TMI Blog2019 (5) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Hon ble Supreme Court, that a debt is an asset in the hand of the bank/lender and NPAs are accounts receivable are treated as NPA. A Bank can always transfer its assets and such transfer (of its debts) and it no manner affect the right or interest of the borrowers. There is no prohibition in the Bank Regulation Act to the bank transferring its assets inter-se nor it can be said the bank are trading in debts. Therefore, such objection of the Respondents in respect of maintainability of the present petition are not legally sustainable; hence is rejected. Procedure under Section 7(5) of the IB Code - The objections raised by the Corporate-Debtor are not legally sustainable in the eyes of Law, as we found that the Corporate Debtor is taking contradictory stands which amount approbate and reprobate on some facts and conditions which not permissible in the eye of the Law. It is also found that clarification as sought for by this Bench by its order dated 19.11.2018 is properly answered and stands satisfied through affidavit of Mr. Nishith Doshi annexing with letter of authority of December, 2018 and other documents. Therefore, it is established that the Corporate Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the corporate debtor under the registered deed of assignment whereby its stands substituted in place of the original lenders viz. State Bank of India, State Bank of Indore and State Bank of Saurashtra and accounts of the corporate debtor are maintained with the ARCIL. It is further stated that since the accounts are not maintained with any other bank, the Bankers Books Evidence Act, 1891 is not applicable. In support of such contention, the applicant company has submitted certified copy of the statement of accounts as maintained by it for the corporate debtor for the period from the date of default to 18.10.2017, (marked Annexure - 5 to the present application), apart from all other documents. 5. The present LB. Petition is filed in respect of alleged default of Debt for amount of ₹ 337,55,92,367/- along with interest as on 2003 when such default was committed by the Corporate-Debtor in making repayment of the loan advanced it as a result, its account came to be declared as NPA w.e.f. March, 2004. However, as per the total dues summary as on 10th November, 2017, (as reflected at page No. 427-428 of the present application), the outstanding due is of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assignment dated 29.03.2006 between State Bank of India and Standard Chartered Bank is annexed with the reply of the respondent marked as Annexure R-1. 9. In its reply, corporate debtor has further stated that Standard Chartered Bank had acquired the debt of the corporate debtor from State Bank of India in the year 2006 through deed of assignment dated 29.03.2006 representing themselves as Asset Reconstruction Company (ARC) registered under the SARFAESI Act, 2002 and having licence to do the business of ARCs in India. Relevant para of said debt assignment agreement is reproduced below: - Para 5 - Purchases s Representation and Warranties (a) The purchaser is a limited liability company, duly organized, validly existing and in good standing under the laws of India, has obtained a certificate of registration as Securitisation and Asset Reconstruction Company from the Reserve Bank of India, pursuant to section 3 of the SARFAESI and is duly qualified and licensed to do business in each jurisdiction in which the charter of its properties of the nature of its activities requires such qualifications; 10. It is the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not exceeding fifteen per cent of total financial assets acquired or to be acquired by the securitisation company or reconstruction company as the Reserve Bank may, by notification, specify; Provided that the Reserve Bank may, by notification, specify different amounts of owned fund for different class or classes of securitisation companies or reconstruction companies; Provided further that a securitisation company or reconstruction company, existing on the commencement of this Act, shall make an application for registration to the Reserve Bank before the expiry of six months from such commencement and notwithstanding anything contained in this sub-section may continue to carry on the business of securitisation or asset reconstruction until a certificate of registration is granted to it or, as the case may be, rejection of application for registration is communicated to it. 13. This shows that rights and entitlement of the Standard Chartered Bank acquired by it through deed of assignment dated 23.03.2006 are defective, illegal and bad in the eyes of Law. As the Standard Chartered Bank acquired the financial assets from State Bank of India which can only be acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capacity of POA holder. It is important to note that this POA is having three pages and all the pages has been signed by POA holder only and there is no signature of any person in the capacity of Executor of this POA. Two other persons have signed this POA at third page of POA by making their signature across to their photographs for the purpose of identification that affixed photographs belong to them and cross sealed by notary. More particularly, text printed over there claiming that aforesaid two persons affixed their signatures as a token of affixation of common seal at the POA in their presence. In first two pages of POA are signed by one person i.e. holder of POA, unable to locate any signature of any other person on said first two pages. 15. It is stated that this POA is a specific and limited POA for the purpose of the Negotiable Instruments Act, 1881 only and holder of this POA cannot act on behalf of the financial creditor under IBC of 2016. Moreover, IBC requires specific authorisation for initiation of proceeding on behalf of the financial creditor. 16. It is stated that, it is clear from the POA attached by the financial creditor that firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest @ 22% per annum compounding on monthly basis and corporate debtor was not left with any other option other than accepting such terms and conditions. 21. That, the corporate debtor is a sick industrial unit and reference of the same is already registered with BIFR since 2006. Corporate debtor is carrying out business of textile and at present approximately 120 persons are employed in the business of the company. 22. That, the sanction letter shows that there is monthly repayment schedule agreed between the parties and amount of liability is also quantified. This sanction letter for settlement of dues is not disclosed by the financial creditor to this Tribunal. This was the basic understanding between the parties and non-disclosure of same tantamount to concealment of material information on the part of the financial creditor. 23. Further, the Corporate-Debtor has paid an amount of ₹ 7,27,15,000/- to Financial Creditor till the date and this amount include ₹ 2,00,00,000/- towards principle amount and ₹ 5,27,15,000/- towards interest. 24. Further, both the parties have entered into new settlement on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor Company. 28. We further considered other objections raised in the reply of the Corporate Debtor. It is brought to notice of this Court that the original loan was advanced to the Corporate-Debtor-Company by the State Bank of India. Such debts were further acquired by the Standard Chartered Bank in the year 2006 through a deed of assignment dated 29.03.2006. It is further stated that the above stated debt along with right and entitlement of Standard Chartered Bank were further assigned to the present Financial Creditor M/s. Asset Reconstruction Company India Limited by its deed of assignment dated 23.03.2006. 29. It has been alleged by the Corporate-Debtor that the above stated assignment of debt by the Principal Lender - State Bank of India to the Standard Chartered Bank and further from Standard Chartered Bank to the present Financial Creditor is not valid and bad in the Law because as per the Corporate Debtor, the Standard Chartered Bank was not registered with as an Asset Reconstruction Company under the SARFAESI Act nor it was having a valid licence for business of ARCs by registering with the Reserve Bank of India ( RBI for short); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the assignee i.e. Kotak Mahindra Bank Ltd. According to the borrower(s), an assignment of a debt can never carry with it the assignment of the obligations of the assignor unless there is a novation of the contract by all parties. Therefore, according to the borrower(s), the impugned deed of assignment is legally unsustainable without novation of original contract between ICICI Bank Ltd. (assignor) and the borrowers) (assignee). We find no merit in the above arguments. 46. As stated above, an outstanding in the account of a borrowers) (customer) is a debt due and payable by the borrowers) to the bank. Secondly, the bank is the owner of such debt. Such debt is an asset in the hands of the bank as a secured creditor or mortgagee or hypothecates The bank can always transfer its asset Such transfer in no manner affects any right or interest of the borrowers) (customer). Further, there is no prohibition in the BR Act, 1949 in the bank transferring its assets inter sc. liven in the matter of assigning debts, it cannot be said that the banks are trading in debts, as held by the High Court(s). The assignor Bank has never purchased the debt(s). It has advanced loans ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase needs to be quoted: The assignment of a debt will not be contrary to public policy solely on the grounds that the assignee has purchased the debt for a considerably discounted price or because that price is only payable after a period of credit. Nor will the assignment be contrary to public policy simply because the assignee may make a profit on the transaction at the end of the day. If there was no prospect of a profit, Hobhouse, LJ. observed, commercial entities would never purchase debts. 50. Similarly, the following proposition in Chitty on Contracts, 27th Edn (1994) at Para 19.027 Is relevant to he noted: It is also well established that a claim to a simple debt is assignable even if the debtor has refused to pay. The practice of assigning or selling debts to debt collecting agencies and credit factors could hardly be carried on if the law were otherwise. 51. In view of the above exposition of law, we find that under the impugned deed of assignment only the account receivables in the hooks of ICICI Bank Ltd. has been transferred to Kotak Mahindra Bank Ltd, the obligations of ICICI Bank Ltd. towards I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration of other issues raised in this batch of cases. Subject to above, the impugned judgment(s) is set aside and the civil appeals are allowed with no order as to costs. 32. By following the above stated preposition, we do not find substance in the objection of the Corporate-Debtor with regard to the assignment of debt by the State Bank of India to the Standard Chartered Bank and further to the present Financial-Creditor. We are of the view that even assuming so that the Standard Chartered Bank was not registered under the SARFAESI Act nor having license to business of ARCs in India being registered with the RBI, there can be no bar for assignment and transfer of the debt by the Principle Lender to another bank or to a financial institution for enforcing/recovery of such debt as per the above decision of the Hon ble Supreme Court, that a debt is an asset in the hand of the bank/lender and NPAs are accounts receivable are treated as NPA. 33. Before reaching to above stated conclusion, this Bench felt expedient to know the stand/comments of the R.B.I, on the legality and validity of the above stated assignment. Hence, issued a notice to the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well-settled. The Hon ble NCLAT in the matter of Ranjit Kapoor v. Asset Reconstruction Company (India) Ltd. [Company Appeal (AT) (Insolvency) No. 410 of 2018, dated 13-6-2018 in (IB)-160(PB)/2018] has pleased to observe and held as such: 5. We find that there are two Assignment Agreements, one dated 21st July, 2014 and the other dated 17th April, 2015 executed in favour of the Respondent. For initiation of Corporate Insolvency Resolution Process, the Respondent-Financial Creditor relied on the Assignment Agreement dated 17th April, 2015. The Corporate Debtor has not disputed the fact that there is a debt due in Law and fact and they defaulted in paying the dues. It is not the case of the Corporate Debtor that there is no debt in law or in fact. 6. The question whether the Assignment Agreement dated 17th April, 2015 is genuine or not cannot be looked into by the Adjudicating Authority while deciding the application under Section 7 or by this Appellate Tribunal, till the Corporate Debtor alleges the same and raise the objection under Section 65 of the Code. No such plea has been taken by the Corporate Debtor before the Adjudicating Authority allegin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lid assignment in favour of Financial Creditor in light of DRT order. 9. The counsel for the Respondent submits that the petitioner has not placed any board resolution on record authorizing the petition to be filed and relying on the judgment in Palogix Infrastructure Private Limited v. ICICI Bank Limited in Company Appeal (AT) (Insol.) No. 30 of 2017 the present petition is not maintainable. The counsel for the Respondent submits that the said Assignment Deed is executed on 28.03.2014, however, the said Deed relies upon an authority letter dated 23.07.2014 authorising Mr. Amit Kedia to enter into the Assignment Deed which was executed prior in time to the authorisation. It is further alleged that the Financial Creditor fraudulently suppressed an alleged Authorisation executed by the Creditor in the year 2011 authorising Mr. Kedia to enter into such Assignment Deed and that a copy of the same is not provided to the Respondent for examining its validity and therefore the same is forged and fabricated. 10. The counsel for the Respondent has also argued that the petition is time barred as being filed beyond the limitation period of three years from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of provisions of IBC, 2016. 35. By considering the above stated stand taken by the R.B.I. by placing reliance on the above stated judicial precedents, it cannot be held such that transfer of debt or NPAs inter-se between banks is not permissible in the Law. Therefore, a Bank can always transfer its assets and such transfer (of its debts) and it no manner affect the right or interest of the borrowers. There is no prohibition in the Bank Regulation Act to the bank transferring its assets inter-se nor it can be said the bank are trading in debts. Therefore, such objection of the Respondents in respect of maintainability of the present petition are not legally sustainable; hence is rejected. 36. This Bench, in its subsequent order dated 27.11.2018 also felt expedient to call for some more information/clarification from the Applicant/Financial Creditor by issuing a notice under Section 7(5) of the Act, in respect of power of attorney holder of the applicant bank as well as its authorised signatory, who has signed the present IB. Petition. In the light of Hon ble NCLAT decision in the matter of Palogix Infrastructure (P.) Ltd. v. ICICI Bank Limited (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther evidence submitted by the financial creditor, suffers from non-application of mind given the apparent and conspicuous mismatch between the amount demanded by the Respondent from the Appellant in its demand notice dated 6th February 2017 and the amount stated to be in default in the said application ................. 20.4 Lastly, the adjudicating authority has reached a conclusion at paragraph 9 of the impugned order that it is satisfied that the Appellant has committed a default of ₹ 27.77 crores, which finding is not only perverse, but also is contrary to the very application of the Financial Creditor itself in complete disregard to the apparent and conspicuous mismatch between the amount demanded by the Financial Creditor from the Appellant-Corporate Debtor in its demand notice dated 6th February, 2017 and the amount stated to be in default in the said application. 21. Showing an incorrect claim, moving the application in a hasty manner and obtaining an ex-parte order from the adjudicating authority which admitted such an incorrect claim, the Financial Creditor cannot disprove its mala fide intention by stating that the claim s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important This it must do within 14 days on the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y letter is duly supported by a power of attorney executed by the Managing Director and Chief Executive Officer ( CEO for short) and the Company Secretary of the Applicant Company pursuant to the resolution passed by the Board of Directors dated 24.07.2000 and 21.04.2015. A copy of such Board Resolution has further been annexed. 42. By considering above given facts and documents produced we are of the view that, clarifications as sought for by this Adjudicating Authority in terms of Section 7(5) are satisfied. 43. The applicant, through the above mentioned affidavit has also pointed out that at one point of time, the Corporate Debtor had not only admitted its debts, liability but also sought for a settlement. Pursuant thereto, the Financial-Creditor wrote a letter dated 10.11.2016 to the Corporate-Debtor accepting its request of settlement of entire dues by making payment of ₹ 16.50 Crores. Such amount was required to be paid in part in four instalments in order to show bona-fide towards the settlement. The Corporate-Debtor had also issued some cheques of ₹ 2.65 Crores in the favour of the present applicant; which were reported to be disho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Furthermore, the question as to whether the respondent has waived its contractual right to receive the amount or is otherwise estopped from pleadings otherwise, will itself be a fact which has to be determined by the Arbitral Tribunal. 37. In Halsbury s Laws of England, 4th Edn. Vol. 16 (Reisuue), Para 957, at p.844 it is stated: On the principle that a person may not approbate and reprobate a special species of estopped has arisen. The principle that a person may not approbate and reprobate expresses two propositions: (1) That the person in question, having a choice between two courses of conduct is to be treated as having made an election from which he cannot resile. (2) That he will not be regarded, in general at any rate, as having so elected unless he has taken a benefit under or arising out of the course of conduct, which he has first pursued and with which his subsequent conduct is inconsistent 44. In the light of above well settled legal preposition, we are of the view that the objections raised by the Corporate-Debtor are not legally sustainable in the eyes of Law, as we found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV. The order of moratorium shall have effect from the date of such order till the compilation of the corporate insolvency resolution process. 49. This Adjudicating Authority, hereby appoints Mr. Sudip Bhattacharya, Resident Address: 903, Queensgate, Hiranandani Estate, Off. G B. Road, Thane (West) - 400607, E-Mail ID: resolutionsudip@gmail.com, (having Insolvency Professional Registration. No.; IIBI/IPA-003/IP-N00080/2017-18/10703) as an Interim- Resolution-Professional. The Interim-Resolution- Professional is further directed to make public announcement of moratorium in respect of Corporate- Debtor-Company soon after receipt of an authenticated copy of this order and to act further as per the order/direction issued by this Adjudicating-Authority and to follow the provisions Section 13 and 14 and relevant provisions of the Insolvency and Bankruptcy Code. 50. An authentic copy of this order be communicated by the Petitioner as well as by this Registry to the Corporate-Debtor-Company, as well as to the Interim-Resolution-Professional and the Registrar of Companies at the earliest. 51. The present IB-Petition is disposed of accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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