TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1230
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.... 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 the Club premises. The ACMM on 22.10.2018 appointed a Recovery Offic....
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....d 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letter from Director of the CD, the Cooperative Bank on 17.11.2022 wrote to Respondent No.1 that Cooperative Bank has withdrawn its OTS.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 (xi) The Company Petition (IB) No.170 of 2019 was withdrawn on 10.02.2023 on settlement. The Cooperative Bank wrote a letter dated 13.01.2023 to Respondent No.1 that OTS entered with Respondent No.1 has been withdrawn and amount of Rs.87.92 lakhs paid by Respondent No.1 was returned with Bank Draft.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 was registered against the CD praying for initiating CIRP against the CD. The basis of the application was the assignment of the loan accoun....
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....t 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 have assigned the debt of the CD to Respondent No.1. Respondent No.1 was not eligible to receive any assignment from the Cooperative Bank. It is submitted that imme....
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....he 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 that amount having been paid by Respondent No.1 on behalf of the CD, it is a Financial Creditor. Learned Counsel for Respondent No.1, however, does not dispute that ....
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....k 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 into a settlement, which is recorded in the Minutes dated 20.10.2022, on the basis of which Writ Petition was disposed of on 21.10.2022 by the Bombay High Court. The Suspended Director of the CD filed Review Petition No.85....
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.... 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 of INR. 2,50,00,000/- by the Petitioner under orders passed by this Hon'ble Court, the Petitioner has offered to deposit a further sum of INR.87,92,000/- only. 3. Accordingly, the Petitioner has paid to Respondent No.2 amounts towards resolution of N.P.A....
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....k, 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 having taken a decision to cancel the OTS with Respondent No.1 has filed a Review Petition No.38 of 2023 in Writ Petition No.11610 of 2022 for recall of the order dated 21.10.2022 along with Minutes dated 20.10.2022. A Writ Petition No.3543 of 2024 was filed by Respondent No.1 in the Bombay High Court, challenging the cancella....
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....bility 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 dated 11.03.2025, the Bombay High Court has allowed the Review Petition filed by the Director of the CD. The judgment of the Bombay High Court dated 11.03.2025 is a detailed judgment, noticing submissions of Respondent No.1 and submissions of review Petitioner. The Bombay High Court has noticed the correspondence between the Liquidato....
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....es 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 Court on such compromise must be removed. In paragraph 58, following has been held: "58) It sought to be contended by Dr. Tulzapurkar that as far as the Bank and Savannah are concerned, the compromise is lawful as the Bank itself walked up to Savannah with an offer to settle the loan account of Shaila Clubs under OTS for an amount of Rs.77,16,350/-. It ....
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.... 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 Supreme Court by following order passed on 25.04.2025: "1. We are not inclined to interfere with the impugned judgment passed by the High Court. Hence, the Special Leave Petitions are dismissed. 2. Pending applications, if any, shall stand disposed of. 22. We may further notice that a Writ Petition No.3543 of 2024 was also filed by Respondent No.1, challenging the canc....
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....itors 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 Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second provisos as the case may be within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission. Explanation. - For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not....
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.... 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 IBC by taking shelter of Explanation to Section 7 in isolation instead of reading it harmoniously with the non-negotiable requirement of Section 7(1) of firstly establishing himself as a Financial Creditor qua the Corporate Debtor." 27. Respondent No.1 has been conducting its business from the Club premises under the Conducting Agreement. Respondent No.1 is not a Financial Creditor of the CD, so as to maintain an application as Financial Creditor under Se....