TaxTMI 
TaxTMI 
2017 (12) TMI 1766
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....i Infrastructure Limited in the year 2012. 2. Since this Corporate Debtor acquired Ruchi Infrastructure Ltd, though this loan facility was initially availed by Ruchi Infrastructure Ltd., the liability being fastened with this Corporate Debtor, this Company petition is filed against this Corporate Debtor. 3. ECB facility was originally granted by this Creditor to Ruchi Infrastructure Ltd vide an Agreement dated 27.1.2012 with repayment schedule as mentioned in Clause 5(1) of the aforesaid Agreement, it has been modified twice in respect to the securities created by creating charge over movable and immovable assets of Ruchi Infrastructure. It has admittedly withdrawn entire loan amount of USD 1,58,95,000 in February, 2012. Since RBI granted its approval for transfer of this ECB loan from Ruchi Infrastructure Ltd to the Corporate Debtor for both being group companies, a Deed of Novation dated 31.3.2015 was executed between the parties transferring ECB loan liability to the Corporate Debtor wherein this Corporate Debtor has admitted that total amount then outstanding was USD 80,35,346. At the same time, an Agreement of Amendment of Securities and Hypothecation was also executed by th....
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....Creditor herein, as to External Commercial Borrowing, annexed Facility Agreement dated 24.1.2012, Utilisation request dated 1.2.2012, Memorandum of Charges dated 16.8.2012, Amendment Agreement dated 24.6.2013, RBI Approval letter dated 16.5.2014 for transfer of ECB from Ruchi Infrastructure Ltd to the Corporate Debtor, Novation Deed dated 31.5.2015 between the Corporate Debtor, Ruchi Infrastructure Ltd and the Financial Creditor situated at London and the Branch of the Financial Creditor at Chennai, Second Amendment Agreement dated 18.6.2015, Memorandum of Hypothecation dated 30.6.2015 and various email correspondences between this Creditor and the Corporate Debtor from 26.8.2016 till 20.7.2017 disclosing demands and acknowledgements passed in between the Petitioner and the Corporate Debtor reflecting that the Corporate Debtor defaulted in making repayment in respect to ECB facility. 6. As to Working Capital facility granted by the Petitioner, it has placed amended and restated facility letter dated 27.1.2016 between the Petitioner and the Corporate Debtor for an amount of Rs. 90 crores, facility letter (amended and restated) dated 27.1.2016 for an amount of Rs. 265,50,00,000, ban....
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....the Appellate Authority, that since JLF process has been initiated, this Bank is bound by the directions of RBI, this Creditor Bank should not have filed this petition in violation of the directions of RBI and that to file this Company petition as to External Commercial Borrowing Facility, jurisdiction lies with the English law but not before this Bench. 10. On looking at the Petition filed under Section 7 of the Code along with the annexures and the opposition filed by the Corporate Debtor, it is crystal clear that this Corporate Debtor has neither disputed granting of ECB facility and working capital facility or withdrawing the facilities granted, nor even disputed the occurrence of default. The objections raised by this Corporate Debtor are procedural in nature in respect to Power of Attorney, certificate issued by the Bank is not in accordance with Banker's Books of Evidence Act, Facility Agreement not adequately stamped, appeal on winding up order being pending before the Appellate Authority, initiation of JLF proceedings and dispute in respect to exercise of jurisdiction under Insolvency & Bankruptcy Code. 11. For there being no objection about this Corporate Debtor ava....
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....la has no authority to authorise Pallav Sangal to institute Insolvency proceedings under IBC for she herself has no authority to delegate her authority to Pallav Sangal to initiate proceedings under Insolvency & Bankruptcy Code, 2016 because the Power of Attorney to Zarin Daruwala is antecedent to the arrival of Insolvency & Bankruptcy Code. To which the answer given by the petitioner counsel is that by oversight the Power of Attorney given on 27.6.2017 has been annexed twice to the petition instead of annexing the Power of Attorney dated 11.7.2017 along with the Power of Attorney dated 27.6.2017. But in the index given to this Company petition, it has been categorically mentioned that Power of Attorney dated 11.7.2017 as Exhibit 'MM' with page nos. 623 and 624 and the Power of Attorney dated 27.6.2017 as Exhibit 'NN' with page nos. 625 and 626. Had the power of attorney dated 11.7.2017 not in existence, the Petitioner could not have reflected it as Exhibit in the list of index. The Counsel submits Zarin Daruwala has been given authority to carry the functions of the Petitioner Bank in India. It is not only for authorising that bank to file proceedings befor....
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....uld this Corporate Debtor raise this dispute saying that power of attorney is defective. There is a material to say that Zarin Daruwala has been given overall authority to manage this Bank in India and when there is a special authority to Pallav Sangal to institute proceedings including insolvency proceedings under authority given on 11.7.2017, it is inconceivable to say that the authority given to Pallav Sangal is defective therefore, we have not found any merit in the submission made by the Corporate Debtor. b. Whether Statement of Accounts have been properly certified as envisaged under Bankers' Books of Evidence Act, 1891? The bank has filed certificate as contemplated under Section 2(A) of the Bankers Books Evidence Act, therefore it can't be said that it can't be taken on record on the ground it has been filed subsequent to filing the Company petition. c. Whether the certificate of Registration of Charge over the assets of the Debtor Company is defective or not? On verification of the Registration of Charge, this Bench having not noticed anything as defective, we have not found any material to take this point into consideration for dismissal of....
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.... the Petitioner wants to invoke insolvency proceedings, it has to be invoked against this company in India only. That being the situation, it is always open to the Petitioner to avail jurisdiction available to it either in England or in India. In view of this reason, we don't find any merit in the objection raised by the Corporate Debtor in respect to the jurisdiction, hence, this point is decided against the Corporate Debtor. 13. For none of the objections raised by the Corporate Debtor are sustainable, for the Petitioner has already proved that for the Corporate Debtor availed loan facilities by entering into various agreements and thereafter, defaulted in making repayments, therefore, we hereby held that this Petition is fit to be admitted under Section 7 of Insolvency & Bankruptcy Code, 2016, whereas this Bench intends to admit the next petition with consequential directions, the Petitioner herein is hereby directed to make its claim before the Insolvency Resolution Professional proposed to be appointed in the case DBS filed against the Corporate Debtor. CP 1372/2017 1. It's a Company Petition filed u/s 7 of Insolvency & Bankruptcy Code, 2016 by the Petitioner/Financ....
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....D 5 million on 26.4.2011, DBS accordingly, transferred USD 10 million on 10.3.2011, USD 5 million on 19.3.2011 and remaining USD 5 million on 29.4.2011 to the Corporate Debtor. 3. As to ECB-II, DBS entered into another Facility Agreement with Ruchi on 15.2.2012 in the same line as above by entering into the Agreement showing its Branch at Mumbai as Arranger and Bank at Singapore as Lender for providing Term Loan Facility to Ruchi Soya for an amount of USD 30 million, like in the above case, Ruchi Soya having submitted two utilisation requests to DBS for USD 15 million each on 1.3.2012 and 4.4.2012, DBS Bank transferred USD 15 million each on 5.3.2012 and 9.4.2012 to the account of Ruchi Soya. 4. The first instalment under ECB-I fell due in the month of September, 2014, until such time, Ruchi regularly made payments of the principal amounts. The outstanding under ECB-I from September, 2014 to March, 2016 was aggregated to USD 10.4 million. As to ECB-II, it fell due in March, 2016; as to this facility, Ruchi Soya paid only the first instalment towards principal under ECB-II for the total amount of USD 5 million. For the remaining instalment payments having fallen due, DBS on 25.8.2....
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....iled by Ruchi Soya. Since part payments have been made and acknowledgements have been given from time to time by Ruchi Soya to DBS Bank, these loans have remained alive as on the date of filing this Company Petition. As the Bank could not realise its outstanding dues from Ruchi Soya, on 11.9.2017, DBS filed this Section 7 Petition against Ruchi Soya before this Bench. 6. Apart from the Facility Agreements entered into, Ruchi executed a Deed of Hypothecation dated 9.8.2012 on the whole of movable and fixed assets of Ruchi Soya Industries Ltd including its movable plant and machinery, machinery spares, tools and accessories, furniture and fixtures and other movables at Village Mithi Rohar, Taluka-Gandhidham, District- Kutch, Kandla, Gujarat. Ruchi also executed Indenture of Mortgage dated 30.8.2012 between Ruchi and DBS, Mumbai Branch mortgaging various assets held by Ruchi as reflected in Schedule II of the Petition. Apart from this, a Security Trustee Agreement was also executed on 12.8.2012 between DBS, Singapore and DBS Bank Ltd, Mumbai Branch. Likewise, DBS filed various documents reflecting Memorandum of Mortgage, utilisation requests, letter addressed on 25.8.2016 by DBS to R....
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....rporate Debtor, the points for determination are as follows: i. Whether there is any defect in the Power of Attorney as stated by the Debtor or not? ii. Whether pending of appeal over the order dismissing winding up petition against the Corporate Debtor, will have any bearing over adjudication of this case or not? iii. Whether this case has to be postponed or not on the ground that on reference (in the matter of Union Bank of India v. Era Infra Engineering Ltd.) to the larger Bench on the issue of as to that whether proceeding under IBC can be triggered while winding up petition pending before the respective High Courts against the same Corporate Debtor? iv. Whether Reserve Bank of India directives pursuant to the Banking Regulations (Amendment) Act, 2017 have any bearing on adjudication of this case or not? v. Whether Facility Agreements have been inadequately stamped as stated by the Corporate Debtor, if so, whether this petition can be admitted basing on such inadequately stamped Agreement? vi. Whether formation of Joint Lender Forum will have any bearing over filing of this case or not? vii. Whether the Statement of Account filed by DBS is in compliance with Part ....
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....torney given prior to enactment of I & B Code is not a valid Power of Attorney to file an application under section 7 of the Code. In support of the above proposition propounded by the debtor counsel, as to point one is concerned, he submits that Pankaj Jain being a power of attorney holder in this case, he cannot be an authorised person as contemplated in signature Box set out at the foot of Form-1 designed for filing application u/s 7 of the Code. As to point two is concerned, since the power of attorney was executed in favour of Pankaj Jain on 26.6.2013 by DBS Bank, which is prior to enactment of I&B Code 2016, the debtor counsel says that it is obvious that this petition shall be dismissed on this ground alone. To ascertain as to whether any merit in the points raised by the debtor counsel, we must look into the Power of Attorney given by the Bank to the Attorney Holder. On perusal of Power of Attorney dated 26.6.2013, it appears that this Power of Attorney was given on 26.6.2013 by DBS Bank incorporated in Republic of Singapore stating that one Pankaj Jain working with DBS Bank Branch in India is conferred with powers and authorities to do various activities on behalf of the....
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....cur any actions suits or other proceedings of every description, at law or in equity including bankruptcy or insolvency or liquidation or winding up or otherwise and to accept service of any writ of summons or other legal process and to enter an appearance in, defend, represent the Bank in or oppose any actions, suits or other proceedings as aforesaid, which may be commenced or prosecuted against the Bank, or wherein the Bank may be in any way concerned or interested, and to execute and deliver any bonds or undertakings necessary or desirable in any such legal or judicial proceedings, or to procure the same to be executed and delivered by any person, persons, firm, corporation or company and to indemnify such person, persons, firm, corporation or company and to indemnify such person, persons, firm, corporation or company for the same. 5. To submit to arbitration or reference any dispute or difference, litigation or action or cause of action that exists or has arisen, or may arise relating to loans of which the Bank as a lender is a party thereto or is otherwise concerned in, and to abide by and perform any award that may be made thereon. 6. To take all such proceedings for decl....
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....and Thirteen (2013). The Common Seal of ) DBS BANK LTD. ) was hereunto affixed ) in the presence of:- ) - Director Piyush Gupta (Mr) - Secretary Goh Peng Fond (Mr)" On perusal of this Power of Attorney, on face, it appears that it is not a Power of Attorney given by some Director on the authority given by the Company. It is ex-facie apparent on record that this Power of Attorney has been directly given by the Bank to the power of attorney holder Mr Pankaj Jain through the Director of the Bank, namely Piyush Gupta and the Secretary of the Bank, namely Goh Peng Fond as mandated under Companies Act of Singapore. Now as against this Power of Attorney granted in favour of Pankaj Jain, let us see what the Companies Act of Singapore envisaging about the powers of the Directors: Chapter 50 Companies Act "Ultra vires transactions 25.-(1) No act or purported act of a company (including the entering into of an agreement by the company and including any act done on behalf of a company by an officer or agent of the company under any purported authority, whether express or implied, of the company) and no conveyance or transfer of property, whether real or personal, to or by a....
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....om a resolution of the company or of any class of shareholders; or (b) from any agreement between the members of the company or of any class of shareholders. (4) This section shall not affect any right of a member of the company to bring proceedings to restrain the doing of an action that is beyond the powers of the directors; but no such proceedings shall lie in respect of an act to be done in fulfillment of a legal obligation arising from a previous act of the company. (5) This section shall not affect any liability incurred by the directors, or any other person, by reason of the directors exceeding their powers. (6) This section shall have effect subject to section 25C. Ratification by company of contracts made before incorporation 41.-(1) Any contract or other transaction purporting to be entered into by a company prior to its formation or by any person on behalf of a company prior to its formation may be ratified by the company after its formation and thereupon the company shall become bound by and entitled to the benefit thereof as if it had been in existence at the date of the contract or other transaction and had been a party thereto. (2) Prior to ratific....
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....tion whose objects require or comprise the transaction of business outside Singapore may, if authorised by its constitution, have for use in any place outside Singapore an official seal, which shall be a facsimile of the common seal of the corporation with the addition on its face of the name of the place where it is to be used and the person affixing any such official seal shall, in writing under his hand, certify on the instrument to which it is affixed the date on which and the place at which it is affixed." Since this Power of Attorney was executed in Singapore, naturally the execution of this Power of Attorney is governed by the statute of that country. In the backdrop of it, if we see Section 25B of Companies Act, Singapore, whenever a person (here Ruchi Soya) in good faith deals with a company (DBS), the Power of directors shall be deemed to be free of any limitation under the Company's constitution. When such a free right has been given to directors of companies of Singapore to deal with outsiders, we don't find any occasion for this Debtor to question the capacity of the director in executing this document. As per this enactment, under Section 41 of the Companies ....
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....ent said to have been issued by e company, it has to be presumed that the document has been conferred with the authority of the company. As to Power of Attorneys are concerned, usually a dispute will arise only when management itself or some of the persons in the management or the persons giving authority themselves raise a dispute saying that such and such power of attorney has not been given by the company. Here in this case, it is a large institution spread all over the world and making this institution run by conferring power upon some attorney holders to act on behalf of the Bank. It is not the case of the Debtor that this Power of Attorney holder is not conferred with power to institute legal proceedings, it is also not the case of the Debtor that this Power of Attorney has not been given by the company. The strange thing in this case is, the Debtor relies upon a hyper technical point that special authorisation has not been given to this Power of Attorney under Insolvency & Bankruptcy Code. 13. To justify this argument, the Counsel has heavily relied upon Palogix Infrastructure (P.) Ltd. (supra) to say that the Power of Attorney filed by one Pankaj Jain to represent on behal....
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.... purpose of Insolvency & Bankruptcy Code which is for the speedy resolution of Insolvency cases. 17. On which, when it went for reference to be decided by a third Member situated at Guwahati, the Ld. Member has decided since a complete new regime in respect of Insolvency/Bankruptcy has been put in place under the Code of 2016, the procedure laid under the Code of 2016 can't be equated with the proceedings for winding up under the Companies Act, 1956, therefore the power given in the POA executed in 2004 cannot be stretched to embrace the power to initiate Corporate Insolvency Resolution proceedings under Section 7 of the Code, 2016. 18. When this order was impugned before Hon'ble NCLAT by the Corporate Debtor, the Counsel appearing on behalf of the Corporate Debtor relied upon State Bank of Travancore v. Kingston Computer India (P.) Ltd. [2011] 11 taxmann.com 172/107 SCL 377 (SC) to say that the "authorisation" in the case of a company would mean a specific authorisation by the Board of Directors of the Company by passing a resolution, unless such specific resolution has been passed authorising the power of attorney with a specific power to proceed under Insolvency & Bank....
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....things are visible, one - it is in relation to a criminal case governed by Criminal Procedure Code wherein it has been categorically mentioned under Section 205 of Criminal Procedure Code that the personal attendance of the accused can be dispensed with only in accordance with Section 205 of the Code. Two - when such specific provision is mentioned in respect to attendance, more especially in a criminal case, nobody can insist upon appearance of the accused through a power of attorney without taking the grant of the respective Criminal Court under Section 205 of the code. In view of the same, it could be understood if a special provision is there in the Code itself to take permission for power of attorney appearance on behalf of the accused, then that specific provision obviously will have overriding effect on Section 2 of the Power of Attorney Act. In criminal cases accused appearance is a requisite; his appearance can be dispensed with only when Court permits it, not otherwise. 22. The proposition in the above case cannot be equated to civil cases because there is no any such pre-requisite in a civil case for the personal attendance of the party unless such party has to adduce s....
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.... not be given to meet eventualities that arise over a period of time. Because legal remedy against default of repayment or inability to pay as the case may be, it will be at some places in the form of bankruptcy, at some places in the form insolvency, and at some places in the form of liquidation, in force all over the world, therefore, to meet this eventuality, exhaustive powers are given to power of attorney. This power of authority is given to him to deal with all situations that happen in India. It is not that in every company, the board has to pass resolution to meet the requirements of the company. If the company size is big, then the board will decide what authority to be exercised by whom. Here the Bank having global presence, it is impossible to pass board resolution every time when suit is filed in one country or other country. In banking business, suing and being sued always keeps happening, when a new legislation has come in any country, if subject matter authorisation to deal with that eventuality is included in the power of attorney, there need not be a separate new authorisation from the company to the power of attorney holder to meet that eventuality. Subject matter....
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....ead across the world. What all we say is non filing of a resolution by the board cannot become a spring board to throw away a case otherwise fit to be admitted. 25. It goes without saying the ultimate object of law is to render justice, here the grievance is this petitioner lent money to the corporate Debtor and the said Corporate Debtor defaulted in paying the said loan. When such default occurs, the aggrieved will seek justice for repayment of its money. When Companies Act, 1956 was in vogue, the creditor shall not invoke winding up jurisdiction unless and until the company is unable to repay loan to the creditor; and that proceeding of winding up shall be a bonafide act. In winding up petition under Companies Act, 1956 in addition to default occurrence, the creditor has to show he has bonafidely proceeded against the company for winding for the company being unable to make payment. The proof of insolvent situation in the company is prerequisite for admission of winding up petition under old Act. Now under the new Act, these doctrines of bonafide and inability to pay have been done away by opening up jurisdiction to file insolvency cases on just showing existence of debt and occ....
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....ing justice on the premise board resolution is not passed is not only legally untenable but also unfair on the part of the Corporate Debtor. The basic propositions for rendering justice are doctrine of truthfulness and reasonableness. The truth is the Corporate Debtor availed loan and then defaulted repayment. Reasonableness is entitlement to the creditor to realise the debt from the Corporate Debtor through the remedies available to him. May be, it is for recovery of money or for initiating insolvency process. The destiny in both the remedies is realisation only. In second case, company may be wound up. When doors are open for ease of doing business by allowing the creditor to directly proceed against the Corporate Debtor, especially when debt and default are admitted, there can't be an impediment otherwise, unless the debtor proves that admitting the petition is not valid under some law. When other statute permits an agent to act on behalf of the principal, when there is no direct prohibition under the Code stopping agent to appear on behalf of the principal, it is not reasonable to stop the agent from proceeding on behalf of the principal. 28. This terminology of authorised....
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.... override the specific provisions of the statute, therefore power of Attorney holder is not competent to file application on behalf of the creditor or corporate applicant. In the same breadth, Honourable NCLAT held that if Manager is competent to sanction loan, then it can't be said that manger cannot file case. By seeing this conclusion by NCLAT, it appears that filing of Board Resolution in every case is not sine qua non, the observation made is since CIRP process is slightly serious, if it is filed through power of attorney, there is a possibility of fraudulently filing cases, and also a possibility to initiate cases under section 65 of the Code. 31. As to timing of power of Attorney execution, for there being no holding in Palogix over power of attorney executed before Insolvency & Bankruptcy Code has come into force, it is not hit by Palogix order. Here, the company having itself executed power of attorney to Pankaj, who is looking after entire India in respect to legal matters, looking at the size of the company, and looking at the sweeping powers given to him, his authority for filing this case cannot be invalidated. Moreover, having Hononorable NCLAT already held that ....
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....s Act, the proceedings before other courts will not be suspended before liquidator or provisional liquidator is appointed, henceforth, we don't find any merit in this argument of the corporate debtor. The Corporate Debtor relied upon Karan Singh v. Bhagawan Singh (1996) 7 SCC 559, Mst. Rafiquennessa v. Lal Bahadur Chetri (AIR 1964 SC 1511 para 13),and Shri Ram Saran Sharma v. Bank of India [1990] 69 Comp. Cas. 544 (Punj. & Har.) para 7, 8 & 9 to say that when appeal is filed against a decree, the court of appeal shall have all the powers and shall perform the same duties as are conferred and imposed on the court of original jurisdiction thereby the appeal is a continuation of the original proceedings. It is true that appeal will become a continuation of the original proceedings, therefore, an appellate authority has seisin of the whole case, it is limited to understand that appellate authority can pass an appellate decree exercising the powers vested with the original jurisdiction. The analogy applied in the ratio above is not applicable to understand the pendency of appeal to be conceived as original proceedings pending before the court of law. If that is the case, when a de....
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....o be filed before this Adjudicating Authority under IBC provided they fall within the ambit of IBC. Henceforth, we have not found any merit in this argument canvassed by the corporate debtor. v. Whether Facility Agreements have been inadequately stamped as stated by the Corporate Debtor, if so, whether this petition can be admitted basing on such inadequately stamped Agreement? The corporate debtor relied upon Avinash Kumar Chauhan v. Vijay Krishna Mishra [2009] 2 SCC 532, Badal Mittal v. Lakdawala Developers Pvt. Ltd. (Bom HC Arb. Petition No. 221 of 2013, para 5) and SMS Tea Estates (P.) Ltd. v. Chandmari Tea Company (P.) Ltd. (2011) 14 SCC 66, Para 17 onwards, to say that facility agreement dated 24.01.2012 is not duly stamped as per the provisions of the Maharashtra Stamp Act 1958, therefore the inadequately stamped documents is inadmissible to use it for using it as evidence. The petitioner relied upon Tata Capital financial Services v. Unity Infraprojects (2015) SCC Online Bom 3507,to say that Hon'ble Bombay High Court after considering SMS Tea Estates (P.) Ltd. (supra), Lakdawala Developers (P.) Ltd. v. Badal Mittal (Appl (L) 272/2013,held that the Agreements having ....
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....mpliance with Part V Serial No. 7 of Form No. 1 or not? The argument of the Corporate Debtor Counsel is that the copies of entries in Bankers' Book are not in accordance with the Bankers Books of Evidence Act therefore, the statement submitted is not admissible, hence the Petition cannot be maintained. To which, the Petitioner has subsequently filed Bank statements for the year 2011-2012 (Exhibit 'A') in its additional Affidavit. Whereas, the Corporate Debtor Counsel raised objection to take this material on record for it has come subsequent to filing of the Petition. Since the Corporate Debtor case is, these entries in Bankers Book are not in accordance with the Bankers' Book Evidence Act, it is essential to look into Part V of Form I to find out as to what is the requirement to be placed as particulars of the financial statement in respect to Entry 7 of this Part V. In Entry 7, what it has been asked is to file copies of entries in a Bankers Book in accordance with the Bankers' Books Evidence Act, 1891 (attach a copy).So two things are requisite, one is, it must be a copy of entry in a Bankers Book, two, that copy shall be attached with Form No. I. If we se....
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....In this case, the Corporate Debtor has nowhere refuted either the existence of debt or occurrence of default. In normal parlance, for an illustrative purpose, if you take a promissory note case, if execution is admitted and payment of consideration is denied, then burden shifts upon the defendant to prove no consideration plea, if he fails to prove that plea, suit will be decreed basing on admission of execution of promissory note. The extent of adducing proof keeps changing depending on the stand of the parties. If consideration plea is not proved, it does not mean the burden shifts upon the plaintiff to prove payment of consideration. Basic propositions of law and logic will rot change as and when new enactment comes into operation. If anything new has come that is not present in the past, then such new provision has to be applied to the extent mentioned there but not to dehors other provisions and other enactments. If at all we understand in that perspective, the doctrine of predictability and certainty will get lost. People will enter into transactions and execute documents with a legitimate expectation that their transactions will not get invalidated in future. For this reason....