TaxTMI 
TaxTMI 
2017 (10) TMI 1580
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....Code Of 2016 and documents furnished therewith, are that the Financial Creditor (in short OFC") herein is a Public Limited Company incorporated under the Companies Act, 1956, having its Registered Office at 86C, Topsia Road (South), Kolkata-700046 and its Corporate Office at Room NO.12 and 13,6A, Kiran Shankar Roy Road, Kolkata-700 001, which has been declared as "public Financial Institution" under Section 4A Of the Companies Act of 1956 (in short 'Act 1956'). 3. One, Gujrat Hydrocarbons & power SEZ Limited, with Registered Office at 301, J.K. Apartment, VIPPS Centre, Local Shopping Centre, Masjid Moth, Greater Kailash-l, New Delhi 110048 (herein after referred to as Principal Borrower) had approached the Financial Creditor With a proposal seeking term loan amounting to RS.IOO crores. 4. The said proposal was considered by FC and in due course, the aforesaid loan was granted on conditions that such loan was to be repaid With interest at the agreed rate in 4(four) equal quarterly instalments starting from 15th day of the 15th month from the date of first disbursement Of the said loan. The repayment Obligations under the said loan agreement were secured having executed....
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....the present proceeding is required to be rejected on counts more than one. First, it was alleged that the person who had submitted the application on behalf of FC before this Bench, he being Mr. Somraj Mukherjee, did not have proper authorisation to file the application before the Adjudicating Authority seeking initiation Of Corporate Insolvency Resolution Process. 11. Secondly, it has been contended that though the FC claims that as on 11th August, 2017, the CD owed it an to the tune of Rs. 595,60,65,355.00 (Rupees Five hundred Ninety Five crores Sixty Iacs Sixty Five thousand and Three hundred Fifty Five only) as being the financial debt, yet, such an amount under no circumstances could be called as financial debt since such debt included certain amount, same being as being Rs. 493,85,10,906.00 penal charges, Which wholly disqualifies the amount stated in the application as debt, same being Rs. 595,60,65,355.00 be graded as financial debt as contemplated in section 5(8) Of the Code of 2016. 12. Thirdly, more importantly, the various figures as regards the debts, so rendered in the different documents, annexed to the application, are so contradictory and so conflicting to On....
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.... the properties which the principal debtor mortgaged! pledged in favour Of the FC, all the avenues, which the CD may have, to get back his money etc. which he needs to pay in satisfaction Of the debt allegedly due to the FC from the side of the principal debtor gets foreclosed forever. 18. However, such eventualities would not only be unnatural, arbitrary aberrant, illogical and capricious but would also be wholly incompatible and mismatch with various arrangements made under different laws including the Contract Act and as such, same cannot be allowed to happen. Therefore, on this count too, the present proceeding is required to be rejected. 19. The application in hand has been questioned on yet another ground by the CD. In that connection, it has been stated that FC presented the preceding before the Debts Recovery Tribunal, Kolkata seeking a certificate for realization of Rs. 121,41,39,813.00 from the principal borrower, the break- up of same being, as being Rs. 100,00,00,000.00 principal amount overdue, Rs. 1,75,54,450.00 as being interest overdue and Rs. 493,85,10,906.00 as being penal charges. 20. It is found well evident that in seeking a recovery certificate from t....
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....d figures in respect of the aforesaid items, on this count too, the proceeding in is required to be rejected. 26. Mr. Saha, learned Sr. Counsel chose to elaborate some the aforesaid allegations, they being allegation NO. 1 and allegation No. 3. In regard to the allegation NO.' aforesaid, it has been argued that Power of Attorney dated 20.03.2017, not being an authorization letter, as contemplated in law and Rules framed thereunder, cannot legally empower the person who submitted the application under Section 7 Of the Code Of 2016 before the Adjudicating Authority. Therefore, on this count alone, the present proceeding is liable to be rejected. 27. In expanding the 3rd allegation, stated above, it has been submitted that the figures regarding debt as on 15.12.2012, were described differently in the various supporting documents, annexed With the application. To bring life and blood to such allegation, it has been pointed out that in Annexure-IE, at page 104, the amount in default as on 15.12.2012 was stated to be Rs. 94,97,13,134.00. However, in Annexure IX (page 1301 to 1303), on the same day, the amount in default was said to be Rs. 96,41,39,813.00. 28. What is worse, ....
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....logic. In that connection, Mr. Banerjee has taken me through the power of attomey dated 20-03.2017 to contend that various recitals in the power of attorney has given full and complete authority to Mr. Somraj Mukherjee, an officer of the bank concerned, to submit the application under Section 7 Of the Code of 2016. 34. Even if one assumes for the sake of arguments for a moment that such power of attorney cannot be acted upon in submitting application under Section 7 Of the Code Of 2016, allegedly for such an authorization having been made under the caption "power Of attorney", as alleged by the CD, yet then, in view of the decision rendered by the Hon'ble NCLAT, New Delhi in the case of Palogix Infrastructure Pvt. Ltd. Vs ICICI Bank Ltd., in Company Appeal (AT) (Insol.) NO.30, 37 and 54 Of 2017 dated such alleged defect too cannot invalidate the "power Of attorney" in question. The relevant part thereof is reproduced below: - "36. In so far as, the present case is concerned, the 'Financial Creditor'-Bank has pleaded that by Board's Resolutions dated 30th May, 2002 and 30th October, 2009, the Bank authorised its officers to do needful in the legal proceed....
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....completely contradictory to one another and as such, those figures regarding the debt in question as on 11.08.2017 should not be believed, it has been contended that such allegation too is not supported of the materials on record. 39. Admitting that the amount due to the FC as on 15.12.2012 has been differently described in Annexure -I-E at page 104, in Annexure. IX, at page 1301 to 1303 (in page 1302, in particular), as well as in the proceeding before the DRT, Kolkata. But then, in that regard, it was contended that those amounts were calculated not always for purposes of showing what was the debt due to FC from the CD on such a date. Only the amount in the application, filed before the ORT, Kolkata, was recorded as debt due from the borrower as on 15.12.2012. The amounts in the other statements, therefore, cannot be treated as actual debt due from borrower as on 15.12.2012. 40. The claims regarding alleged mismatch of debts made in various documents including claims made in CEIL, notice dated 15-2-2012, statements of CIBIL at page 806, amount stated as debt in the proceeding before the DRT, Kolkata as well as amount stated as debt in the present proceeding, have also been ....
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....stablished, the Adjudicating authority would have no other option but to admit the application. 47. In the present case, the FC has sufficiently established that an amount to the tune of Rs. 595,60,65,355.00 as on 11-08-2017 had fallen due from the side of the FC and so also from CD. The FC has also established that a default thereto had occurred on 11.08.2017. That being the situation, the allegation mounted on this count from the side of the CD gets slipped to oblivion without making even any dent on the claim of FC in the present proceeding. 48. In regard to the allegation that two parallel proceedings for the same subject matter in two different fora, one before the ORT, Kolkata and the other before the Adjudicating Authority, had severely risked the right and benefit of the CD, as being the guarantor of the loan aforesaid, the FC has responded in the following manner in the reply to the written Objection: There is no question Of any parallel proceeding IBC is a complete code in itself. It has been held by the Han'ble Supreme Court Of India that any right to apply under this code is independent Of any Other right under any other Act. This scope of both proceeding....
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....t to note that such Power of Attorney was executed cn the basis of resolution adopted by the Board on 27.02.2017. 52. On reading the power of Attorney in between the lines, it is found that such a Power of Attorney is, in fact, an authorization letter empowering Mr. Mukherjee, an officer of the Bank concerned to do various acts and deeds for mentioned therein for and on behalf of the said Bank which included the power to submit the application in question before the Adjudicating Authority. 53. In this connection, one may look into the decision Of Hon'ble NCIAT in the Case Of palogix Infrastructure Pvt. Ltd. (supra) wherein it was held that if an authorization is otherwise valid, same does not cease to be an authorization empowering someone to do various acts and deeds mentioned therein including the authority to submit application under Section 7/9/10 Of the Code Of 2016 only because Of the fact that such authorization has been issued under the caption "power of Attorney". In view of above revelations, I have found no reason to uphold the contention under consideration. 54. In regard to the allegation that since the FC in the proceeding before the DRT, Kolkata did not ....
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....erest Rate (SBR-1 1.00) % per annuam payable on the 15th of every month, in arrear. Current SBR is 16X per annum. Item 2 Default Interest Rate % per month on the entire outstanding amount Of the Facility (for the period Of default) Item 3 Additional Interest Rate As detailed in Article 9-3. --(page 527, Vol. of the application)' "Additional Interest The Borrower shall pay additional interest (Additional Interest") over the normal interest rates for breach Of /non-compliance of terms Of sanction or violation Of covenants as follows: Reason for levying Additional interest Additional interest rate Amount to which additional interest Will be charged Period for which additional interest will be charged Non compliance to any Of the terms Of the Financing Documents within stipulated Period. 3% per month Entire outstanding amount Of the Facility For the period Of Default/reach Non compliance by way Of deviation Of any stipulated condition(s) at any point Of time during the currency Of the facility to the Borrower 3% per month Entire outstanding amount Of the Facili....
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....y agreed to repay the loan With agreed rate Of interest- but also---- to pay the penal charges in the event of its failure to repay the loan in accordance with the repayment schedule. 58. What is more, in the agreement between the FC and the CD, the later had given an unconditional, irrevocable and continuous guarantee to the FC to repay the loan to the FC in the event of the of the failure of the principal debtor to repay the loan in accordance with repayment schedule aforesaid and that too on, the same terms and conditions that had been agreed to by the FC and principal debtor. 59. In the teeth Of above disclosures, there cannot be any escape from the conclusion that in the event of the failure of the main debtor to repay the loan in accordance with the repayment schedule, the CD took upon itself an obligation to repay the loan in question -not only with agreed rate of interest -but also- repay the loan with penal charges at agreed rates which are all well incorporated in the loan agreement between the FC and the principal debtor. 60. Further, in a proceeding under Section 7 of the Code of 2016, the FC is to establish -(i)---- that the CD owed a debt to the FC and -(ii)-....
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....ebtor with the passages of time, there has always been upward surge in the amounts, shown as due from the defaulting debtor, in the account in the name Of such debtor. This, in my opinion, clearly explains as to why higher dues were shown in the account in the name of such debtor on the dates referred to by the CD, more particularly, on 15.12.2012, 15.12.2013, IS .12 2014, 15.12.2015 and 15.12.2016. 67. It is worth noting here that the CD claims that in Annexure -I.E at page 104, amount due to the FC as on 15.12.2012 was shown as Rs. 94,97,13,134.00 whereas in Annexure. 'X, at page 1301 to 1303 (in page 1302, in particular), on the same date, amount due to the FC from the borrower was shown as Rs. 964139813.oo. Again, in the proceeding before the DRT, as on 15-12-2012, the amount allegedly due to the FC from the CD was shown as Rs. 121,41,39,813.00. 67. However, the FC has made an attempt to reconcile as to how on the same date, the different documents, produced from the Side Of the FC, projected different figures regarding debt due to the FC on such a date. Such explanation can be found in the reply to the written objection from the side of the CD. For ready reference, t....
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....ng disbursement of Rs. '00 crores to the borrower I.e as on 10.01.20". (e) The decisions of Starlog Enterprises Ltd Vs Bank Ltd relied on by the Corporate debtor is not at all relevant in this case as paragraphs 9 to and paragraph 20 of the decisions would show that in that Case the financial creditor had made a claim Of Rs. 'O crores On 6th February, 20'? in the notice prior to filing the application and immediately thereafter in the application which they filed made a claim of approxirnately Rs. 30 crores. This was considered to be an abuse of the process of law and was considered as one of the grounds for dismissal though the impugned order of admission was set aside on the basis that notice was served before admitting the application under section 7 of the IBC. 68. I have very carefully gone through the counter statement rendered in the reply to the written objection in the light Of materials available on record and have reasons to concur with the contention, so rendered in the reply to the written objection from the side of the FC. Being so, decision relied on by the CD to demolish the case of the FC is found inapplicable to the case under consideration....
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....eprivation of the use of the money. The essence of interest in the opinion of Lord Wright, in Riches v. Westminister Bank Ltd., [1947] 1 All ER 469, 472, is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or, conversely, the loss he suffered because he had not that use. The genera! idea is that he is entitled to compensation for the deprivation; the money due to creditor was not paid, or, in other words, was withheld from him by the debtor after the time when payment should have been made, in breach of his legal rights, and interest was a compensation whether the compensation was liquidated under an agreement or Statute. A Division Bench Of the High Court of Punjab speaking through Tek Chand, J. in C.I.T., Punjab v. Dr. Shamlal NaruJa, AIR (1963) Punjab 411 thus articulated the concept Of interest - "the words "interest" and "'compensation" are sometimes used interchangeably and on other 'occasions they have distinct connotation. "Interest" in general terms is the return or compensation for the use or retention by one....
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....ious laws holding the field and found that such apprehension, expressed from the side of the CD, is totally unfounded. Rather a careful perusal of Section 14 Of the Code Of 2016, which speaks about moratorium, would reveal that Section 14 Of the Code Of 2016 would cater completely the apprehension, expressed by the CD which I have detailed herein before. For ready reference, Section 14 is reproduced below: "14. (1) Subject to provisions of subsections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting an of the following, namely. - (a) the institution Of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court Of law, tribunal, arbitration panel or other authority; (b) encumbering alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconst....
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....ct that in the proceeding before the ORT, Kolkata, the FC has prayed for recovery certificate for an amount to the tune Rs. 121,41,39,813.00 of and also for enforcement of such certificate in the event, such a certificate is granted, and that too, by disposing the properties/assets Which the principal debtor pledged [mortgaged with the FC and if necessary, by also by disposing the property which the guarantors pledged 'mortgaged with the FC. Such revelations also show that the assets/properties of the Cd herein which were pledged / mortgaged with the FC in likely to disposed of in the event of the enforcement of the recovery certificate from the side of the DRT, Kolkata. 79. When such admitted or well evident positions are considered in the light Of laid down in section 14 of the Code of 2016, it would appear clearly that directions in the aforesaid section needs to be extended to proceeding in question, now pending before the DRT, Kolkata. Being so, in my opinion, in the event of admission Of the present application, this Adjudicating Authority would be required to declare by order moratorium for the purposes, so specified in Section 14 Of the Code Of 2016. In that event, t....
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....arantors/mortgagors at present, then the proceeding, which is pending before the Debt Recovery Tribunal, Allahabad cannot go on and the same is stayed till the finalization Of corporate insolvency resolution process or till the NCLT approves the resolution plan under sub-section (1) Of Section 31 or passes an order for liquidation Of corporate debtor under Section 33, as the case may be. " 82. On the conspectus Of discussion, herein before, I find no reason to upheld the contention advanced by Sri Saha, learned Senior counsel appearing for the CD that having filed two parallel proceedings in two different fora, the FC has the FC has completely jeopardized the various rights and benefits which CD has under the laws as being the guarantor in respect of loan sanctioned in favour of principal debtor aforementioned. 83. Our forgoing discussion has now made it abundantly clear that the claim advanced from the side Of CD that the application in hand could not disclose even the "claim" as contemplated in sect*on 3(6), much less its such application establishing the fact that the CD owed a debt to the FC as on 11 .08.2017 or that there was a default in repayment Of loan on same date, ....
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.... ID:[email protected]] Phone no. +91-33-22817715 as Interim Resolution professional to carry the functions as mentioned under Insolvency and Bankruptcy Code, 2016. vi. That the public announcement of corporate insolvency resolution process be made immediately as specified under Section 13 of the Code and calling for submissions of claim under Section 15 of the code. vii. An authentic copy Of this order be issued to the parties including Interim Resolution professional after the completion of necessary formalities for their information and doing needful. vii. An authentic copy of this order be issued to the Interim Resolution Professional after the completion of necessary formalities for his information and doing needful in accordance with the prescription of law as well as directions rendered herein before. In view of the above, the Application is admitted and accordingly stand disposed of. 87. Before I part With the record, it needs to be stated that during the final hearing of this proceeding, the counsel appearing for the CD contend that the Code has prescribed different time limits for completion of each and every stage of the pr....
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.... The aforesaid issue now stands decided by decision of the Appellate Tribunal in "M/S. Inventive Industries Limited vs Bank & Anr. in CA (AT) (Insolvency) Nu I & 2 of 2017' wherein the Appellate Tribunal observed and held:- "43. There is no specific provision under the Code, 2016 to provide hearing to Corporate debtor in a petition under Section 7 or 9 of the I&B Code, 2016. "53. In view of the discussion above, we are of the and hold that the Adjudicating Authority is bound to issue a limited notice to the corporate debtor before admitting a case for ascertainment of existence of default based on material submitted by the corporate debtor and to find our whether 2 the application is complete and or there is any ocher defect required to be remoted. Adherence to Principles or natural justice would not mean in every situation the adjudicating authority is required to afford reasonable Opportunity of hearing to the Corporate debtor before passing its order. " In this connection we may state that the vires of Section 7 of I&B Code was considered by Hon'ble Calcutta High Court in " Sree Metaliks Limited Ann in writ petition 7144 of 2017, wherein Hon'ble High Court ....
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....l creditor. This Statutory requirement of ascertainment of default brings with its wake the extension Of a reasonable opportunity to the corporate debtor to substantiate by document or otherwise, that there docs nor exist a default as claimed against The proceedings before the NCLT are adversarial' in nature. Both the sides are. therefore, entitled to a reasonable opportunity Of hearing. The requirement of NCLT and NCLAT to adhere to the principles of natural justice and the Fact that. the principles of natural justice are not ousted by the Code Of 2016 can be Found from Section 7(4) of the Code of 2016 and Rule 4 or of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Rule 4 deals with an application made by a financial creditor under Section 7 Code OF 2016 Sub- nile (3) Of Rule 4 requires such financial creditor to despatch a copy of the application filed with the adjudicating authority, by registered post or speed post to the registered office of the corporate debtor. Rule 10 of the Rules of 2016 states that, till such time the Rules of procedure for conduct of proceedings under the Code of 2016 are notified, an to be filed before the adjudic....