TaxTMI 
TaxTMI 
2024 (3) TMI 990
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....g its independent findings, has mechanically repeated the decision of the Wilful Defaulters Identification Committee (First Committee). Thus, the RC Order is devoid of independent reasons and ought to be set aside. 2. Learned counsel argues that the borrower-Company, that is, Duncans Industries Limited, of which the petitioner was a Director, had approached the Bank for a One Time Settlement (OTS). The time for repayment of instalments under the OTS, which was agreed upon by the parties, had been extended from time to time. Before the last extended period expired, the borrower-Company underwent a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016. Thus, it cannot be said that the borrower-Company was a 'defaulter', as it did not have the opportunity to repay the loan under the OTS due to the commencement of the CIRP. 3. Secondly, the borrower-Company suffered huge losses during the relevant financial years, that is, from 2014-15 to 2018-19. The Committees failed to take into consideration that due to such huge losses, it could not be said that the borrower, despite having capacity to honour the repayment obligations, had defaul....
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.... of the garden and the total transaction through the same was a paltry amount. The account was primarily treated as an outflow account where money was transferred from the company's Bank Account to defray the operational expenses. 11. With regard to the allegation under Clause 2.1.3(d), that the unit had defaulted in meeting its repayment obligations and also disposed of or removed moveable fixed assets or immovable property given for the purpose of securing the term loan without the knowledge of the bank, it is argued that the borrower-Company had entered into agreements with third-parties in the year 2004 and the contract had only been renewed subsequently in July, 2013. There was no objection on the part of the Bank, which was fully aware of such transactions. That apart, the borrower-Company did not part with possession of the tea gardens in favour of the assignee but only entered into a marketing, management contract with it. 12. Insofar as the assignment of Hantapara, Garganda, Tulsipara and Dhumchipara Tea Estates are concerned, the Central Government had authorized the Tea Board under Section 16E of the Tea Act in a Notification dated January 20, 2016 to take immediat....
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....mmittee decision. However, it is denied that it was a mere copy of the First Committee's decision. By pointing out to the latter portions of the RC order, learned counsel argues that the said Committee gave its independent decision on the issues involved. 19. The petitioner has argued that the borrower-Company being in a CIRP proceeding, the Director and promoter of the same also had to be absolved. Such contention is refuted by learned counsel for the Bank who cites the judgment of Kotak Mahindra Bank Limited Vs. Hindustan national Glass & Industries Limited and Others, reported at (2013) 7 SCC 369, for the proposition that it cannot be said if the debt is extinguished subsequent to default being committed, no proceeding for wilful defaulter declaration can be initiated or continued. The offence committed by the Company or a juristic person does not absolve the responsibility of its Directors. The purpose of the Master Circular is to put in place a system of disseminate credit information pertaining to wilful defaulters for cautioning banks and financial institutions so as to ensure that further Bank finance is not made available to them. It is argued that the same operates on ....
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....udicial, authorities. Even in State Bank of India Vs. Jah Developers Private Limited and Others, reported at (2019) 6 SCC 787, the Supreme Court held that the powers of the Committees were administrative powers given to in-house committees to gather facts and arrive at a result. 26. In Union of India Vs. H.C. Goel, reported at AIR 1964 SC 364, the Supreme Court held that in exercising jurisdiction under Article 226, the High Court will take the evidence as it stands and only examine whether on that evidence the impugned conclusion follows or not. 27. Learned counsel for the bank cites Syed Yakoob Vs. K.S. Radhakrishnan and Others, reported at AIR 1964 SC 477, where it was held that if findings of fact were allowed to be disturbed by High Courts in such manner that may lead to an interminable search for correct findings, the court would not interfere unless it is shown that the impugned finding is based on no evidence. 28. While testing an order of a quasi-judicial authority, it is argued that this Court should not be concerned with the correctness of the order. If the order can be sustained on some evidence already on record, even if the conclusion is not correct and the r....
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....ed. 32. Insofar as the transfer to Nagrifarm Tea Company is concerned, it is argued that the borrower-Company had entered into an agreement upon consideration of Re. 1/- only, allowing the Nagrifarm Tea Company Limited to take away the entire sale proceeds in respect of tea produced and manufactured at the gardens, indicating that the teas which were hypothecated to the Bank were alienated and disposed of to the detriment of the Bank. 33. Even if the reasons given in the impugned Committee orders are not to the liking of the petitioner, it is not a case of being an unreasoned order. Moreover, the balance sheets of the company showed that there was indeed mens rea to willfully not pay the Bank's dues. 34. While considering the arguments of the parties, it is observed that the petitioner has taken a plea that an OTS was reached in terms of which the petitioner was making payments. However, the same could not reach culmination as the CIRP intervened. Such argument, however, has no legs to stand upon. An OTS means that a part of the debts is only paid, whereas the other part is written-off by the Bank. Therefore, even if the OTS is in full and final settlement of the loan inso....
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.... Darjeeling Branch. Hence, at a time when the borrower-Company was duty-bound to channelize its entire funds through the respondent no. 1-Bank due to its agreement with the latter, it failed to meet such obligation, which was a condition of the cash credit facility, and routed some money through a different bank account. Such act is sufficient to come within the purview of diversion of funds as contemplated in the Master Circular. 39. The transfer of some of the assets, movable fixed assets and/or immovable properties, has been disputed by the petitioner. Such dispute is ex facie sham. 40. The petitioner admittedly transferred/assigned, in whatever form, its entitlement to realization of sale proceeds of tea produced and manufactured in its gardens. The borrower-Company had pledged the tea gardens and its produce with the respondent no. 1-Bank. The revenue of a tea garden is almost exclusively earned from its sale and manufacture of tea. The right to realize the proceeds of such sale of tea and manufacture of the same comprises the entire corpus of the secured assets. Having assigned the same in favour of third-parties, the borrower-Company was definitely guilty of disposing ....