TaxTMI 
TaxTMI 
2021 (6) TMI 492
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....red and Two only). 2. Brief facts of the case, which are relevant to the issue in question, are as follows: (1) M/s. LIC Housing Finance Limited ('Petitioner / Financial Creditor') is a Company incorporated on 19.06.1989 under the provisions of Companies Act, 1956 bearing CIN: L65922MH1989PLC052257 with its registered office situated at Bombay Life Building, 2nd Floor, 45/47, Veer Nariman Road, Mumbai - 400001. The Petitioner is a financial institution involved in providing long term finance to individuals for purchase or construction of house or flat for residential purpose / repair and renovation of existing flat/houses. It provides finance on existing property for business, personal needs etc. It also provides long term finance to persons engaged in the business of construction of houses or flats for residential purpose and to be sold by them. (2) M/s. Buoyant Technology Constellations Private Limited ('Respondent / Corporate Debtor') is a Company incorporated on 23.07.2007 under the provisions of Companies Act, 1956 vide CIN: U45201KA2007PTC043436 with its registered office situated at Mantri House, No. 41, Vittal Mallya Road, Bangalore - 560001. Its Author....
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....ditional interest on principal, commitment charges, liquidated damages, costs, charges and all other monies that may be payable and remain unpaid to M/s. LIC Housing Finance Limited. c. Escrow Agreement 31.01.2017 entered into and executed between M/s. Mantri Technology Constellations Private Limited on the first part, M/s. LIC Housing Finance Limited and Punjab National Bank on the Third Part. This agreement provides that for the benefit of the Lender (Financial Creditor) the Borrower (Corporate Debtor) shall establish open and maintain an Escrow account for depositing the receivables with the designated branch of the Escrow agent as mentioned in the Schedule I annexed to the Escrow Agreement. (6) The disbursement schedule is as follows: (7) Further, as per the Memorandum of Deposit of Title Deeds executed on 27.02.2017 at Bangalore between M/s. Manyata Reality, M/s. Mantri Technology Constellations Private Limited (the Borrowers), M/s. Mantri Developers (the Guarantor) and in favour of LIC Housing Finance Limited, the borrowers have offered to create mortgage in respect of the properties as described in Schedule B,D and F annexed to the Memorandum of Deposit of Title Deeds ....
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....oner herein came forward to clear off the loan of Vijaya Bank Consortium and sanction larger limits with all the assets and securities being shifted over in its favor. After confirming with various aspects and cluster of details, the Petitioner Bank agreed to take over the entire existing outstanding loan of Vijaya Bank Consortium and agreed to fund Rs. 250 crores (which was inclusive of the payment disbursed to the outstanding of Vijaya Bank Consortium). Thereafter, detailed loan Agreement dated 20.01.2017 was entered into between the Respondent and the Petitioner. A registered Memorandum of Deposit of Title Deeds dated 27.02.2017 was also executed in favor of the Petitioner. A General Undertaking Cum Indemnity dated 20.01.2017 was also executed by the Respondent in favor of the Petitioner. By this document it is amply clear that the developer's share and all sale proceeds would cover as an indemnity to the financial assistance received. (5) Further, a Corporate Guarantee was also executed by M/s. Mantri Developers Pvt. Ltd., on behalf of the Respondent in favor of the Petitioner as per Deed of Corporate Guarantee dated 20.01.2017 and by this it was amply agreed upon by the ....
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....n agreement, Memorandum of Deposit of title deeds or any other documents inter-se, there is no agreement for "enforcement of security interest" and nor such right to do so under the Securitization Act (SARFAESI) vests with the Petitioner organization. Further, the security created in favor of the Petitioner Financial Institution being the value of Developer's share in the entire project, their right to enforce will get accrued in them only upon formation of complete developers share. In other words, the right of bank to enforce against the pledged asset of Developer's share is clearly a contingent right upon the completion of the project since the Developer's share will be not accrue in the developer without the project being completed. In case of failure to complete the project or such eventualities, the deed of indemnity and the corporate guarantee protected the Petitioner. (9) It is submitted that the repayment of loan was to commence only after 18 months. As per the terms mentioned in the loan agreement, the Petitioner had to release the additional security once the moratorium period of 18 months was over. Vide LICHFL Sanction Letter dated 30.12.2016, it was agree....
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....on vague grounds. (12) Respondent received the letter from LICHFL dated 06.02.2019 asking to clear the outstanding dues of Rs. 66.48 crores. Subsequently, the Respondent met officials of Petitioner and explained various practical issues and also informed them vide letter dated 22.05.2019, stating that, they have completed the entire project barring certain finishing works and other external development / landscape etc., post which to apply for Fire CC, followed by seeking Occupancy Certificate from the local authority. Despite, LICHFL chose to initiate legal proceedings by committing serious breach of contract. (13) It is contended that the entire "Real Estate Market" affected very badly due to slowdown in the market and due to various reasons. Particularly, the customer focus undergoing a shift from "under construction project" towards "completed/ near completion project", due to this the Respondent has saw sudden drop in sales momentum which badly resulted in poor collections. Ultimately due to all these reasons completion of the project was delayed and, in the meantime, the repayment of which was agreed as per the sanctioned terms also fell due as the Petitioner did not coop....
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....oper disbursements in time, leveling false allegations of default even when the payments were in order, wrongly classifying the Respondent's accounts as NPA, wrongly invoking SARFAESI provisions, etc., were clearly unlawful, as they were bound to follow the terms of legal contract. The respondent therefore, initiated a suit in OS No. 26493/2019 before the City Civil Court Bangalore and the Hon'ble Court was pleased to grant an interim order dated 19.11.2019 restraining the Petitioner from taking any coercive steps. The said order was in subsistence till 26.02.2020 till it was vacated on a legal ground. In a court held mediation proceedings, this Respondent also submitted proposal of settlement and schedule of payments. When once the Petitioner is aware of the fact that the loan is secured and the assets offered as security are far exceeding the liability, moving under the IBC is not permissible under law or under the facts and circumstances of the case. (18) Amid severe distress caused by the Petitioner, the Respondent has completed the project and obtained the Occupation Certificate from BBMP, Bangalore on 28.10.2020. Thereafter, it has informed "Possession Handover" to ....
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....into their account via the escrow arrangement. Till the construction of all apartments are complete in all respects and it comes into existence, the contract is a contingent contract and the same cannot be enforced for any reasons. (22) It is also stated that the OC has been received for the Mantri Lithos project, which was developed on the lands approximately 6.5 Acres and the balance lands of 9.5 acres (out of total lands of 15 Acres, 31 Guntas) are yet to developed and the same are mortgaged with the Petitioner. Apart from these 9.5 Acres of lands, as per the Loan Sanction Letter and Loan Agreement executed, the Petitioner has agreed in writing that, "the Additional security of certain lands shown under Schedule II was to be released after the 18 months moratorium period", but the Petitioner breached the contract by refusing to do the same and keeping the same pending. Repeated requests made by Respondent to the Petitioner that upon release of the Additional Security, funds will be raised on that and with which the loan foreclosure would be done is pending consideration as per their mail. Total lands of appx 19.5 Acres are struck with the Petitioner which has a present valuati....
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....Finance Company, is conducting adverse to its objects. The lending was secured through escrow arrangement and the Petitioner is a party in the overall contract of construction and sale of units under its NOC. The dispute is rather contractual in nature. The loan is not unsecured and the recovery through securities is otherwise possible beyond doubt. Hence, the application is nothing but a one that would fall under section 65 of the Code. This Tribunal is being abused and the intention is a coercive recovery. Being aware of the financial status of this Respondent and having gone through their financial statement which clearly shows its worthiness, other liabilities in respect of other projects towards different bankers / institutions, the Petitioner has presented this application without notifying them and without obtaining their concurrence is a glaring breach of law and intents of the legislation. Thus, the Petition deserves to be dismissed. 4. In response to the aforesaid objections, the Petitioner has filed Rejoinder, dated 03.03.2021, by inter alia stating as follows: (1) It is stated that the Corporate Debtor failed to furnish a constructive statement of accounts clearly de....
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....ttention to some decided cases on the issue. 5. The Respondent has also filed written submissions reiterating the averments made in their objections. It has further contended that since the Petition is filed during injunction order operating against LICHFL they should not take any coercive steps, and thus the instant Petition is contemptuous and the IBC proceedings may be dismissed and the Parties may be relegated to for an amicable settlement and resolution of difference via-media in terms of contemplation made under section 12A of the Commercial Courts Act, 2015. For the reasons stated in its objections, the completion of the project was delayed and, in the meantime, the repayment of which was agreed as per the sanctioned terms also fell due as the Petitioner did not cooperate by way of releasing the additional security. Covid 19 was another major blow on the entire industry and it is needless to state that the Respondent was unspared. 6. Heard Ms. Ankita Paul, learned Counsel for the Petitioner and Mr. Shyam Sundar, learned Counsel for the Respondent. We have carefully perused the pleadings of the Parties, the written submission filed, the extant provisions of the Code, the Ru....
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.... upon the similar performance by the other party. 9. We find that in the process of raising the loan of Rs. 250 crore, the Petitioner and the Respondent have entered into several agreements, bilaterally and involving other parties as well, such as the Punjab National Bank, JDA partners, the parent company etc. They are briefly considered hereunder. (1) It is seen from the Loan Sanction Letter of 30.12.2016 placed at Annexure 2 of the CP, that as per its terms, the loan had a term of 36 months including the moratorium period of 18 months from the date of first disbursement. Further, apart from the Main Security there was an Additional Security held by the Petitioner, comprising of land parcels in Bengaluru South Taluk, over which the Petitioner would have charge, to be registered with the ROC; registered with the Central Registry; and Enforceability certificate as Additional security. This could be invoked in case of default: non- payment of any loan or dues, any litigation arising on the project or any action taken by statutory authorities. However it is mentioned that "Additional Security to be released after completion of the moratorium period of 18 months or reduction of outs....
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....ed from the sale of apartments/properties to the assignee, i.e. the Petitioner, till all the dues were cleared. Further, for recovery of debt, the Respondent (Assignor), the Petitioner (Lender) and Punjab National Bank (Escrow Agent) entered into an Escrow Agreement on 31.01.2017, a copy of which is placed at page 233 of the CP, Ann. 9 of the Petition. As per Clause III at page 3 of this Agreement, it was agreed that the receivables to be collected by the Assignor from all the concerned persons shall be directly be credited/deposited into the said Escrow Account and the Escrow Agent shall transfer the receipts into the account of the Lender, such amount as is equivalent to the sum payable by the Borrower to the Lender on a Due Date. As per clauses 5.4 and 5.6, if the balance in the Escrow Account was less than the amount due on a Due date, the Escrow Agent shall within 2 working days from the further receipt in the Account, transfer all such amount, to the extent of the shortfall, to the Lender's account. As per Clause 6, in case of default, the Escrow Agent shall, on the written instructions of the Lender, transfer such amounts to the Lender as are specified. (4) It is seen ....
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....eing severely affected by the Covid 19 pandemic and the ensuing lockdowns. Major decisions have been taken to protect industry from its effects, to inject economic stimulus and to revive the economy. On 24.03.2020 the minimum threshold of default was increased from Rs. 1 Lakh to Rs. 1 Crore, various provisions were modified/suspended, so that Companies facing financial stress due to the pandemic can be supported rather than be pushed into CIRP. Debts are being restructured as per Government guidelines. Taking cognizance of the present scenario, even the Hon'ble Supreme Court in suo motu proceedings in Miscellaneous Application No. 665/2021 in SMW(c) No. 3/2020 had previously, vide order dt. 23rd March 2020 and again recently vide order dated 27.04.2021, extended limitation periods prescribed under the general law of limitation or under Special Laws (both Central and/or State). 11. In a recent appeal decided by the Hon'ble NCLAT in Brig. E.S. Krishnamurthy & Ors. vs. M/s. Bharath Hi-Tech Builders Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 699 of 200, dated 30.07.2020, this aspect was considered and it was held that: "....................we take judicial note of the f....
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....ted lockdown. We may mention that in the case of Gujarat Urga Vikas Nigam vs. Amit Gupta and others the Hon'ble Supreme Court clarified that the NCLT has been created as a single forum to adjudicate disputes which arise solely from or relate to the insolvency of the Corporate Debtor. However it also sounded a note of caution that NCLT should ensure that it does not usurp the legitimate jurisdiction of other Courts, Tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor. The nexus with the insolvency of the Debtor must exist. 15. In the instant case, we are unable to come to a conclusion that the Respondent is insolvent. Its release of charges by the Vijaya Bank Consortium and issue of NOC showed that it had cleared all its dues. A look at the Respondent's long list of assets held by the Petitioner as security itself, with valuation of more than 800 crore, land the developer's share in the project, shows that it possesses huge parcels of land, many times over in value of the loan, apart from the corporate guarantee given by the parent, Mantri Developers Private Ltd. It has invested large amounts in....
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....sed. This shows that the two sides have been in continuous touch to work out repayment issues. The Petitioner's response that the release of additional security would be considered after its account is updated, is against the terms of the Sanction Order. The Petitioner's contentions that the projected receivables was not as good as shown by it leading to the conclusion that it was trying to defraud the Petitioner, does appear to be acceptable in the light of the OC received, the latest Project report, the correspondence, that all the receivables were flowing to the Petitioner through the Escrow Account, the holding back of the Additional Security by the Petitioner and genuine hardship caused to this sector during the Covid 19 pandemic. Besides, recovery if any, could be enforced only after the Respondent became eligible for the developer's share on completion of the project. 18. The Petitioner has taken support from various decided cases. We have considered. The cases cited viz. Innoventive Industries vs. ICICI Bank and Ors; Babulal Vardharji Gurjar vs. Veer Gurjar Aluminium Industries; Vishal Doshi vs. Bank of India and Ors; Vineet Khosla vs. Edelweiss Reconstruction ....