TaxTMI 
TaxTMI 
2019 (3) TMI 1634
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....ed in the Company Petition, which are relevant to the issue in question, are as follows: I) Oriental Bank of Comrnerce (herein after referred to as Petitioner/ Financial Creditor) was incorporated on 1980. The Financial Creditor is a Banking Company registered under the Companies Act, 1956 having CIN No. U65191DL1901PLC002036. 2) M/S. IDEB Projects Pvt. Ltd (herein after referred to as Respondent/ Corporate Debtor) was incorporated on 17.04.1997, CIN No. U85110KA1997FTC022128. Authorised share capital is Rs. 27,70,OO,OOO/- (Rupees Twenty Seven Crore Seventy Lakhs Only) and Paid up Capital is Rs. 20,70,67,130/- (Rupees Twenty Crore Seventy Lakhs Sixty Seven Thousand One Hundred and Thirty Only). 3) The Corporate Debtor had approached the Financial Creditor and other Banks for procuring financial assistance for the purpose of working capital. In pursuant to the request of the Corporate Debtor, the Financial Creditor had sanctioned the credit facility vide Sanctioned the credit facility vide Letter dated 04.07.2007. Subsequently, the parties have entered into a Working Capital Consortium Agreement dated 11.07.2007. The working Capital Consortium includes Sta....
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....porated as a Private Limited Company in the year 1997 and started operations in the year 1998 as Construction/ Contracting Company. The 1st Defendant Company is involved in all aspects of infrastructure projects such as roads, bridges, metro-rails, industrial park, residential and commercial building including IT parks. During 2007, the 1st Defendant Company was banking with ICICI Bank and Lord Krishna Bank under multiple banking arrangements. The 1st Defendant Company desired to broad base their banking arrangement and therefore approached the State Bank of India (SBI), Oriental Bank of Commerce (OBC), State Bank of Patiala (SBOP), State Bank of Travancore (SBT) and ICICI Bank (ICICI). The said Banks agreed to provide working capital facilities to a total extent of Rs. 380 Crores under a Consortium Lending Arrangement. Under the Arrangement, the following facilities were provided by Applicant No. I to 5 Banks: a) Working Capital Credit limit of Rs. 75 Crores b) LC Limit of Rs. 50 Crores c) Bank Guarantee Limit of Rs. 255 Crores and the limits sanctioned by each of the above said Banks are as hereunder: a. State Bank of India (SBI) Rs. 95 Crores ....
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....994/- (Rupees Thirty Six Crores Eighteen Lakhs Fifty Two Thousand Nine Hundred and Ninety Four Only) towards the facility granted by the Financial Creditor. Later on, the Recovery Officer DRT-I at Bangalore had issued Demand Notice on 25.04.2016, on behalf of all Banks, to the respondents in the case, basing on above Recovery Certification, by calling upon the Respondents ( which includes the Petitioner herein) to deposit total amount of including interest as on 31.10.2010 along with future interest and cost till realisation is due against them, within 15 days from the date of receipt of the notice, failing which recovery proceedings shall be initiated as per rules. Therefore, as on 30.11.2018 the Corporate Debtor is liable to pay an amount of Rs. (Rupees One Hundred and Six Crores Eighty Seven Lakhs Fifty Thousand Only). However, the Corporate Debtor failed to pay said outstanding till today by forcing the Financial Creditor to initiate the instant CIRP against the Corporate Debtor under the Code. 3. The Respondent/Corporate Debtor has opposed the petition, by filing a Statement of Objection dated 05.02.2019 by inter alia contending as follows: 1) At the outset it is s....
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.... securities agreed to be created or to close any cause to be closed the respective Cash Credit Account(s) or other Account(s) opened in the Books of the Said Banks but in the Moming of the fid! working day immediately preceding, any action intended to be taken under this clause due notice of such intention and of the action intended to be taken shall be communicated in writing by the Lead Bank to the other Banks and the other Banks Shall immediately or as soon as possible after receipt of such notice demand repayment of the moneys due under the relative Cash Credit Account(s) or other Account(s) of the Borrower with it and notify its intention in writing either to act jointly in such action then the said Banks shall act jointly and in case of failure, neglect or refusal by the Other Banks to join in any action, the Lead Bank taking action shall make the Banks so refusing a defendant/ respondent in any action which it may take against the Borrower". It is contended that there is an irrevocable letter of authority was executed by the Financial Creditor to State Bank of India (Lead Bank). iii. Subsequently, the Corporate Debtor and Financial Creditor along with the o....
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.... exists a dispute between the Consortium of Bankers and the Corporate Debtor, which is pending before the DRT. 5) It is stated that the Corporate Debtor has in all paid a sum of Rs. 298,86,14,799/(Rupees Two Hundred and Ninety Eight Crores Eighty Six Lakhs Fourteen Thousand Seven Hundred Ninety Nine Only) to the Consortium. As per Memorandum of Understanding (MOU) with the Consortium signed on 06.10.2017 and which is pursuant to the earlier Agreement dated 09.05.2012 and agreement dated 10.09.2014, the parties have agreed as per Clause No.35 in Agreement dated 09.05.2012 that no Recovery Proceedings shall be commenced or continued under the terms of the said Agreement are fulfilled. Clause 35 reads as follows: "Clause 35However the working capital lenders may proceed with legal proceedings already initiated against the Borrowers/ Guarantors and others and mortgaged properties before the DRT Bangalore in OA 862 of 2010 and obtain decrees against the Borrower/ Guarantor and the mortgaged properties but shall not execute the said decrees during the pendency of this MOU". The Consortium including the Financial Creditor has vide aforesaid MoU's dated 06.10....
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....ficate amount with interest thereon and the Applicant bank shall have the right to proceed further under the provisions of the SARFESI Act, 2002 and the lead bank shall be fully authorised and entitled to take physical possession of the Application schedule mortgaged properties and to sell the same and realise the dues payable under the Recovery Certificate". c) In pursuance of OA decreed the Debt Recovery Tribunal , Bangalore, the Corporate Debtor is liable to pay an amount of Rs. 36, (Rupees Thirty Six Crores Eighteen Lakhs Fifty Two thousand Nine Hundred and Ninety Four Only) towards the facility granted by the Financial Creditor. Later on 25.04.2016 the Recovery officer DRT-I at Bangalore had issued Dernand Notice in respect of the same. Therefore, as on 30.11.2018 the Corporate Debtor is liable to pay an amount of d) The understanding as per paragraph 35 of the MOU was confirmed to the said immoveable properties and cannot be extended to state or mean that all the recovery proceedings have been agreed to be stalled during the pendency of the said MoU. It is further submitted that the subject matter of OA 862 of 2010 are charged exclusively to the Consortium B....
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....r to the Judgment of Lord Atkin in Lissenden v. C.A.V.Bosch, Ltd., (1940) 1 All E.R., At 436-437 which says. "the doctrine of election could have no place in the present case. The applicant is not faced with alternative rights. It is the same right that he claims, but in larger degree. In Mills v. Duckworth, (1938) 1 All E.R.318, a plaintiff, who had been awarded damages for negligence had taken the judgment sum out of a larger sum paid into Court and have been appealed against the quantum of damages, and was met by a similar objection to his appeal. Greer, L.J, in overruling the objection, pointedly said, at p. 321. " the plaintiff said: " I am not going to blow hot and cold. I am going to blow hotter." Here the Applicant is not faced with a choice between the alternative rights. He has exercised an undisputed right to compensation, and claims to have a right to more. One has not lost one's right to a second help because one has taken the first." When secured creditors like the Respondent are driven from pillar to post to recovery what is legitimately due to them, in attempting to avail of more than one remedy at the same time, they do not "bl....
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....nior Counsel for Petitioner further submits that the basic facts with regard to the sanction of the loan, committing default etc are not in dispute. Under the consortium of Banks, the Respondent had availed Working Capital Facilities of Rs. 380 Crores in terms of the Working Capital consortium Agreement dated 11.07.2007 in terms of sanction letter dated 12.07.2007. On committing default, all the consortium Banks together have filed O.A No. 862 of 2010 before Debt Recovery Tribunal (DRT) at Bangalore. Subsequently, DRT decreed the amount and also issued a recovery certificate to all the consortium Banks including the present petitioner/ financial Creditor. Subsequently, the Recovery Officer issued a demand notice dated 25.04.2016 to all the Respondents of OA , which includes the Respondents herein, by demanding to pay the outstanding amount to all the Banks including the Petitioner. Since, the Petitioner failed to pay the outstanding amount in question, it is aggregated to 106, 87,500,000/-(Rupees Hundred and Six Crore Eighty Seven Lac Fifty Thousand Only) which includes principal and interest. Therefore, the impugned outstanding amount is calculated in accordance with terms o....
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....ortium Banks is concerned, it is to be pointed out here that Section 7 of the Code permit a Financial Creditor either by itself or jointly with other financial creditors can file an application for initiating CIRP against the Corporate Debtor when it has committed a default. Therefore, Oriental Bank of Commerce admittedly the financial Creditor, which has extended loan to the Corporate Debtor and it has committed default and suffered a decree passed by the DRT and issued Recovery Certificate entitling all the consortium Banks to recover the their outstanding amount jointly and severally. Therefore, the instant Company Petition is maintainable singly. 12. So far as the allegations of Corporate Debtor with regard to the discrepancies in the outstanding amount is concerned, it is not in dispute that the Corporate Debtor/ Respondent has initially availed the loan amount of Crores from the Petitioner. When it committed default, the Consortium Banks lead by SBI has filed original application and obtained joint decree entitling the Banks to recover their respective outstanding amount jointly and severally from the Corporate Debtor. As per the Compromise Petition has filed before ....
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....urchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capitat lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on nonrecourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clau....
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....any order restraining the Tribunal from proceeding with the case except the order of Hon 'ble High court of Karnataka, as stated supra, by directing the Tribunal to dispose of the case in accordance with law. And there is no stay granted in pending appeal, by the Debt Recovery Tribunal. It is not in dispute that Provisions of the Limitation Act, 1963 is applicable to the provisions of the Code and it is also held by Hon'ble Supreme Court in B.K.EducationaI case referred supra. Therefore, we are of the considered opinion that the instant Company petition is within limitation. 18. In order to find as to whether any solution to the issue in question is possible or not, the Tribunal granted several opportunities to the parties. However, there is no solution to the issue and Respondent has not come forward to pay even part amount and thus three is no other alternative for the Tribunal except to consider the question of admission. The Respondent committed default not only in respect of instant petitioner but also to the State Bank of India apart from other banks as per the Debt Recovery Tribunal Certificate mentioned above. Therefore, the Corporate Debtor is prima facie become....
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....- section (2), ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor under sub-section(3)". 57) Sub-section (5) of Section 7 Of the 1& B Code provides for admission or rejection of application of a financial creditor. Where the Adjudicating Authority is satisfied that-.........the documents are complete or incomplete. 58) The Adjudicating Authority post ascertaining and being satisfied that such a default has occurred may admit the application of the financial creditor. In other words, the statute mandates the Adjudicating Authority to ascertain and record satisfaction as to the occurrence of default before admitting the application. Mere claim by the financial creditor that the default has occurred is not sufficient. The same is subject to the Adjudicating Authority's summary adjudication, though limited to 'ascertainment' and 'satisfaction'. " 21. The Hon'ble Supreme Court has also upheld the above judgement in Civil Appeal Nos. 8337-8338 Of 2017 vide judgement dated 31 st August, 2017. The Hon'ble Supreme Court has adverted to the Secti....
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....eclared by the Hon'ble NCLAT and Hon'ble Supreme Court as extracted above, the Adjudicating Authority/ Tribunal has to examine the instant case with regard to debt and default, whether Application/ petition is complete/ incomplete, such default is supported by evidence; named qualified Interim Resolution Professional. As stated supra, the instant Company petition is filed in accordance with law. The total/overall outstanding dues in favour of the Financial Creditor is Rs. (Rupees Hundred and Six Crore Eighty Seven Lac Fifty Thousand Only) with future interest cost, suggested name of Shri ValayudhamJayavel,79, Concorde Cupertino, Electronic City Phase 1, Bengaluru 560 100, Registration No.1BB1/1PA-001/1P- P01012/2017-2018/11663 as Interim Resolution Professional and he has filed written Communication dated 03.12.2018 under rule of I & B(AAA) Rules, 2016 by inter alia declaring that he is a qualified Insolvency Resolution Professional, he is not undergoing any disciplinary proceedings, he is willing to accept to appointment as such if the Tribunal appoints him etc. Therefore, we are satisfied that debt and default in question has occurred in the instant case, and thus it is a....