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TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 1441
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....ffice at Baroda House Mandvi, Baroda-390006, Gujarat and acting through its Corporate Financial Services at 1st Floor, Thirumala Estates Building, Himayathnagar, Hyderabad. It was incorporated as "The Bank of Baroda Limited" on 20th July, 1908, which was subsequently constituted as a corresponding new bank on commencement of the Banking Companies Act. (2) Originally, My Home Group through M/s. Maha Hotel Projects Private Limited, VBC Finance and Leasing Limited through Basil Infrastructure Projects Limited and EIH Limited formed a consortium (the "Companies Consortium"), so as to bid for the Development of a five-star hotel project over the land admeasuring Acres 04-33.7 (equivalent to 17,551 square metres) forming part of Survey No. 64 of Madhapur Village, Serilingampally Mandal, Ranga Reddy District, pursuant to their understanding under Memorandum of Understanding dated July 23, 2005. The Government of Andhra Pradesh through the Department of Youth Advancement Tourism and Culture ("Department of YATC") awarded, on leasehold basis for 33 years, land admeasuring Acres 04-33.7 (equivalent to 17, 551 square metres) forming part of Survey No. 64 of Madhapur Village, Serilingampally....
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....eration on the Project Land, instead of one hotel, they were desirous of establishing and operating, as part of the Project, two hotels and that the first would be branded "Trident" and the second would be branded "Oberoi" (both are hereinafter jointly referred to as the "Hotel Project"). Accordingly, a Royalty Agreement dated February 22, 2008 was executed by and between the Company and Oberoi Hotels Private Limited ("OHP") for use by the Company of the name "Oberoi". A Management Agreement incorporating Technical Assistance Services dated February 22, 2008 was also executed by and between E1H and the Company in connection with the setting up and operations of Oberoi, Hyderabad. (7) The Company has since submitted the "Revised Detailed Project Report" (DPR) on August 28, 2008 to the Department of YATC to seek its concurrence on the dual branding of the Hotel Project, the change in the Hotel Project cost, the change in shareholding pattern, assignment of role, responsibilities and rights of each entity in the Companies Consortium and investment in the Company directly or through Core (i.e., the holding company), and other related matters. The said DPR was approved by the Departme....
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....itions were issued by each of the banks. Thereafter, the Lenders Consortium executed a Facilities Agreement on September 02, 2009 sanctioning the credit facility of Rs. 350,00,00,000/~ (Rupees Three Hundred and Fifty Crores only), the Non-fund based facility of Rs. 70,00,00,000/- (Rupees Seventy Crores only) by way of the Letters of Credit (as Sub Limit to Term Loan Facility) and Rs. 35,00,00,000/- (Rupees Thirty-Five Crores only) by way of Bank Guarantees (hereinafter the "Term Loan-1"). (12) The Company, the Lenders Consortium and the Bank of Baroda entered into an escrow arrangement for routing the Loan disbursements made by the Lenders Consortium where after the Escrow account No. 25210200000052 was opened with Bank of Baroda, Corporate Financial services branch, Himayatnagar on February 12, 2009 and the loan facilities were disbursed through the said escrow account. Pursuant to the terms of the Letters of Sanction and the Facilities Agreement, the Company executed Deed of Hypothecation on February 02, 2009 on pari passu basis on all its movable and immovable assets both present and future (excluding current assets) (the "Principal DOH", which expression shall include all ame....
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....n of the Tower-I of the Hotel Project was achieved before the Term Loan-3 was sanctioned and disbursed as its expected Commercial Operation Date (COD) was in 2013. (14) Upon a revision in the cost of the Hotel Project from Rs. 827,96,00,000/~ (Rupees Eight Hundred Twenty-Seven Crores and Ninety-Six Lakhs only) to Rs. 1087,81,00,000 (Rupees One Thousand and Eighty-Seven Crores and Eighty-One Lakhs only), the Company had approached the aforementioned Lenders Consortium for grant of additional credit facilities. The Lenders Consortium sanctioned an amount of Rs. 155,00,00,000/-(Rupees One Hundred and Fifty-Five Crores only) the Non-fund based facility of Rs. 20,00,00,000/- (Rupees Twenty Crores only) by way of the Letters of Credit (as Sub Limit to Term Loans) under Second Additional Facilities Agreement executed on September 13, 2014 and separate Letters of Sanction with various terms and conditions contained therein (hereinafter the "Term Loan-3"). (15) The lender banks under the Lenders Consortium formed the Joint Lenders Forum (JLF) on January 24, 2015 as required under the provisions of the Reserve Bank of India Notification on Framework for Revitalizing Distressed Assets in ....
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....78,79,00,000/- (Rupees Six Hundred Seventy-Eight Crores and Seventy-Nine Lakhs Only) and Non- Fund Based facility of Rs. 50,00,00,000/- (Rupees Fifty Crores Only) provided by the Lenders Consortium under the Facilities Agreement and Additional Facilities Agreements. (20) To secure its performance under the Facilities Agreement and Additional Facilities Agreements the Company executed equitable mortgage of the Leasehold rights of the Project Land. Further the Lenders Consortium has secured a collateral security by way of Corporate Guarantee from the holding company i.e., M/s. Core Hotels Ventures Private Limited in favour of the Lenders. (21) The Company created first charge in favour of the Lenders Consortium on the Profits of the Company, after provision for taxation and dividends (if any). The Company created a second charge on all its present and future, movable and immovable assets relating to the Hotel Project in favour of the working capital lender i.e., Punjab and Sind bank. Further, the Company created second charge on its current assets created out of any working capital facilities (that may be availed by the Company) in favour of the Consortium of Lenders. (22) The ....
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.... Thereafter, the Company submitted fresh OTS proposal of Rs. 450,00,00,000/- (Rupees Four Hundred and Fifty Crores), the Lenders Consortium did not find it satisfactory, in the JLF Meeting held on August 17, 2017 since the said OTS was less than the earlier indicated OTS amount of Rs. 500,00,00,000/- (Rupees Five Hundred Crores); hence did not approve the same. (26) Subsequently, the Company submitted another OTS proposal of Rs. 475,00,00,000/- (Rupees Four Hundred and Seventy-Five Crores) with certain terms and condition, which taken up for consideration in the last JLF meeting held on September 27, 2017 called by Punjab National Bank, which is the 2nd highest lender and advised the Company for a revised OTS. However, Bank of Baroda ,the Lead Lender informed the JLF and the Company that Bank of Baroda is proceeding to prefer the proceedings under the provisions of the Insolvency and Bankruptcy Code, 2016 on the file of the National Company Law Tribunal and recommended that the resolution plan may be routed through the said process since the Company has not settled the Lenders dues for more than a year and is deemed to be not in a position to resolve the existing concerns in a ti....
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....e Hon'ble High court vide its orders dated December 21, 2017 dismissed the aforementioned writ with several findings including the one that the Petitioner by referring to circulars cannot restrict effective and efficacious statutory remedy or right of the Applicant Bank under the code. An Asset, including a debt or a leased asset, becomes non-performing when it ceases to generate income for the bank. The Respondent's account was classified as NPA as at 31-12-2015.A system of early recognition of a stressed account before their slippage to NPAs is " Special Mention Accounts". Special mention assets are not classified as NPAs thus, the guidelines relating to the SMAs are not applicable to the case on hand as the Respondent/ Corporate Debtor's Account has already been classified as NPA.The JLF may explore various options to resolve the stress in the account by using the Corrective Action Plans like "Rectification" to the loan account and "Restructuring" the account if both are not feasible, the JLF can choose to proceed with the third option of recovery. In the present case even after availing the CAP the Respondent/Corporate Debtor continued to Default. Hence the Applicant bank has c....
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....e Respondent's Hotel has become operational in the month of September, 2013 and it has acquired substantial recognition and reputation. The respondent has so far paid an amount of Rs. 350 crores to the lenders Banks. (3) In terms of the RBI guidelines, the consortium of Bankers formed the Joint Lender's Forum (JLF) on 24-05-2014, with a sole intention to speed up decisions when an asset (loan) of more Rs. 100 crores or more turns into a stressed assets. In compliance of the same, a JLF was formed by the Consortium of banks (i.e., financial creditor (BOB) and Dena Bank, Syndicate Bank, Corporation Bank, Punjab National Bank, The Jammu and Kashmir Bank, Punjab and Sind Bank and Bank of Maharashtra). As per the RBI guidelines, the JLF can come up with any plan which is best suited and feasible for reviving the Company/assets. (4) It is further submitted that in the said JLF meeting held on 15-03-2017 the following points came up for discussion: (a) Edelweiss presented the Comprehensive Debt Resolution as circulated to the Consortium Lenders which includes induction of Rs. 150 Crores as Priority Debt from Priority Lenders. (b) JLF Lenders deliberated the proposal of the Company....
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....nt 7. Bank of Maharashtra 8. Bank of Baroda Resolution through NCLT (8) RBI Regulations: It is submitted that the Reserve bank of India vide RBI/2013-14/503 DBOD.BP.BC. No. 97/21.04.132/2013-14, dated 26-02-2014 passed guidelines which were subsequently amended vide RBI/2016-17/299. DBR.BP.BC. No. 67/21.04.048/2016-17, dated 05.05.2017 wherein it was resolved that when a minimum of 60% creditors by value and 50% of the creditors by number in JLF would be considered as the basis for deciding the CAP, and the same will be binding on all lenders, subject to the exit (by substitution) option available in the Framework. The RBI circulars further provide an exit mechanism wherein, if any bank which does not support the majority decision on the CAP may exit subject to substitution within the stipulated timeline, failing which it shall abide the decision of the JLF. The relevant portion of the regulation is extracted herewith: RBI/2016-17/299 DBR.BP.BC. No. 67/21.04.048/ 2016-17, dated 05-05-2017: "4. In this context, it is reiterated that lenders must scrupulously adhere to the timelines prescribed in the Framework for finalizing and implementing the....
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....afeguarding the Stressed Assets in the interest of economic viability issued the Guidelines vide RBI/2013-14/503 DBOD.BP.BC. No. 97/ 21.04.132/2013-14, dated 26-02-2014 (subsequently amended vide RBI/2016-17/299, DBR. B.P. BC. No. 67/21.04.048/2016-17, dated 05-05-2017). (12) Further RBI issued guide lines vide RBI/2015-16/422, DBR. B.P. BC. No. 103/21.04.132/2015-16, dated 13-06-2016 (subsequently amended vide RBI/2016-17/121, DBR. B.P. BC. No. 33/21.04.132/2016-17) states that the Corrective Action Plan can also be applied to the accounts which have been declared as NPA/Substandard. (13) In the facts of the present case, all the lenders/banks formed a JLF on 24-05-2014 and thereafter from time to time have taken all decisions in terms of the guidelines issued by RBI. The JLF in its meeting held on 15-03-2017 has jointly agreed to obtain a techno economic viability of the Respondent hotel to revise the enterprise value in terms of the RBI guidelines and therefore entrusted BOB to take necessary steps. In view of the same BOB appointed Dun & Bradstreet and Khandelwal Jain & Co. (14) Thereafter, BOB informed other banks vide letter dated 29-06-2017 that the enterprise value of....
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....ecome NPA, the RBI guidelines for restructure are not applicable are not true and correct. The RBI guidelines for restructuring the stressed assets are applicable to the respondent as a matter of fact the guidelines also mandate that the banks to identify the account even before it slips into NPA. The very fact that the petitioner called the meetings of JLF all throughout and also circulated a proposal in July, 2017 to the JLF/lenders under the CAP (Corrective Action Plan) as per the RBI guidelines would leave no manner of doubt that the petitioner knowing very well that the RBI guidelines are binding on the petitioner and also the guidelines for CAP are applicable to NPA. As such the petitioner cannot contend today that since respondent account has become NPA the CAP is not applicable to respondent. (17) It is stated that the petitioner is acting in a manner against the interest of the respondent and other lenders. On 04-10-2015, the Company has informed the Bank of Baroda and the other Consortium banks about the unauthorized current account by the operator of Company. The Bank of Baroda on 17-10-2015 addressed a letter to UBI informing them that no NOC has been taken from Lende....
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....ucturing the debt of the respondent. Strangely, the petitioner has till date neither rejected the proposal of the respondent nor has made any other offer. The very fact that the RBI has come with the guidelines to be followed by the banks in particular the JLF is to avoid this kind of situation where all the banks agree for a restructuring and only bank can spoil the entire process and scuttle the efforts. This is a case where there is an economic value to the asset and the respondent has made a proposal, which is being considered by all the banks positively and PNB has also in principally agreed to fund additionally. The sole motive of the petitioner is to cripple the respondent financially and to arm-twist the majority decision (other lenders) taken in the JLF meeting and is being done in utter bad faith and is abusing its position as a lender. The petitioner by suppressing the material facts with regard to the Correction Action Plan being taken by the JLF for reviving the asset filed the present Company petition, and on this ground alone, the present company petition is liable to be dismissed. One of the objects of the IBC Code is to revive/restructure the companies which are be....
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.... to reiterate again here. 7. As stated supra, the Company Petition is filed under Section 7 of IBC R/w 4 of I & B (AAA) Rules, 2016 by seeking to initiate CIRP in respect of Corporate Debtor under IBC, 2016. As per provision 5(a) of Section 7, IBC, 2016, the Adjudicating Authority is empowered to pass an order to admit the application /petition if a default has occurred and the application under sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed resolution professional, and it can also reject it under Section 7(5)(b) if the application is incomplete or disciplinary proceedings against proposed resolution professional is pending etc. As stated supra, the respondent was afforded sufficient opportunity by adjourning the case on several dates as mentioned above before initiating CIRP, to come forward with any viable solution to the issue acceptable to the petitioner. But it could not avail it except raising so many issues in their counter as briefly stated supra and those contentions are hardly have any bearing on issued raised in the instant Company petition. The petitioner, being lead Bank has legal right to take recourse to legal acti....
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....e likely to cause to the respondent by initiating the instant CIRP and whatever, grievances/contentions of the respondent can very well be placed before the Interim Resolution professional and all the Financial Creditors will be formed Committee of Creditors to decide the CIRP. The other lenders of respondent can also place their stated acceptance of One time Settlement etc. before the Committee of Creditors. 9. In view of the above facts and circumstances of the case, we are of considered view that default in question has occurred and the instant petition/application is complete as per sub-section 2 and there is no disciplinary proceedings pending against the proposed resolution professional so as to admit the case under section 7(5)(a) of IBC,2016. The proposed Interim professional has also filed Form No.2 on 16-09-2017. By invoking powers conferred on the Adjudicating Authority u/ss 7,10,12,13,14,15,16, 17, 18, 19, 20, 21, 22 and 25 and other applicable provisions of the Insolvency and Bankruptcy Code, 2016, the Company Petition bearing CP (IB) No. 248/7/HDB/2017 is hereby admitted with the following consequential directions : (1) We hereby appointed Shri Subodh Kumar Agrawa....