TMI Blog2020 (10) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... come prematurely before this Tribunal, although the Agreement itself provides other options for recovering its dues, such as by sale of the assets taken as security from the Respondent/Corporate Debtor. It is clear that the Petitioner intends to use this process for recovery alone, without making out a case for initiation of CIRP, which is not permissible. Since the Financial Creditor and the Corporate Debtor were seriously engaged in a settlement exercise, a more proactive approach would help, such as approaching the higher Authorities or Committees set up under the Banking Regulation (Amendment) Act, 2017, by the RBI to seek advice on the resolution of stressed assets, or taking recourse to the options available under the Agreement for recovery, by appropriating the assets held as security. Instead of exercising these options for recovery of its debt, the Financial Creditor has opted to hastily come to this Authority seeking initiation of CIRP against an otherwise solvent company. The Petition is therefore premature. Petition is disposed of with the directions that the Petitioner/Financial Creditor and the Respondent/Corporate Debtor should continue their settlement efforts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king for financial assistance for his business and applied for loan. The Financial Creditor has lent ₹ 13,00,00,000/- (Rupees Thirteen Crores Only) to the Corporate Debtor in the year 2016 as term loan for the purpose of part funding of developmental charges in connection with formation of Residential Layout in Kasavenahalli Village, Varthur Hobli, Bengaluru South. (4) The Corporate Debtor has offered the security of all the piece and parcel of the converted land which belongs to Mr. CD. Sanjay Raj, Director of the Corporate Debtor, bearing Sy. No. 38, BBMP Khata No. 4129 (Sy. No. 38, 39) Kasavenahalli Village, Varthur Hobli, Bangalore South now coming under BBMP Marathahalli Sub-Division limits, measuring 2 acres and 35 guntas by way of simple mortgage. (5) Further, the Director of the Corporate Debtor, Mr. CD. Sanjay Raj also along with other Directors offered their personal guarantee. However, after disbursement of loan, the Corporate Debtor did not repay the loan instalments including interest which had the repayment period of 30 months. Hence, the Corporate Debtor defaulted in repayment of loan to the Financial Creditor as per the agreed terms. The Financial Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the middle of the aforesaid project. The Corporate Debtor was therefore constrained to approach plan sanctioning authority i.e. Anekal Planning Authority (APA), which is a sub-division of BMRDA seeking modification in its plan again and got the plan approved on 24.05.2017 vide Ref. No. LAO/74/12-13. Such modification has reduced the number of plots to 262 from original sanctioned 322 plots in which Corporate Debtor has lost 60 plots, thereby the revenue loss being estimated is at ₹ 32.00 to 34.00 Crores. This change in the plan cast a huge monetary loss to the Company and also delayed the on-set of the project. Further, due to non-marking and non-fixing of stone by concerned Government authority, the road alignment in the aforesaid modified sanction dated 24.05.2017 was incorrect, due to which the Corporate Debtor was again constrained to approach APA for the revised modified plan. (4) Golden Serenity Project totally consist of 262 Sites/Plots, of which all the sites have been sold to various customers/proposed buyers. The Company has to receive a balance sale consideration of ₹ 49 Crores from respective customers/buyers. Further, the financial institutions/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a plan as outlined above to settle the dues of the Financial Creditor and undertakes to file the repayment plan and schedule once documentation is executed for the development of the property with M/s. Shriram Properties Pvt. Ltd. 4. The Respondent has further filed the additional objections dated 30.05.2019, by inter alia contending that the Petition itself is not maintainable, having regard to the fact that the Applicant is a Secured Creditor, the ground of unable to pay the debt or discharge the same, will not confer a cause of action on the Bank to initiate the proceedings before this Adjudicating Authority. 5. The Respondent has also filed additional objections dated 27.06.2019, by inter alia contending as follows: (1) It is contended that the Corporate Debtor is having more assets than its liabilities and during the audited FY 2017-18, the Company is having net worth of ₹ 203,76,87,881/-. It has received a provisional plan approval for one of its new Residential Layout Project in respect of Sy.No. 86, measuring 5 acres 21 Guntas of Converted land (ALN(A)(K A)Sr56/2005-06, dated 29.03.2006) situated at Indlabele Village, Attibele Hobli, Anekal Taluk, Bangalor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Petitioner/Financial Creditor u/s 7 of the Code of 2016. 9. We find from the Synopsis forming part of the Petition that the term loan was given for the purpose of funding of development charges in connection with formation of Residential Layout in Kasavenahalli Village, Varthur Hobli, Bengaluru South. However, as per the of copy Agreement dated 19.05.2016, filed with the Petition, it is mentioned that the said loan was given for the purpose of part funding of developmental charges in connection with development of residential layout Golden Serenity, in Sompura Village, Sarjapur Hobli, Anekal Taluk, Bangalore District. Hence, it is not clear from the Petition itself as to with reference to which loan is the Petitioner/Financial Creditor pursuing these proceedings u/s 7 of the Code. This Petition could be treated as defective on this ground itself. We would assume, however, that the same is with reference to the one mentioned in the Agreement. 10. The present Petition is made u/s 7 of the Code, which deals with Initiation of corporate insolvency resolution process by financial creditor. In both the sub sections (5)(a) and (5)(b) to section 7, it is stated for the Adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring Sy. No. 38, Kasavanahalli Village, Varthur Hobli, Bangalore South Taluk, measuring 2 acres 35 guntas for development of............ . It is also mentioned in the Agreement that: 3. It Is agreed that in case of default by the First Party, the Second Party is at liberty to recall the entire loan amount and initiate recovery proceedings against the property secured and also against the schedule property. Its communication regarding sanction of the loan by the Central Loan Committee, dated 05.05.2016 also mentioned this security as under: 1. SECURITY: A) Primary: Mortgage followed by Registered Memorandum of the landed property situated at 38 39, Kasavanahalli Village, Varthur Hobli, Bangalore South Taluk standing in the name of Shri. C.D. Sanjay Raj, one of the Directors of the company. Personal guarantee of the three directors namely, Shri C.D. Sanjay Raj, Shri K. Krishnan, Shri P.V.S. Bhanumurthy and that of Shri K. Pratap in their individual capacity Thus, it is seen that the mechanism for recovery of the debt was embedded in the Agreement itself, and mutually agreed to. The Respondent/Corporate Debtor is a Secured Creditor, as against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is further seen from the submissions of both sides that the Respondent paid some of the initial instalments of repayment of the loan. Thereafter, some of its projects got delayed. Its plans sanctioned in 2013 had to be modified due to the revision of the CDP Master Plan 2013 by the Anekal Planning Authority. The revised plan sanctioned in May 2017 led to reduction of number of plots for sale, resulting in an estimated loss of about ₹ 32 Crores. A further plan revision was necessitated subsequently, leading to payments of up to ₹ 40 Crores to 45 Crores being held up, though receivable. Further, as per the RERA Rules, it has to invest 70% of its revenue on construction activities, and only 30% becomes available for meeting its other liabilities. It is clear that the Respondent is not a wilful defaulter. It needs some more time. It entered into an arrangement with M/s. Shriram Properties Pvt. Ltd. for development of their prime land. Once this materialises it hopes to get on with the loan repayments. It has also been inviting third party investors for joint development. 15. As regards the Petitioner's prayer to initiate CIRP against the Respondent/Corporate Debtor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than 400 employees and it has several ongoing projects for plot/apartments. Any such action may drive away prospective buyers, as also due payments from the present buyers. While sale of its secured assets would affect only those assets, CIRP would adversely affect the valuation of all the assets of the Corporate Debtor. It would also freeze the other ongoing 2 projects in which almost 500 customers have invested partially and construction is being carried out. 17. Since the Financial Creditor and the Corporate Debtor were seriously engaged in a settlement exercise, a more proactive approach would help, such as approaching the higher Authorities or Committees set up under the Banking Regulation (Amendment) Act, 2017, by the RBI to seek advice on the resolution of stressed assets, or taking recourse to the options available under the Agreement for recovery, by appropriating the assets held as security. Instead of exercising these options for recovery of its debt, the Financial Creditor has opted to hastily come to this Authority seeking initiation of CIRP against an otherwise solvent company. The Petition is therefore premature. However, regard is also had to the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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