TaxTMI 
TaxTMI 
2025 (8) TMI 1230
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....ENT ASHOK BHUSHAN, J. These two Appeal(s) have been filed against the same order dated 28.07.2023 passed by National Company Law Tribunal, Mumbai Bench, Court-II admitting Section 7 application filed by Savannah Lifestyle Private Limited (Respondent No.1 herein). 2. Brief background facts of the case necessary to be noticed for deciding these Appeal(s) are: (i) Shaila Clubs and Resorts Pvt. Ltd. - Corporate Debtor ("CD") obtained financial facilities from Consortium of Bank including Vasantdada Shetkari Sahakari Bank (hereinafter referred to as the "Cooperative Bank") in the year 2005. The CD entered into a Mortgage Deed dated 27.05.2005. (ii) Respondent No.1 - Savannah Lifestyle Pvt. Ltd. approached the CD for permitting it to conduct its business from the Club Premises. The CD entered into a Conducting Agreement with Respondent No.1 on 18.05.2007 for 15 years and six months. (iii) The Cooperative Bank issued a Recovery Certificate on 23.02.2012 against the CD for recovering an amount of Rs.5,11,51,489. The Cooperative Bank filed a case before the Chief Metropolitan Magistrate ("ACMM") praying to allow the Cooperative Bank to take possession of ....
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....r of the CD - Mr. Amit Kore sent a letter dated 17.11.2022 to the Cooperative Bank objecting to the Minutes dated 20.10.2022 recorded by the Bank. On receiving the letter from Director of the CD, the Cooperative Bank on 17.11.2022 wrote to Respondent No.1 that Cooperative Bank has withdrawn its OTS. (ix) On 01.12.2022, this Appellate Tribunal pleased to set aside the CIRP in CP (IB) No.170 of 2018 and remitted the matter to Adjudicating Authority for fresh consideration. (x) A Review Petition No.38 of 2023 was filed by the Rajesh Vilasrao Patil, Suspended Director of the CD in the Bombay High Court in Writ Petition (C) No.11610 of 2022 praying for review of the order dated 21.10.2022 as well as the Minutes. (xi) The Company Petition (IB) No.170 of 2019 was withdrawn on 10.02.2023 on settlement. The Cooperative Bank wrote a letter dated 13.01.2023 to Respondent No.1 that OTS entered with Respondent No.1 has been withdrawn and amount of Rs.87.92 lakhs paid by Respondent No.1 was returned with Bank Draft. The CD also issued an eviction notice to Respondent No.1. (xii) Respondent No.1 filed an application under Section 7 on which CP(IB)No.37 of 2023 ....
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....ord. 5. We have heard Shri Arun Kathpalia, learned Senior Counsel appearing for the Appellant and Shri Sandeep Bajaj, learned Counsel appearing for Respondent No.1. 6. Learned Counsel for the Appellant submits that Respondent No.1 had no right to enter into any OTS with Cooperative Bank to get the assignment of debt of the CD. It is submitted that Respondent No.1 under a Conducting Agreement was given possession of the Club premises to run its business, which Agreement has also come to an end in November, 2022. Respondent No.1 has not paid its conducting charges to the Club. The OTS entered by the Cooperative Bank with Respondent No.1, which is recorded in the Minutes dated 20.10.2022 before the Bombay High Court in Writ Petition No.11610 of 2022 was on the strength of illegal assignment by the Cooperative Bank in favour of Respondent No.1. The OTS letter, which was given by the Cooperative Bank was meant for the CD and Respondent No.1 has no authority or jurisdiction to accept the OTS letter, it was only conducting business from the Club premises. Under the Master-Directions Reserve Bank of India (Transfer of Loan Exposure) Directions, 2021, the Cooperative Bank could not ha....
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.... Direction of the CD as well as the application filed by the Cooperative Bank and recalled its order dated 21.10.2022 along with Minutes dated 20.10.2022. The very basis of the claim of Respondent No.1 having been knocked out, the order passed by Adjudicating Authority deserves to be set aside on the grounds as noted above as well as the order of the Bombay High Court dated 11.03.2025. It is submitted that Respondent No.1 has also filed a Special Leave Petition against the judgment of the Bombay High Court dated 11.03.2025, which SLP has been dismissed by the Hon'ble Supreme Court on 25.04.2025. It is, thus, conclusively held that assignment, which is claimed by Respondent No.1 is illegal and unlawful. It is also submitted that Respondent No.1 is not the Financial Creditor, hence, it has no right to maintain Section 7 application. 7. Learned Counsel for Respondent No.1 opposing the submissions of learned Counsel for the Appellant submits that Respondent No.1 has made payment to the Cooperative Bank and the said payment was made on behalf of the CD, the said payment is the 'financial debt', entitling Respondent No.1 to maintain Section 7 application. It is submitted t....
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....tive Bank, requested the Cooperative Bank to assign the loan along with all securities of the CD to Respondent No.1 and replace it in place of CD. (iv) The Liquidator of the Cooperative Bank and Respondent No.1 entered into a settlement, which is recorded in the Minutes of the proceedings before the Bombay High Court on 20.10.2022 in Writ Petition No.11610 of 2022. The Writ Petition was disposed of vide order dated 21.10.2022 in terms of the Minutes. (v) On 17.11.2022, Mr. Amit Kore, Suspended Director of the CD wrote a letter to the Cooperative Bank, raising objection towards the OTS entered by the Cooperative Bank with Respondent No.1 and it was also communicated to the Liquidator that Respondent No.1 has no authority to enter into any OTS and Respondent No.1 has acted with malafide and ulterior motives. (vi) The Cooperative Bank on 18.11.2022 has written a letter to Respondent No.1, informing that Respondent No.1 is ineligible for the OTS claim. The Cooperative Bank also returned the amount of Rs.87.92 lakhs by Bank Draft to Respondent No.1. (vii) In Writ Petition No.11610 of 2022, the Liquidator of the Bank and Respondent No.1 has entered int....
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....gned to Savannah Lifestyle Private Limited." 12. The basis of the application is, thus, assignment of debt of the Cooperative Bank in favour of Respondent No.1, which is recorded in the Minutes dated 20.10.2022 of the Writ Petition before the Bombay High Court. It is relevant to notice the Minutes dated 20.10.2022 in Writ Petition No.11610 of 2022, which Minutes were signed by the Liquidator of Vasantdada Shetkari Sahakari Bank and Respondent No.1. It is useful to extract the entire Minutes of the order, which is as follows: "MINUTES OF ORDER 1. The Petitioner and Respondent No. 1 and 2 have settled their disputes out of Court. 2. By an order dated 28th of July 2022, the learned Deputy Registrar (Urban Banks), Cooperative Societies, Maharashtra State, Pune, has extended the application of the One Time Settlement Scheme dated 6th of June 2022 to the Respondent No. 2 Bank. Accordingly, among other defaulters, Respondent No. 2 has offered the benefits of the same to Respondent No. 3 as also to the Petitioner since the Petitioner is in possession of the Premises. As against the actual dues of INR 8,97,73,098/- as of today, after the credit ....
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....ues Certificate" to the petitioner. In view of this, nothing survives in the petition. The petition is disposed of in terms of the Minutes of Order. 3. Leave to amend. Amendment to be carried out forthwith." 14. Section 7 application, thus, was based on the assignment as claimed by Respondent No.1 from Cooperative Bank, which is recorded in the Minutes dated 20.12.2022. There is no separate assignment or documents by the Cooperative Bank in favour of Respondent No.1. Respondent No.1 claims assignment on the basis of the Minutes of the Order dated 20.10.2022 as is pleaded in Section 7 application. 15. The CD as noted above, through its Director on 17.11.2022 immediately objected to the action of the Cooperative Bank in entering into OTS with Respondent No.1. After receiving the complaint, the Cooperative Bank communicated to Respondent No.1 on 18.11.2022 and 13.01.2023 that Respondent No.1 has been found ineligible for the OTS. The Cooperative Bank has also returned the amount paid by Respondent No.1 towards OTS, which letter is also part of the record and filed as Annexure A-26 of the Appeal. It is also relevant to notice that the Liquidator of the Cooperative Bank after h....
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....avour of Respondent No.1 as recorded in the Minutes dated 20.12.2022, which assignment was withdrawn by the Cooperative Bank informing Respondent No.1 and returning the amount received. Respondent No.1 aggrieved by the cancellation of the OTS also filed Writ Petition in the Bombay High Court. The CD was, thus, challenging the very eligibility of action of the Cooperative Bank entering into OTS with Respondent No.1. The Adjudicating Authority did not advert to the said issues and by the impugned order has admitted Section 7 application, relying on claim of assignment of Respondent No.1 on the basis of Minutes of the proceedings dated 20.10.2022. 18. The judgment of the Bombay High Court dated 11.03.2025 passed in Review Petition and IA in Writ Petition No.11610 of 2022 now recalled the order dated 21.20.2022 passed by it as well as Minutes of the proceedings dated 20.10.2022, noted in the Writ Petition. The very basis and foundation of the case of Respondent No.1, thus is knocked out. The claim of assignment of Respondent No.1 from Cooperative Bank having been held to be unlawfaul, there is no right in Respondent No.1 to claim to be Financial Creditor of the CD. By order da....
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....et of Shaila Clubs being Club premises at Bandra in Mumbai. By transfer of loan, it became mortgagee of the Club's property. On the basis of assignment of loan of Shaila Clubs in its favour, Savannah has instituted CIRP against Shaila Clubs and would ultimately realise the outstanding loan amount alienating the property of Shaila Clubs. Thus, the Minutes of Order directly affect the rights of Shaila Clubs. The objective behind RBI Directives of not permitting ineligible lender to purchase NPA is totally frustrated in the present case, where Savannah is actually eyeing to secure ownership of property under its management as mere Conductor by paying sum of Rs.3.37 crores in Shaila Clubs' loan account. The compromise effected between Bank and Savannah actually affects the interest of Shaila Clubs, who is not the signatory to the compromise. Mere presence of Advocate of Shaila Clubs before the Court on 21 October 2022 or failure on the part of the Advocate to raise any objection to disposal of the petition in view of the Minutes of Order would not convert unlawful compromise into lawful one." 19. The Bombay High Court held that compromise itself being unlawful the seal of the High C....
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....ed by relegating it to remedy of raising objection in CIRP before NCLT which does not have the jurisdiction to declare that the compromise effected through the Minutes of Order accepted by this Court is unlawful. NCLT would always treat the Minutes of Order, with seal of this Court, to be lawful. It is therefore necessary that the order dated 21 October 2022 is recalled." 20. Ultimately, the High Court recalled the order dated 21.10.2022 on the applications filed by the Cooperative Bank as well as the Review Petition filed by the CD. In paragraph 66 of the judgment, following has been held: "66) After considering the overall conspectus of the case, I am of the view that the order passed by this Court on 21 October 2022 on the basis of Minutes of Order dated 20 October 2022 deserves to be recalled both in application filed by the Bank as well as in the Review Petitions filed by Shaila Clubs and its suspended director." 21. It is relevant to notice that Respondent No.1 has filed a Special Leave Petition No.10922-10924/2025 before the Hon'ble Supreme Court, challenging the order of the Bombay High Court dated 11.03.2025, which Appeal has been dismissed by the Hon'ble Su....
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....ting Authority when a default has occurred. Provided that for the financial creditors, referred to in clauses (a) and (b) of subsection (6A) of section 21, an application for initiation corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent. of the total number of such creditors in the same class, whichever is less: Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less: Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first or second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolv....
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.... the amount paid by Respondent No.1 was to protect its possession and cannot be treated as any disbursement made to the CD. 26. In the above context, we may refer to the judgment of this Tribunal in Gp. Capt Atul Jain vs. Tripathi Hospital Pvt. Ltd. and Ors. - (2023) SCC OnLine NCLAT 366, which was relied by learned Counsel for Respondent No.1 itself, where it was held that for application under Section 7, sub-section (1), claiming to be Applicant on behalf of default of another Financial Creditor, the non-negotiable requirement is to establish himself as a Financial Creditor of the CD. In paragraph 21 of the judgment, following was laid down : "21. ..... Be that as it may, the Appellant is however required, in the first place, to establish himself as a Financial Creditor of the Corporate Debtor in terms of Section 5(7) of IBC before being allowed to take advantage of the explanation clause to Section 7 to establish default owed not only to himself as a financial creditor but to any other financial creditor of the corporate debtor on the basis of NeSL data for initiation of CIRP against the Corporate Debtor. The Appellant has clearly misconstrued the provisions of....