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TMI Blog2019 (7) TMI 1886X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the affidavit dated 28.11.2018 filed in support of the instant application, are as follows: (1) The Intervener/ Objector (hereinafter referred to as "SBI") is a banking corporation constituted under the SBI Act, 1955 having its Corporate Center at State Bank Bhavan, Madame Cama Road Niraman Point, Mumbai, Maharashtra - 400 021. The instant application has been filed through its administrative Office and is represented by its Chief Manager (Credit) S.N.Murthy, who is authorized to sign the application as per notification dated 21.06.1972 R/ w Regulations 76 and 77 of the State Bank of India General Regulations, 1956. (2) The Respondent, Sovereign Developers and Infrastructures Ltd. (herein after referred to as "Sovereign Developers") is a Company registered under the Provisions of the Companies act, 1956 and is engaged in the business of construction. The Respondent is the absolute owner the property bearing Sy No.511, situated at Kalkere Village, K.R.Puram Hobli, Bangalore East Taluk. On the said land, the Respondent obtain a sanction plan from the BBMP for the purpose of building a residential apartment by the name "Sovereign Unnati". (3) The Respondent/ Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y hand over the originals of the registered sale deeds/ property document to SBI immediately. However, only few of the recipients have responded to the notice. (8) It is stated that the said assignment of the loan and the classification of the account as NPA are contrary to the assurances held out of SBI & is also in gross violation of established banking practice & procedure. The same has resulted in severe prejudice and hardship to SBI. (9) It is stated that by assigning the loan and declaring the account as an NPA, Phoenix ARC and Karnataka Bank have violated their contractual commitment towards SBI. By concealment of the above breach, Phoenix ARC is misrepresenting that they are the sole secured creditors and that all recovery efforts would purportedly result in preferential recovering for them. Further though the flats were SBI's Entitlement, phoenix ARC are seeking to disentitle their rights so as unjustly enrich themselves. Phoenix ARC and/or Karnataka Bank's actions are wholly mala fide, untenable and against banking practice and good faith. Having protected its investment by compelling disbursals of all home loans into the escrow account, Phoenix ARC and/or Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 17.12.2018 passed in IA No.351/2018 by this Tribunal, was set aside with the following direction: "For the reasons aforesaid, we set aside the impugned order passed by the Adjudicating Authority and remit the case of the Adjudication with direction to decide the application after hearing the appellant and "Corporate Debtor' in accordance with law. No other person should be given liberty at this stage. However, we make it clear that if the application U/ s 7 is admitted, it will be open to the aggrieved person to move before this Appellate Tribunal. " Therefore, the instant application has to be rejected by following the above ratio, and also urged the Tribunal to decide the question of admission, as per the merits of the case without further delay and no miscellaneous Application can be entertained at this stage. 6. Subsequent to the above I.A. No. 351 of 2018, another IA No. 147 of 2019 was filed by K.M. Ka1appa & 5 others, by seeking to implead them as Respondent to the main Company Petition. However, the same is rejected by the Adjudicating Authority by an order dated 13th June, 2019 by following the ratio as decided by the Hon'ble NCLAT in said appeal. The ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to recall the loan from the Borrower/ s in case the completion of the construction of the building in question is delayed beyond 6 (six) months from the completion date indicated by the Vendor/ Developers' and such decision to recall shall be at the discretion of the Financier. 8. The Karnataka Bank has addressed letter vide No. KBL/KOR/PF678/OR/10.11 dated 2nd June, 2011 to SBI by conveying their no objection for considering the Housing Loan Facility to the purchaser, however subject to condition that proceeds of Housing loan to be released and remitted to "Karnataka bank A/C Sovereign Developers & Infrastructure Limited, A/c No.0942000100170001 and they will issue 'No. Objection Certificate that the proceedings of the Housing loan to be and they issued a No Objection Certificate for registering the apartment and the undivided share in the land on receipt of all the proceeds as per the above referred "Agreement to Sell" entered into between the parties on 16.04.2011. Admittedly neither the Karnataka Bank Limited nor M/s.Phoenix ARC Pvt. Ltd is a party to the said Tripartite Agreement. Even the said letter for issuing No objection is conditional one. 9. Therefore, by read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inod Kumar V.K and 15 others (impleading Applicants), Under Order 1 Rule 10 of CPC R/w Rule 11 and 60(5) of the NCLT Rules, 2016, by inter alia seeking to permit them to come on record as additional respondents in the above case in the interest of justice and equity. 2. Brief facts of the case, as mentioned in the Application, are as follows: 1) This application has been filed on behalf of the Agreement Holder of the flats in different blocks of Sovereign Unnathi Project by the Sovereign Developers and Infrastructure Ltd. 2) It is stated that the Respondent Sovereign Developers and Infrastructure Ltd has built about 1192 flats which is exclusive of the share of the owners. That, the Respondent Sovereign Developers and Infrastructure ltd has made advertisement for sale of those flats to the needs. That the proposed impleading applicant No. 1 saw the advertisement and entered into agreement of sale with the Respondent, by agreeing to purchase Flat No. B2-14-2 and the sale consideration for sale of Schedule 'B' property is Rs. 18,50,000/- which is includes cost towards undivided share in the Land and the Construction cost. Taxes shall be applicable only on construction co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dated 05.06.2010, the agreement holder has paid sum of Rs. 17,14,428/- to the Respondent through different Cheques in different stages of construction and gave full supports to complete the project. 5) It is stated that, unfortunately the Respondent did not complete the project and violate the terms and conditions as stipulated in the agreement to sale and agreed to complete the project on or before December, 2012. Subsequently, the Respondent has issued a letter dated 26.08.2013 for reasons explained above for continued support, co-operation and payment of escalation incurred by the Respondent in order to complete the "Sovereign Unnathi" project an escalation amount of Rs. 6,75,000/- toward the additional sale consideration on account of payment of escalation and that the escalation amount sum of Rs. 6,75,000/- shall pay at the time of taking possession of the flat. Therefore, again the impleading applicant entered into an Addendum Agreement with Respondent and thereby mutually agreed that the completion date as per clause of the agreement to sell dated 05.06.2010 stands revised to 30th June, 2015 or offer of possession whichever is earlier, for the completion of the Project. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement holders paid the Builder/ confirming party Rs. 1,00,000/- by way of advance towards sale price and the balance amount shall be payable in the manner of different stages of construction and with a condition to Construction of the apartment in Schedule 'E' property will be completed on or before 30.05.2013 as far as possible. Subsequent to the agreement to sale dated 02.05.2011, the agreement holder has paid sum of Rs. 18,95,215/- to the Respondent through different Cheques in different stages of construction and gave full supports to complete the project. 9) It is stated that, unfortunately the Respondent did not complete the project and violate the terms and conditions as stipulated in the agreement to sale and agreed to complete the project on or before 30.05.2013. Subsequently, the Respondent has issued a letter dated 26.08.2013 for reasons explained above for continued support, co-operation and payment of escalation incurred by the Respondent in order to complete the "Sovereign Unnathi" project an escalation amount of Rs. 6,67,400/- toward the additional sale consideration on account of payment of escalation and that the escalation amount sum of Rs. 6,67,400/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposed impleading applicant No.6 saw the advertisement and entered into agreement of sale with the Respondent, by agreeing to purchase Flat No. B5-05-1&2 and the sale consideration for sale of Schedule 'B' property is Rs. 30,80,000/- which is includes cost towards undivided share in the Land and the Construction cost. Taxes shall be applicable only on construction costs. The Purchaser/ Agreement holders paid the Builder/ confirming party Rs. 2,00,000/- by way of advance towards sale price and the balance amount shall be payable in the manner of different stages of construction and with a condition to Construction of the apartment in Schedule 'B' property will be completed on or before 30th November, 2012 as far as possible. Subsequent to the agreement to sale dated 26.06.2010, the agreement holder has paid sum of Rs. 35,17,194/- to the Respondent through different Cheques in different stages of construction and gave full supports to complete the project. 13) It is stated that, unfortunately the Respondent did not complete the project and violate the terms and conditions as stipulated in the agreement to sale and agreed to complete the project on or before 30th No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and with a condition to Construction of the apartment in Schedule 'B' property will be completed on or before 30th May, 2013 as far as possible. Subsequent to the agreement to sale dated 18.04.2011, the agreement holder has paid sum of Rs. 16,82,225/- to the Respondent through different Cheques in different stages of construction and gave full supports to complete the project. 16) It is stated that, unfortunately the Respondent did not complete the project and violate the terms and conditions as stipulated in the agreement to sale and agreed to complete the project on or before 30th May, 2013. Subsequently, the Respondent has issued a letter dated 26.08.2013 for reasons explained above for continued support, co-operation and payment of escalation incurred by the Respondent in order to complete the "Sovereign Unnathi" project an escalation amount of Rs. 8,51,000/- toward the additional sale consideration on account of payment of escalation and that the escalation amount sum of Rs. 8,51,000/- shall pay at the time of taking possession of the flat. Therefore, again the impleading applicant entered into an Addendum Agreement with Respondent and thereby mutually agreed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for sale of Schedule 'E' property is Rs. 16,40,000/- which is includes cost towards undivided share in the Land and the Construction cost. Taxes shall be applicable only on construction costs. The Purchaser/ Agreement holders paid the Builder/confirming party Rs. 1,00,000/- by way of advance towards sale price and the balance amount shall be payable in the manner of different stages of construction and with a condition to Construction of the apartment in Schedule 'E' property will be completed on or before 30th May, 2013 as far as possible. Subsequent to the agreement to sale dated 28.04.2011, the agreement holder has paid sum of Rs. 17,81,302/- to the Respondent through different Cheques in different stages of construction and gave full supports to complete the project. 20) It is stated that, unfortunately the Respondent did not complete the project and violate the terms and conditions as stipulated in the agreement to sale and agreed to complete the project on or before 30th May, 2013. Subsequently, the Respondent has issued a letter dated 26.08.2013 for reasons explained above for continued support, co-operation and payment of escalation incurred by the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 16.04.2011, the agreement holder has paid sum of Rs. 16,31,000/- to the Respondent through different Cheques in different stages of construction and gave full supports to complete the project. 23) It is stated that, unfortunately the Respondent did not complete the project and violate the terms and conditions as stipulated in the agreement to sale and agreed to complete the project on or before 30th May, 2013. Subsequently, the Respondent has issued a letter dated 26.08.2013 for reasons explained above for continued support, co-operation and payment of escalation incurred by the Respondent in order to complete the "Sovereign Unnathi" project an escalation amount of Rs. 8,51,000/- toward the additional sale consideration on account of payment of escalation and that the escalation amount sum of Rs. 8,51,000/- shall pay at the time of taking possession of the flat. Therefore, again the impleading applicant entered into an Addendum Agreement with Respondent and thereby mutually agreed that the completion date as per clause of the agreement to sell dated 28.04.2011 stands revised to 30th December, 2016 or offer of possession whichever is earlier, for the completion of the Project. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... costs. The Purchaser/ Agreement holders paid the Builder/confirming party Rs. 1,00,000/- by way of advance towards sale price and the balance amount shall be payable in the manner of different stages of construction and with a condition to Construction of the apartment in Schedule 'E' property will be completed on or before 30th May, 2013 as far as possible. Subsequent to the agreement to sale dated 23.03.2011, the agreement holder has paid sum of Rs. 18,32,064/- to the Respondent through different Cheques in different stages of construction and gave full supports to complete the project. 27) It is stated that, unfortunately the Respondent did not complete the project and violate the terms and conditions as stipulated in the agreement to sale and agreed to complete the project on or before 30th May, 2013. Subsequently, the Respondent has issued a letter dated 26.08.2013 for reasons explained above for continued support, co-operation and payment of escalation incurred by the Respondent in order to complete the "Sovereign Unnathi" project an escalation amount of Rs. 5,84,500/- toward the additional sale consideration on account of payment of escalation and that the escalat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. 30) That the proposed impleading applicant No. 16 saw the advertisement and entered into agreement of sale with the Respondent, by agreeing to purchase Flat No.B1-10-1 and the sale consideration for sale of Schedule 'B' property is Rs. 16,40,000/- which is includes cost towards undivided share in the Land and the Construction cost. Taxes shall be applicable only on construction costs. The Purchaser/ Agreement holders paid the Builder/ confirming party Rs. 1,00,000/- by way of advance towards sale price and the balance amount shall be payable in the manner of different stages of construction and with a condition to Construction of the apartment in Schedule 'B' property will be completed on or before 30th November, 2012 as far as possible. Subsequent to the agreement to sale dated 01.07.2010, the agreement holder has paid sum of Rs. 19,35,792/- to the Respondent through different Cheques in different stages of construction and gave full supports to complete the project. 31) It is stated that, unfortunately the Respondent did not complete the project and violate the terms and conditions as stipulated in the agreement to sale and agreed to complete the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Chandrakant R.Patil, learned Counsel for Impleading Applicant and Shri Om Prakash, Learned Senior Counsel learned Counsel for Respondent/ Petitioner and Shri Ajay Kumar.M, learned Counsel for Respondent/ Corporate Debtor. We have carefully perused the pleading of both the parties and extant provisions of the Code. 4. Shri Chandrakant.R.Patil, learned Counsel for Impleading Applicant. by pointing out various averments made in the Application, as briefly stated supra, has further submitted that Applicants are proper and necessary party to be impleaded to the main Petition, and thus urged the Tribunal to permit to implead them, as prayed for. 5. Shri 0m Prakash, learned Senior Counsel for Respondent/ Petitioner, has stated that application itself is not maintainable and he has placed on record, the order of Hon'ble NCLAT, passed in Company Appeal (AT) (Insolvency) No. 184 of 2019 between M/s.Phoenix ARC Pvt. Ltd. vs. Shri Vishal M Poonater & Anr. Dated 22.04.2019, wherein the order dated 17.12.2018 passed in IA No.351/2018 by this Tribunal, was set aside with the following direction: "For the reasons aforesaid, we set aside the impugned order passed by the Adjudicating Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: (1) M/s.Phoenix Arc Private Limited (Trustee of Phoenix Trust FY 16-15 Scheme B) (Petitioner/ Financial Creditor/ Applicant) is incorporated on 02.03.2007 registered address at: 5th Floor, Dani Corporate Park 158, CST, Road. Mumbai. (2) M/s.Sovereign Developers and Infrastructure Limited (Respondent/ Corporate Debtor) is incorporated on 21.04.2006, approached Karnataka Bank Ltd (hereinafter referred to as the "Assignor Bank") for grant of a Loan amounting to a sum of Rs. 25,00,00,000/- for the purpose of the construction of residential apartments. The Loan amount (hereinafter referred to as the "Assigned Debt") comprised a Term Loan of Rs. 25,00,00,000/- along with interest at the prime Lending Rate compounded monthly, along with further interest at the rate of 2% per annum in case of non-repayment of the Loan amount by the due date. (3) As per the terms of the Loan Agreement, the Assigned Debt taken by the corporate debtor was to be repaid by May, 2014, in installments, commencing from November, 2012 until May, 2014 along with future interest and other charges thereon. In view of the repeated defaults by the Corporate Debtor, the assignor Bank was constrained to clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board of Directors of the Corporate Debtor dated 04.05.2016, resolved and give consent for and accepting the terms of the Assignment of the debt to the applicant herein by the Assignor Bank. As per the terms of the restructuring agreed upon by the parties, the Corporate debtor sought additional funding of Rs. 5,00,00,000/-. The Board of Directors of the Corporate Debtor dated 04.05.2016, resolved and gave consent for availing of a Term Loan of Rs. 6,00,00,000/- from the Applicant herein. The Applicant acting in its capacity as Trustee of Phoenix Trust FY 16-15 Scheme B herein accepted the offer of the Corporate Debtor and entered into a Letter of Acceptance with the defendants on the 9th of June, 2016 with conditions for granting of additional loan. (6) On the 09.06.2016, a New Loan Agreement was executed by the parties herein, for the grant of additional financial assistance to the Corporate Debtor by the applicant herein, amounting to a sum of Rs. 5,00,00,00/- (herein referred to as the "New Loan") along with interest at the rate of 24% compounded monthly and penal interest at the rate of 6% p.a. the New Loan, taken by the respondent was to be repaid by 2016, along with future ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m suppression of material facts and the Petition is not maintainable either in law or facts and the same is liable to be dismissed. (2) The Petitioner is an Asset Reconstruction Company, who took on assignment, a loan obtained by the Respondent from Karnataka Bank. The Karnataka Bank had sanctioned a total of Rs. 25 Crores as term loan. Though the Respondent had flagged several issues with the Karnataka Bank, who had not disbursed the loan amounts as per terms of loan agreement and had not disbursed the entire loan amounts. Yet, the Karnataka Bank , in a hurried and hastily manner assigned the loan to the Petitioner. The Respondent, after assignment had brought to the notice of the Petitioner that the project commissioned by the Respondent was fast approaching completion and as such, was in need of little funding in order to complete the project at the earliest. (3) The Respondent also informed the Petitioner that it has built about 1192 flats, which is exclusive of the share of the owners, out of which about 1077 have been sold to the various flat owners and the total receivables from the flat owners towards balance payment itself was around 106 Crores. However, the same could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handover the flats to the owners and the same have begun to yield fruits, the Respondent has been now registered with RERA and a number is being assigned for the project. Further, the Respondent and its promoters gone a step further to get the attachment of the Escrow account removed by the Sales Tax Authorities, which once again proves the bonafide on the part of the Respondent in completing the project. (7) Despite repeatedly being pointing out to the Petitioner that the receivables from the project was itself more than sufficient to cover the total amount due towards the Petitioner and that all that is need is for them to issue NOCs for registration of the flats towards which the flat owners would pay balance consideration, on one ground or the Other, has been delaying the same, leading to escalation in the total amount due and at the same time has reduced the pace of completion of the project. Therefore, it is contended though above a year ago, the total amount required for completion of the project was about Rs. 90 Crores, has now been brought down to about Rs. 15 Crores only and the project is on the verge of the completion and handing over to the flat owners. As such, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enal rate of interest. All these repayment are towards repayment of principle and interest of additional loan of Rs. 5 Crore availed from Phoenix ARC. It was an established fact that Phoenix ARC appropriated the taxes amounts and special purpose fund amounts like BWSSB/ KEB amounts paid into Escrow Account towards repayment obligations of loan dues. (10) The Respondent wrote several communications, requesting the Phoenix ARC to refund the Tax amounts for onwards payment to statutory authorities fell on deaf ears and also the amounts paid by customers for special purposes like getting approvals for BWSSB/ KEB also not refunded to the Respondent for getting approvals. All these issues escalated and Sales Tax Authorities issued 'Attachment Orders' on Escrow Account. There was no effort from Phoenix ARC to resolve the issues and their adamant attitude to adjust the loan dues led to the present situation, which is deplorable. (11) It is stated that the petitioner has not brought on record the Escrow account maintained through its Escrow manager to which the payments were being made until recently and as such, the complete statement of facts have not been placed on record by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he specific purpose funds meant for BESCOM and BWSSB, is just & practical. It is impractical to do restructuring without sharing of receivables and to appropriate entire receivables in Escrow Account towards repayment obligations. (14) The Respondent has been registered with the RERA Authority and has been given a registration number. The said registration in fact came after filing of the above Petition, which again shows that the project is under progress and has not been abandoned, as wrongly painted by the Petitioner. There are about 115 units, which are yet to be sold by the Respondent and the same can be liquidated or taken over by the Petitioner towards payment of their dues. A direction may also be given to the Petitioner to issue NoCs, to all the flat purchasers who have already given requests to the Petitioner, since it has not stated any reasons for non-issuance of the NoCs. (15) It is stated that there are about 900 families waiting for possession of their flats and if CIRP is initiated, all such families stand to lose their moneys. The only scenario where all parties concerned stand to gain, is only when the Respondent is able to complete the project, as the flat pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the following judgments in support of his case: * Innovative Industries Limited Vs. ICICI Bank & Others (AIR 2017 SC 4084) * Swiss Ribbons Private Limited & Others Vs. Union of India & Others. 6. Shri Ajay Kumar.M, learned Counsel for Respondent, while pointing out various averments made in the written arguments dated 11.07.2019, as briefly mentioned supra, has further submitted that while admitting that there is a debt and default and it was due to the circumstances/ non-co-operation created by the Petitioner, and they are ready to pay the outstanding amount provided they give no objection to register the plots as requested, and they are having more property than the outstanding amount. 7. Earlier, the Adjudicating Authority has allowed I.A No.351/2018 in C.P(IB) No. 167/BB/2018 is filed by Shri Vishal M.Poonater, vide order dated 17.12.2018, by directing the Applicant/ Petitioner to implead the application. However, the same was set aside by the Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 184 of 2019, filed by M/s.Phoenix ARC Pvt. Ltd, by remitting the case to the Adjudicating Authority with a direction to decide the application, after hearing the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties and also furnished personal guarantees for the loan. The Corporate debtor failed to pay the outstanding amount even after repeated demands made to the Corporate Debtor for total amount of Rs. 35,33,34,286/- towards the dues of the Assigned Debt as well as the New Loan as on 16th August, 2017, which became Rs. 42,80,92,640/- along with interest as on 02.09.2018. The assigned debt and additional loan in question and subsequent debt and default are not in dispute. The Petitioner has also given a sufficient opportunity to the Respondent to pay the outstanding amount and also issued a Legal Notice dated 26th June, 2017, by inter alia stating that they have sanctioned additional loan of Rs. 5,00,00,000/- in the larger interest of the purchasers of the apartments to complete Phase-I works. However, it is alleged that the Corporate Debtor failed to complete Phase-I works, even though the additional funding was granted for the said purpose and due to the failure to complete Phase - I Works, the customers, who had intended to purchase the apartments did not deposit the amounts towards BWSSB and BESCOM charges. As a result, the amount due was not paid, and they have also denied the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Securitization 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; e. The supply of essential goods and services to the Corporate Debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period; f. The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator; g. The order of moratorium shall have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process. (3) The IRP is directed to follow all extant provisions of the IBC, 2016 and all the extant rules including fees rules as framed by IBBI from time to time. The IRP is hereby directed to file progress reports to the Tribunal from time to time. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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