TMI Blog2018 (4) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... r has proposed for reassessment of its non-fund based limits from ₹ 2,250/- Crores to ₹ 4,220/- Crores out of which a debt of ₹ 3,100/- Cores as a non-fund based loan has been duly admitted. Since, such being position that the Corporate Debtor Companies are not able to repay its debts then, its Board of Director cannot be expected to remain in and to keep continue with the affair of managing the company. Thus as a matter of record that the Corporate Debtor Companies M/s. Rotomac Global Private Limited itself through its letter dated 14.03.2016 has admitted its loan liability to the extent of ₹ 3,100 Crores. Such being the factual position the Company is not able to repay its debts then its management cannot be expected to have a divine right to keep continue with the managing the affair of the company - petition under the I & B Code is acceptable. - CP No. (IB) 70/ALD/2017 And CP No. (IB)/ALD/2017 - - - Dated:- 27-2-2018 - MR. RAJESWARA RAO VITTANALA AND MR. RAVIKUMAR DURAISAMY, JJ. For The Applicant : Anurag Khanna, Sr. Adv. and Rahul Agarwal, Adv. For The Respondent : Navin Sinha, Sr. Adv. and Dinesh Kakkar, Adv. JUDGMENT/COMMON ORD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g other i.e. statement of accounts for the Borrower, CIBIL Report, Report of the Independent Auditor pertaining to the Borrower, Order of the Debt Recovery Tribunal (Allahabad Bench) in OA 613 of 2006. Further, the above stated documents annexed are stated as under:- (A) I. A letter from the Borrower to the financial Creditor dated March 14th, 2016 acknowledging debt owed to it under the Working Capital Consortium Agreement dated October 06th, 2015. II. A letter from the Borrower to the financial Creditor dated March 31st, 2016 acknowledging debt to the tune of ₹ 35 Crores. III. A reply of the Borrower to notice issued by the Financial Creditor under Section 13(2) of the SARFAESI Act, dated November 28th, 2016. IV. The demand Notice sent by the financial creditor to the Corporate Debtor Company Rotomac Exports Pvt. Ltd. by invoking the corporate guarantee issued by it on February 03rd, 2014 and for demanding payment to the tune of ₹ 529,25,95,650.67 (as on November 21st, 2016) in respect of loans availed by the Borrower. V. The recall letter sent by Financial Creditor to the Borrower dated May 11th, 2016. VI. A demand Notice sent by the Financial Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in 2015 as have been stated in the present applications. 3. It is stated/contended that the Applicant Bank has already initiated proceedings before the Debts Recovery Tribunal, Allahabad Bench, Allahabad vide OA No. 613 of 2016 and by the order dated 10.01.2017 (Exhibit XV0 the Debts Recovery Tribunal, Allahabad has issued a recovery certificate against the present Corporate Debtor which includes guarantors e.g. M/s. Rotomac Exports Pvt. Ltd. Furthermore, the said recovery certificate is under execution by initiating a recovery proceeding before the Recovery Officer of the DRT, Allahabad who has already issued a notice on 29.05.2017 under section 29 of the RDDBFI Act, 1993 to the Corporate Debtors. 4. It is also contended that apart the Applicant Bank has further issued notice dated 21.11.2016 under Section 13(2) of SARFAESI Act, and consequent thereto a symbolic possession has also been taken by the Bank U/s. 13(4) of the SARFAESI Act in respect of secured/mortgaged properties. 5. It is also contended that although the Debts Recovery Tribunal, Allahabad passed an order for issuing recovery certificates against the Corporate Debtor Company, but it was kind enough to gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor Company still stands categorised as a wilful defaulter. The Corporate Debtor Company Rotomac Pvt. Ltd. made such allegation that Applicant Bank took such decision deliberately despite such being facts that, it itself had participated in the JLF meeting held in Mumbai on 05.11.2016. 7. It is further contended that the loan percentage of the present Applicant-Bank is Limited only 22% of the total outstanding debts due to these Banks which comes around ₹ 2,620 Crores. 8. It is submitted that the Corporate Debtor Companies are pursuing the matter with the Lead Bank as well as the other Banks to take a decision for bringing the company back on track by preparing a resolution plan and restructuring the debts but because of filing of the present application for part amount of ₹ 500 Crores (odd), will necessarily jeopardize the process of coming for settlement with the lead bank as well as with the other banks, who are holding a stake of almost 80% of total outstanding debts. 9. It is also contended that, if one banker from the Consortium of Banks declare the borrower company as a wilful defaulter then it will necessarily fetter its restructuring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters of record or statements of fact. ii. Vide the statements made in paragraphs 6, 7, 8, 11 25, the Corporate Debtor is admitting the fact that it has availed a debt from the Applicant and that it is in default with respect to that debt. iii. With reference to paragraphs 9, 9A, 10, 13, 14, 15, 20, 22 23, it is submitted that the fact that the financial creditor has initiated proceedings before the Debt Recovery Tribunal, Allahabad Bench and it has also initiated proceeding under the Sccuritisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or that the pendency of certain proceedings before the Hon'ble High Court in Misc. Writ Petition No. 12648 of 2017, are not impediments to a financial creditor for moving an application before this Hon'ble Tribunal under Section 7 of the Insolvency Code, and in no manner affects its ability to do so. iv. With reference to the submissions made by the Corporate Debtor in paragraphs 12, 16, 17, 18, 19, 21, 22, 24 27 of the Counter Affidavit. It is replied that the fact that certain other creditors of the Corporate Debtor Companies are working on certain mechanism to fix the defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact throughout in the contents of the Counter Affidavit, the Corporate Debtor nowhere contested the claim of the financial Creditor and in fact has admitted its default clearly. During the course of hearing, this Court vide its order dated 15.06.2017 further sought for certain clarification on procedural irregularity and defects by issuing a notice under Section 7(5) of the I B Code to the Financial Creditor which has been replied through an affidavit of Mr. Chandra Shekhar Awasthi, wherein the Applicant Bank took such a plea by bringing on record a Power of Attorney dated June 19th, 2017 executed by its Power of Attorney holder Sh. Brijesh Kumar Singh by appointing authorizing to Mr. Chandra Shekhar Awasthi as an attorney to file application on behalf of the Applicant Bank against the Corporate Debtor Companies including filing of the present application i.e. CP No. (IB)70/ALD/20I7 CP No.(IB)71/ALD/2017. Thus, the Bank has duly ratified the authority of authorisation in favour of Mr. Chandra Shekhar Awasthi to sign the pleadings and to file the present application. A copy of such power of attorney dated 19th June, 2017 is placed on record along with his affidavit. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The Ld. Sr. Advocate representing the Financial Creditor drew our attention to the decision of the Hon'ble NCLAT passed in the matter of Innoventive Industries Ltd. (supra), wherein it has been held and ruled that the Adjudicating Authority on receipt of application U/s. 7(2) is required to ascertain existence of default on the basis of evidence furnished by the Financial Creditor under sub-section (3) including Joint Lender Forum. Therefore, Ld. Sr. Advocate for applicant, the Adjudicating Authority is not required to look into any other factor for consideration of admission or rejection of the present application except to as provided in the Code and on occurrence of default U/s. 7, it is immaterial for deciding the present application as to whether a prior permission of or consent from one or other authority including the JLF is obtained or otherwise. Therefore, according to him, the present application deserves for admission. In contra to this, Sh. Navin Sinha, Ld. Sr. Advocate along with Advocate Sh. Dinesh Kakkar for the Corporate Debtor Company would submit that the financial creditor was not fair enough to approach this Court because the debt owed to the Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, dated 24-3-2017] in para 27- We are further of the view that already proceedings for execution of the award have been initiated. An effective remedy has been availed by the applicant. We have not been able to accept that a party can invoke more than one remedy simultaneously. It is in fact against the fundamental principles of judicial administration to allow a party to avail more than one remedies. Ordinarily only one remedy at one time could be availed as is evident from the fundamental principles laid down in Section 10 CPC. It would promote forum shopping which is wholly impermissible in law . 13. He further placed reliance on a decision of the Bombay High Court in Company Application No. 470 of 2016 in [Company Petition No.570 (Bom.) of 2016, dated 14-2-2017] (along with group of matters) in the matter of IDFC Bank Ltd. v. Ruchi Soya Industries Ltd. wherein the Ld. Single Judge of the Hon'ble Bombay High Court took such view by observing that if 98% of the creditors in value of the total dues of respondent are agreed to oppose the winding up petition are participating in JLF's meetings to take steps for rectification and restructuring of the debts of respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilful defaulter. That apart the Hon'ble NCLT in the matter of Annapurna Infrastructure (P.) Ltd. (supra) took a view on such issue where an adjudication between the same parties is pending in a Court having jurisdiction to adjudicate upon the same and a subsequently instituted suit on the basis of same issue between the same parties cannot be allowed to proceed. While, we feel that the pendency of the suit is distinguishable from restructuring of debts or resolution plan pending under consideration before the Joint Lender's Forum. Moreover, the Hon'ble Supreme Court in the above referred recent judgment in the matter of Innoventive Industries Ltd. (supra) has ruled to set up a guidelines and pleased to issue a mandate to us by observing as such, because this is very first application that has been moved under the Code, we thought it necessary to deliver a detailed judgment so that all Courts and Tribunals may take notice of a paradigm shift in the law. Entrenched managements are no longer allowed to continue in management if they cannot pay their debts. The Insolvency Bankruptcy Code, 2016 has been passed after great deliberation and pursuant to various committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom judicial aspects. The Code also seeks to provide for establishment of the Insolvency and Bankruptcy Board of India (Board) for regulation of insolvency professionals, insolvency professional agencies and information utilities. Till the Board is established, the Central Government shall exercise all powers of the Board or designate any financial sector regulator to exercise the powers and functions of the Board. Insolvency professional will assist in completion of insolvency resolution, liquidation and bankruptcy proceedings envisaged in the Code. Information utilities would collect, collate, authenticate and disseminate financial information to facilitate such proceedings. The Code also proposes to establish a fund to be called the Insolvency and Bankruptcy Fund of India for the purposes specified in the Code. The Code seeks to provide for amendments in the Indian Partnership Act, 1932, the Central Excise Act, 1944, Customs Act, 1962, Income-tax Act, 1961, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Finance Act, 1994, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Sick Industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if nobody can save it, rather than allowing it to be squandered, the assets must be distributed - as the Joint committee has decided - in accordance with the waterfall mechanism which they have created. (Emphasis Supplied) It is now matter of record that the Corporate Debtor Company M/s. Rotomac Global Pvt. Ltd. still stands categorized as a wilful defaulter in the review/reconsidered decision dated 04.03.2017 of the Bank of Baroda/Financial Creditor by reiterating the same. Such review of its decision is made pursuant to a direction issued by the Hon'ble Allahabad High Court in the above referred writ petition which may be subject to further challenge before the Hon'ble Allahabad High Court, but the things remains still unchanged until such decision (to classify the Corporate Debtor as a wilful defaulter) is not reversed by the Hon'ble High Court or by a competent court of law. Thus, in our view, till then the Joint Lender's Forum is not in a position to work on preparation of a resolution plan, if any, in respect of the Corporate Debtor Company, nor such plan can be materialized until unless such legal disability/procedural difficulty is removed by a compet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent is obtained from one or other authority, including the JLF (Joint Lender's Forum). Further, the Hon'ble Allahabad High Court in its recent decision in the matter of Sanjeev Shriya v. State Bank of India [Writ-C No. 30285 (All.) of 2017, dated 6-9-2017] and in connected case Deepak Singhania v. State Bank of India [Writ-C No. 30033 (All.) of 2017, dated 13-7-2017] has also held that the provision of I B Code would prevail over the provisions of DRT proceedings by observing (in the relevant para Nos. 21, 24, 29, 31 32 of the judgment) as such:- 21. Section 60 stipulates that the Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof, shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate person is located. As per provisions contained under Section 60 of the IBC, 2016 the National Company Law Tribunal shall be the Adjudicating Authority for insolvency resolution and liquidation of corporate debtors and also lays down the criteria for establishing the territorial jurisdiction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid directions/observations, both the writ petitions are disposed of. By considering the abovestated legal and factual position of the present case, such objections raised by the Corporate Debtor Companies carry no force that the Applicant Bank cannot move an application under the I B Code before this Court, while the JLF is considering or has seized of the issue of resolution plan for the Corporate Debtor or the Applicant Bank filed the present petition contrary to the guidelines issued by the RBI. Because in our humble opinion such objection/contention may sound high but remedy lie elsewhere not necessarily before this Court under the I B Code. The company could take up such issue with the RBI but such action does not necessarily debar the Applicant Bank for filing present application under the I B Code before this Court nor jurisdiction of this Courts is expressly barred, if such RBI Circular/Guidelines are ignored or violated by the Applicant Bank. Moreover, M/s. Rotomac Global Pvt. Ltd. earlier itself, in its letter dated March 14th, 2016 No. RGPL/2015-16 addressed to AGM, Bank of India, Kanpur earlier has proposed for reassessment of its non-fund based limits f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the past, laws in India have brought arms of the government (legislature, executive or judiciary) into this question. This has been strictly avoided by the Committee. The appropriate disposition of a defaulting firm is a business decision, and only the creditors should make it, xxx xxx xxx xxx Speed is of essence Speed is of essence for the working of the bankruptcy code, for two reasons. First, while the 'calm period' can help keep an organisation afloat, without the full clarity of ownership and control, significant decisions cannot be made. Without effective leadership, the firm will tend to atrophy and fail. The longer the delay, the more likely it is that liquidation will be the only answer. Second, the liquidation value tends to go down with time as many assets suffer from a high economic rate of depreciation. From the viewpoint of creditors, a good realisation can generally be obtained if the firm is sold as a going concern. Hence, when delays induce liquidation, there is value destruction. Further, even in liquidation, the realisation is lower when there are delays. Hence, delays cause value destruction. Thus, achieving a high recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Insolvency and Bankruptcy Code, 2016 in respect of both the Corporate Debtor Companies. 2. That the order of moratorium u/s. 14 shall have effect from 20th September, 2017 till the completion of corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of corporate debtor under section 33 as the case may be. 3. That this Bench hereby prohibits the institution of suits or continuation of pending suit or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; 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 SARFAESI Act, 2002; the recovery of any property by an owner or less or where such property is occupied by or in the possession of the corporate debtor. 4. That the supply of essential goods or services to co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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