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2017 (2) TMI 703 - BOMBAY HIGH COURT

2017 (2) TMI 703 - BOMBAY HIGH COURT - TMI - Winding up - whether the IDBI Bank Limited, a Consortium Leader representing the consortium of 21 banks who have lent and advanced huge amounts to the respondent company can be allowed to intervene in this company petition at the stage of admission of the company petition or can be allowed to intervene only after the company petition is admitted and notice is issued for final hearing of the company petition? - Held that:- A perusal of the company appl .....

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etition and are entitled to be heard at the admission stage of this petition. Any order of admission of this petition will seriously hamper the interest of large number of lenders which are participating in the process of restructuring of the respondent company. I am thus inclined to allow the intervention application filed by the IDBI Bank Limited and permit them to intervene in the present proceedings at the admission stage. - Scope of revival - rectification and restructuring actions - He .....

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oner would not benefit the petitioner or the creditors of the respondent generally. Even if there are any chances of revival of the respondent-company which are attempted by the creditors of more than 98% in value, any adverse order passed in this petition at this stage would hamper the chances of revival of the respondent. - Powers of the Company Court under Section 539 of the Companies Act, 1956 are discretionary and have to be exercised cautiously and judiciously. In the facts of this cas .....

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dam, Senior Counsel with Mr. Pratik Sakseria, Mr. Akash Menon, Ms. Salonee Kulkarni and Ms. Suchita Jaiswal i/b Mr. Ameya Gokhale for the Petitioner. Mr. Mustafa Doctor, Senior Counsel with Mr. Naushad Engineer, Mr. Hasmit Trivedi and Mr. Lalan Gupta i/b Dhruve Liladhar & Co. for the Respondent. Mr. Sharan Jagtiani with Mr. Chandavale, Ms. Ayodhya Patki and Mr. Nilesh Bhutekar for the Applicant in Company Application No.470 of 2016 / Intervenor. JUDGMENT :-

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ment as a party respondent in Company Petition No.570 of 2016 and in the Company Application No.455 of 2016. 2. On 25th January, 2016, the petitioner sanctioned various facilities / financial assistance in favour of the respondent not exceeding an aggregate amount of ₹ 200.00 crores. On 28th January, 2016, the petitioner and the respondent executed Master Facility Agreement. It was provided in the said agreement that the petitioner had sanctioned secured over all limits of ͅ .....

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r disbursed a sum of ₹ 20.00 crores under the said Master Facility Agreement. The petitioner issued various letters of credit in accordance with the limits under the said agreement. 4. Vide a letter dated 7th May, 2016, the petitioner reminded the respondent that an amount of ₹ 20.00 crores under the short term loan facility was to be repaid by the respondent on or before 7th May, 2016, which the respondent had failed and neglected to repay and discharge its obligations un .....

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term facility of ₹ 20.00 crores, letter of credit issued for US $ 3,814,803.80 had also matured on 10th May, 2016 which the respondent had failed and neglected to repay to the petitioner. The petitioner called upon the respondent to make the said payment immediately and threatened to take necessary steps for enforcing its rights against the respondent. 6. On 12th May, 2016, the petitioner sent a reminder regarding outstanding amounts payable under the said agreement by the resp .....

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er to the respondent regarding outstanding payments and called upon the respondent to pay the said amount. 7. It is the case of the petitioner that on 16th May, 2016, a letter of credit for US $ 1,426,000 became due and payable by the respondent to the petitioner. By a letter dated 16th May, 2016, the petitioner sent another reminder to the respondent for the outstanding amount. 8. On 16th May, 2016, the respondent replied for the first time to the notices issued by the pet .....

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ment had occurred in view of the continuous defaults alleged to have been committed by the respondent and thus the petitioner was constrained to cancel all unutilized limits under the said agreement. The petitioner called upon the respondent to clear all outstanding liability and to furnish cash collateral for the balance letters of credit. There was no response to the said letter from the respondent. 10. On 19th May, 2016, the petitioner issued a statutory notice for winding up under .....

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e petitioner that on 23rd May, 2016, letter of credit for US $ 33,11,938.18 became due and payable by the respondent to the petitioner. On 23rd May, 2016, the petitioner sent a reminder to the respondent regarding the alleged outstanding amount payable under the said agreement. 13. It is the case of the petitioner that the respondent made an announcement on 21st May, 2016 through Bombay Stock Exchange that the respondent would be convening a meeting on 30th May, 2016 recommending divi .....

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r. The petitioner vide letter dated 26th May, 2016 sent a reminder to the respondent to pay various alleged outstanding amounts. 14. On 31st May, 2016, the respondent replied to the said statutory notice and reiterated what was stated by it in their earlier reply. It was alleged in the said reply that the respondent had not defaulted but there was some delay in making payments for the reasons beyond its control. It was also alleged that an additional interest charged by the petitioner .....

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me due and payable by the respondent to the petitioner. The petitioner vide its letter dated 6th June, 2016 sent a reminder to the respondent for payment of the alleged outstanding dues. On 28th June, 2016, letter of credit for US $ 2,742,957.80 became due and payable by the respondent to the petitioner. On 28th June, 2016, the petitioner sent a reminder to the respondent for payment of the alleged outstanding dues. 16. On 8th July, 2016, the petitioner filed a company petition inter- .....

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tioner invited my attention to the various documents annexed to the company petition, including the correspondence exchanged between the parties and also to the averments made in the Company Application No.445 of 2016 and more particularly in paragraph 7. He submits that the respondent has sold its stake to another company i.e. Ruchi Kagome Foods India Private Limited. Reliance is also placed on press release dated 22nd May, 2016 in support of the submission that the respondent had proposed to t .....

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come of the meetings of the Board of Directors of the respondent. He submits that the loss suffered by the respondent during the financial year 2015-2016 itself according to the said letter is about ₹ 811.70 crores. He also placed reliance on the audited report of the respondent. 19. It is submitted that since the respondent is heavily indebted and has suffered tremendous financial loss and is in process of hiving off its business to a third party, the respondent company is dee .....

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eply has no binding effect and thus no reliance thereon can be placed by the respondent against the petitioner. My attention is invited to those five circulars, which have been relied upon by the respondent in its affidavit in reply. Insofar as circular dated 26th February, 2014 i.e. Frame Work for Revitalising Distressed Assets in the Economy - Guidelines on Joint Lender's Forum (JLF) and Corrective Action Plans (CAP) is concerned, it is submitted that there is no dispute that the Joint Len .....

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the said circular are not binding upon the petitioner. He submits that the respondent is not declared as willful defaulter in view of the order passed by this Court in the company petition in favour of the respondent. He submits that none of the options available under the said circular, including (i) Corrective Action Plan, (ii) Restructuring and (iii) Recovery, are binding on the petitioner including the decisions, if any, taken by the said Joint Lender's Forum. He submits that the petitio .....

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ditors by number in the said Joint Lender's Forum would have signed Inter Creditors Agreement and not otherwise. He submits that admittedly no such Inter Creditors Agreement was signed by the petitioner and thus the decisions, if any, even if taken by 75% of the creditors by value and 60% of the creditors by number in the JLF would not be binding upon the petitioner. He submits that under clauses 3.3 and 3.4 of the said circular, no such agreement was arrived at between the JLF and the respo .....

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of the creditors by number in the Joint Lender's Forum if the lenders have not signed Inter Creditor Agreement and Debtor Creditor's Agreement. He submits that under clause 7.2 of the said circular, penalty can be imposed for committing any default by a member of the JLF only if the lender was a signatory to such Inter Creditor Agreement and Debtor Creditor Agreement. 24. Learned senior counsel appearing for the petitioner also placed reliance on the Master Circular dated 1st .....

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tor Creditor Agreement and not otherwise. He submits that the lender has to first agree to sign the agreement and to enter in the said JLF and the said Inter Creditors Agreement and Debtor Creditor's Agreement to make decisions of the said JLF binding upon the lender. He submits that the petitioner in this case totally remained outside the said JLF. It is submitted that since the petitioner was not a part of the said JLF, there was no question of the petitioner exercising any option, includi .....

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violation of the decisions taken by the JLF provided the lenders would have been the signatories to the said two agreement and those lenders would have changed their stand later or would have refused to implement the package. 27. Mr.Kadam, learned senior counsel for the petitioner placed reliance on various submissions made in the additional affidavit dated 31st August, 2016 and submits that 8 out of 11 Crushing plant of the respondent are already closed. He submits that the mark to .....

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ive of the petitioner. He submits that even if the petitioner has made any suggestion in any of the JLF meeting or had attended the said meeting, the decisions taken, if any, in such meetings of the said JLF were not binding upon the petitioner in view of the petitioner not having signed the Inter Creditor's Agreement or Debtor Creditor's Agreement, no decision taken by the said JLF could be made applicable to the petitioner. He also invited my attention to the minutes of the meeting of .....

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at even those minutes would indicate that reconstructing and rectification has failed. He submits that in the said meeting, the petitioner had made its position clear that the petitioner has already filed winding up petition against the respondent and seeks to pursue the same. 30. It is submitted by the learned senior counsel for the petitioner that since the respondent has admitted its liability towards the petitioner, the petitioner is entitled to prosecute this proceedings for wind .....

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bar against the petitioner from prosecuting winding up proceedings against the respondent. 31. It is submitted by the learned senior counsel that even under the circular dated 1st July, 2014 and more particularly clause 22.1(c), it is clearly provided that if first two options provided at (a) and (b) of clause 19.1 are not feasible, due legal process may be resorted to. He submits that as on today admittedly no reconstructing process of the respondent is formulated and finalized. Lear .....

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ems SDN Board, (2010) 10 SCC 553. He submits that even if SDR scheme as canvassed by the said JLF is pending, the company petition for winding up can still be admitted since the conditions of winding up of the company are satisfied. 32. Mr. Kadam, learned senior counsel for the petitioner placed reliance on the judgment of this Court in the case of BNY Corporate Trustee Services Ltd. Vs. Wockhardt Ltd., (2014) 187 Comp Cas 301 (Bom) and in particular paragraph on page 339 in support o .....

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nt-company are satisfied. 33. Learned senior counsel distinguishes the judgment of this Court in the case of Tata Capital Financial Services Ltd. Vs. Unity Infraprojects Ltd. & Ors. (supra) on the ground that the facts before this Court in the said judgment were totally different. He submits that admittedly no such SDR scheme was finalised in this case as on today. Learned senior counsel placed reliance on the judgment in the matter of Advent Corporation Pvt. Ltd., reported in (19 .....

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the case of Bharat Petroleum Corporation Limited Vs. National Organic Chemical Industries Ltd. & Anr., 2004 (2) Mh.L.J. 114 and thus the said judgment of this Court is per-incurium and not binding on this Court. 34. Mr. Doctor, learned senior counsel for the respondent, on the other hand, invited my attention to various averments made in the affidavit-in-reply filed by the respondent dated 23rd September 2016 and would submit that this company petition is not at all maintainable. .....

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exercise one of the options prescribed under the Circular dated 26th February 2014 and various other Circulars i.e. dated 1st July 2014, 24th September 2015 and 25th February 2016 and 13th June 2016. He submits that once the corrective action plan is accepted by 75% of the lenders in value and 50% in number, such decision is binding on all the lenders including the petitioner. It is submitted that if any lender including the petitioner does not wish to be a part of such a scheme, it is bound to .....

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aced reliance on the judgment of the Supreme Court in the case of Canara Bank Vs. P.R.N. Upadhyaya and Ors., (1998) 6 SCC 526 and in particular paragraph 11 thereof in support of his submission that the circulars issued by the Reserve Bank of India under Section 21 or 35 of the Banking Regulation Act, 1949 are statutory in nature and are required to be complied with by the banks. Mr. Kadam, learned senior counsel for the petitioner at this stage states that there is no dispute that the circulars .....

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auses 2.3, 2.6, 2.7, 3, 6.3 and 7.1 to 7.3 of the Circular dated 26th February 2014. He submits that under the said circular and more particularly under clause 2.3 thereof, since the account of the respondent was reported under the category as Special Mention Account-2, all the lenders including the petitioner were mandatorily required to form a Committee to be called JLF. He submits that under clause 2.6 of the said circular, it is mandatory for all the lenders to formulate and sign an Agreemen .....

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said circular, if the decision is agreed upon by a minimum of 75% of creditors by value and 60% of creditors by number in the JLF, the same would be considered as the basis for proceeding with the restructuring of the account and such decision agreed upon by the aforesaid number of creditors, it would be binding on all the lenders. He submits that once the decision is taken by a minimum of 75% of creditors by value and 60% of creditors by number in the JLF, all the lenders have to sign the Inte .....

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count of the borrower is classified as Non- Performing Assets (NPA). He submits that under clauses 7.1 to 7.4 of the said circular, the punitive action is provided against such lenders who change their stance and refuses to implement the package or causes delay. He submits that since the said provision contemplates for punitive action, it presupposes that other provisions provided therein are binding and are mandatory in nature. He submits that the said provision would be binding even upon the l .....

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r Agreement, there was no question of exercising any option of exit from the JLF. He submits that such Inter Creditor Agreement and Debtor Creditor Agreement have to be entered into after the decision of restructuring of the account of the borrower is decided by the JLF. He submits that the scheme framed and the decision taken by the JLF have to be made workable. The majority of the creditors have decided to form a scheme and to take steps towards restructuring of the account of the r .....

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42. In his alternate submission, the learned senior counsel for the respondent invited my attention to the averments made in the affidavit-in-reply to demonstrate that the respondent alone processes 15% of the processing capacity of India's edible oil requirements. The respondent provides nutritious and value oriented foods to over 15 crore Indian consumers through a network built over last 30 years. The respondent has 21 manufacturing units across India and plays a significant role i .....

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> 43. It is submitted that the respondent is a public listed company having more than 25000 shareholders and has received several awards and accolades. The respondent was ranked No.1 firm as per total income in financial year 2015 in the food produce sector by Dun and Bradstreet. The respondent has been featured in the list of World's top 250 Consumer Produce Companies prepared by Deloitte. The respondent has remitted an aggregate amount of ₹ 14,89,00,000/- towards its direct tax .....

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submitted by the learned senior counsel for the respondent that in so far as the order passed by the Security Exchange Board of India which has been relied upon by the learned senior counsel for the petitioner is concerned, the said order was passed ex-parte. He submits that by the said order, a show cause notice was issued to the respondent with an opportunity to file an objection which objection has already been filed by the respondent. He submits that in any event, the said order passed by t .....

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ntervention application before this Court on behalf of the consortium lenders for their working capital limits and term loan limits. He submits that only the petitioner who is not a consortium member has chosen to file the present winding up petition though had attended all the meetings of the said JLF. He submits that since 21 bankers who are consortium members and are the major secured creditors have unanimously decided to oppose the said winding up petition, this Court has to consider wishes .....

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stage. 46. Learned senior counsel for the respondent placed reliance on the judgment of the Gujarat High Court in the case of Tata Iron and Steel Co. Vs. Micro Forge (India) Ltd., (2001) 104 Comp Cas 533 and in particular paragraphs 14 and 16 to 19 in support of his submission that the winding up order shall not be made on a petition of the creditors, if it would not benefit him or the creditors of the company in general. He submits that since the respondentcompany has not become def .....

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icular paragraph 22 thereof and would submit that if there is opposition to the making of the winding up order by the creditors, the Court will consider their wishes and may decline to make the winding up order. He also placed reliance on the judgment of this Court in the case of Bharat Petroleum Corporation Limited (supra) and in particular paragraphs 2 to 6 and would submit that since an order of admission seriously affects the market position of a company, the wishes of the workers, creditors .....

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ognised by law. 48. Learned senior counsel for the respondent also placed reliance on the judgment of the Gujarat High Court in the matter of Rishi Enterprises, (1992) 73 Comp Cas 271 and in particular paragraphs 1 to 6 in support of the submission that the wishes of the workers and creditors have to be considered and the Court may decline to make a winding up order. 49. Learned senior counsel for the respondent placed reliance on the judgment of this Court in the case of Tata Capital .....

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erall economic slow down of the industries at large in India including the respondent, this Court shall exercise discretion in favour of the respondent and shall refuse to pass an order of winding up of the respondent-company. He submits that approach of the Court in this situation shall be for revival of such company and not to pass a drastic order of winding up of a company which would destroy the chances of revival if any of the company in future. He submits that it is the government policy t .....

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fraudulent sale. He submits that the respondent-company is now turn profitable. He submits that the leader of such consortium banks i.e. IDBI bank limited has already filed a separate company application inter-alia praying for intervention for opposing the present company petition filed by the petitioner. He submits that in view of opposition of the company petition by those 21 secured creditors opposing admission of the company petition, this Court shall not pass any order admitting this compa .....

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to the said JLF. He submits that total debts of the respondent towards those 21 members of the consortium is about ₹ 8593 crore. The principal amount of the petitioner is however only to the extent of ₹ 70 crore. He submits that the alleged liability of the petitioner recoverable from the respondent company is hardly 2% of the total debts of the other lenders and is at 1% of the debts of the total creditors. 52. In so far as the circulars issued by the Reserve Bank of Indi .....

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these 21 creditors have to be considered by this Court before admitting the company petition or before passing any interim order. Learned counsel also sought reliance on various judgments referred to and relied upon by Mr.Doctor, learned senior counsel for the respondent in support of the aforesaid submission. It is submitted by the learned senior counsel that the judgment of this Court in the case of Bharat Petroleum Corporation Limited (supra) is not per-incurium as canvassed by the learned s .....

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e submits that relying upon the said judgment of the Supreme Court, this Court in the said judgment in the case of Bharat Petroleum Corporation Limited (supra) has held that having due regard to the provisions of Section 557(1) of the Companies Act, 1956, the principle which has been laid down by the Supreme Court in the case of the workers must necessarily apply in the case of the creditors. 54. It is submitted that the judgment of this Court in the matter of Advent Corporation Pvt. .....

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not noticed in the judgment in the matter of Advent Corporation Pvt. Ltd. (supra). 55. It is submitted by the learned counsel for the Intervenor that the Draft Techno Economic Viability Report has been already circulated amongst the members of the JLF. An Audit Draft Report is expected by end of January 2017. He submits that further meeting of the said JLF for taking further course of action for restructuring and revival of the respondent-company would be taken by the said JLF after s .....

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would apply if any default is committed after execution of Inter Creditor Agreement and Debtor Creditor Agreement. He submits that clause 7.3 specifically provides for the consequences for non-compliance of the obligations prior to such execution of Inter Creditor Agreement and Debtor Creditor Agreement. He submits that since the said circular provides for punitive action for committing breaches of obligations of the parties, it presupposes that the compliance of the obligations under those cir .....

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said JLF. 58. The learned counsel for the Intervenor also tenders a copy of the proforma prepared by the Indian Banks' Association to show various provisions to be incorporated in the agreements to be entered into by the members of the JLF while restructuring the respondent or initiating the recovery action. He submits that the said JLF Master's Agreements have sanctity and force of law till the Inter Creditor Agreement and Debtor Creditor Agreement are signed. Such Inter Cred .....

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f execution of Inter Creditor Agreement and Debtor Creditor Agreement has not reached till date whereas, the execution of the said JLF Master's Agreement has already been completed by 18 banks out of 21 banks. It is submitted that admission of the company petition would hamper the process of restructuring of the respondent-company and thus the Intervenor thus be permitted to intervene in these proceedings and to oppose the admission of winding up of this company petition and grant of any int .....

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ment of this court in case of Tata Capital Financial Services Ltd. (supra). He submits that admittedly all the creditors of the respondent are not before this court. All the creditors whether unsecured or secured can oppose or support this winding up petition only if this petition is admitted and if the petition is advertised in accordance with the Company (Courts) Rules. He submits that the minutes of the meeting of the JLF also clearly indicates that different suggestions were given .....

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creditor would be suspended or would not be enforced if a JLF is formed. 61. Learned senior counsel for the petitioner once again led emphasis on clause 3(1)(b) of the circular and would submit that even the said provision clearly indicates that the lenders are given an option to sign the Inter Creditor Agreement or Debtor Creditor Agreement. He submits that even the said provision provides that the stand-still clause may be stipulated in the Debtor Creditor Agreement. He s .....

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ncy of the respondent clearly exists. 62. It is submitted by the learned senior counsel that since the intervenor is not entitled to be heard in this company petition at this stage, the objection raised by the intervenor cannot be considered by this court. He submits that there is no scheme formulated by JLF under implementation as on today. He submits that there is no definite proposal given by the lenders in the said JLF which can be implemented so as to restructure the respondent c .....

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suffered substantial speculation loss and have taken various steps prejudicial to the interest of large number of creditors including the petitioner by making an attempt to dispose of the valuable assets such as trade mark etc. He submits that though various steps were to be taken by the respondent pursuant to the decisions taken in the meeting held by the said JLF, the respondent has not complied with any of those suggestion given/decision taken in the said JLF meeting. He submits that since J .....

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the petitioner to wait and watch for a longer period for the outcome of the implementation of the various conflicting suggestions given by the lenders in the JLF. 65. Mr.Doctor, learned senior counsel for the respondent submits that the debt of the petitioner is only to the extent of 1% of the total debts of the creditors and 2% of the debts of the total creditors of the other banks and financial institutions who are supporting the respondent. He submits that in these circumstances, t .....

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tervene only after the company petition is admitted and notice is issued for final hearing of the company petition. The IDBI Bank Limited has filed Company Application No.470 of 2016 inter-alia praying for its impleadment as a party or in the alternate has prayed for intervention in this company petition. The petitioner has opposed the company application filed by the applicant i.e. IDBI Bank Limited on various grounds. 67. Mr.Kadam, learned senior counsel appearing for the petitioner .....

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er of winding up of the respondent company and not at this stage. 68. Learned senior counsel for the petitioner placed reliance on the judgment in the matter of Advent Corporation Private Limited (supra) and would submit that this Court in the said judgment has categorically held that the Court can pass a winding up order in the interest of shareholders and in the interest of creditors, no such enquiry however can possibly be made by the Court at the preliminary stage of admission of .....

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led to make out that he is a creditor. 69. It is the submission of the learned senior counsel for the petitioner that the judgment of this Court in the matter of Advent Corporation Private Limited (supra) was not brought to the notice of this Court in case of Bharat Petroleum Corporation Limited (supra) decided by a learned single Judge of this Court and thus the judgment of this Court in case of Bharat Petroleum Corporation Limited (supra) is per-incurium. 70. The Supreme .....

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1956 in all matters relating to the winding up of the company the Court may ascertain the wishes of the creditors. It is held that winding up order will not be made on a creditor's petition if it would not benefit him or the company's creditors generally. 71. In case of National Textile Workers' Union & Ors. vs. P.R. Ramakrishnan, (supra) the Supreme Court laid down principle that the workers are entitled to appear at the admission stage of winding up petition either t .....

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verted to the judgment of the Supreme Court in case of National Textile Workers' Union & Ors. (supra) and M/s.Madhusudan Gordhandas & Co. (supra) and has held that the circumstance that there is no rule which envisages that the creditors may be heard to oppose the admission of a petition does not interpose any bar to the Company Court even at the stage of admission in view of the clear mandate of section 557 that in all matters relating to the winding up of a company, the Court will .....

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h bank was Leader of the Consortium Banks and had advanced large amounts to the respondent company therein towards working capital facilities. The Consortium Banks had granted its in-principal approval for the acceptance of restructuring package by other members of Consortium. This Court allowed the said Consortium Leader to intervene in the said winding up petition at the admission stage. In my view, the judgment of the Supreme Court in case of National Textile Workers' Union &am .....

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an Gordhandas & Co. (supra), which are delivered subsequently. I am thus not inclined to accept the submission of the learned senior counsel for the petitioner that the judgment of this Court in case of Bharat Petroleum Corporation Limited (supra) is per-incurium on the ground that the judgment of this Court in the matter of Advent Corporation Private Limited (supra) was not brought to the notice of this Court when the judgment in Bharat Petroleum Corporation Limited (supra) was delivered by .....

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tage of final disposal, but also, depending on facts of an individual case, at the time of admission of a winding up petition. It is held that restructuring package in respect of a debt of a respondent company being under active implementation and reflecting materially on the viability of the company as also the effect of a winding up order, or even an order of admission of a winding up petition, on the implementation of such package and its effects qua the company and all the other stakeholders .....

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ion is admitted and if they are allowed to be heard only after the admission of the petition and after advertising of the petition is ordered by this Court. In my view, once the company petition is admitted and if the petition is advertised even if there are any chances of revival of the respondent company, such chances of revival would be remote. The advertisement of the petition in the newspapers and gazette may affect the reputation and business of the respondent company. It will have serious .....

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the respondent company are allowed to intervene, the Court can take a balance view after considering the wishes of major creditors, workers and contributories before even admitting such petition. I am thus not inclined to accept the submission of the learned senior counsel for the petitioner that no prejudice would be caused to the respondent company or other set of creditors if they are not allowed to intervene at the admission stage of the company petition and they can be allowed to be heard .....

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udgment of this Court in case of Bharat Petroleum Corporation Limited (supra) and has held that the secured creditors can be heard at the stage of admission of company petition and can be permitted to intervene. The said judgment applies to the facts of this case. I am respectfully bound by the said judgment. 79. Insofar as the facts of this case are concerned, it is not in dispute that the applicant - IDBI Bank Limited is a leader of Consortium of 21 banks and is authorized to repres .....

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n filed by the intervenor indicates that the working capital consortium and term loan dues of the term lenders outstanding is ₹ 8593.00 crore and ₹ 945.00 crore respectively. It is thus clear that insofar as the petitioner is concerned, the alleged liability of the petitioner recoverable from the respondent company is hardly 2% of the total debts of the other lenders and is at 1% of the debts of the total creditors. In my view, the intervenors are thus entitled to oppose this petitio .....

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e Bank of India which are relied upon by the respondent are statutory in nature and are binding on the banks, including the petitioner and are whether required to be complied with by the petitioner or not before initiating this proceeding. 81. A perusal of the circular (guidelines) dated 26th February, 2014 issued by the Reserve Bank of India on Joint Lenders' Forum (JLF) and Corrective Action Plan (CAP) indicates that the said guidelines are issued by the Reserve Bank of India on .....

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and Provisioning Pertaining to Advances and any other instructions issued in that regard from time to time. 82. In paragraph 2.1, the loan accounts are classified in three categories. Clause 2.3 provides that as soon as the account is reported by any of the lenders to Central Repository of Information on Large Credits (CRILC) as SMA-2 category, they should mandatorily form a committee to be called Joint Lenders' Forum (JLF) if the aggregate exposure of lenders in that account is .....

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led as JLF agreement incorporating the broad rules for the functioning of the said JLF. The Indian Banks Association has to prepare master JLF agreement and operational guidelines for JLF which could be adopted by all the lenders. The said JLF has to explore the possibility of the borrower setting right the irregularities / weaknesses in the account. 84. Clause 2.7 of the said circular provides that while JLF formation and subsequent corrective actions will be mandatory in accounts ha .....

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) recovery. Under clause (a), a specific commitment from the borrower is contemplated to regularize the account so that the account comes out of SMA status or does not slip into NPA category. Clause (b) of the clause 3.1 provides that such action of restructuring, the lenders in the JLF may sign Inter Creditor Agreement and also required the borrower to sign the Debtor Creditor Agreement which would provide legal basis for any restructuring process, rectification and restructuring. Clause (c) pr .....

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as the basis for proceedings with restructuring of the account, and will be binding on all the lenders under the terms inter creditor agreement. It further provides that if the JLF decides to proceed with recovery, the minimum criteria for binding decision, if any, under any relevant laws / acts would be applicable. Clause 3.4 of the said circular clearly provides that if JLF decides on options of rectification or restructuring, but the account fails to perform as per the agreed terms under opt .....

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and is a signatory to ICA and DCA, but changes their stance later on, or delays / refuses to implement the package. will also be subjected to accelerated provisioning requirement as indicated in paragraph 7.1. 88. Clause 5 of the said circular dated 24th September, 2015 clearly provides for exit option available to the lender. Dissenting lender who is not willing to participate in rectification or restructuring of an account has an option to exit their exposure completely by selling .....

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plied with by the banks is not in any doubt. It is not in dispute that the petitioner bank is also bound by the statutory circulars issued by the Reserve Bank Of India under the said provision. It is an admitted position that even according to the petitioner, the petitioner was bound to form Joint Lenders' Forum along with other lenders in view of the classification of the account of the respondent under SMA-2. It is also not in dispute that the petitioner had attended most of the meetings h .....

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nsel for the petitioner. In my view, since the formation of JLF was mandatory, all corrective action plans were required to be explored by the said JLF such as rectification or restructuring etc. It is not in dispute that percentage of the creditors by value and percentage of creditors by number in JLF as required under clause 3.2 have been participating in the said JLF, including the petitioner. Several suggestions have been given by the members of the said JLF, including the petitioner towards .....

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idered, the commitment from the promoters for extending their personal guarantees along with declaration that they would not undertake any transaction, that they would not alienate assets without the permission of the JLF and simultaneously any deviation from the commitment by borrowers affecting the security / recoverability of the loans would be treated as a valid factor for initiating recovery process for any such action to be sustainable, the lenders could sign an Inter Creditor Agreement an .....

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the JLF would not be binding upon the petitioner. 93. A perusal of the said circular also indicates that the said circular further provides that if any lender including the petitioner does not wish to be a part of such a scheme, it is bound to sell its exposure to another lender. In my view, the learned senior counsel for the respondent is right in his submission that under the said circular, it is not open to the dissenting lender to continue with its existing exposure and simultaneo .....

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es for punitive action against such lenders who change their stance and refuses to implement the package or causes delay which itself indicates that the said circular is binding upon the petitioner. 95. A perusal of the circular dated 24th September 2015 issued by the Reserve Bank of India clearly indicates that the said circular was issued in continuity of the circular dated 21st October 2014. In paragraph 5.2 of the said circular dated 24th September 2015, it is clarified that it ha .....

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y by selling their exposure to a new or existing lenders within the prescribed timeline for implementation of the agreed CAP. 96. It is provided that the exiting lenders will not have the option to continue with their existing exposure and simultaneously not agreeing for rectification or restructuring as CAP. The new lender to whom the exiting lender sells its stake may not be required to commit any additional finance, if the agreed CAP involves additional finance. It is further provi .....

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until the lenders are signatories to the Inter Creditor Agreement and the Debtor Creditor Agreement, the decision taken by the JLF for restructuring or for any other steps against the company is not binding is concerned, in my view, the said provision cannot be read in isolation. The Court has to consider and interpret all the provisions of the circular so as to give true and correct meaning thereof and has to interpret the circulars harmoniously. 98. In so far as the submission of th .....

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itioner. A perusal of the above referred circular clearly indicates that none of the circulars compel the banking companies to reduce its claim or not to initiate their proceedings against the borrower. 99. A perusal of the circular dated 26th February 2014 and subsequent circulars referred to aforesaid which are in continuity with the said circular indicates that all the banks which are governed by the said circular have to form JLF, all the lenders will have to monitor the asset qua .....

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. It is thus clear that the petitioner which is also a banking company and forming part of the said JLF can also adopt the appropriate legal steps as and by way of recovery process that may be decided by the said JLF only after corrective action plan i.e. Rectification and Restructuring are not found feasible. In my view, the petitioner thus independently cannot adopt any recovery process being part of the said JLF unless the process of rectification and restructuring are found not fe .....

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covery process in terms of clause 3.1 (c) of the said circular dated 26th February 2014 is taken by the said JLF. The petitioner independently cannot adopt any proceedings during the on going process of rectification and restructuring being proceeded with or being under consideration by the said JLF. 101. If the petitioner is allowed to proceed with the recovery process by adopting this winding up petition at the stage when the process of rectification and restructuring is being decid .....

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e of Sudhir Shantilal Mehta Vs.Central Bureau of Investigation, (2009) 8 SCC 1 has held that having regard to the fact that the Reserve Bank of India exercises control over the banking companies, the said circular issued by the Reserve Bank of India was binding on the banking companies. A similar view has been also taken by the Supreme Court in the case of Sardar Associates and Ors. Vs. Punjab and Sind Bank and Ors., (2009) 8 SCC 257. The Supreme Court has adverted to its judgment in the case of .....

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erioration and prejudice as also to secure the proper management of any banking company generally. 103. It is held that the Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is held that the Reserve Bank of India has been issuing directions/circulars from time to time which, inter alia, deal with the rate of interest which can be charged and the periods at the end of which rests can be struck down, interest calculated thereon and charged and capita .....

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irculars/directives issued by the Reserve Bank of India from time to time for implementation of those directives by various banking companies are statutory in nature and are binding on all the banking companies including the petitioner. 104. In so far as the judgment of this Court in the case of BNY Corporate Trustee Services Ltd. Vs. Wockhardt Ltd. (supra) relied on by Mr.Kadam, learned senior counsel for the petitioner is concerned, this Court while considering the CDR scheme has he .....

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nd proved in that behalf. In my view, the said judgment would not assist the case of the petitioner. The CDR scheme was not binding on the creditors whereas, the circulars/directives issued by the Reserve Bank of India under the provisions of the Banking Regulation Act, 1949 read with the Reserve Bank of India Act, 1934 are statutory in nature and are binding. 105. In this case, it is not in dispute that the JLF has already been formed pursuant to the circular dated 26th February 2014 .....

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a Capital Financial Services Ltd. Vs. Unity Infraprojects Ltd. & Ors. (supra) has distinguished the judgment of this Court in the case of BNY Corporate Trustee Services Ltd. Vs. Wockhardt Ltd. (supra) in view of the further steps taken by the creditors to revive the borrower-company. This Court has dismissed the company petition for winding up against the borrower-company. In my view, the judgment of this Court in the case of Tata Capital Financial Services Ltd. Vs. Unity Infraprojects Ltd. .....

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f the Companies Act, 1956 in all matters relating to the winding up of the company, the Court may ascertain the wishes of the creditors. It is held that the wishes of the shareholders are also considered though the Court may attach greater weight to the views of the creditors. It is further clarified that the wishes of the creditors will however be tested by the Court on the grounds as to whether the case of the persons opposing the winding up is reasonable; secondly, whether there are matters w .....

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t of the Supreme Court in the case of M/s.Madhusudan Gordhandas & Co. (supra). 108. This Court in the case of Tata Capital Financial Services Ltd. Vs. Unity Infraprojects Ltd. & Ors. (supra) has held that it was true that there was no defence to the debts of the petitioner and there was a clear case of deemed inability to pay it on the part of the company, but that does not mean that the Company Court is obligated to admit a winding up petition. It is held that advisability of .....

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at merely because any one of the circumstances enumerated in section 433 of the Companies Act exists, the court is not bound to order winding up of the company. Nobody can aspire to wind up the company as a matter of course. The court has wide power and discretion. It is held that inability to pay debts is required to be judged from various sets of facts and circumstances. It is held that inability to pay debts in all cases, ipso facto, could not be construed as an appropriate case fo .....

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pay its debts for a while, but that by itself is not a criterion for exercise of the power to wind up, ipso facto. 111. It is held by the Gujarat High Court in the said judgment that even dividend declared by the company regularly and having profit in the light of the profit and loss account, though temporarily, there may be inability to pay the debt or in the case of any eventuality, the company is unable to make the payment of dues, that by itself could not be construed as a ground .....

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t is also necessary to consider whether the respondent-company has become defunct or has closed its business, for quite some time, whether it is commercially insolvent. For the purpose of finding commercial insolvency, a mere look into the financial data is relevant to examine about its soundness. It is held that a winding up petition is not a legitimate means of seeking to enforce the payment of a debt which is disputed by the company, bona fide and ought not to be aimed at pressurising the com .....

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ent has exclusive access to 55000 hectares of land planted with palm plantations under the Oil Palm Plantation Programme sponsored by Government of India in several States. The respondent is a public listed company having more than 25000 shareholders. 113. It is the case of the respondent that the respondent was ranked No.1 firm as per total income in financial year 2015 in the food produce sector by Dun and Bradstreet. The respondent has been featured in the list of World's top 2 .....

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ndent that it employs 8325 persons and has paid all its employees their wages. The total wages paid in the Financial Year 2015-2016 aggregates to ₹ 2,11,37,00,000/-. The respondent also claims to have paid dividend till last year. The petitioner has not seriously disputed the aforesaid details asserted by the respondent. 114. In these circumstances, when 98% of the creditors in value of the total debts of the respondent have agreed to oppose this petition for winding .....

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es of revival of the respondent-company which are attempted by the creditors of more than 98% in value, any adverse order passed in this petition at this stage would hamper the chances of revival of the respondent. This Court has to consider the wishes of large number of the creditors who are seriously opposing the winding up of the respondent as against the desire of the petitioner who is claiming about 1% of the total debts of the respondent and seeks to pursue this winding up petit .....

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