MANU/ND/8999/2019

IN THE NATIONAL COMPANY LAW TRIBUNAL

KOLKATA BENCH
CP(IB)No. 1214/KB/2018
Decided On: 28.06.2019
Appellants: State Bank of India
Vs.
Respondent: Rohit Ferro Tech Limited
Hon'ble Judges/Coram:
M.B. Gosavi, Member (J)
Counsels:
For Appellant/Petitioner/Plaintiff: Joy Saha, Sr. Advocate, Siddhartha Datta, Suhani
Dwivedi, Deepanjan Dutta Roy, Advocates
For Respondents/Defendant: S.K. Kapur, Sr. Advocate, Manju Bhuteria, Debargha
Basu and Tridib Bose, Advocates
ORDER
M.B. Gosavi, Member (J)
State Bank of India - the Financial Creditor filed this application under section 7 of
the Insolvency & Bankruptcy Code, 2016 (in short, I&B Code) against Rohit Ferro
Tech Limited- Corporate Debtor to start Corporate Insolvency Resolution Process (in
short, "CIRP") of the Corporate Debtor as the Corporate Debtor allegedly committed
default in paying the financial debt of Rs.1792,12,74,701/-.
2. The following facts are not in dispute:
2.1 Under various loan agreement credit facilities, SBI granted and disbursed
loan to the corporate debtor. The Corporate Debtor did not repay the loan as
agreed and committed default in paying the sum. Its account became NPA. At
the end of July, 2018, sum of Rs.1792,12,74,701/- is set to be due against
the corporate debtor. Since the corporate debtor committed default in paying
the debt. This application is filed to start CIRP of the corporate debtor.
2.2. Notice of this application is duly served. The corporate debtor appeared
through one Mr. Samir Mukherjee, Manager(Legal). He filed affidavit-in-
reply. Corporate Debtor challenged this proceeding on four grounds:
(i) Mr. Bishwatosh Misra, Assistant General Manager Head Office, SBI
is not properly authorised to initiate this proceeding under section 7
of I&B Code, 2016.
(ii) This proceeding is filed on the basis of Reserve Bank of India's
circular dated 12.02.2018. Hon'ble Supreme Court in case of Dharani
Sugars and Chemicals Ltd.-vs- Union of India & Ors. held the circular
to be bad in law and declared that proceedings under I&B Code on
the basis of that circular are non-est. They are to be disposed off.

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 (iii) Winding up petition of the corporate debtor is filed in the
Hon'ble High Court and hence this parallel proceeding cannot be
entertained.
(iv) Financial Creditor did not produce certificate of default issued by
Information Utility.
3 . I heard the Ld. Sr. Counsel, Mr. Joy Saha for the financial creditor, Ld. Sr.
Counsel, Mr. Kapur for the corporate debtor.
4. I have gone through the records and proceedings of this case and also perused the
judgement of the Hon'ble Apex Court in the case of Dharani Sugars and Chemicals
Ltd. (supra). At the outset, it is to be noted that the corporate debtor did not dispute
two materials facts:- (i) that there is a financial debt being payable by them to the
Financial Creditor more than sum of Rs.1 lakh and (ii) there is a default on their part
in paying the debt.
5. The proceeding was challenged on various grounds, which are as follows:
(a) Ld. Sr. Counsel, Mr. Kapur appearing for the corporate debtor submitted
that corporate debtor does not insist this authority to record the finding on
some of disputed facts, i.e., whether authorisation to file proceeding is
properly issued in favour of the Assistant General Manager?
(b) What is the effect of winding up petition? Pending and admitted against
the corporate debtor in the Hon'ble High Court and
(c) Information Utility certificate is not produced by the bank.
6. Ld. Sr. Counsel submitted that this proceeding is filed by the State Bank of India
on the basis of circular dated 12.02.2018 issued by the RBI. In case of Dharani
Sugars & Chemicals Ltd., the Hon'ble Apex Curt held that the said circular to be ultra
vires. Consequently, all actions taken under that circular including this proceeding
under I&B Code held to be bad in law and non est.
7. As against this, the Ld. Sr. Counsel, Mr. Joy Saha submitted that Corporate Debtor
did not really dispute that they are under default in paying huge sum of money
through bank towards repayment of their debt. The defences raised by the corporate
debtor are not all tenable under law and on facts. He pointed out that I&B Code is
self-contained Code. It allows financial creditor to produce alongwith the application
a certificate of default issued by information utility or any other evidence to prove the
default. In this case, voluminous evidence is produced by the bank to prove the
default. He further submitted that pendency of winding up petition against the
corporate debtor is no ground to reject the application because provisions of I&B
Code supersede other Act, as per section 238 of I&B Code. According to the Ld. Sr.
Counsel, Assistant General Manager is duly authorised by the bank to file this
proceeding. As far as RBI circular is concerned, Ld. Sr. Counsel submitted that the
bank has right to file proceeding independently.
8 . I considered the submissions of both Ld. Sr. Counsels. In fact, Ld. Sr. Counsel,
Mr. Kapur for the corporate debtor candidly submitted that he does not insist this
authority to give finding whether AGM was properly authorised to file this proceeding
or whether the proceeding is maintainable for winding up petition is pending against
the corporate debtor. His trace was on the point that this proceeding is not

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maintainable in view the Hon'ble Supreme Court Judgement in case of Dharani
Sugars & Chemicals Ltd. According to the Ld. Sr. Counsel, SBI filed this proceeding
on the basis of RBI circular dated 12.08.2018. The Circular declared to be ultra vires
and consequently all proceedings initiated on the basis of this circular held to be non
est.
9 . The real point in dispute appears to be whether SBI initiated this proceeding on
the basis of RBI circular dated 12.02.2018 or it is independent proceeding.
10. SBI, at their own, did not state anywhere in the application that proceeding is
initiated on the basis of and as per the guidelines issued by the RBI in its circular
dated 12.02.2018. But the corporate debtor produced on record SBI letter dated
23.08.2018 giving reference of corporate debtor's proposal of resolution of bad debt
dated 16.08.2018. While rejecting that proposal, SBI made it clear in para 6 of that
letter the following:
"6. Further, RFTL's financials do not support any restructuring and no request
of restructuring has come either from the company's side despite the
guidelines of RBI dated 12.02.2018 available in the public domain, we hold
the view that no restructuring of the account during the period after 1st
March, 2018 is possible. As such, in order to recover the public money
advanced to RFTL through proper resolution, we have to approach the NCLT
under section 7 of the IBC"
10.1 This letter clearly indicates that as the corporate debtor did not submit proper
proposal of restructuring of their debt, as per RBI circular dated 12.02.2018 the bank
has no option but to file this proceeding. It further appears from the record that in
fact the corporate debtor had submitted proposal of restructuring dated 20.09.2017
which was never considered by the bank.
11. It is clear from the bank's letter dated 23.08.2018 that this proceeding under
section 7 of I&B Code is initiated against the corporate debtor because there were
clear guidelines from the RBI and those contained in its circular dated 12.02.2018.
12. In case of Dharani Sugars & Chemicals Ltd.-vs- Union of India & Ors. [Transfer
Case (Civil) 66 of 2018], the Apex Court clearly held that, Tor these reasons also, the
impugned circular will have to be declared as ultra vires as a whole, and be declared
to be of no effect in law. Consequently, all actions taken under the said circular,
including actions by which the insolvency Code has been triggered must fall along
with the said circular. As a result, all cases in which debtors have been proceeded
against by financial creditors under section 7 of the Insolvency Code, only because of
the operation of the impugned circular will be proceedings which, being faulted at the
very inception, are declared to be non-est."
13. The Hon'ble Supreme Court held RBI circular dated 12.02.2018 to be bad in law
and ultra vires. The Apex Court also declared that all proceedings initiated on the
basis of that circular are bad in law and non est. As per the case at hand is
concerned, it is seen from the evidence on record that this proceeding is also initiated
by the bank against the corporate debtor on the basis of RBI Circular dated
12.02.2018. It is held to be not maintainable. I proceed to pass the following order.
ORDER
The application CP(IB) No.1214/KB/2018 is rejected. Proceeding is disposed off.

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Registry is hereby directed to communicate the order to the Financial Creditor and
Corporate Debtor by Speed Post and also by email.
Let the certified copy of the order be issued upon compliance with requisite
formalities
.
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