TaxTMI 
TaxTMI 
2018 (4) TMI 1441
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.... Transfer of Undertakings) Act, 1970 with its head office 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....
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.... of the Companies Consortium agreed inter se that in the interest of better revenue generation 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.....
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.... Bank and Corporation Bank (the "Lenders Consortium"). Accordingly, separate sanction letters with specific terms and conditions 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....
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....he Lenders Consortium and the Company executed First Supplemental Additional Facilities Agreement dated September 13, 2014.The completion 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 (J....
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.... (19) The total credit facility of Rs. 728,79,00,000/- (Rupees Seven Hundred and Twenty-Eight Crores and Seventy-Nine Lakhs Only) comprising of Fund Based facility of Rs. 678,79,00,000/- (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....
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....prospective investor/priority debt from the existing Lenders Consortium in the JLF meeting held on March 15, 2017. The said proposal with additional funding is not considered favourable by Bank of Baroda the Lead Lender. 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....
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....y of the banks in the consortium, excepting Bank of Baroda by voting or otherwise, the OTI proposed by the Respondent in the JLF held on 27-09-2017 as alleged by the Respondent in Para No.22 of the Affidavit filed in support of the Writ Petition The 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 "Re....
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....k and Bank of Maharashtra) including Petitioner i.e., Bank of Baroda (herein after referred to as "BOB") and the credit facility availed by Company from BOB amount to Rs. 149.04 (i.e., Rs. 140.79 crores of Fund Based and Rs. 8.25 crores of Non-Fund based credit) which come to 20.15% entire debt. The 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....
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.... S. No. Consortium Banks Proposal Rs. 505 crores 1. Dena Bank 2. Syndicate Bank 3. Corporation Bank Restructuring with Additional funding on pro rata basis. 4. Punjab National Bank PNB in principal agreed for additional funding of Rs. 160 crores. 5. Punjab and Sind Bank 6. The Jammu and Kashmir Bank One Time Settlement 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 CA....
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....A, Section 35AA & Section 35AB of Banking Regulation Act 1949. The Apex court has also held that the guidelines issued by Reserve Bank of India are statutory in nature are binding on the banks. (Please refer (i) ICICI Bank Ltd. v. Official Liquidator of APS Star Industries Ltd. [2010] 10 SCC 1, (Paras 35 and 39; (ii) Sardar Associations v. Punjab & Sind Bank [2009] 8 SCC 57, (Para 15 and 38; (iii) BOI Financial Ltd. v. Custodian [1997] 10 SCC 488, (Para 27). (11) That RBI for a very specific purpose of safeguarding 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 JL....
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....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) read with 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) relied by the Respondent are binding on all the banks in relation of JLF and as such the present guidelines prevail over all other guidelines in case of any inconsistency. The contention of the petitioner that the once an account has become 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 guideli....
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..... The Petitioner bank shows that it was acting against the interest of the Respondent Company and other consortium members. (18) It is the respondent, who has been taking all necessary steps to regularize the banking operations for opening of TRA account and all monies generated by the hotel to be deposited in the said TRA account in terms of the agreements entered with the lenders and in the interest of the lenders. (19) It is alleged that the present petition is filed by the petitioner in bad faith and scuttle the entire process of resolution/restructuring 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. ....
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.... case is listed for admission on various dates viz., 07-11-2017, 15-11-2017, 15-12-2017, 01-01-2018, 10-01-2018, 18-01-2018, 13-02-2018 and 20-02-2018. 5. Heard Ms. Varalakshmi Tadepalli along with Ms. Preethi Agarwal, learned Counsels for the Petitioner; Shri Vikramjit Banerjee, and Shri D. Srinivas learned Senior Counsels along with Shri P. Vikrarn for the Respondents. We have carefully perused all pleadings of both the parties along with extant provisions of IBC, 2016. 6. The learned counsels for both the parties have reiterated their respective pleadings as briefly stated supra, and they may not necessary 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 t....
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....the alleged violations of petitioner in not adhering to its guidelines. However, the respondent did not appear to have taken such course of action. On the contrary, the petitioner has time and again reiterated that it has every mandate to initiate the instant CIRP, and it has initiated the instant proceedings strictly in accordance with law. As several contentions raised by the respondent hardly have any relevance to the issue in question, they are not being adverted here, and they are deemed to have rejected. Moreover, the respondent has already availed alternative remedy of filing writ petition. There cannot be any prejudice 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/a....