TaxTMI 
TaxTMI 
2024 (7) TMI 624
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..... 2. Brief facts of the case necessary to be noticed for deciding the Appeal are: (i) The State Bank of Travancore has sanctioned loan to the tune of Rs. 99 crores on 17.03.2012 to the Corporate Debtor. On 08.04.2013, the working capital limit of Rs. 99 crores was renewed for a further period of 12 months. (ii) On 31.03.2013, the accounts of the Corporate Debtor was declared as Non-Performing Assets ("NPA"). The SBI along with other consortium lenders entered into Master Restructuring Agreement with the Corporate Debtor on 28.09.2013. Various documents were executed by the Corporate Debtor in support of Master Restructuring Agreement on 30.09.2013. On 14.02.2014, the erstwhile State Bank of Travancore restructured the credit facilities in favour of the Corporate Debtor and an amount of Rs. 89,46,00,000/- was sanctioned. On 26.03.2014, Deed of Accession and Modification on Master Restructuring Agreement was executed. On 23.12.2015, the State Bank of Travancore additionally sanctioned the limit of Rs. 36,74,00,000/-. Various documents thereafter were executed. On 28.12.2015, State Bank of Travancore sanctioned the limit of Rs. 1,26,20,00,000/- in favour of the Co....
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....tion. The reasons given by the Adjudicating Authority for rejecting Section 7 Application, are contained in paragraphs 19 and 20, which are as follows: "19. The petitioner even after filing of this petition for initiation of Corporate Insolvency Resolution process against the respondent, simultaneously proceeded with T.A.No.179 of 2020 before DRT II-Kolkata, for recovery of the said debt amount. Of course, pending of petition before DRT is no bar to proceed with petition under section 7 of IBC 2016. The facts alleged in this petition is almost similar to the averments made in petition T.A.No.179 of 2020. The DRT is the competent civil forum established for adjudication and recovery of debts due to banks and financial institutions. The petitioner and respondent are parties in T.A.No.179 of 2020. The order passed in T.A.No.179 of 2020 is now under appeal before the DRAT and not reached finality hence, the principal of resjudicata does not apply. However, the order passed in T.A.No.179 of 2020 is valid and existing order in force, hence we cannot simply ignore the said order and proceed with this petition. If this Adjudicating Authority proceed with this petition, there is a ....
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....Appellant and Shri Krishnendu Datta, learned Senior Counsel with Shri Sandeep Bajaj, learned Counsel appearing for the Respondent. 4. Shri Abhijeet Sinha, learned Senior Counsel for the Appellant, challenging the order of the Adjudicating Authority submits that proceedings under Section 19 of the 1993 Act is no bar for entertaining an Application under Section 7. The proceedings under Section 19 are for different purpose, i.e. for recovery of the dues of the Bank, whereas the proceedings under Section 7 of the IBC is for different purpose and object, i.e., insolvency resolution of the Corporate Debtor. The pendency of the proceedings under Section 19 (at present which is pending before the Calcutta High Court), which was dismissed by DRT vide order dated 17.06.2022, cannot be a ground to reject Section 7 Application. It is submitted that the Adjudicating Authority has also committed error in relying on Section 10 of the Code of Civil Procedure ("CPC") by holding that Section 7 proceedings, which is subsequent, needs to be stayed, in view of Section 10 of CPC. It is submitted that by Section 238 of the IBC overriding effects has been given to the proceedings under IBC and neither....
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.... of the 1993 Act were initiated on 11.09.2018 and Section 7 Application has been filed on 01.08.2021. The learned Counsel for the Bank has relied on the OTS proposal dated 07.07.2021. Before we come to the respective submission of the parties, it is relevant to notice the pleadings in Section 7 Application. Particulars of financial debt have been mentioned in Part-IV of Section 7 Application. The 'date of default' has been mentioned as 30.09.2016. Part-IV of the Application is as follows: "Part - IV PARTICULARS OF FINANCIAL DEBT 1 TOTAL AMOUNT OF DEBT GRANTED DATE(S) OF DISBURSEMENT 28.12.2015:- Rs. l,26,20,00,000/- (Rupees One Hundred Twenty Six Crore Twenty Lakhs Only) 23.12.2015:- Rs. 36,74,00,000/- (Rupees Thirty Six Crore Seventy Four Lakhs) 14.02.2014:- Rs. 89,46,00,000/- (Rupees Eighty Nine Crore Forty Six Lakhs Only) 08.04.2013:- Rs. 70,00,00,000/- (Rupees Seventy Crore Only) 17.03.2012:-Rs. 99,00,00,000/- (Rupees Ninety Nine Crore Only) The sanction letters for the said limits is hereto annexed and collectively marked as Annexure E'. 2 AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATION ....
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....12, West Wing, Tulsiani Chambers, Free Press Journal Road, Nariman Point, Mumbai - 400 021 Sub: Abhijeet Ferrotech Limited - Proposal for One Time Settlement (OTS) of om account with State Bank of India Respected Sir, Without prejudice to any of our rights available under applicable rules and laws, we are submitting herewith our OTS Proposal for consideration at your end. a) We will settle the account of Abhijeet Ferrotech Limited maintained with State Bank of India at Rs. 21.29 Crs as full and final settlement. b) The broad terms and condition of OTS proposal will be as per below provisions:- I. Final OTS proposal will be submit to bank along with an upfront payment of 10% of the OTS amount i.e. Rs. 2.13 Crs and the same will be deposited with State Bank of India's Non-Lien Loan Account. This upfront payment will be refundable if the proposal does not get approved by competent authority due to any of the reasons; 2. Part 25% i.e. Rs. 5.32 Crs will be* deposited within 3 months from the date of approval of OTS Sanction. 3. Remaining 65% amount will be payable within 9 months time period along with a s....
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....ns Pvt. Ltd. and Anr. Vs. Union of India and Ors. - (2019) 4 SCC 17 has laid down that Code is a beneficial legislation, which puts the Corporate Debtor back on its feet and is not a mere recovery legislation for creditors. In paragraph-28 of the judgment, the Hon'ble Supreme Court laid down following: "28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects ....
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....ts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor.] [Inserted by Act 30 of 2004, Section 20 (w.e.f. 11.11.2004). (1A) Every bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of section 2, may, at its option, opt to initiate proceedings under the Multi-State Co-operative Societies Act, 2002 to recover debts, whether due before or after the date of commencement of the Enforcement of the Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 from any person instead of making an application under this Chapter. (1B) In case, a bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of section 2 has filed an application under this Chapter and subsequently opts to withdraw the application for the purpose of initiating proceeding under the Multi-State Co-operative Societies Act, 2002 to recover debts, it may do so with the permission of the Tribunal and every such application seeking permission from the Tribunal to withdraw the application made under sub-section (1A) sh....
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....ation T.A.No.179 of 2020. The subsequently filed petition shall stand stayed. ...." 15. The first question to be answered is as to whether reliance by the Adjudicating Authority to Section 10 of CPC for taking the view that Section 7 Application, which is subsequent proceeding need to be stayed is correct view in law. Section 10 of the CPC provides as follows: "10. Stay of suit -- No Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in 1[India] have jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court]. Explanation.--The pendency of a suit in a foreign Court does not preclude the Courts in India from trying a suit founded on the same cause of action." 16. Section 238 of the IBC as extracted above, gives overriding effect to the proceedings un....
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....y negligence, hence, Section 7 Application cannot be admitted. The said findings were question before this Tribunal. This Tribunal in paragraph 17 and 19 of the judgment, held as follows: "17. From the judgment of the Adjudicating Authority as noticed above in State Bank of India's case, it is clear that Adjudicating Authority has based its decision of rejecting Section 7 Application on the ground that the default committed by the Corporate Debtor in restructuring its debt, there is contributory negligence by the State Bank of India as well as Punjab National Bank. The fact that certain portion of sanction amount of financial facilities could not be disbursed by the Financial Creditors can be ground for rejecting Section 7 Application has already been answered by the Hon'ble Supreme Court in its judgment in Innoventive Industries Limited (supra). We need to notice some submissions, which were raised before the Hon'ble Supreme Court in Innoventive Industries Limited and the views, which were expressed by the Hon'ble Supreme Court in the above case. In Innoventive Industries Limited, a Section 7 Application was filed by the Financial Creditors. Nineteen Banking entities had ....
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....3 and 64 of the judgment, which clinches the issue, following has been laid down: "63. Even otherwise, Shri Salve took us through MRA in great detail. Dr Singhvi did likewise to buttress his point of view that having promised to infuse funds into the appellant, not a single naya paisa was ever disbursed. According to us, one particular clause in MRA is determinative on the merits of this case, even if we were to go into the same. Under Article V entitled "Representations and Warranties", Clause 20(t) states as follows: "(t) Nature of Obligations The obligations under this Agreement and the other restructuring documents constitute direct, unconditional and general obligations of the borrower and the reconstituted facilities, rank at least pari passu as to priority of payment to all other unsubordinated indebtedness of the borrower other than any priority established under applicable law." 64. The obligation of the corporate debtor was, therefore, unconditional and did not depend upon infusing of funds by the creditors into the appellant Company. Also, the argument taken for the first time before us that no debt was in fact due under MRA as it has ....
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....or rejecting Section 7 Application. Reliance on filing of a Suit by the Corporate Debtor was not relevant for rejecting Section 7 Application" 18. Thus, the determination of default in DRT proceedings, which is pending in Calcutta High Court can have relevance for the purposes of Section 19 Application, but cannot be said to be a reason to hold the proceedings under Section 7 barred, as has been held by the Adjudicating Authority. 19. The learned Counsel for the Appellant has also relied on judgment of Hon'ble Supreme Court in A. Navinchandra Steels Pvt. Ltd. vs. SREI Equipment Finance Ltd. - (2021) 4 SCC 435. In the above case, the Hon'ble Supreme Court had occasion to notice few fundamentals with regard to IBC legislation. The observation was also made that Companies Act, 2013 is the general statute as compared to IBC. In paragraph 16, 17 and 18, following was held: "16. Having heard the learned counsel for all the parties, it is important to restate a few fundamentals. Given the object of the IBC as delineated in paras 25 to 28 of Swiss Ribbons (P) Ltd. v. Union of India [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] ["Swiss Ribbons"], it is clear tha....
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....Court has observed that vis-à-vis the LIC Act, 1956, the Companies Act, 1956 can be treated as a general statute. This is clear from para 19 of that judgment. It was observed: '19. Further, the provisions of the special Act i.e. the LIC Act, will override the provisions of the general Act viz. the Companies Act which is an Act relating to companies in general.' (emphasis in original) Thus, some High Courts rightly treated the Companies Act as a general statute, and the RDB Act as a special statute overriding the general statute. Special law v. special law 40. Alternatively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, Section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd. [Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd., (1993) 2 SCC 144] where there wa....
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.... of this Court in A.P. State Financial Corpn. case [A.P. State Financial Corpn. v. Official Liquidator, (2000) 7 SCC 291] This Court pointed out therein that Section 29 of the SFC Act cannot override the provisions of Sections 529(1) and 529-A of the Companies Act, 1956, inasmuch as SFCs cannot exercise the right under Section 29 ignoring a pari passu charge of the workmen.' The view taken therein was reiterated by a three-Judge Bench of this Court in Rajasthan State Financial Corpn. v. Official Liquidator [Rajasthan State Financial Corpn. v. Official Liquidator, (2005) 8 SCC 190] wherein it was stated: (SCC pp. 201-202, para 18) '18. In the light of the discussion as above, we think it proper to sum up the legal position thus: (i) A Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in-liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (ii) A District Court entertaining an application....
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....s not end the matter. It is clear that Respondent 3 has filed a Section 7 application under the Code on 11-1-2018, on which an order has been passed admitting such application by NCLT on 13-4-2018 [Alchemist Asset & Reconstruction Co. Ltd. v. Jaipur Metals & Electricals Ltd., 2018 SCC OnLine NCLT 32209]. This proceeding is an independent proceeding which has nothing to do with the transfer of pending winding-up proceedings before the High Court. It was open for Respondent 3 at any time before a winding-up order is passed to apply under Section 7 of the Code. This is clear from a reading of Section 7 together with Section 238 of the Code which reads as follows: '238. Provisions of this Code to override other laws.- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.' 20. Shri Dave's ingenious argument that since Section 434 of the Companies Act, 2013 is amended by the Eleventh Schedule to the Code, the amended Section 434 must be read as being part of the Code and not the Companies Act, 2013,....
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.... the Appellate Tribunal because it is clear that the financial creditor's application which has been admitted by the Tribunal is clearly an independent proceeding which must be decided in accordance with the provisions of the Code."" 21. The Hon'ble Supreme Court clearly held in the above case that petition under Section 7 is an independent proceeding, which is unaffected by pendency of proceedings in other Court, which may be filed by the same Company. In paragraph 25 of the judgment following was held: "25. A conspectus of the aforesaid authorities would show that a petition either under Section 7 or Section 9 IBC is an independent proceeding which is unaffected by winding-up proceedings that may be filed qua the same company. Given the object sought to be achieved by the IBC, it is clear that only where a company in winding up is near corporate death that no transfer of the winding-up proceeding would then take place to NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion that corporate death is inevitable, every effort should be made to resuscitate the corporate debtor in the larger public interest, which includes not only the work....
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....ction 7 is an independent proceedings and winding up proceeding would have no effect in deciding Section 7 Application on the basis of provisions contained in IBC. In paragraph 29, following was held: "29. Dr Singhvi and Shri Ranjit Kumar have vehemently argued that SREI has suppressed the winding-up proceeding in its application under Section 7 IBC before NCLT and has resorted to Section 7 only as a subterfuge to avoid moving a transfer application before the High Court in the pending winding-up proceeding. These arguments do not avail the appellant for the simple reason that Section 7 is an independent proceeding, as has been held in a catena of judgments of this Court, which has to be tried on its own merits. Any "suppression" of the winding-up proceeding would, therefore, not be of any effect in deciding a Section 7 petition on the basis of the provisions contained in the IBC. Equally, it cannot be said that any subterfuge has been availed of for the same reason that Section 7 is an independent proceeding that stands by itself. As has been correctly pointed out by Shri Sinha, a discretionary jurisdiction under the fifth proviso to Section 434(1)(c) of the Companies Act....
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.... the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub- section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be." 25. There can be no d....
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....estoppel and res judicata are equally applicable in proceedings before administrative authorities as they are based on public policy and justice." 27. There can be no doubt to the proposition laid down in the above case. What was held in the above case was determination of issue between the parties operates in any subsequent proceedings in the same suit as well as in the subsequent suit between the said parties in which the same issue arises. As noted above, the proceedings under 1993 Act for recovery of debt due to Bank and proceedings under Section 7 of the IBC, are entirely different proceedings with different purpose and object. Section 238 having given overriding effect to the proceedings under Section 7, the order passed, cannot operate as issue estoppel between the parties in reference to Section 7 proceedings and the judgment of the Hon'ble Supreme Court in Hope Plantations Ltd. does not render any assistance to the Respondent. 28. The learned Counsel for the Respondent has also relied on another judgment of the Hon'ble Supreme Court in (2016) 14 SCC 49 - Satyendra Kumar v. Raj Nath Dubey, where reliance has been placed on paragraph 15, which is as follows: "....
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....rmination of title in respect of land of different Village, there was a determination regarding entitlement of rights of objector. When the objector, whose claim was denied, with respect to the land of different village, the judgment rendered earlier was stated as res judicata. The Hon'ble Supreme Court held that the res judicata would not operate in subsequent proceedings in respect to other properties. In paragraph 9 of the judgment, the findings of the High Court were noticed, which held that findings or issue of law would not operate as res judicata in the subsequent proceedings in respect of other properties. The view of the High Court as quoted in paragraph 9 of the order, ultimately upheld by the Hon'ble Supreme Court and in paragraph 16, following was held: "16. However, as explained and held by this Court in Mathura Prasad Bajoo Jaiswal [Mathura Prasad Bajoo Jaiswal v. Dossibai N.B. Jeejeebhoy, (1970) 1 SCC 613 : AIR 1971 SC 2355] , where the decision is on a pure question of law then a court cannot be precluded from deciding such question of law differently. Such bar cannot be invoked either on principle of equity or estoppel. No equitable principle or estoppel c....