TaxTMI 
TaxTMI 
2023 (11) TMI 906
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.... the Appellant challenging the order dated 21.07.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Court-2 in MA No.2886 of 2019 and I.A. No. 3114 of 2022 in CP (IB) No. 532 of 2018 by which order the Adjudicating Authority has allowed MA No. 2886 of 2019 and dismissed I.A. No. 3114 of 2022. 2. I.A. No. 3022 of 2023 has been filed in Company Appeal (AT) (Ins.) No. 1546 of 2022 which Company Appeal was disposed of by judgment and order of this Tribunal dated 22.02.2023. I.A. No. 3022 of 2023 has been filed praying for certain directions. In I.A. No. 3022 of 2023, this Tribunal passed an order on 20.07.2023 issuing notice in the application and directing the Adjudicating Authority to not consider approval of Resolution Plan till next date. 3. Contempt Case (AT) No.21 of 2023 has been filed by the Appellant praying for initiating contempt proceedings against the Resolution Professional and various Directors and other persons of Asset Reconstruction Company (India) Ltd. alleging wilful disobedience of order dated 20.07.2023 passed by this Tribunal in I.A. No. 3022 of 2023 in Company Appeal (AT) (Ins.) No. 1546 of 2022. In the Contempt Applic....
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....lance amount upto 30.09.2011 and in event of default the original liabilities were to stand reinstated with revised rate of interest @22% p.a. compounded with monthly rests from 01.07.2010. vii. The Corporate Debtor having committed default in complying to the settlement terms, the ARCIL by its letter dated 17.06.2013 revoked the sanctioned settlement agreement. Revocation letter stated that all the monies paid pursuant to the Sanction letters stands forfeited and adjusted towards the total outstanding dues of the Corporate Debtor. viii. After revocation, the ARCIL issued notice under Section 13(2) of the SARFAESI Act to the Corporate Debtor claming aggregate amount of Rs.235,46,34,381/- together with further interest @22% p.a. compounded at monthly rest. ARCIL filed proceeding under Section 14 of the SARFAESI Act, where Chief Metropolitan Magistrate passed an order dated 03.01.2014. ix. Aggrieved by the order dated 03.01.2014, the Corporate Debtor filed Securitization Application No.02 of 2014 before the DRT under Section 17 of the SARFAESI Act, which was dismissed on 23.03.2016. Against dismissal of the Securitization Application, Appeal No. 104 of 2016....
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....llant - Shareholder and Promoter of the Corporate Debtor filed an I.A. No. 3114 of 2022 before the NCLT seeking the stay of CIRP until rate of interest is determined. xvii. On 08.12.2022, NCLT allowed I.A. No. 3727 of 2022 filed by the Resolution Professional to take on record the updated list of creditors as on 11.12.2022. xviii. Against the order dated 08.12.2022, Company Appeal (AT) (Ins) No. 1546 of 2022 was filed by the Appellant, which appeal came to be disposed of by this Tribunal by order dated 02.02.2023. In Para 11 of the order of this Tribunal dated 02.02.2023 following was held : "11. We are of the view that the Adjudicating Authority should determine the rate of interest as per its order dated 31.05.2019 before any Resolution Plan reaches at the stage of approval. Determination of rate of interest having bearing on the total claims of the Financial Creditors, the Adjudicating Authority should make a decision regarding the above before any Resolution Plan is approved. The order impugned dated 08.12.2022 is not interfered with, but the said order shall be subject to any order passed by the Adjudicating Authority as indicated above. We dispose o....
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....ormance security by the successful resolution professional. vi. The report that would have been filed by the Resolution Professional before the Hon'ble NCLT, in the subject insolvency proceedings intimating regarding the successful resolution applicant. vii. The Application, filed by the Resolution Professional before the Hon'ble NCLT, Mumbai in the subject insolvency proceedings seeking approval of the Resolution Plan of the successful resolution applicant in terms of Section 31 of the Code. b) Restrain the RP and the COC from proceeding further in CIRP. c) Ad-interim and Interim Reliefs in terms of prayer clause (a) and (b) above; d) Cost and professional costs be provided for; e) Pass any or such other Order(s) as this Hon'ble Tribunal may deem fit and appropriate in the facts and circumstances of the case." xx. In the I.A. No.3022 of 2023 following order was passed on 20.07.2023: "ORDER 20.07.2023: I.A. No. 3022 of 2023: This I.A. has been filed by the Appellants relying on order passed by this Tribunal on 02.02.2023. In order dated 02.02.2023, Para 11 of the order proceeds as follows: ....
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....al Creditor). 6. Shri Virender Ganda, learned senior counsel for the Appellant submits that order passed by the Adjudicating Authority dated 21.07.2023 determining the rate of interest as 22% p.a. is wholly erroneous and against the settled issues pertaining to determination of rate of interest by the DRAT as well has the Bombay High Court. It is submitted that the DRAT in its order dated 17.05.2016 in Appeal No. 104 of 2016 has held that interest could not be charged @22% p.a. at monthly rest from 01.07.2010 to 30.06.2013 since the ARCIL has by letter dated 17.06.2013 has revoked the settlement. It is submitted that order passed by DRAT directed Corporate Debtor to deposit 25% of the amount so calculated. It is further submitted by Shri Ganda that in the OA filed before the DRT rate of interest was 14.85% and application was filed for amendment of rate of interest to 22% which was rejected by DRT as well as by DRAT, against which ARCIL has filed Writ Petition No. 904 of 2018 which too was dismissed by the Hon'ble Bombay High Court by order dated 19.10.2018. The High Court in its judgment has clearly held that the ARCIL has revoked the settlement dated 28.02.2011 by letter dated....
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....016, which was filed by the Corporate Debtor on 28.10.2022 along with amount deposited and accumulated interest to the extent of Rs.51,03,39,938/-. It is submitted that the Resolution Professional has misconducted itself in not proceeding in the CIRP after first determining the rate of interest. Shri Ganda further submitted that occasion to charge interest @22% does not arise since the settlement dated 28.02.2011 which is basis of 22% interest was revoked by ARCIL by letter dated 17.06.2013 and after revocation of Settlement Agreement, ARCIL cannot charge 22% interest on the dues of the Corporate Debtor. When the Settlement Agreement dated 28.02.2011 is revoked, the Modification Agreement dated 29.09.2011 also loses its importance. 7. Shri Arun Kathpalia, learned senior counsel for the Resolution Professional submits that the order dated 17.05.2016 of the DRAT was in context of pre-deposit and the said order cannot be read as determination of rate of interest. Pre-deposit was not made by the Corporate Debtor and appeal was dismissed on 05.04.2017. In order of the High Court dated 25.04.2017 clarification was made by the High Court that all contentions of both the parties are lef....
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....ed to order of Hon'ble Supreme Court dated 03.01.2019 that the question of determination of rate of interest was left open to be decided by the Adjudicating Authority. Hence, final determination by DRAT was also not there. The Resolution Professional has already filed an application for determination of rate of interest being MA No. 2886 of 2019. Resolution Plan was approved by the CoC on 22.06.2023 and the application has already been filed for approval of Resolution Plan before the Adjudicating Authority. Any order passed by this Tribunal in Company Appeal (AT) (Ins.) No. 1114-1115 of 2023 has to be given effect to. 9. We have considered the submissions of learned counsel for the parties and perused the record. 10. The Adjudicating Authority while admitting Section 7 application filed by the ARCIL, in Para 40 has already observed that whether 22% can be treated as rate of interest or charging 14.85%, it shall be decided by the Bench on filing complete information by the Resolution Professional. Para 40 of the order has already been noticed and extracted by this Tribunal in its order dated 02.02.2023. The Adjudicating Authority has now determined the rate of interest by the ....
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.... the duplicate copy of the letter signed by any of the Directors duly authorized in that behalf supported by relevant resolutions passed by the Board of Directors of the Borrower and Guarantors in this regard including the change in rate of interest and revised repayment schedule. Thereafter, you should retain the original and return the duplicate copy of this letter to Arcil. Please note the aforesaid approval for sentiment will be effective only upon Borrower providing/entering into appropriate agreements with Arcil, as required and compliance of this Sanction Letter, Yours faithfully, Agreed and Accepted For V. Hotels Limited Satish Kumar Gupta A. S. Anantharaman Senior Vice President Chief Financial Officer & Group Head Guarantors: 1. 2. 3." 12. Terms and conditions of settlement were incorporated in Annexure to letter dated 28.02.2011. Para 1.1 and 1.2 of Annexure is as follows: "1.1) Conditions Precedent: The Settlement shall be subject to fulfilment of the conditions precedent being: a) Confirm and undertake to pay Rs.150,75,83,970/- along with accrued Interest at t....
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....an, CFO Dear Sir, Re: Revocation of sanctioned settlement We refer to our sanction letter No, BG3/PQ/FY 11/13979 dated February 28, 2011 and subsequent extensions letters BGIII/VN/FY12/8835A dated December 30, 2011, BGIII/VN/FY13/4051 dated August 6, 2012 and BGIII/VN/FY14/891 dated May 29, 2013, (hereinafter collectively referred to as the "Sanction Letters") for settlement of dues of V Hotelss Limited (VHL) acquired by Arcil in its capacity as trustees of Arcil-V Hotels Ltd. Trust, Arcil-V Hotels Limited-II Trust, Arcil-V Hotels Limited-III Trust and Arcil-V Hotels Limited-IV Trust, from Bank of Indla, Punjab National Bank, Union Bank of India, Vijaya Bank respectively. As per the terms and conditions of the Sanction Letters, VHL was required to make payments of settlement amount as stipulated in the last extension letter dated May 29, 2013 to Arcil. However, VHL failed to make payment of Rs.17.50 crore due on April 30, 2013 despite reminder letter BGIII/VN/FY14/636 dated May 10, 2013 and also defaulted in payment of Rs.17.50 crore due on May 31, 2013. VHL has defaulted in making payments of settlement amount in accordance with the ter....
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....e vision of section 18(1) of the SARFAEST Act, 2002, 1 deem it just and proper to direct that for entertaining the present appeal, the appellant shall deposit 25% of the amount as directed in the preceding paragraph of this order as debt due payable by the appellant within a month from the data of this order, which is a mandatory requirement, in the form of demand draft in the name of the Registrar, DRAT, Mumbai, who shall keep the same in the FDR in the Nationalized Bank for a period of six months in auto renewal scheme so that the same can fetch the prevailing rate of Interest of the Bank. Heard the learned counsels for the parties in the Interim relief prayed by the appellant. In the facts and circumstances of the present case and in the interest of justice, I deem it just and proper to direct that the respondents-Financial Institution shall not take any coercive steps against the appellant till the next date. It is made clear that if the appellant falls to deposit the mandatory pre-deposit amount as directed above within a period of one month from today, the interim order shall stand automatically vacated. List this case for further hearing 2....
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....as been place by Shri Ganda i.e. the proceedings emanating from Application for Amendment filed by ARCIL for amending the rate of interest in the OA, which was filed by the lender. In OA No.114 of 2005, the application filed by the ARCIL for amending the rate of interest as 22% from 14.85% was rejected by the DRT which order was also affirmed by the DRAT. Writ Petition was filed by ARCIL against the order passed by the DRAT and DRT rejecting the Amendment Application. In the said Writ Petition, the Hon'ble High Court has made observations in Para 22 and 23, which has been relied by learned counsel for the Appellant: "22. Bare reading of the Application made by the Petitioners for amendment shows that same is based on the sanction letter dated 28.02.2011 by which the Respondents agreed to settle the dues by OTS, wherein they agreed to pay interest @ 22% pa. On the basis of the said sanction letter, the Petitioners as well as the Respondents entered into modification of agreement dated 29.09.2010, Bare reading of the said modification of agreement, shows that the same is based on sanction letter dated 28.02.2011. Clause 3 of the said modification agreement dated 29.09.2011 r....
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....rest of 22% by carrying out amendment in the Original Application. The said observation made by the High Court fully support the submission raised by counsel for the Appellant. We, however, cannot lose sight of the fact that the Hon'ble Supreme Court by order dated 03.01.2019 while dismissing the SLP, clarified that the Tribunal shall, if it considers appropriate having regard to the circumstances of the case, decide on the appropriate rate of interest after hearing both sides. Thus, the determination of rate of interest was left open to the Tribunal after hearing both the sides. In view of the order of the Hon'ble Supreme Court dated 03.01.2019, we are satisfied that order of the High Court dated 19.10.2018 in view of the order of the Hon'ble Supreme Court, cannot be held that issue of interest has become res judicata and finalised. More so, observation of the Hon'ble Supreme Court in order dated 03.01.2019 were with regard to determination of rate of interest by DRAT. We having found that in view of the clarification issued by Hon'ble Supreme Court and the finding of the High Court, the determination of rate of interest was to be done by the DRT and obviously the rate of interest....
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....ion Agreement, which continues to bind the parties, the Financial Creditor is entitled to the outstanding dues along with the Applicable rate of interest at the rate of 22% p.a. compounding rests monthly. Further the issue in the proceedings pending before the DRT, DRAT, Hon'ble High Court of Bombay and Supreme Court, was with regards to whether or not the Financial Creditor can amend the pleading in the Original Application filed before the DRT. The issue of Settlement Agreement, Modification Agreement was not even a fact in issue before the aforesaid Courts. The Hon'ble Supreme Court vide its Order dated 03.01.2019 has also ordered that the rate of interest may be decided by the Tribunal." 22. The reason for the Adjudicating Authority for taking the decision for rate of interest as 22% essentially rest on the letter of the Corporate Debtor dated 10.02.2011, Sanction Letter dated 28.02.2011 and Modification Agreement dated 29.09.2011 as well as the Revocation Letter dated 17.06.2013. We now again revert to the aforesaid letters to find out the true import of the decision of the Adjudicating Authority. There is no dispute that the Corporate Debtor himself submit....
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....otels Ltd 11 -Trust, Arcil-V. Hotels Ltd - III -Trust and Arcil-V. Hotels Ltd - IV -Trust from Bank of India, Punjab National Union Bank of respectively, are now rescheduled IN TWO INSTALIMENTS Dank, India and Vijaya Bank AS UDNER in terms of terms of settlement letter dated 28.02.2011, aggregates as under: a. Rs. 10 crores on acceptance of sanction letter dated February 28, 2011. b. On September 30, 2011, the balance amount after adjusting the said Rs. 10 crores from the aggregate amount of Rs. 150.76 crores to be paid along with interest @ 22% per annum compounded at monthly rests from July 4, 2010. 4. The Borrower has paid Rs. 10 crores and shall arrange and ensure to repay the balance amount after adjusting Rs.10 crores from the aggregate amount of Rs.150.76 crores together with the interest @ 22% per annum compounded with monthly rests from July 01, 2010 upto 30th September, 2011 on or before the abovesaid due date i.e. 30th September, 2011 without fail. 5. Notwithstanding anything herein or in the financing documents contained, the Loans shall become forthwith due and payable by the Borrower to Arcil and Arcil will be entitled to enforce it....
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....arrying out amendment in Original Application. 26. It is further relevant to notice that Revocation Letter dated 17.06.2013 does not confine only to Sanction Letter but refers to extension letters granting extension of time till May 31, 2013 to make deposits. The Modification Agreement dated 29.09.211 was nothing but reiteration of last day of deposit i.e. 30.09.2011 as per Sanction Letter 28.02.2011. When extensions were granted to deposit beyond 30.09.2011, the Modification Agreement was also effected by extensions and when vide Revocation Letter dated 17.06.2013, Sanction Letter dated 28.02.2011 along with extensions were revoked the Modification Agreement dated 29.09.2011 cannot survive to be enforced by ARCIL. 27. We have already held that there is no final determination of the rate of interest and the observations made by the Hon'ble High Court were on the basis of Revocation Letter dated 17.06.2013. The Financial Creditor has sanctioned the settlement of dues on fulfilment of terms as condition precedent as contained in letter dated 28.02.2011 that Rs.10 Crore was to be made upfront payment and rest of the amount was to be paid till 31.09.2011. The said settlement was ....
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....as owed to the Corporate Debtor is to be reflected in the aggregate of claims which has been admitted by Resolution Professional in accordance with the Code and the CIRP, Regulations, 2016. The Correct amount of claim of ARCIL was dependent on determination of the rate of interest. The Resolution Professional has admitted the claim on the basis of rate of interest @22%. In view of the decision which we have taken in this Appeal, the rate of interest which can be charged by the ARCIL is only 14.85%. Hence, the entire admitted claim of ARCIL required redetermination with regard to which we are passing appropriate directions in this Appeal. 31. Learned Counsel for the Appellant submitted that the amount deposited by the Corporate Debtor from time to time has not been taken into consideration. We may notice that the amount deposited by the Corporate Debtor after Sanction Letter dated 28.02.2011 was forfeited and adjusted against the amount due by virtue of Revocation Letter dated 17.06.2013. 32. One more submission which was made by Mr. Ganda that the Resolution Professional has withdrawn the Appeal which was filed by the Corporate Debtor in which the amount was deposited by the ....