TaxTMI 
TaxTMI 
2017 (7) TMI 580
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....rned Senior Counsel Mr. Mihir Thakore, with learned Senior Counsels Mr. Saurabh Soparkar, and Mr. Mihir Joshi, with learned advocates Mr. Keyur Gandhi for M/s. Nanavati Associates, Mr. Mahesh Agrawal, Mr. Nisarg Desai, Mr. Raheel Patel and Mr. Shriraj Khambete for the petitioner on 7.7.2017 and 12.7.2017. 2. Heard learned Senior Counsel Mr. Darius Khambhatta, with learned advocates Mr. Amar N Bhatt, Mr.Rajendra Barot, Mr. Nishanth Shashidharan, and Mr. Vivek Shetty for the Respondent No. 1. 3. Heard learned Senior Counsel Mr. Ravi Kadam, with learned Senior Counsel Mr. Anshin Desai, with learned advocate Mr. Nirag Pathak, Mr. Ameya Gokhle, and Ms. Grishma Ahuja for M/s. Shardul Amarchand Mangaldas & Co., for the respondent No.2. 4. Heard learned Senior Counsel and Advocate General Mr. Kamal B. Trivedi, with learned Senior Counsel Mr. Rashesh Sanjanwala, with Mr. Sandeep Singhi with Mr. Siddharth Joshi for M/s. Singhi & Co. for the respondent No.3 opposing the petition on 12.7.2017 and 13.7.2017. 5. Heard learned Senior Counsels Mr. Mihir Thakore and Mr. Darius Khambhatta, in reply on 13.7.2017 & 14.7.2017. Perused the record including notes of submissions. 6. The pet....
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....within six months; Pass such other or further orders, as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case. 9. Since the main challenge in the petition is decision of June 13, 2017 in the form of press release by the RBI, it would be relevant to recollect its contents, as on 13.06.2017; because it has been modified/corrected on July 08, 2017; after the order dated 4.7.2017 by this Court, calling upon RBI to initially explain that what they mean by "Such cases will be accorded priority by the National Company Law Tribunal", which is a statement in such Press release, which reads thus: "Date : Jun 13, 2017 RBI identifies Accounts for Reference by Banks under the Insolvency and Bankruptcy Code (IBC) The Reserve Bank of India had issued a Press Release on May 22, 2017 outlining the steps taken and those on the anvil pursuant to the promulgation of the Banking Regulation (Amendment) Ordinance, 2017. The Press Release had mentioned inter alia that the RBI would be constituting a Committee comprised majorly of its independent Board Members to advise it in regard to the cases that may be considered for reference for resolution un....
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....ct of the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT)." This mean NCLT has to give priority to cases filed by the directives of RBI against the cases, which are filed by other creditors or petitioners before the NCLT. 11. Therefore, this Court has to call upon the RBI to explain their stand on returnable date 7.7.2017. However no explanation has come forward on record on 7.7.2017 but learned counsel for the RBI has admitted that there is mistake on the part of the RBI and seek apology and convey sorrow on behalf of RBI for such drafting, submitting that there is improper drafting but not the intention as is visualized from the para 5 of such press release dated 13.6.2017 and confirm that RBI will issue corrigendum to delete such line. In turn RBI has issued corrigendum on July 8, 2017 (page 942 with petition), and disclosed such fact on record by way of affidavit dated 13.7.2017 submitting that: "2. Respondent No.1 issued a corrigendum dated July 8, 2017 to its press release dated June 13, 2017 bearing No.2016-2017/3363 titled "RBI identifies Accounts for Reference by Banks under the Insolvency and Bankruptcy ....
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....of a document of RBI to publish such press release, Mr. Darius Khambhatta, learned Senior Counsel with Mr. Amar N. Bhatt, learned advocate appearing for respondent No.1 has placed on record (page No. 948) the stand of RBI that; "pursuant to the recommendations of the Internal Advisory Committee (IAC) (which held its meeting on June 12,2017), RBI took the decision which is contained in the Press Release dated June 13,2017 (Annexure A, Pg.30). There is no other document in which the decision to issue the press release has been recorded. There are subsequent specific directions issued to Banks, akin to the one issued by the RBI to SBI which is produced by the Petitioner at Page 947 of the Additional Affidavit dated July 14, 2017." Therefore, it becomes clear and certain that the Reserve Bank of India is under the impression that now when jurisdiction of matters pertaining to Company Law has been transferred to NCLT by enacting IBC, the NCLT has to follow their advice and directions. This is a serious issue because irrespective of factual details and merits against any borrower or any litigant, the basic Constitutional mandate is quite clear that the adjudicating authoritie....
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....the BR Act 1949, introduced through the Ordinance, and the notification issued thereafter by the Central Government empower RBI to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC). It also enables the Reserve Bank to issue directions with respect to stressed assets and specify one or more authorities or committees with such members as the Bank may appoint or approve for appointment to advise banking companies on resolution of stressed assets. 3. Immediately upon the promulgation of the Ordinance, the Reserve Bank issued a directive bringing the following changes to the existing regulations on dealing with stressed assets. i. It was clarified that a corrective action plan could include flexible restructuring, SDR and S4A. ii. With a view to facilitating decision making in the JLF, consent required for approval of a proposal was changed to 60 percent by value instead of 75 percent earlier, while keeping that by number at 50 percent. iii. Banks who were in the minority on the proposal approved by the JLF are required to eithe....
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....nk would be holding meetings in the near future with these stakeholders. 8. The Reserve Bank will issue further updates as may be deemed necessary at an appropriate time. Jose J. Kattoor Chief General Manager Press Release: 2016-2017/3138 On perusal of such press release dated 22.5.2017 makes it clear that in fact a decision is taken to change the percentage or value of Nonperforming Accounts (in short 'NPA') from 75% to 60% on or before 22.5.2017, but at the same time, it is surprising to note that RBI has conveyed the Banks that the Boards of Banks were advised to empower their executives to implement Joint Lenders' Forum (in short 'JLF') decisions without further reference to them. Therefore, it seems that the RBI wants Bank's officers to act upon the decision of JLF, and take steps for its implementation, without referring such decision to its own Board of Directors. It may be an administrative issue, but it speaks for itself. Similarly, there are some directions regarding restructuring so as to include flexible restructuring, including Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A). Since its reference is there....
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....equired to be struck down. Moreover, the direction is issued without considering the relevant factors viz. the restructuring was underway in case of the Petitioner and was at the stage of finalization as per existing mandatory circulars of RBI and considering the irrelevant factors viz the quantum of debt completely ignoring the stress faced by the steel industry as a whole in India. 2) On a true and correct interpretation of Section 35AA of BRA, the Central Government is required to authorize the Reserve Bank of India to issue directions to any banking company or companies to initiate insolvency resolution process in respect of a default, under the provisions of Insolvency and Bankruptcy Code. The above section therefore implies that in each case of default, the RBI will have to come to a subjective satisfaction based on objective facts to give such directions to the Banking Company and the Central Government cannot give general direction to the Banking Company to initiate insolvency proceedings in respect of various defaults. The RBI has not considered specific cases of defaults before issuing authorization and consequently their authorization, which is generic in nature....
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....: one, where, direction is given to commence resolution under IBC and other where resolution is to be finalized within 6 months. The Petitioner's case clearly is that a resolution process was underway and was being finalized by the JLF. The Petitioner could never have been classified in category falling under para 3 of the circular dated 13.06.2017 when as late as on 13.06.2017 itself, the JLF was considering the finer details of the proposal for restructuring the debt of the Petitioner. Classifying the petitioner in para 3 and not para 4 is clearly arbitrary, discriminatory and violative of Article 14 of the Constitution of India as the classification has no rational nexus to the object sought to be achieved viz. restructuring of debt. 4) The Petitioner further submits that the Petitioner's case is most eminently suited to be classified under para 4 as the resolution plan was under process. To classify the Petitioner in para 3 is to treat the Petitioner dissimilarly as compared to others who have been given 6 months time to finalize the resolution process. The Petitioner submits that there is no reasonable basis applied for classification into two classes. The only criter....
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....f the Board of Directors and hands over of management to Insolvency Resolution Professional (IRP). Such harsh consequences ought to be resorted to only when there is no other resolution or reconstruction of the Company is possible. In the present case, the facts clearly show that any reasonable person would come to a conclusion that the progress achieved by the Company including in particular repayment of Rs. 3500 Crores would show that the resolution process between the Banks and the Petitioner is eminently possible to be achieved. b) The Petitioner has its operations in six locations i.e., Hazira (Gujarat), Vishakamatnam (Andhra Pradesh), Kirundal (Chattisgarh), Paradeep (Odisha), Dabuna (Odisha) and Pune (Maharashtra). All the plants in these six locations spread over 5 states are operational. There are atleast 8 finished products being manufactured by the Petitioner. Such as HRC, plates, pipes, pellets, etc. These manufacturing units given direct employment to 4500 persons. Sudden change of management of these vast operations spread all over India from the Board of Directors to a single individual i.e., the Insolvency Resolution Professional is likely to disrupt the sm....
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....ce, atleast in the case of the Petitioner it ought to be categorised with other companies who have been given six month's time to have a restructuring proposal. In this regard, reliance is placed upon Union of India v. G Ganayutham (1997) 7 SCC 463. 6) The Petitioner further submits that Section 35AA and 35AB of BRA have been inserted to enable the Government of India to authorize Reserve Bank of India to give necessary directions in respect of specific default to initiate Insolvency Resolution Process. From the language of above two Sections, it is evident that unless a Directive is issued by Reserve Bank of India on a Bank, the Bank is not entitled to initiate Insolvency Resolution Process. It is evident that no Directive is issued to the Standard Chartered Bank to initiate Insolvency Resolution Process. This apart, if the Petitioner's contention is accepted that it should be classified in para 4, then there should be specific Directive by the Reserve Bank of India that the Banks should finalize the restructuring within six months. This Directive should equally apply to the Standard Chartered Bank and would be binding on it. It would be mandatory for the Standard Charted....
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.... on March 31, 2017, the Petitioner's account was in NPA to the extent of Rs. 32,864 crores; iii. the general position of NPAs country wide was drastic and required urgent action to be taken under the IBC; iv. on February 29, 2016, SBI had written to the Petitioner to declare its account NPA; v. even according to the Petitioner its outstanding were about Rs. 45,695 Crores as on September 30, 2016; and vi. the JLF restructuring of the Petitioner had proved ineffective and was nowhere near completion. 4) The directives of the RBI were thus, not on any "imaginary grounds" or "wishful thinking". - what in law, the Petitioner would have to establish to have them quashed (Bhikhubhai Patel v. State of Gujarat, (2008) 4 SCC 144 - Paragraph 24 - cited by the Petitioner). 5) The law as to permissible classification is well settled and the judgments cited by the Petitioners themselves lay down the following: a) classification must be founded on an intelligible differentia which distinguishes persons grouped together from others left out and that differentia must have a rational relation to the object sought to be achieved by the statute (Union....
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....ing the objective filter of companies where the banking exposure was more than Rs. 5000 Crores ("List B"); and d) to ensure that the identification process does not include companies who have only recently faced stress, the IAC identified the seasoned NPAs from List B, i.e., those companies which were classified as NPA to the extent of more than 60% as on March 31, 2016 until March 31, 2017 ("List C"). Though there is reference of List "A", "B" and "C" in written submissions, no such list is found on record. However facts are explained in above sub-paras. 7) Thus, contrary to the argument canvassed by the Petitioners, Respondent No.1 has not arbitrarily identified 12 companies for action under the IBC by the Press Release. The process adopted by the RBI for identifying the 12 entities was completely consistent with the object of making quickest recovery of substantial economic value. The RBI seeks to focus on the cases which have the twin criteria of being the largest and longest standing NPAs. Such classification is based on an intelligible differentia, i.e., both quantum (Rs.5000 Crores and 60% NPA) as well as length of outstanding (at least fifteen mon....
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....ly unjust or outrageous or directed to an unauthorized end" that a decision can be set aside as arbitrary and unreasonable. (Vinod Kumar v. State of Haryana (2013) 16 SCC - paragraph 25 - cited by the Petitioner) The RBI Press Release/Directives are just and required in the public interest, cannot by any stretch of the imagination be called outrageous and are directed towards the end authorized by Section 35AA and the Order. 14) The review by the Court is a secondary review and not a primary one (Union of India v. G. Ganayutham, (1997) 7 SCC 463 - paragraphs 27 and 31 - cited by the Petitioner). 15) It is the decision making process and not the decision that an Article 226 Court can review. (Vinod Kumar v. State of Haryana (2013) 16 SCC - paragraph 24 - cited by the Petitioner) 16) Petitioner's alternative relief - Priority for package; at paragraph 2 (l) of the Application, the Petitioner seeks the following: "In the alternative without prejudice to the aforesaid the Petitioner seeks a direction of this Hon'ble Court to the NCLT to consider at the first instance the revival package that has been under discussion with the banks before proceeding further w....
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.... of the largest and most crucial sectors in India. It involves heavy financial and economic stakes of not only the banks themselves but also industry and commerce in India as a whole apart from the public. Any interference with this process formulated by RBI will prejudice the very significant economic reform formulated by Parliament and the Government of India which was to bring value back in the system. It will also have wide ranging repercussions not only in economic and commercial terms but also for the public. The reliefs sought by the Petitioner will cause damage to public interest and have a long-term impact. These are significant factors to be taken into account whilst deciding interim relief. 16. The Learned counsel for Respondent No. 2 has submitted as under: 1) Writ Petition cannot lie restraining the Respondent No. 2- SBI from exercising its legitimate statutory right under Section- 7 of IBC. The IBC is a complete code, which has given a specific statutory right to the Respondent No. 2 (Financial Creditor) to initiate insolvency resolution process against the Petitioner (Corporate Debtor). In the instant case all three requirements of Section- 7 of ....
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....cturing proposal is false and contrary to the material on record. It is submitted that, the Petitioners have not approached this Hon'ble Court with clean hands and have suppressed vital information from this Hon'ble Court. It is the case of the Petitioners that, the Respondent No. 2 led JLF has accorded approval to the restructuring scheme. However, the record shows that no such approval has been granted by the JLF, till date. There are many open issues and critical conditions in relation to the restructuring proposal, which remain unresolved and pending the same, there cannot be any question of JLF even finalizing the proposal much less, granting "in-principle" or for that matter any approval per se to the restructuring scheme. It is further pertinent to note that,though there were series of written communications between the Petitioner and the Respondent No. 2 in respect of boundary conditions and pending issues pertaining to restructuring scheme dating, as far back as June 2016, till date,both the parties have not been able to resolve the pending issues. Moreover, the restructuring proposal/scheme was not as per Respondent No.1/RBI's guidelines/circulars pertaining to the restru....
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....anks through tagging till such time the process under NCLT mechanism is put in place." (Page-926 of Writ Petition ) 9) In fact, the presentation shows that, the Petitioners were aware and had no serious objection to the IRP being appointed."Concern on the resolution professional to be appointed - Request 3:We wish to also request the lenders to ensure that the role of the Resolution Professional (under the NCLT process) is proposed asunder:- (a) Allow the management team to continue to operate on day-to-day basis with checks and balances already in place so as to ensure continuity of operations in order to sustain value of the company. (b) Work in a cohesive manner with the Lenders and the Promoters/Company to draw up a suitable financial package, which is to be implemented in a time bound manner". (Page- 928 of Writ Petition) 10) In fact it is pertinent to note that the top management of the Petitioner including Mr. Prashant Ruia attended the said meeting on 22.06.2017 as its seen from the attendance sheet of the said meeting which is at Annexure -D to the Affidavit dated 13.07. 2017 filed by the Respondent No. 2 - SBI in the present proceedings....
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.... Respondent No. 2was filing an application before the NCLT against the Petitioners and IRP was likely to be appointed. The Petitioners herein, sought certain concession on tagging until the IRP was appointed. "We understand that SBI is filing the application in the NCLT for ESIL and IRP is likely to be appointed in the next couple of weeks. (Page-939 of Writ Petition) "We need your urgent and immediate assistance to waive the tagging with immediate effect until such time as the IRP is appointed. We understand that once the IRP is appointed, he would be deciding on the matters in consultation with the Committee of Creditors."( Page-939 of Writ Petition) 17) Thus, the Petitioners were aware that the insolvency proceedings were being initiated by the Respondent No. 2 and accepted and consented to the same. Having agreed and consented to the initiation of the proceedings under the IBC by the Respondent No. 2 and having noted and accepted that,the IRP would be appointed, the Petitioners are not entitled to turn around and object to the7 10same. It is submitted that by reason of having accepted the aforesaid proceedings unconditionally,the Petitioners are dis-entitled to challen....
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.... in managing the affairs of the corporate debtor. Therefore, it is submitted that, there is no vested right of management of the Company and any right to the management of the Company, is subject to law and liable to be exercised in accordance with law. 21) Prohibition cannot be issued against the judicial authority, a writ of prohibition against a judicial authority cannot be exercised unless the authority a. proceeds to act without or in excess of jurisdiction; b. proceeds to act in violation of the principles of natural justice; c. proceeds to act under law which is itself ultra vires or unconstitutional; d. proceeds to act in contravention of fundamental rights. 22) It is not the case of the Petitioners that, the Hon'ble NCLT has exceeded its jurisdiction. Moreover, the IBC specifically designates "NCLT" as the"Adjudicating Authority" for the purposes of the insolvency proceedings initiated under the provisions of the IBC. The Petitioners have nowhere in their Writ Petition, even alleged that the Hon'ble NCLT lacks the jurisdiction or is exceeding its jurisdiction in hearing the insolvency proceedings initiated against the P....
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....ndent No. 1. 3)Even otherwise, the Respondent No. 1 has not issued any directive to the Respondent No. 3 nor has Respondent No. 3 acted on the basis of any directive issued for filing proceedings against the Petitioner No. 1 under IBC. The same is evident from the following: i. Written Submissions of the Petitioner No. 1, the relevant extract of which reads as follows: "... It is evident that no Directive is issued to the Standard Chartered Bank to initiate Insolvency Resolution Process." [Page 26 of the Written Submissions of the Petitioner No. 1] ii. The directive dated 15.06.2017 (page 947)issued by the Respondent No. 1 to the Respondent No. 2, the relevant extract of which reads as follows: "In exercise of the powers conferred by the provisions of the Banking Regulation Act, 1949, and the Banking Regulation (Amendment) Ordinance, 2017, the Reserve Bank of India hereby directs State Bank of India to initiate insolvency resolution process, singly or jointly with other lenders, under the provisions of the Insolvency and Bankruptcy Code, 2016 in respect of the default committed by Essar Steel India Limited." In view of the aforesaid, it is clear ....
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.... Company to have a dialogue with Standard Chartered Bank to explore possibility of repaying the unsecured debt at a discount or issue CRPS on the same terms as per the Debt Restructuring proposal or such other measures which will resolve the matter amicably." [Page 102; at page 103/A of the captioned petition] v. Letter dated 09.06.2017 addressed by the Petitioner No. 1 to the Respondent No. 3, the relevant extract of which reads as follows: "a. JLF has been constituted by the Lenders to ESIL under the RBI Guidelines and SCB is not a Lender to ESIL under the RBI Guidelines." [Page 778; at page 779 of the captioned petition]. 5) In view of the aforesaid, it is evident that the Respondent No. 3 was never a part of any Joint Lenders Forum or in any discussions/process for restructuring the debts of the Petitioner No. 1. Therefore, the contention of the Petitioner No. 1 that it was in advance stage of negotiation with the lenders of the Petitioner No. 1 and any other contentions based thereupon do not apply to the Respondent No. 3. While the Petitioner No. 1 has claimed payment of Rs. 3467 Crores to its lenders since April 2016, no such payment has been made by the Pe....
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.... of the Respondent No. 1 or that the same was triggered in view of the directive of the Respondent No. 1. 7) The contention of the Petitioner No. 1 that a bank can initiate proceedings under the IBC only upon a direction under Section 35AA of the BR Act issued by the Respondent No. 1 cannot be sustained. Section 35AA of the BR Act is only an enabling provision under which the Respondent No. 1 can direct those banks to initiate insolvency proceedings who otherwise have not done so. The said section cannot be interpreted to mean that a financial creditor cannot otherwise initiate proceedings under the IBC independently. If such an interpretation is to be accepted, then the provisions of the IBC would be rendered otiose. This is further evident from the following provisions: i. Section 2 of the BR Act: "2. Application of other laws not barred. - The provisions of this Act shall be in addition to, and not, save as hereinafter expressly provided, in derogation of the Companies Act, 1956 (1 of 1956), and any other law for the time being in force." ii. Section 238 of the IBC: "238. Provisions of this Code to override other laws. - The provisions of this Code sha....
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....d to be dismissed qua the Respondent No. 3 with exemplary costs. 18. As against that, learned advocate for the petitioner has pointed out different provisions of the Code which is also relied upon by the respondents but their proposition are different inasmuch as, it is the case of the petitioner that pursuant to such provisions, the management of the company rests in the hands of the insolvency professional who may not be capable to run the company and, therefore, it would result into end of running company for no valid reason. 19. Whereas, learned Senior Counsel Mr. Darius Khambhatta for the RBI has submitted, relying upon different provisions of the Act being Sections 6 to 31 emphasizing that initiation of insolvency proceedings would not mean to declaring the company insolvent immediately but the Code provides for an elaborate mechanism to restructure the company but in a time bound frame which is 180 days with possibility of further extension for further 90 days only and, thereby, decision is to be arrived at within 270 days thatwhether restructuring is possible or not and if restructuring is not possible within such time frame, then and then, company is to be declared i....
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....be thrown out at threshold and summarily without entering into merits and for the same reasons, petitioner is neither entitled to any final relief nor any interim relief whatsoever. When I am already disposing this petition without granting any relief in favour of the petitioner, I do not wish to enter into such discussion on such issue except to make it clear that petition is not disposed of solely on such ground and to that extent let it be made clear that practically both the sides have their own perception in considering particular information in particular manner and, therefore, I do not think that there is any suppression of material facts which may ultimately mislead the Court in any manner whatsoever as apprehended by the respondents. It seems that the Press Release on 22.6.2017 is in confirmation of communication dated 5.5.2017 by RBI to all Scheduled Commercial Banks regarding large stressed assets resolution wherein in paragraph 5, all those issues were disclosed in Press Release dated 22.5.2017. Therefore, generally, it is to be believed that press release would always be issued after some internal documentation or correspondence and may not be based upon any oral decis....
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....e discussion on factual merits would otherwise prejudice the either side and, therefore, I have avoided to discuss the factual details to ascertain that whether there was actual necessity to initiate proceedings under the Code or not. Similar is the position so far as case of Bhikhubhai Vithalabhai Patel (Supra) is concerned. 28. With reference to Vinod Kumar (Supra), petitioner has submitted that if any power is exercised on the basis of facts which do not exist or which are patently erroneous or inadmissible purpose or on irrelevant grounds or without regard to relevant considerations or with gross unreasonableness, such exercise of power will stand vitiated. Thereby, if such decision is manifestly unjust or outrageous or directed to an unauthorized end, then, it can be quashed by the judicial authority but otherwise the scope of judicial review is limited and the Courts are not to go into the merits of the decision but are concerned with the decision making process only and, therefore, interference with the order of the administrative authority is not permissible in absence of irrational, unreasonable orimproper procedure. In view of such fact, thiscase will also not be helpf....
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.... Therefore, this petition is to be disposed of, with observation that mandate of Hon'ble Supreme Court is to be followed by the NCLT. 35.Petitioner is also relying upon the judgment dated 1.5.2017 in Company Appeal (AT) No.09 of 2017 between J.K. Jute Mills Co. Ltd. v. M/s. Surendra Trading Company by the National Company Law Tribunal, wherein, it has been held that after relying upon several judgments of Hon'ble Supreme Court that the word 'shall' used in IB Code is not mandatory but directory in nature subject to condition that for adjudicating the time schedule prescribed under the Code the adjudicating authority must record reasons, though the time is essence of the Code. Thereby, the appellate tribunal under the Code has relied upon the judgment of Hon'ble Supreme Court which confirms that a provision in a Statute which is procedural in nature, that places the word 'shall' may not be held to be mandatory if thereby no prejudice is caused. Similarly the view which is being taken by this Court is also endorsed by the appellate bench while directing the adjudicating authority to reject the application though it seems to be on technical ground but it confirms that the adjudicat....
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....ency proceedings would be a decision of the concerned person, who is entitled to file such application and, therefore, to that extent, it cannot be said either respondent No.2 or 3 can be restrained from filing such application in accordance with law. 2) It is undisputed fact that filing of such application itself cannot be questioned or that action cannot be quashed, but it goes without saying that such filing would not amount to admitting or allowing the petition for insolvency without offering reasonable opportunity to the company, which is requested to be taken into insolvency by any such person. Therefore, the adjudicating authority being NCLT herein, which is constituted in place of the Company Court, needs to decide on its own based upon factual details that whether the insolvency petition is required to be entertained as such or not. 3) For the purpose, adjudicating authority, certainly requires to extend hearing and reasonable opportunity to the company to explain that why such an application should not be entertained. In other words, filing of an application may not result into mechanical admission of application as seen and posed by RBI in impugned pres....
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....vise banking companies on resolution of stressedassets." 7) The bare reading of Section 35(AA) makes it clear that the RBI is authorised to issue directions to initiate insolvency resolution process in respect of a default, and explanation makes it clear that the default has the same meaning as assigned to it in Clause (12) of Section 3 of the Insolvency and Bankruptcy Code, which means non-payment of debt when whole or any part or installment of the amount of debt has become due and payable and is not repaid by the debtor or the corporate debtor as the case may be. Therefore, when it is undisputed fact that the petitioner company has not paid its debt to the tune of more than Rs. 32,000 Crores at the end of 31.3.2017 and when total debt is more than Rs. 45,000 Crores, it is clear and obvious that RBI is authorised to direct any banking company to initiate insolvency resolution process. 8) However, the petitioner has pressed and submitted that when Section 35(AB) provides for direction for resolution of stress assets and when process of restructuring is on-going with JLF since long, the decision of the RBI to initiate insolvency resolution process against the peti....
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....ts. However, none of such citation confirms that an administrative order requires hearing and reasons may be disclosed for such decision. It may be recollected here that if there is any representation against any company and if decision is taken based upon such feedback, then, probably authority needs to call upon the company to explain against such representation, but when RBI has categorically confirmed that their decision is based upon the advise received from their Internal Advisory Committee, and more particularly, when decision is to the effect that the companies which have outstanding debt with more than 60% non-performing accounts for more than a year beyond Rs. 5,000 Crores, the concerned Bank should initiate insolvency proceeding at the earliest. It cannot be said that there is classification of companies in any nature whatsoever. So far as identifying disclosure in paragraphs 3 and 4 of press release dated 13.6.2017 as classification is concerned, in fact there is no classification because in paragraph 4 also, it is stated that for rest of the companies against whom advise is issued for initiating insolvency resolution proceedings at the earliest, wherein petitioner No.1....
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....s as prayed in this petition. 12) However, before concluding the petition, one has to deal with the submission of the petitioner that considering the provisions of Insolvency and Bankruptcy Code, 2016, filing of petition would result into admitting the petition within 14 days being mandate of the NCLT under the Act, and it would result into drastic impact on the day to day functioning of the company and its process of restructuring the affairs of the company so as to survive. It is contended that on admission of the petition under Insolvency and Bankruptcy Code, 2016, if Interim Resolution Professionals are to be appointed mechanically, without considering the facts and circumstances and without offering an opportunity to finalise the restructuring plan, which is at the advance stage, and thereby, if control of the Board of Director is withdrawn, then, suppliers would not continue to supply raw-materials, which would result into closure of all units and thereby, retrenchment of 4500 employees' for no valid reasons, more particularly when company is functioning at its 80% capacity and doing well to cope-up with the competitive market against non-availability of gas (fuel) f....
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....rring the earlier press release dated May 22, 2017, and since in such press release there is reference of S4A - Scheme for Sustainable Structuring of Stressed Assets, which is also introduced on the same day i.e. 13.6.2017; it would be appropriate for RBI to see that benefit of all its schemes is equally offered and extended to all without any discrimination. It is quite clear and obvious that Court has to see that there is no arbitrariness or discrimination by State or its authorities. (C) It cannot be held that directions under reference is in nature of classification or such classification is irrational, unjust, arbitrary or discriminatory; but it would be appropriate for RBI to see that benefit of all its schemes is equally offered and extended to all without any discrimination. Therefore relief in terms of para 7(a) cannot be granted. (D) It cannot be held that Banking Company is not entitled to initiate insolvency proceedings without the directions of the RBI u/s 35AA of BRA. Therefore relief in terms of para 7(b) cannot be granted. (E) It cannot be held that directives of RBI under reference by impugned press release is binding upon SCB and therefo....