TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 986
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....ed is acting in the capacity as a Trustee of ARCIL AST 002-1 Trust and ARCIL AST - II Trust have acquired the secured dues of State Bank of India, State Bank of Indore and State Bank of Saurashtra from Standard Chartered Bank vide assignment deed dated 22.03.2013. 3. The Corporate Debtor i.e. M/s. Dhar Textile Mills Limited was incorporated under the Companies Act, 1956 on 15.06.1984 having its identification No. L17121MP1984PLC002484 and having share capital of 110,000,000 consisting of 110,00,000 equity shares of Rs. 10/- each. The paid up share capital of the corporate debtor company is Rs. 98,087,530 consisting of 98,08,753 equity shares of Rs. 10/- each. The company is having its registered office at C-1/A, Low Land Area, Polo ground, Industrial Estate, Indore 452 015, Madhya Pradesh. 4. The applicant/financial creditor i.e. ARCIL is registered under the provisions of the SARFAESI Act, 2002 with the Reserve Bank of India. ARCIL has taken over the debts of the corporate debtor under the registered deed of assignment whereby its stands substituted in place of the original lenders viz. State Bank of India, State Bank of Indore and State Bank of Saurashtra and accounts of the co....
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....averment made by the applicant in the present application. The respondents further alleged that the applicants are guilty of gross suppression of material information and did not approach this Tribunal with clean hands and, therefore, the present petition is required to be dismissed at threshold and the applicant further be penalised under Section 75 of the Insolvency and Bankruptcy Code, 2016. It is also alleged that the assignment of debt to the financial creditor is defective, illegal, bad in law and not enforceable and cannot be cured. It is also submitted that debt of the corporate debtor was acquired by the financial creditor through deed of assignment dated 22.03.2013 from Standard Chartered Bank for a heavily discounted amount of Rs. 14.65 crores. Standard Chartered Bank had acquired it from State Bank of India through Deed of Assignment dated 29.03.2006. A copy of said deed of assignment dated 29.03.2006 between State Bank of India and Standard Chartered Bank is annexed with the reply of the respondent marked as Annexure R-1. 9. In its reply, corporate debtor has further stated that Standard Chartered Bank had acquired the debt of the corporate debtor from State Bank of I....
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....s per section 3(1) of SARFAESI Act, 2002, no securitisation company or reconstruction company carry or commence the business until it has obtained registration certificate under this section. Relevant para of Section 3 of SARFAESI Act, 2002 is reproduced below: "Section 3. Registration of Securitisation companies or reconstruction companies; (1) No securitisation company or reconstruction company shall commence or carry on the business of securitisation or asset reconstruction without; (a) Obtaining a certificate of registration granted under this section and (b) Having the owned fund of not less than two crore rupees or such other amount not exceeding fifteen per cent of total financial assets acquired or to be acquired by the securitisation company or reconstruction company as the Reserve Bank may, by notification, specify; Provided that the Reserve Bank may, by notification, specify different amounts of owned fund for different class or classes of securitisation companies or reconstruction companies; Provided further that a securitisation company or reconstruction company, existing on the commencement of this Act, shall make an application for registration to the Reserve....
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....e application on behalf of financial creditor and thus the present application is not complete as stipulated in Section 7(5)(a) of the IB Code and is liable to be rejected on the said ground alone. It is imperative to note that as per para 5 of part I of form 1 of application submitted by financial creditor Mr. Gyanendra Jha, Chief Manager of ARCIL has been shown as person authorised to submit application on their behalf. Mr. Jha claimed to be authorised signatory through a Power of Attorney (POA) executed in his favour as attached at page No. 1 of application. Thus the present application is signed by Mr. Jha in the capacity of POA holder. It is important to note that this POA is having three pages and all the pages has been signed by POA holder only and there is no signature of any person in the capacity of Executor of this POA. Two other persons have signed this POA at third page of POA by making their signature across to their photographs for the purpose of identification that affixed photographs belong to them and cross sealed by notary. More particularly, text printed over there claiming that aforesaid two persons affixed their signatures as a token of affixation of common se....
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....ng settlement of dues between them and clause (a) of 1.2 of the said settlement letter shows that there is an agreement between the parties to settle the amount at Rs. 15.65 crores with interest @ 22% per annum compounding on monthly basis. A repayment schedule has also been attached for repayment of Rs. 15.65 crores and total repayment amount along with interest till 01.03.2018 is Rs. 27.69 crores. 20. That, taking advantage of the situation and need of Corporate debtor, financial creditor charged exorbitant rate of interest @ 22% per annum compounding on monthly basis and corporate debtor was not left with any other option other than accepting such terms and conditions. 21. That, the corporate debtor is a sick industrial unit and reference of the same is already registered with BIFR since 2006. Corporate debtor is carrying out business of textile and at present approximately 120 persons are employed in the business of the company. 22. That, the sanction letter shows that there is monthly repayment schedule agreed between the parties and amount of liability is also quantified. This sanction letter for settlement of dues is not disclosed by the financial creditor to this Tribuna....
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....easons shown for committing such default except to this that there were some financial crunches and negative swing in the economy because of demonetisation period. Hence, in our view due to such default committed in making payment of the debt amount can alone be valid ground for triggering Corporate Insolvency Resolution Process ("CIRP" for short) in respect of the Corporate Debtor Company. 28. We further considered other objections raised in the reply of the Corporate Debtor. It is brought to notice of this Court that the original loan was advanced to the Corporate-Debtor-Company by the State Bank of India. Such debts were further acquired by the Standard Chartered Bank in the year 2006 through a deed of assignment dated 29.03.2006. It is further stated that the above stated debt along with right and entitlement of Standard Chartered Bank were further assigned to the present Financial Creditor M/s. Asset Reconstruction Company India Limited by its deed of assignment dated 23.03.2006. 29. It has been alleged by the Corporate-Debtor that the above stated assignment of debt by the Principal Lender - State Bank of India to the Standard Chartered Bank and further from Standard Charte....
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.... financial instruments in possession of ICICI Bank Ltd. to Kotak Mahindra Bank Ltd. transfers not merely the right to recover the debt but also transfers the obligations under the financial instruments "as if they were executed by the clients of ICICI Rank in favour of the assignee" i.e. Kotak Mahindra Bank Ltd. According to the borrower(s), an assignment of a debt can never carry with it the assignment of the obligations of the assignor unless there is a novation of the contract by all parties. Therefore, according to the borrower(s), the impugned deed of assignment is legally unsustainable without novation of original contract between ICICI Bank Ltd. (assignor) and the borrowers) (assignee). We find no merit in the above arguments. 46. As stated above, an outstanding in the account of a borrowers) (customer) is a debt due and payable by the borrowers) to the bank. Secondly, the bank is the owner of such debt. Such debt is an asset in the hands of the bank as a secured creditor or mortgagee or hypothecates The bank can always transfer its asset Such transfer in no manner affects any right or interest of the borrowers) (customer). Further, there is no prohibition in the BR Act, 1....
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.... of a claim for compensation which one party has against the other for breach of contract. 49. In Comdex International Ltd. v. Bank of Zambia, the following observation which is relevant to the present case needs to be quoted: "The assignment of a debt will not be contrary to public policy solely on the grounds that the assignee has purchased the debt for a considerably discounted price or because that price is only payable after a period of credit. Nor will the assignment be contrary to public policy simply because the assignee may make a profit on the transaction at the end of the day. If there was no prospect of a profit, Hobhouse, LJ. observed, commercial entities would never purchase debts." 50. Similarly, the following proposition in Chitty on Contracts, 27th Edn (1994) at Para 19.027 Is relevant to he noted: "It is also well established that a claim to a simple debt is assignable even if the debtor has refused to pay. The practice of assigning or 'selling' debts to debt collecting agencies and credit factors could hardly be carried on if the law were otherwise." 51. In view of the above exposition of law, we find that under the impugned deed of assignment only the ....
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....49. However, we remit these matters to the Division Bench of the High Court(s) for consideration of other issues raised in this batch of cases. Subject to above, the impugned judgment(s) is set aside and the civil appeals are allowed with no order as to costs." 32. By following the above stated preposition, we do not find substance in the objection of the Corporate-Debtor with regard to the assignment of debt by the State Bank of India to the Standard Chartered Bank and further to the present Financial-Creditor. We are of the view that even assuming so that the Standard Chartered Bank was not registered under the SARFAESI Act nor having license to business of ARCs in India being registered with the RBI, there can be no bar for assignment and transfer of the debt by the Principle Lender to another bank or to a financial institution for enforcing/recovery of such debt as per the above decision of the Hon'ble Supreme Court, that a debt is an asset in the hand of the bank/lender and NPAs are accounts receivable are treated as NPA. 33. Before reaching to above stated conclusion, this Bench felt expedient to know the stand/comments of the R.B.I, on the legality and validity of the abov....
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....er of Ranjit Kapoor v. Asset Reconstruction Company (India) Ltd. [Company Appeal (AT) (Insolvency) No. 410 of 2018, dated 13-6-2018 in (IB)-160(PB)/2018] has pleased to observe and held as such: "5. We find that there are two Assignment Agreements, one dated 21st July, 2014 and the other dated 17th April, 2015 executed in favour of the Respondent. For initiation of Corporate Insolvency Resolution Process, the Respondent-Financial Creditor relied on the Assignment Agreement dated 17th April, 2015. The Corporate Debtor has not disputed the fact that there is a debt due in Law and fact and they defaulted in paying the dues. It is not the case of the Corporate Debtor that there is no debt in law or in fact. 6. The question whether the Assignment Agreement dated 17th April, 2015 is genuine or not cannot be looked into by the Adjudicating Authority while deciding the application under Section 7 or by this Appellate Tribunal, till the Corporate Debtor alleges the same and raise the objection under Section 65 of the Code. No such plea has been taken by the Corporate Debtor before the Adjudicating Authority alleging fraud on the part of the Financial Creditor for initiation of proceedin....
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.... the petitioner has not placed any board resolution on record authorizing the petition to be filed and relying on the judgment in Palogix Infrastructure Private Limited v. ICICI Bank Limited in Company Appeal (AT) (Insol.) No. 30 of 2017 the present petition is not maintainable. The counsel for the Respondent submits that the said Assignment Deed is executed on 28.03.2014, however, the said Deed relies upon an authority letter dated 23.07.2014 authorising Mr. Amit Kedia to enter into the Assignment Deed which was executed prior in time to the authorisation. It is further alleged that the Financial Creditor fraudulently suppressed an alleged Authorisation executed by the Creditor in the year 2011 authorising Mr. Kedia to enter into such Assignment Deed and that a copy of the same is not provided to the Respondent for examining its validity and therefore the same is forged and fabricated. 10. The counsel for the Respondent has also argued that the petition is time barred as being filed beyond the limitation period of three years from the date when the account of the respondent company was classified as NPA on 21.07.2011. 11. On perusal of the petition and the documents filed it i....
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....s inter-se between banks is not permissible in the Law. Therefore, a Bank can always transfer its assets and such transfer (of its debts) and it no manner affect the right or interest of the borrowers. There is no prohibition in the Bank Regulation Act to the bank transferring its assets inter-se nor it can be said the bank are trading in debts. Therefore, such objection of the Respondents in respect of maintainability of the present petition are not legally sustainable; hence is rejected. 36. This Bench, in its subsequent order dated 27.11.2018 also felt expedient to call for some more information/clarification from the Applicant/Financial Creditor by issuing a notice under Section 7(5) of the Act, in respect of power of attorney holder of the applicant bank as well as its authorised signatory, who has signed the present IB. Petition. In the light of Hon'ble NCLAT decision in the matter of Palogix Infrastructure (P.) Ltd. v. ICICI Bank Limited (CP No. 37/2017) decided on 22.09.2017 and thereby asked from the petitioner to furnish its ratification of the present signatory of the present LB. Petition, duly supported by its specific Board Resolution and thus to confirm/ratify the ac....
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......... 20.4 Lastly, the 'adjudicating authority' has reached a conclusion at paragraph 9 of the impugned order that it is satisfied that the Appellant has committed a default of Rs. 27.77 crores, which finding is not only perverse, but also is contrary to the very application of the Financial Creditor itself in complete disregard to the apparent and conspicuous mismatch between the amount demanded by the Financial Creditor from the Appellant-Corporate Debtor in its demand notice dated 6th February, 2017 and the amount stated to be in default in the said application. 21. Showing an incorrect claim, moving the application in a hasty manner and obtaining an ex-parte order from the 'adjudicating authority' which admitted such an incorrect claim, the Financial Creditor cannot disprove its mala fide intention by stating that the claim submitted is correct amount The I&B Code does not provide for any such mechanism where post-admission, the applicant financial creditor can modify their claim amount." Thus, in the light of above decision of the Hon'ble NCLAT, such discrepancy if found in the claim then Financial Creditor cannot be allowed to revise the same after admission of the peti....
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....articulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important This it must do within 14 days on the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority.....
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....icating Authority in terms of Section 7(5) are satisfied. 43. The applicant, through the above mentioned affidavit has also pointed out that at one point of time, the Corporate Debtor had not only admitted its debts, liability but also sought for a settlement. Pursuant thereto, the Financial-Creditor wrote a letter dated 10.11.2016 to the Corporate-Debtor accepting its request of settlement of entire dues by making payment of Rs. 16.50 Crores. Such amount was required to be paid in part in four instalments in order to show bona-fide towards the settlement. The Corporate-Debtor had also issued some cheques of Rs. 2.65 Crores in the favour of the present applicant; which were reported to be dishonoured by the Bank. Thus, it is established that, minimum amount of debt has been admitted by the Corporate-Debtor itself to the extent of Rs. 16.50 Crores; and once it had agreed to make payment of such debts to the present applicants/Financial-Creditor. If in view of the Corporate Debtor, the present applicant was not acceptable to it or entitled to make recovery of such debts than the Corporate-Debtor was not supposed to have issued such cheques worth of Rs. 2.65 Crores in favour of the p....
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....ween two courses of conduct is to be treated as having made an election from which he cannot resile. (2) That he will not be regarded, in general at any rate, as having so elected unless he has taken a benefit under or arising out of the course of conduct, which he has first pursued and with which his subsequent conduct is inconsistent" 44. In the light of above well settled legal preposition, we are of the view that the objections raised by the Corporate-Debtor are not legally sustainable in the eyes of Law, as we found that the Corporate Debtor is taking contradictory stands which amount approbate and reprobate on some facts and conditions which not permissible in the eye of the Law. 45. Further, it is also found that clarification as sought for by this Bench by its order dated 19.11.2018 is properly answered and stands satisfied through affidavit of Mr. Nishith Doshi annexing with letter of authority of December, 2018 and other documents. 46. Therefore, it is established that the Corporate Debtor has admitted the amount of debt due to the present applicant to the extent of Rs. 16.5 Crores and further issued cheque for amount of Rs. 2.65 Crores; which are defaulted as such a....