TaxTMI 
TaxTMI 
2022 (3) TMI 1553
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....ny incorporated on 06.12.1993 with CIN No. U85110KA1993PLC015001 with its registered office at K.M. Road, Chikmagalur, Karnataka-577101. Hence the jurisdiction lies with this Adjudicating Authority. The Authorised Share Capital of the Respondent Company is Rs. 2,35,48,60,635/- and its Paid up Share Capital is Rs. 19,15,08,844/-. 3. Brief facts of the case, as stated in the Petition, are that Co-operative Rabobank U.A., the Applicant, is a Company registered as an overseas Company in Hong Kong where it maintains a branch. The Applicant, through its branch in Hong Kong, had extended two facilities amounting to USD 4,50,00,000 (INR 3,30,66,00,000 computed at the rate of USD 1 = INR 73.48) to the Corporate Debtor by way of the facility agreement dated 29.07.2015 and 27.03.2018. The Corporate Debtor is a Company registered under the Companies Act, 1956 having its registered office as mentioned above. Under the Facility Agreement dated 29.07.2015, the Applicant had disbursed USD 2,00,00,000 ('Facility 1') to the Corporate Debtor, while USD 2,50,00,000 ('Facility 2') was disbursed under the other Facility Agreement. 4. The Principal amount and the overdue interest am....
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....d 02.07.2018 by Mr. V.G. Siddhartha in favour of the Security Trustee stating that the title deeds for the stated immovable properties are deposited with the Security Trustee to secure, inter alia, the Facilities, is annexed as Annexure A-20. viii.) Copies of Personal Guarantee issued by Mr. V.G. Siddhartha (now deceased) in respect of Facility 1 and 2 were annexed as Annexure A-15 and Annexure A-16. ix.) Letter dated 06.08.2020 issued by the Applicant to the Corporate Debtor mentioning the payment defaults by the Corporate Debtor under the Facilities is annexed as Annexure A-35. 6. In light of the continuing defaults by the Corporate Debtor under the said Facilities, the Applicant initiated the present proceedings as a Financial Creditor of the Corporate Debtor by filing this Petition on 18.01.2021. 7. The Corporate Debtor has filed its preliminary objections on 27.07.2021 by inter alia contending as under: i.) It is submitted that Yes Bank Limited, Respondent's lender, along with other lenders such as RBL Bank, Karnataka Bank, IndusInd Bank and Kotak Mahindra Bank have taken the initiative of debt resolution process of the Respondent Company v....
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....spective charges over the Corporate Debtor's assets which are part of the restructuring. Even if it is assumed that the resolution process was initiated on 06.01.2021, the timelines specified in ICA for implementation of resolution plan (180 days) have expired on 05.07.2021. Till date, the resolution process under the Circular is in preliminary stages as no unconditional offer for the Corporate Debtor's vending division is received despite the process being pending since April, 2020. 9. The Corporate Debtor also filed the statement of objections dated 03.12.2021 by inter alia contending as under: i.) In order to restructure its businesses, the Respondent has already taken steps to hive-off all non-core businesses, to conserve liquidity and improve the profitability of core businesses of the Company, namely, operating of Cafe Coffee Day outlets and operating of Coffee Vending machine business, etc. In this regard, the Respondent reached out to all its lenders (despite not having recovered from the impact of the Covid-19 pandemic), and offered to restructure its business and assets so as to pay the dues. ii.) The Respondent has held several meetings with ....
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....e Code as their financial health was poor even before filing of the said Petition. The Petitioner averred that Rs. 54 crores of alleged debt falling in the period of suspension has been included in the Petition for the 'sake of completeness', without even a whisper of such an averment in the Petition. vii.) The Hon'ble High Court of Delhi has expressed the view that when a particular installment fell due during a suspension period (despite of defaults of previous instalments before a suspension period) declared by the RBI, the concerned bank ought not to have classified the defaulter's account as an NPA. viii.) It is submitted that Yes Bank Ltd., Respondent's key lender along with other lenders have taken initiative of debt resolution process of the Respondent in terms of RBI's Circular dated 07.06.2019 under the Prudential Framework for Resolution of Stressed Assets, which provides a robust mechanism for timely resolution of stressed assets. The said Prudential Framework binds all lenders with the resolution plan if the same has been agreed to by 75% of lenders in value and 60% of lenders in number. The lenders had a detailed meeting on 17....
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....ing prior to the Suspension Period. The Petition deserves to be admitted because the value of the defaults which were committed prior to the Suspension Period were far above Rs. 1 Crore. The Petitioner reiterates that the Corporate Debtor had committed 7 distinct defaults prior to 25.03.2020 and the value of said defaults were USD 75,83,213.86 (INR 55,72,14,554). The Corporate Debtor has craftily sought to misinterpret Section 10A of the Code on mere technicalities to avoid admission of the Petition. 12. The Petitioner further submits that the Hon'ble Supreme Court has held in the case of Swiss Ribbons v. Union of India and Ors., (2019) 4 SCC 17 that legislative policy has shifted from the concept of 'inability to pay debts' as under the Companies Act, 1956 to 'determination of default'. Therefore, the Corporate Debtor's submissions regarding its solvency/profitability are irrelevant under the Code. The Corporate Debtor had defaults amounting to Rs. 211.65 crores as on 31.03.2020. According to the Corporate Debtor's credit rating, as per CARE Ratings as on 02.12.2020 is 'CARE D: ISSUER NOT COOPERATING'. According to the Prudential Framework Ci....
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....ntention to suspend the Petitions u/s. 7, 9 and 10 of the IBC, 2016 against Corporate Persons under distress due to the unprecedented situation caused by the Covid-19 pandemic. In consonance with the said Ordinance, Sec. 10A was inserted to the IBC, 2016 by way of an amendment, wherein, it inter alia states that for any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year from such date, as may be notified in that behalf. Provided that no Petition shall ever be filed for initiation of CIRP of a Corporate Debtor for the said default occurring during the said period. Section 10A of the IBC, 2016 is prefaced with a non obstante provision which has the effect of overriding Sections 7, 9 and 10. On 04.04.2021, the IBC (Amendment) Ordinance, 2021 was issued notifying the suspension of filing petitions u/s. 7, 9 and 10 of the IBC, 2016 ended on 24.03.2021. v.) From the proviso to Section 10A, it is clear that no Petition under Sections 7, 9 and 10 of the IBC, 2016 can ever be filed against a Corporate Debtor for any default occurring between the period 25.03.2020 and 24.03.2021 ('Period of Suspension'). ....
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.... prior to 25.03.2020. Accordingly, a Financial Creditor can file an application u/s. 7 of the Code during the Suspension Period if it pertains to a default that occurred before 25.03.2020. This view has also been consistently adopted by the Hon'ble Supreme Court of India and the Hon'ble NCLAT. ii.) It is submitted that the restriction on filing a petition u/s. 7 of the Code during the Suspension Period is inapplicable as the Petition is filed because the Corporate Debtor committed several defaults before 25.03.2020, as detailed in pages 13-16 of the Petition. A mere mention of defaults committed after 25.03.2020 does not in any manner dilute or undermine the maintainability of the Petition pursuant to the defaults committed before the Suspension Period. iii.) The Corporate Debtor defaulted on multiple repayment obligations which started from 06.08.2019. Further, till 06.02.2020, which is before the commencement of the Suspension Period, the Corporate Debtor had defaults amounting to Rs. 55,72,14,554/-. iv.) The Corporate Debtor's objections in the preliminary objections were limited to stating that the Petition is premature as certain lenders ....
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....te insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5(21) means a claim in respect of provision of goods or services. 28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor-it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under subsection (1) in such form and manner as is prescribed, which takes us to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, t....
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....se of the Respondent that all the lenders of the Respondent-Corporate Debtor, including the Petitioner in the instant CP already initiated the process for resolution of the Corporate Debtor in terms of the "Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions 2019, dated 07.06.2019" (hereinafter referred as 'Prudential Framework') and when the said resolution process is in advanced stage, the Petitioner taken a U-turn and filed the instant CP with the sole purpose of recovery of its alleged debt. The learned Counsel submits that since the instant CP is filed for the purpose of recovery of the debt but not for resolution of the Corporate Debtor, which is the sole object of the I & B Code, 2016, the same is liable to be dismissed. 20. The Circular dated 07.06.2019 of the Reserve Bank of India, under which the Prudential Framework for Resolution of Stressed Assets was issued, reads as under: RBI/2018-19/203 DBR No. BP.BC.45/21.04.048/2018-19 June 7, 2019 Prudential Framework for Resolution of Stressed Assets Introduction In exercise of the powers conferred by the Banking Regulation Act, 194....
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....he SMA sub-categories will be as follows: 8. As provided in terms of the circular In these directions, wherever a reference is made to the circulars addressed to banks, other lenders indicated at paragraph 3 should refer to corresponding circulars applicable to them, if any. DBS.OSMOS. No. 14703/33.01.001/2013-14 dated May 22, 2014 and subsequent amendments thereto, lenders shall report credit information, including classification of an account as SMA to Central Repository of Information on Large Credits (CRILC), on all borrowers having aggregate exposure Aggregate exposure under the guidelines would include all fund based and non-fund based exposure, including investment exposure with the lenders. of Rs. 50 million and above with them. The CRILC-Main Report shall be submitted on a monthly basis. In addition, the lenders shall submit a weekly report of instances of default by all borrowers (with aggregate exposure of Rs. 50 million and above) by close of business on every Friday, or the preceding working day if Friday happens to be a holiday. B. Implementation of Resolution Plan 9. All lenders must put in place Board-approved policies for reso....
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.... first default after the reference date. 12. The reference dates for the above purpose shall be as under: 13. The RP may involve any action/plan/reorganization including, but not limited to, regularisation of the account by payment of all over dues by the borrower entity, sale of the exposures to other entities/investors, change in ownership and restructuring Restructuring is an act in which a lender, for economic or legal reasons relating to the borrower's financial difficulty, grants concessions to the borrower. Restructuring would normally involve modification of terms of the advances/securities, which would generally include, among others, alteration of payment period/payable amount/the amount of instalments/rate of interest; roll over of credit facilities; sanction of additional credit facility/release of additional funds for an account in default to aid curing of default/enhancement of existing credit limits; compromise settlements where time for payment of settlement amount exceeds three months.. The RP shall be clearly documented by the lenders concerned (even if there is no change in any terms and conditions). C. Implementation Conditions for....
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....h any of the lenders. 16. A RP which involves lenders exiting the exposure by assigning the exposures to third party or a RP involving recovery action shall be deemed to be implemented only if the exposure to the borrower is fully extinguished. D. Delayed Implementation of Resolution Plan 17. Where a viable RP in respect of a borrower is not implemented within the timelines given below, all lenders shall make additional provisions as under: 18. The additional provisions shall be made over and above the higher of the following, subject to the total provisions held being capped at 100% of total outstanding: (a) The provisions already held; or, (b) The provisions required to be made as per the asset classification status of the borrower account. 19. The additional provisions shall be made by all the lenders with exposure to such borrower. 20. The additional provisions shall also be required to be made in cases where the lenders have initiated recovery proceedings, unless the recovery proceedings are fully completed. 21. The above additional provisions may be reversed as under: (a) Where the RP in....
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....26. Section I(B), I(C) and I(D) of the framework shall not be applicable to revival and rehabilitation of MSMEs covered by the instructions contained in Circular No. FIDD.MSME & NFS. BC. No. 21/06.02.31/2015-16 dated March 17, 2016, as amended from time to time. Section I(E) of the framework shall not be in derogation to the provisions of the circular DBR No. BP.BC.18/21.04.048/2018-19 dated January 1, 2019. 27. Restructuring of loans in the event of a natural calamity, including asset classification and provisioning, shall continue to be guided as per the extant instructions. 28. The framework shall not be available for borrower entities in respect of which specific instructions have already been issued or are issued by the Reserve Bank to the banks for initiation of insolvency proceedings under the IBC. Lenders shall pursue such cases as per the specific instructions issued to them. V. Withdrawal of extant instructions 29. The extant instructions on resolution of stressed assets such as Framework for Revitalising Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Rest....
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.... the pre-requisites before taking any decision by the Lenders in relation to the proposed Resolution Plan were noted. The letter of the Lead Bank i.e., Yes Bank addressed to all other Lenders including the Petitioner updating the debt resolution process of the Respondent-Corporate Debtor reads as under: 24. A bare perusal of the above referred correspondence clearly establishes that keeping in view the Covid-19 situation and the impact of the same on the Respondent-Corporate Debtor and the sudden demise of the Chairman of the Corporate Debtor and the various sincere and bona fide efforts taken by the succeeding management of the Corporate Debtor and the progress of speedy recovery of the Corporate Debtor after the initial period of Covid-19, all the Lenders of the Corporate Debtor including the Petitioner chosen to adopt the debt resolution process under the Prudential Framework against the Corporate Debtor. It is further revealed that the Petitioner-Bank has also participated along with all other Lenders in the process of the resolution of the Corporate Debtor in terms of the Prudential Framework before filing the instant CP and even thereafter. A perusal of the guidelines/norm....
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....te Debtor. Therefore, though, a Creditor can choose its own forum, but in the peculiar facts of the present case, we are of the view that the Petitioner is trying to utilise the provisions of the I & B Code, 2016, for recovery of debt, which is impermissible. 28. In view of our above finding, we are of the view that there is no need to delve upon other issues of the Company Petition. 29. In the circumstances and for the aforesaid reasons, the Company Petition bearing CP(IB) No. 19/BB/2021 is dismissed. 30. In view of the orders passed in the main Company Petition, I.A. No. 261 of 2021 is also disposed of as no further orders are necessary. ============= Document 1à¤à¤¾à¤°à¤¤à¥€à¤¯ रिजरà¥à¤µ बैंक RESERVE BANK OF INDIA www.rbi.org.in Document 2 गिरिनियमन विà¤à¤¾à¤—, केनà¥à¤¦à¥à¤°à¥€à¤¯ कारà¥à¤¯à¤¾à¤²à¤¯ 12 400001 मंतिल शहीद à¤à¤—त सिंह Department of Banking Regulation, Centr....
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....ders to take collective decision and resolve the stressed asset in a timebound manner. This helps in best-possible recovery for all the lenders while preserving the value of the Company. For CDGL, the Lenders have formulated a resolution plan involving sale of the Vending division through a bid process. In this regard, various domestic lenders of CDGL, viz. Yes Bank, RBL Bank, Karnataka Bank and Indusind Bank have already signed the ICA. Further, Kotak Mahindra Bank is also expected to sign the ICA shortly. These five domestic lenders constitute -51% of the total cutstanding debt of CDGL, (as on Dec 31, 2020) Other foreign lenders (DEG, FMO, Media Hag) are also in support of the resolution process initiated by domestic lenders, as the same is expected to provide better value for the Vending business. A Steering Committee comprising of three barks (Yes Bank, RBL Bank and Karnataka Bank) has been formed to oversee the resolution process, on behalf of the Lenders. The committee has held 5 meetings since its formation (dated- Dec 28 2020, Jan 14 2021, Jan 27 2021, Mar 09 2021 and April 05 2021) to review the progress of the resolution process and ....
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....buyers, we believe the process for sale of Vending division can be concluded shortly. In the view of above developments, we request your continuing support on data/information sharing with the advisors and prospective buyers, so that the transaction gets completed in a timely manner. For YES Bank Limited Fans Authorized Signatory CC: Steering Committee Lenders 1. Karnataka Bank 2. RBL Bank Advisors Yes Securities (India) Limited SBI Capital Markets Limited Mb TRUE COPY Document 9Phone +49 (0)221 4986 1865 Fax+49 (0) 221 4986 93 1865 [email protected] www.deginvest.de NO RY * GOV E VALD TAX SE12-ny Von: Abhirup [email protected] Abhirup Mukhenee@rabobank F Gesendet: Dienstag, 18. Ma 2021 09:25 An: [email protected] Amn [email protected]: [email protected]; Vierke, Anja Anja [email protected]> Shireen Chardavarkar@indusind com; Piyush [email protected]; Breuninger, Silvia , [email protected] chandrasekhar [email protected]; [email protected] sameer, [email protected] in: [email protected] Cc:[email protected]; [email protected]; Mrinal Kher shicans.com Seema.Ag....