TMI Blog2018 (2) TMI 1718X X X X Extracts X X X X X X X X Extracts X X X X ..... Ms. Misha, Anoop Rawat and Vaijayanti Paliwal, Advs. For The Respondent : S.N. Mukherjee, Sr. Adv., Ms. Ranjana Roy Gawai, Ms. Vasudha Sen and Vivek Sibal, Advs. JUDGMENT CHIEF JUSTICE (RETD.) M. M. KUMAR, HON'BLE PRESIDENT 1. The State Bank of India is a Bank established by the State Bank of India Act, 1955. It is a Parliamentary Legislation which was to transfer all the assets of imperial Bank of India to it. The Act made various provisions with regard to the transfer and other matter connected with or incidental thereto. There are many other developments which might have taken place but in the present case we are concerned with the merger of other five subsidiaries Banks into State Bank of India namely State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State of Patiala and State Bank of Travancore. As a result of merger, the combination has become the first Indian lender bank to rank amongst the world s top 50 banks. A document with regard to merger has been placed on record of this petition. The merger has taken place w.e.f. 01.04.2017 vide notification dated 22.02.2017. The gazette Notification to this effect has been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber of the State Bank of India and other Banks merged with it in pursuance of the gazette Notification dated 22.02.2017 w.e.f. 01.04.2017. The details of disbursement as given in Annexure P/6 are as under:- DETAILS OF DISBURSEMENT MASTER FACILITY AGREEMENT OF ₹ 1000 CRORES GRANTED BY STATE BANK OF INDIA Account No. - 32904061641 Date of Disbursement Amount of Disbursement (Rs.) 23/03/2013 200,00,00,000 4/02/2013 300,00,00,000 4/03/2013 500,00,00,000 TOTAL 1000,00,00,000 MASTER FACILITY AGREEMENT FOR ₹ 4300 CRORES INTER ALIA GRANTED BY STATE BANK OF INDIA Account No. - 33727442305 (State Bank of India) Date of Disbursement Amount of Disbursement (Rs.) 18/03/2014 210,00,00,000 22/03/2014 40,00,00,000 17/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/09/2014 8,00,00,000 18/11/2014 10,50,00,000 19/11/2014 1,00,00,000 24/12/2014 19,65,00,000 27/12/2014 55,00,00,000 31/12/2014 67,00,000 23/03/2015 32,00,00,000 30/04/2015 2,33,00,000 Total 300,00,00,000 Loan Account No. - 65220217147 (State Bank of Patiala) Date of Disbursement Amount of Disbursement (Rs.) 23/12/2014 80,00,00,000 24/12/2014 25,00,00,000 27/12/2014 27,00,00,000 31/12/2014 33,00,000 23/03/2015 16,00,00,000 30/04/2015 1,67,00,000 TOTAL 150,00,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BANK OF INDIA Account No. - 35231549210 (State Bank of India) Date of Disbursement Amount of Disbursement (Rs.) 18/09/2015 25,00,00,000 19/10/2015 25,00,00,000 21/12/2015 12,50,00,000 TOTAL 62,50,00,000 Account No. - 62432752776 (State Bank of Hyderabad) 26/08/2015 12,00,00,000 21/09/2015 3,00,00,000 27/11/2015 2,50,00,000 22/12/2015 2,50,00,000 TOTAL 20,00,00,000 Account No. - 67350561209 (State Bank of Travancore) Date of Disbursement Amount of Disbursement (Rs.) 22/01/2016 3,50,00,000 22/02/2016 63,00,00,000 28/04/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000 Account No. - 65235531431 (State Bank of Patiala) 2 Date of Disbursement Date of Disbursement 30/06/2015 295,01,99,999 This account combines three (3) facilities i.e. (a) Memorandum of Agreement dated 26 December 2013 of loan for overall limit executed between erstwhile State Bank of Hyderabad to the Corporate Debtor for ₹ 100 crores; (b) Memorandum of Agreement dated 11 May 2012 of loan for overall limit executed between erstwhile State Bank of Hyderabad to the Corporate Debtor for ₹ 150 crores; and (c) Sanction limit of erstwhile State Bank of Hyderabad in Common Facility Agreement dated 27 February 2008 This account combines three (3) facilities i.e. Sanction limit of erstwhile State Bank of Patiala in Common Facility Agreement dated 27 February 2008; (b) Agreement of Loan for Overall Limit dated 23 March 2013 executed between the Corporate Debtor and the erstwhile State Bank of Patiala (structured vide Debt Structuring Agreement 5/25 scheme); and (c) Agreement of Loan for Overall Limit executed between the Corporate Debtor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Bank of Bikaner and Jaipur) Date of Disbursement Amount of Disbursement (Rs.) 20/06/2015 31,22,00,000 Total 31,22,00,000 TERM LOAN FOR ADDITIONAL BALANCING CAPEX FOR AN AMOUNT OF RS. 960 CRORES GRANTED BY STATE BANK OF INDIA Account No. - 35197383601 (State Bank of India) Date of Disbursement Amount of Disbursement (Rs.) 17/12/2015 50,00,00,000 19/05/2016 44,59,96,644 28/06/2016 6,03,91,880 Total 100,63,88,524 Account No. - 2458530729 (State Bank of Hyderabad) Date of Disbursement Amount of Disbursement (Rs.) 9/03/2016 3,39,63,823 3/06/2016 91,03,161 25/07/2016 7,58,73,690 1/08/2016 4,07,84,375 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CORPORATE LOAN OF ₹ 150 CRORES BY ERSTWHILE STATE BANK OF TRAVANCORE Account No. - 67238477555 Date of Disbursement Amount of Disbursement (Rs.) 12/08/2013 150,00,00,000 Total 150,00,00,000 CORPORATE LOAN OF ₹ 200 CRORES GRANTED BY ERSTWHILE STATE BANK OF HYDERABAD Account No. - 62295533428 Date of Disbursement Amount of Disbursement (Rs.) 10/08/2013 200,00,00,000 CORPORATE LOAN OF ₹ 100 CRORES BY ERSTWHILE STATE BANK OF MYSORE Account No. - 64127017006 Date of Disbursement Amount of Disbursement (Rs.) 25/09/2013 100,00,00,000 CORPORATE LOAN OF ₹ 75 CRORES GRANTED BY THE ERSTWHILE STATE BANK OF MYSORE Account No. - 64104161997 Date of Disbursement Amount of Disbu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g capital to the Corporate Debtor up to a total limit of ₹ 12,459 crores. The account for the said facility for running accounts with disbursal on a regular basis and the details of the same have been reflected in the statement of account, for the accounts maintained with respect to the working capital consortium agreement dated 02.03.2015 which have been separately enclosed with the application. 6. In column 2 of part IV the amount claimed to be default and the date on which the default occurred have been stated in the clear terms. According to the averments made by the Financial Creditor-State Bank of India the facility availed by the Corporate Debtor are overdue and total amount in default is ₹ 4390,75,41,611 (Indian Rupees Four Thousand Three Hundred Ninety Crores Seventy Five Lakhs Forty One Thousand Six Hundred and Eleven Only) for the Indian Rupee Loans and US$ 49,684,877 (United States Dollars Forty Nine Million Six Hundred Eighty Four Thousand Eight Hundred and Seventy Seven Only) towards the Foreign Currency Loan. The details with regard to the date, amount and the days of default with respect to the facility granted by the Financial Creditor to the Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Revival letter dated 9 December 2014 in favour of the erstwhile State Bank of Bikaner and Jaipur with respect to the Memorandum of Agreement dated 23 December 2011 for a corporate loan of ₹ 150 crores. 10. Revival letter dated 10 June 2016 in favour of erstwhile State Bank of Bikaner and Jaipur with respect to the Memorandum of Agreement dated 28 June 2013 for a corporate loan of ₹ 75 crores. 11. Revival Letter(s) dated 21 July 2016 in favour of erstwhile State Bank of Travancore with respect to the Memorandum of Agreement dated 7 August 2013 for meeting funding requirement of the ongoing normal capex for a corporate loan of ₹ 150 crores. 12. Revival Letter dated 19 September 2014 issued by Mr. Neeraj Singal for the purposes of the Limitation in favour of erstwhile State Bank of Mysore with respect to the Memorandum of Agreement dated 19 March 2012 for a corporate loan of ₹ 75 crores for part financing the normal capital expenditure at the existing manufacturing facilities. 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Erstwhile State Bank of Bikaner and Jaipur 31 March 2016 926,40,52,394.00 Pgs. 7321-7334 (Vol 38) Erstwhile State Bank of Patiala 31 March 2015 916,94,31,879.70 Pg 7335 (Vol. 38) Erstwhile State Bank of Mysore 31 March 2017 670,07,92,810.70 Pgs. 7336-7338 (Vol 38) Pgs. 7339 to 7341 (Vol. 39) Total 6525,10,25,795.63 9. In addition to the amount confirmed as reflected in the column Total the Corporate Debtor has also admitted accrued interest on this amount which could not be quantified at the time of balance confirmation. 10. It is also pertinent to mention that the Corporate Debtor in its balance sheet has acknowledged the following amounts as borrowed from the Banks: Type of loan Principal Amount (In Rupees) Interest Amount (In Rupees) Cash Credit from banks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security interest held by the Financial Creditor along with ROC record has also been placed on record (from pages 193 372). 14. There are various documents placed on record establishing authority to file the application which include authorization dated 16.06.2017 issued by the Chairman of the State Bank of India. It clearly states that in pursuance of powers conferred under Section 27 of the Bank of India Act, 1955 the Chairman authorize all the officers on whom signing powers have been conferred vide the gazette Notification dated 27.03.1987 to sign applications, reply, affidavit, counter-affidavit, sur rejoinder and generally all pleadings and file applications for initiation of Corporate Insolvency Resolutions Process before the National Company Law Tribunal, under the provisions of IBC on behalf of the Bank or in connection with any proceedings before Tribunal for or against the Bank under IBC. A reference has then be made to Regulations 76 77 of the State Bank of India (General Regulations, 1955). Regulation 77 with regard to signing the pleadings clearly stipulates that plaints, written statements, petitions and applications may be signed and verified, affidavits may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Reserve Bank of India issued on 13.06.2017 (press release). It has been highlighted that the criteria mentioned in the press release dated 13.06.2017 for initiation of Insolvency and Bankruptcy Process was two folds namely concerning all accounts with fund and non-fund based outstanding amount greater than ₹ 5000 crores and the account with 60% or more which is classified as non-performing by banks as on 31.03.2016. It has been emphasized that both the criterion had to be fulfilled before initiation of any action under the IBC. The lender banks were required to finalize a resolution plan within six months effective from 13.06.2017 in case the Corporate Debtor does not fall within the criteria mentioned. It is claimed that the Corporate Debtor does not fall within the parameters fixed by the RBI for initiation of Insolvency and Bankruptcy process. The reason disclosed is that on 31.03.2016 the outstanding amount of the Corporate Debtor classified as non-performing was less than 60%. The respondents have also referred to circular dated 26.02.2014 issued by the RBI which required the banks to identify any incipient stress in the account by creating three sub-categories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- (a) The Application lacks material particulars and the amounts claimed are unsubstantiated (i) The Applicant in Part IV, Sr. No. 2 of the Application/Form 1 has claimed an amount of ₹ 4390,75,41,611 for the Indian Rupee Loans and US$ 49,684,877 towards foreign currency loans, are in default details whereof have been sought to be provided in Annexure 7 to the Application. While the Application/Form 1 does not mention the period of alleged default, Annexure-7 states Details of default as on 30 June 2017 . Mandatory evidence to corroborate the claims made in Annexure 7 is however not provided by the Applicant. (ii) Part V, Sr. Nos. 6 and 7 of the Application, refer to record of default (Annexure 11) and detailed account statements (Annexure 12). Annexure-11 provides Report on Exposure to a Borrower with 31.03.2017 as the quarter in reference. The account statements provided in Annexure-12, on the other hand, do not refer to the period upto 30.06.2017. It is thus stated that the Applicant has failed to provide any evidence to support and corroborate its claims of purported default for the period up to 30.06.2017. Thus, in absence of the mandatory evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he borrower is limited to payment of interest only unless the facility has been closed or recalled. No such action has even been considered in the instant case. It is also relevant to note that the consortium of lenders under JLF in their meeting dated 16.03.2016 had approved Holding on operations , which means that the accounts of the borrower are not to be freezed or recalled and allowed to be continued for smooth running of operations, which aspect continued to be recorded as late as 08.06.2017, the date on which the meeting of Steering Committee of Lenders was held. Pertinently the holding on operations were never discontinued by the lenders including the Applicant. Copy of the minutes of the meetings of the JLF dated 16.03.2016 and meeting of Steering Committee dated 08.06.2017 have been placed on record (Annexures CD-11 and CD-19 marked in paras 16 (f) and 16 (q) respectively below). 22. A tabular representation of the error in treatment i.e. clubbing of working capital accounts as default amount is provided hereunder: Sr. No Description of loan/working Capital Account Pg-Reference from Application Vol. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before proceeding further, we may deal with CA No. 203(PB)/2017 filed on 17.07.2017. A copy of the application stated to have been sent to the respondent on 15.07.2017. The application prays for rectification of some errors in part IV, error in synopsis, page Nos. 5 6 of Form-1, page 142 of Annexure P/6 and Annexure P/7 to the application as specifically mentioned in para 3 of the application. A further request has been to take the amended synopsis and amended pages on record. 26. It is appropriate to mention that respondent in para 16 under the caption the application lacks material particulars and the amount claimed are unsubstantiated has raised objection to the discrepancies occurring at pages 5 and 6 of Form-1 and the discrepancy in the figures of the amount claimed to be in default and other things. 27. After hearing learned counsel for both sides on the application CA. No. 203(PB)/2017, we are of the view that the application for amendments deserves to be accepted for the reason that the application was signed on 15.07.2017 and a copy of the same was supplied to the respondent. Objection by the respondent were filed on 18.07.2017 and such objection would not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce has also been placed on the observation made in para 83 of the judgment rendered in the case of Innoventive Industries Limited v. ICICI Bank Anr. in Company appeal (AT) (Insolvency) No. 1 2 of 2017 . 31. Ms. Pallavi S. Shroff learned senior counsel for the petitioner has vehemently argued that all requirements of Section 7 for the initiation of Corporate Insolvency Resolution Process by a Financial Creditor stand fulfilled. In that regard, she has submitted that the application as prescribed by Rule 4 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 (2) of IBC has been filed with amendments. The Financial Creditor has also given the details of the merger of associate Banks which have merged with the petitioner-State Bank of India by virtue of the Notification dated 22.02.2017 w.e.f. 01.04.2017. She has further submitted that the details of the default along with the dates have been clearly stated in part IV along with all the minute details. There is overwhelming evidence available in the shape of the default and name of the resolution professional has also been clearly specified. 32. Ms. Shroff has placed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be accompanied by the prescribed fee. It is evident from the record that the application has been filed on the pro forma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. Where the Adjudicating Authority is satisfied that a default has occurred and the application under sub-section 2 of Section 7 is complete; and no disciplinary proceedings were pending against the proposed Interim Resolution Professional then the Adjudicating Authority may admit such application. In the present case, the application was filed on 05.07.2017 and even amendment was sought by C.A. No. 203(PB)/2017 on 17.07.2017. The objections and reply was filed on 18.07.2017. 35. Keeping in view the aforesaid facts it is required to be seen as to what was the amount of default and when it occurred. According to amended part IV of the application filed on Form-1 it is clearly stated that the amount in default is ₹ 4295,96,16,611 (Indian Rupees Four Thousand Two Hundred Ninety Five Crores Ninety Six Lakhs Sixteen Thousand Six Hundred and Eleven Only) for the Indian Rupee Loans and US$ 49,684,877 (United Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode one of the requirements is satisfied and secondly any objection with regard to amount would be maintainable before the Committee of Creditors. Once default in terms of Rule 3(12) of the Code is established and all other requirements are fulfilled the Insolvency Resolution Process has to be triggered. A perusal of the aforesaid para would show that by no stretch of imagination the National Company Tribunal has been entrusted with the function to determine the amount of default. The only issue for us to examine is whether in terms of Section 4 of IBC the amount of default is rupee one lac or more than rupee one lac, than requirement stand satisfied. 37. The other arguments has also not impressed us that the adequate opportunity for restructuring in terms of the policy of the RBI issued vide the press release dated 13.06.2017, master circular dated 01.07.2015, Timelines for Stressed Assets Resolution dated 05.05.2017 or framework for structuring of Stressed Assets in the economy - guidelines in Joint Lender Forum and Corrective Action Plan (CAP) dated 26.02.2014 as all such efforts are the part of external processes which are beyond the scope of the Insolvency and Bankrupt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. 40. It is made clear that the provisions of moratorium shall not apply to transactions which might be notified by the Central Government or the supply of the essential goods or services to the Corporate Debtor as may be specified is not to be terminated or suspended or interrupted during the moratorium period. 41. The Interim Resolution Professional shall perform all his functions religiously and strictly which are contemplated, inter alia, by Sections 15, 17, 18, 19, 20 21 of IBC. It is further made clear that all the personnel connected with the Corporate Debtor, its promoters or any other person associated with the Management of the Corporate Debtor are under legal obligation under ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
