9911796707
TMI Blog2018 (7) TMI 1983X X X X Extracts X X X X X X X X Extracts X X X X ..... 6391 and its registered office is at Bharatgarh Road, Nalagarh, District Solan, Himachal Pradesh-174101. Therefore, the matter lies within the territorial jurisdiction of this Bench of the Tribunal. 2. It is stated that the respondent is engaged in the business of manufacturing of cotton yarns, polyester yarn and blended yarn from cotton and polyester fibre and that on the request of the respondent, The Hongkong and Shanghai Banking Corporation Ltd. (hereinafter referred as HSBC) granted working capital and term loan facilities to the respondent vide sanction letter dated 24.03.2009 for an amount of Rs. 129,02,00,000 for a period of 60 months and the respondent and HSBC entered into a Crporate Rupee Loan Facility Agreement dated 08.04.2009, wherein all the terms of the loan agreement were set in and the respondent also executed deed of hypothecation and memorandum of entry in favour of HSBC to secure the loan, stipulating therein all the conditions regarding the creation of charge on moveable and immoveable properties of the respondent in favour of HSBC. It is submitted that due to defaults committed by the respondent in repayment of the loan amount, the account of the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition are supported by affidavit of the authorised representative of the petitioner, namely; Gurleen Chhabra, one of the authorised person as per Board resolution dated 20.09.2017 of the petitioner (Annexure-I (c) of the petition). A copy of the petition is also stated to be sent to the respondent by speed post on 01.02.2018. 5. Notice of this petition was issued to the respondent. The respondent contested the petition by filing a written reply. It is stated that the petition is an exercise in fraud practised upon the respondent by the petitioner and its alleged assignor, HSBC and that the assignment purported to be undertaken by HSBC in favour of the petitioner was not only against the agreements between the respondent and HSBC but also against the guidelines of the Reserve Bank of India (RBI) and as such the purported assignment was illegal, malafide, fraudulent and undertaken by HSBC with ulterior motives in connivance with the petitioner and there is no debt owed to the petitioner which can sustain the present application. It is averred that the respondent was incorporated in September, 2000 and gained good reputation in the textile industry and to support its business it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 (Annexure R-4) (colly) of the reply). 7. It is then submitted that the last payment of interest (before the purported illegal assignment to the petitioner on 21.03.2012) was made to HSBC by way of draw down from the HSBC SBLC on 15.02.2012 which was against the interest over dues for the month of November, 2011 to January, 2012. It is submitted that all of a sudden, without warning, without notice and without any hint of proposed action, the respondent received a letter dated 23.03.2012 from HSBC through e-mail on 26.03.2012, stating that HSBC had assigned the HSBC loan to the petitioner and that through e-mail on 27.03.2012, it was informed by HSBC that by way of a deed of assignment dated 21.03.2012, executed between HSBC and the petitioner, the HSBC loan, "alongwith the underlying financial documents and the security interest (other than the SBLC and the rights arising thereunder)" has been assigned to the petitioner. It is stated that details of specific transaction dated 22.03.2012 in the "demand deposit transaction history" of the respondent showed a receipt of Rs. 81,25,08,408 as "(PROCEEDS UNDER GTY FROM HSBC MAR)" (transaction dated 22.03.2012), was asked from HSBC by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in January, 2016, the promoters of the respondent company filed a restoration application against the dismissal of the promoter's suit alongwith an application for condonation of delay and that the delay in filing restoration application has been condoned and the restoration application was listed for 07.04.2018. 9. As regards notice under section 13 (2) of the SARFAESI Act, appeal is stated to be filed before the DRT objecting to the classification of the respondent's account as NPA and assailing the validity of the assignment deed. As regards recall notice of the petitioner issued on 19.01.2016, it is stated that this was duly responded to by the respondent on 17.02.2016 reiterating its objections to the impugned assignment and similar objections were also taken with reference to O.A. under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 filed by the petitioner on 07.06.2016. It is further stated that meanwhile, in 2015 the GLAM sold its 44.44% shares to one ADAL Media Pvt. Ltd. in 2015. It has been submitted that HSBC was in a great hurry to somehow classify the respondent's account as NPA and then surreptitiously assigned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 09.05.2018. When the matter was listed on 09.05.2018 this Tribunal also issued notice of defect regarding non-enclosure of ledger extract Annexure-A to the assignment deed dated 21.03.2012. The compliance was made by diary No.1575 dated 15.05.2018 and order of the BIFR in case No.50/2011-M/s GPI Textiles Ltd. for hearing on 20.04.2012 was also filed. The compliance was noted in this Tribunal's order dated 23.05.2018 and the arguments were heard. 11. During the course of the arguments, learned counsel for the petitioner has contended that as per Section 7(5) (a) of the Code, the Adjudicating Authority is required to satisfy itself regarding default; application under Form 1 is complete; and there are no disciplinary proceedings against the Interim Resolution Professional. It was argued that as per Article V of the Corporate Rupee Loan Facility Agreement dated 08.04.2009 between the respondent and HSBC (Annexure-IV (b) of the petition reference to BIFR would constitute an event of default and that it is also provided that not acting on the event of default will not constitute the same as having been condoned by HSBC, unless specifically communicated by HSBC. It was argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff date of the principal is mentioned as on 20.03.2012 and the cut off date for the interest due is on 19.03.2012. Therefore, it is pleaded that in respect of entry for transfer of amount of Rs. 81.25 crores dated 22.03.2012 in the demand deposit transaction history, the borrower cannot take any benefit of any accounting entry subsequent to the cut off date and the posting of such entries is the sole domain of the assignor. As regards the entry of Rs. 50 crores on 22.03.2012 in the demand deposit transaction history, the same is stated to relate to the consideration which was paid by the petitioner through RTGS to HSBC in lieu of the assignment agreement. As regards the reliance by the respondent on the objections to assignment by SBI, it was pleaded that there was no consortium loan and the assignment of debt does not cause any change qua the status of SBI as another secured creditor and the fact remains that the respondent has not even repaid the debts of SBI which is around Rs. 100 crores. The learned counsel for the petitioner has relied on the judgement of ICICI Bank Ltd. v. Official Liquidator of APS Star Industries Ltd. [2010] 10 SCC 11 in which it was stated that NPAs are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance of SBLC and its criticality. It is pleaded that it was incumbent on HSBC to take recourse to SBLC and clear the default and this was also the practice followed by HSBC when they used to draw down the monthly interest from SBLC (in case of non-payment of by the respondent on the due date), without reference and without notice to the respondent. It is pleaded that the sequence of events show that the assignment was pre-meditated and NPA was declared and entire loan was made outstanding on 20.03.2012 only so that HSBC could somehow assign the loan to the petitioner and in addition, the loan was settled by payment of Rs. 81 crores from SBLC and if at all, it is GLAM which is the creditor of the respondent and Glam is free to file a claim against the respondent for the same. It is submitted that the impugned assignment was challenged by the promoters on 16.06.2012 before the Civil Judge, First Court, Alipore and in addition, the respondent has challenged the assignment before DRT and has also filed a writ petition before the Hon'ble High Court of Himachal Pradesh. It is pleaded that the petitioner has failed to establish default on part of the respondent and failed to explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in any event, such admissions and non-challenge cannot make illegal assignment legal and this cannot be construed as a waiver of RBI guidelines. With reference to the petitioner's submissions with regard to the entry of Rs. 81.25 crores on 22.03.2012 in the Demand Deposit Transaction History, it is submitted that HSBC stated that the details be obtained from the petitioner and the petitioner stated that the details be obtained from HSBC. With reference to the petitioner's argument that orders in cases filed by promoters are not relevant and further they have been dismissed, it is reiterated by the learned counsel for the respondent that the orders are relevant to the extent they recognise the importance of SBLC to the entire loan structure and that the restoration application filed by the promoters is still pending. 15. In rejoinder, the learned counsel for the petitioner reiterated his submissions and pleaded that in view of the decision of the Hon'ble Supreme Court in APS Star Industries Ltd. (supra), the borrower could not take advantage since he was in default. It was pleaded that the petition be allowed and CIRP proceedings initiated against the respondent. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en at Rs. 233,70,672.36 in the assignment deed date 21.03.2012 and interest due as on 19.03.2012 of Rs. 2,19,11,929.50 taken in the rectification letter date 09.05.2012. It is explained in the letter dated 09.05.2012 that due to some clerical mistake, the particulars of loan as mentioned in Clause 1 Details of Loans of Schedule 1 of the deed of assignment deed dated 21.03.2012 referred different interest due amount as on 20.03.2012 which is being rectified with this letter. It therefore, appears that the notice under Section 13(2) of SARFAESI Act 2002 dated 15.05.2012(Annexure-V (g) of the petition) mentioned the outstanding dues under the facility as aggregating to Rs. 131,21,11,929.50 as on 20.03.2012. Further, in the statement of dues (Annexure-V (w) of the application, the outstanding dues with interest as on 20.03.2012 are taken i.e. it appears that one day's interest of 20.03.2012 is added and the outstanding dues with interest are thereby shown at Rs. 131,35,70,672. We therefore, do not find any force in the objection raised by the respondent. 19. The only issue therefore, requiring consideration is whether the petitioner is a financial creditor of the respondent. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the principal amount of HSBC loan was due on 20.04.2014 and only monthly interest of 11% was to be paid during the tenure of the HSBC loan and that even the balance confirmation letter dated 15.03.2012 (on which reliance is sought to be placed by the petitioner) mentions outstanding interest of only two months and therefore, the account of the respondent could not be classified as NPA on 01.03.2012 as on the said date no interest has been outstanding for more than 90 days from the end of the quarter in which it was due as per RBI guidelines. 23. Vide diary No.1186 dated 17.04.2018, the respondent has submitted the RBI Prudential Norms circulated by Master Circular dated 02.07.2012 (page 20 of diary No.1186 dated 17.04.2018). The definition of non performing assets (para 2.1.3) is on the same lines as in the 2015 Prudential Norms. The 2012 Prudential Norms refer to RBI Master Circular dated 01.07.2011. This master circular had been downloaded from the RBI website and the definition of non performing assets (para 2.1) is on the same lines as in the Master Circular of 2012 and 2015. The respondent's contention is that in APS Star Inds. Ltd. (supra), the Hon'ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein such terms and conditions as may be agreed upon between them; or (b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them." 25. Therefore, there is no condition stipulated in section 5 of SARFAESI Act 2002 that an asset reconstruction company has to acquire only NPAs of banks or financial institutions. It is concluded that the nature of the financial asset transferred i.e. whether it is NPA or not is not such a material condition so as to make the agreement invalid. We may add here that as per para 2.1 (a) of the assignment deed dated 21.03.2012, (page 237 of the petition) it is stated that the agreement to assign is in consideration of the assignee having deposited the purchase consideration in the Escrow Account and therefore, the assignment is for valuable consideration received. Further, as para 3.1 of the assignment deed dated 21.03.2012, HSBC has represented and warranted to the petitioner that as on the date of the deed and with reference to the facts and circumstances then existing, the loans are non performing assets and have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the respondent's contention cannot be accepted. (ii) The respondent has referred to page 121, 124 and 125 of diary No.1186 dated 17.04.2018 filed by the respondent to state that as per RBI guidelines, initial holding period (of NPAs) of two years has been prescribed for banks holding NPAs prior to the amendment. The reference therein sought to be relied upon by the respondent is with regard to RBI circular dated 13.07.2005. This circular is available at page 14 of diary No.1186 dated 17.04.2018 filed by the respondent. The first para thereof clearly states that the guidelines would be applicable to banks/FIs and NBFCs purchasing/selling non performing financial assets from/to other banks/FIs/NBFCs (excluding securitisation companies/reconstruction companies). Therefore, this RBI guideline is not applicable in the present case which is of an asset reconstruction company. (iii) The learned counsel for the respondent has argued that the assignment of debt was in violation of Section 5(3) of the SARFEASI Act, 2002 which provides for assignment of the loan with all underlying security and guarantees etc. Section 5(3) is only in respect of the rights of the asset reconstruct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of 180 days from the draw down date was given for this purpose. We find that the respondent's interpretation that SBLC was a condition precedent to the loan cannot therefore, be taken to be correct. In this context, the argument of the learned counsel for the respondent that in case of default, it was incumbent on HSBC to take recourse of the SBLC and clear the default is being considered. The condition provided for by clause 3.1 of the Corporate Rupee Loan Facility Agreement dated 08.04.2009 (supra) is minimum security cover by way of SBLC for 105% of the outstanding principal and interest calculated at the Facility Interest Rate for the next two months (including on account of exchange rate fluctuation for securities other than SBLC, minimum security cover of 1.00 is set out in clause 3.1). Clause 3.3 provides for the respondent procuring, providing and furnishing additional security when HSBC is of the opinion that the security provided for the facility has fallen below the security cover. Therefore, the clauses in Article III of the Corporate Rupee Loan Facility Agreement (supra) only provide for the minimum security cover and creation of additional security when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither GLAM or the respondent and it is further provided that any assignment of the SBLC to a proposed assignee shall only be done together with the concurrent assignment of the Facility Rights Agreement in favour of the same assignee. The assignment of SBLC is specifically excluded in the assignment deed dated 21.03.2012 and therefore, the proviso has no effect. As regards the other part, the prior notice to or consent from either GLAM or the respondent for assignment or transfer is required only for the rights, benefits and obligations under the Facility Rights Agreement and the Transaction Documents. Moreover, clause 9.11 of the facility rights agreement states that the agreement shall be read in conjunction with the Corporate Rupee Loan Facility Agreement and in the event there is any conflict between the terms of the two agreements, the Corporate Rupee Loan Facility Agreement shall prevail. Clause 2.1 of the Corporate Rupee Loan Facility Agreement (Annexure IV (b) of the application) clearly states that the term loan is subject to the terms and conditions contained in the Agreement as also in the General Conditions. Section 11.5 of the General Conditions states that the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent's account with HSBC and the relevant entry of 22.03.2012 reads as follows:-page 106 of reply Date Transaction details Deposit Balance 22 March, 2012 TRANSFER HSBC-PHOENIX ARC-ESCROW FT TO GPI TEXTILES LTD WRLR-00069 11:13:52 TRANSFER PARTIAL CLAIM PROCEEDS UNDER GTY FM HSBC MAR APP ROPRTINOD TRF TO GPI TECTILE LTD. 500,000,000.00 478,088,070.50 WRLP-00112 17: 46: 03 812,508,408 1,290,596,478.50 The respondent has only taken an extract of the narration in its reply at page 16. The contents of the noting of the transaction do not appear to justify the claim of the respondents that this was a draw down which was made on SBLC. The amount involved is substantial. However, with regard to clarification regarding the entry the respondent has mainly referred to communications in March, 2012(Annexure R-7 (colly) of reply). It has been also stated that by e-mail dated 30.03.2012 (page 109 of reply) when the respondent enquired from HSBC regarding the entry, it was told that since the account has been assigned to the petitioner with effect from 21.03.2012, all balance confirmations and outstanding details from 21.03.2012 onwards needs to be obtained from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that it received e-mail from HSBC on 27.03.2012 stating that the assignment deed dated 21.03.2012 assigned the security interest (other than the SBLC and the rights arising thereunder). Therefore, as on the date of BIFR hearing on 20.04.2012, the respondent was well aware that SLBC has not been assigned to the petitioner. In these circumstances the reliance on the representations by HSBC is misplaced. Moreover, no further action was taken for withdrawing the no objection. As regards the challenge to the assignment deed, the respondent's reply is that the assignment deed was challenged in reply to SARFAESI notices, OA application before DRT etc. Therefore, effectively, the assignment deed dated 21.03.2012 was unchallenged. (x) In view of the above discussion, we reject the contention of the respondent that the debt is not legally assigned or transferred to the petitioner. It is therefore, held that the petitioner is a financial creditor as defined in Section 5(7) of the Code and is entitled to initiate CIRP in the case of the respondent under Section 7 of the Code. We are also satisfied that the conditions provided for by Section 7(5) (a) of the Code are satisfied in as m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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