendered his examination in chief by way of an affidavit which is Ex R10. In his testimony the R10 W 1 deposed that petitioner stood guarantor for the repayment of :8: Insolvency No.08/2002 facilities granted by their Bank to M/s International to the extend 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 having 4 other properties. However, during his crossexamination the R10 W 1 deposed that he had no personal knowledge regarding of properties mentioned in para5 of his affidavit regarding his allegations that the petitioner is owning the 4 properties.
16. The respondent No. 3 IDBI examined S. Balasubramanium, 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.
17. The respondent No. 4 examined Shri G.C. Jagadeesan, Chief Manager of Bank of Madura Ltd. ( ICICI Bank) and deposed in his affidavit that the petitioner has stood guarantor for loan of Rs. 6 Crore sanctioned and disbursed to the respondent Bank to M/s Shoes East Ltd. in her personal :9: Insolvency No.08/2002 capacity and the Bank has instituted proceedings before the DRT for recovery of more than Rs. 6 Crore against the petitioner.
18. The Oriental Bank of Commerce , respondent no.8, 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 testified 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 complete divergent to funds and the petitioner did not take any steps to recover the loans for the said Companies. The witness deposed that they already instituted original application against the petitioner.
19. 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 :10: Insolvency No.08/2002 5,46,000 equity shares of the said company but the company and the petitioner filed to make the payment of dues and in this record, they have already be instituted an original application for the recovery of the outstanding amount.
20. No other respondent led it's evidence.
21. Issue no.1 :Whether petitioner has not come to the court with clean hands? O.P.R. The onus to prove this issue is on the respondents but there no documents have been filed on behalf of the respondents in order to prove this issue. There is nothing on record to suggest that the petitioner has approached the Court with un clean hands. Accordingly, the issue stands decided against the respondents.
22. Issue no.2: Whether the petitioner is entitled to be adjudged as insolvent? For petitionerdebtor to succeed to her 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 :11: Insolvency No.08/2002 (4) If an order of abatement in execution of such a decree has made and is subsisting against his property.
23. 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 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.
:12: Insolvency No.08/2002
24. 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 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 :13: Insolvency No.08/2002 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.
25. From the testimony of the petitioner and also of the respondents, 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.
26. 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 :14: Insolvency No.08/2002 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
:15: Insolvency No.08/2002
Insolvency No.8/2002
Krishna 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 :16: Insolvency No.08/2002 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 :17: Insolvency No.08/2002