TaxTMI 
TaxTMI 
2020 (10) TMI 327
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....mmitted as identified in the impugned RBI Guidelines and now on the other hand saying that the said RBI Guidelines should not be made the basis for quashing of the proceedings because only those cases are to be covered which are having exposure Rs. 20 Billion or above and since in the present case the debt as per Bank of India Petition under section 7 of the I&B Code in the capacity of Financial Creditor is much below therefore, legally not to be quashed. This plea of the Bank is not sustainable in the eyes of law because if it was so, then why the Banks have asked for a Resolution of the debt under the compliance of impugned guidelines of the RBI. The evidences on record have explicitly demonstrated that the Consortium of Banks have taken the due steps following the RBI Guidelines. 11. We hereby conclude that since the proceedings under section 7 of the Insolvency Code were the consequence of the impugned RBI Guidelines, which stood quashed by the Hon'ble Supreme Court, hence as a result, this Petition is non-est hence dismissed.' 2. Learned Counsel appearing for the Appellant submitted that the total outstanding debt and dues payable by the Respondent to the erstwhile Oriental....
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....nsel further contended that as per the Circular dated 12.02.2018, the timelines for large accounts to be referred under IBC was with respect to accounts with an aggregate exposure of Rs. 20/- billion on or after March 1st, 2018 and that for other accounts with aggregate exposure of the lenders below Rs. 20/- billion and above Rs. 1/-billion, RBI intended to announce over a two-year period, reference date for implementing the RP to ensure calibrated, time bound resolution of all such accounts to default. He submitted that the last offer was received on 22.02.2018, after RBI Circular dated 12.02.2018 and vehemently denied that the Application was pursuant to the RBI Circular. 6. Learned Counsel appearing for the Respondent submitted that the Circular of RBI dated 12.02.2018, has been declared as non-est in the eyes of law by the Hon'ble Supreme Court in Dharani Sugars (Supra) that the consortium of lenders approved the restructuring package on 30.03.2015, two-year moratorium was given for payment of the term loan installments; the Company incurred losses and faced several cash flow issues which was discussed in the JLF Meeting on 04.06.2016; the consortium of lenders acquired 51% st....
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....the following observations; '7.2 The National Company Law Tribunal is free to consider as to whether insolvency proceedings were initiated pursuant to the Reserve Bank of India-respondent No. 1's Circular dated 12/02/2018. With these observations, the writ petitions stand disposed of.' 10. The Minutes of the Meeting held on a) 26.02.2018 and on b) 13.03.2018, relied upon by the Respondent Counsel to prove his case, is being re-produced as hereunder; a) 'Minutes of the Core Committee Meeting held on February 26, 2018 at Oriental Bank of Commerce, 14th Floor, Maker Tower F, Cuffe Parade, Mumbai-05 Representatives of Oriental Bank of Commerce, Punjab National Bank. Canara Bank Central Bank of India, Allahabad Bank, Bank of Maharashtra, Exim Bank, Corporation Bank and Indian Bank were present Representative of IDBI Bank and United Bank of India were present through conference call. Attendance sheet is enclosed in Annexure - III. Mr. Sunil Chugh, Deputy General Manager, Oriental Bank of Commerce welcomed the participants in the meeting. Summary of discussions is as under: 1) Mr. Chugh informed the house that IDBI Caps (Process advisor) had been negotiating with prospectiv....
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....ed by three applicants viz. Morgardshammar AB, Nordea Bank and Banco Di Brescia SPA was held on 20.02.2018 before the Hon'ble High Court of Bombay and order of that hearing has been received on Friday evening (23.02.2018). Next date of hearing is scheduled on 27.02.2018. The Hon'ble High Court has desired to have concrete instructions as to how the petitioners interest will be taken care. The Committer discussed the order of the Hon'ble High Court. The committee was of the view that since RBI has recently issued a Circular on 12.02.2018 and lenders have to re-examine the proposal under new guidelines after putting up Board approved policies by every Bank, a request can be made to Hon'ble High Court for seeking some time to arrive at any decision resolution for the company. The meeting ended with vote of thanks to the chair.' b) 'Minutes of the Lenders Meeting held on March 13, 2018 at the Oriental Bank of Commerce, 14th Floor, Marker Tower F, Cuffe Parade, Mumbai - 05 Representatives of Oriental Bank of Commerce, Punjab National Bank. Canara Bank Central Bank of India, Allahabad Bank, Bank of Maharashtra, Exim Bank, Corporation Bank and Indian Bank were present Representati....
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....d time will be made respondent and may file separate OA. It was discussed that draft of above notices shall be prepared by M/s MDP & Partners and draft shall be circulated to lenders. The legal cost shall be met from cutback proceeds in TRA. 3. In response to red flagging of account, IDBI Bank informed that they have done RFA mainly due to following reasons; a) ESW MB - delay in payment of outstanding dues. b) The change in management of MCL could not be completed within the standstill period, SDR package failed and account was downgraded to NPA category. Corporation Bank informed that they are also in process of red flagging the account. In last consortium meeting held on 01.03.2018, lenders deliberated on the need to conduct Investigate audit/forensic audit. It was decided in that meeting that a final decision in this regard may be taken in next meeting. Lenders deliberated on this matter and decided that OBC shall invite bids from a few forensic auditors on their panel 4. Minutes of last consortium meeting held on March 01, 2018 were confirmed by participants The meeting ended with vote of thanks' 11. Learned Counsel for the Respondent drew our attention to th....
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....the Application under Section 7 qua the debts owed by the Respondent Company to the Appellant and not on behalf of the JLF. The relevant portion of the RBI Circular dated 12.02.2018 is reproduced as hereunder to ascertain whether the instant case is covered by the said Circular, which was declared non-est by the Hon'ble Supreme Court in Dharani Sugars (Supra); 'Guidelines dated 12.02.2018 (RBI/2017-18/131 DBR. No. BP.BC.101/21.04.048/2017-18) :- "D. Timelines for Large Accounts to be Referred under IBC 8. In respect of accounts with aggregate exposure of the lenders at Rs. 20 Billion and above, on or after March 1, 2018 ('reference date'), including accounts where resolution may have been initiated under any of the existing schemes as well as accounts classified as restructured standard assets which are currently in respective specified periods (as per the previous guidelines), RP shall be implemented as per the following timelines: i) If in default as on the reference date, then 180 days from the reference date. ii) If in default after the reference date, then 180 days from the date of first such default. 9. If a RP in respect of such large accounts is not implemented ....
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....ounce over a two-year period, reference date for implementing the RP to ensure time-bound resolution of all such accounts in default. Further, the documentary evidence filed before us does not evidence any such announcement made with respect to the subject matter. We are of the considered view that there is force in the contention of the Learned Counsel appearing for the Appellant that the said Circular is not applicable to the instant case and as a consequence the decision of Dharani Sugars (Supra) is also not applicable, more so taking into consideration what the Hon'ble Supreme Court has observed in Para 2 of the Judgment; '2. It will be noticed that the salient features of this circular are that restructuring in respect of borrowers entities de hors the Insolvency & Bankruptcy Code, 2016 ["Insolvency Code"] can only occur if the resolution plan that involves restructuring is agreed to by all lenders, i.e., 100 per cent concurrence. Secondly, what has been chosen to be the subject matter of the circular is debts with an aggregate exposure of INR 2000 crore and over on or after 01.03.2018. With respect to such debts, if default persists for 180 days from 01.03.2018, or if the d....
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....he decision to file the Application was initiated only pursuant to the RBI Circular. Additionally, a mere discussion in the Minutes of the Meetings cannot be construed as substantial evidence to establish that the decision to file Section 7 Application was pursuant to the RBI Circular. A perusal of the Order of the Hon'ble High Court dated 05.03.2018 shows that time was given till 06.04.2018 to the JLF to complete the process and the same was discussed by the JLF in their Meeting dated 13.03.2018 and appreciating the concern of the Hon'ble High Court and taking into consideration that a time-bound resolution could not be achieved within such a short period of time, a decision was taken to file Section 7 Petition under the Code. It is pertinent to mention that the Respondent Company in their Reply dated 06.06.2018 did not mention or whisper that the Application was filed pursuant to the RBI Circular. In their Additional Affidavit dated 17.09.2019, the Respondent submitted that the Appellant had filed a Section 7 Application pursuant to and in implementation of the said Circular though in their sur-rejoinder dated 27.07.2018, the Respondent has submitted that the Application was file....