TMI Blog2019 (8) TMI 1841X X X X Extracts X X X X X X X X Extracts X X X X ..... he debtors have been proceeded against the financial creditors under Section 7 of the Code only because of the operation of the impugned Circular, which, being faulted at the very inception are declared to be non est - In the instant case, it may be noticed that Section 7 of the Code confers a statutory right for initiation of Corporate Resolution Process on a financial creditor. The submissions made on behalf of the petitioners that the proceeding initiated by respondents before the Tribunal under the Code are non est and void ab initio cannot be accepted. It is also pertinent to mention here that since the Circular dated 12.02;2018 has already been quashed by the Supreme Court in its entirety, therefore, the contention that whether or not it applies to the case of the petitioners need not be gone into - the petition disposed off. - WRIT PETITION NO.26084 OF 2019(GM-RES) - - - Dated:- 8-8-2019 - THE HON BLE MR. JUSTICE ALOK ARADHE FOR THE APPELLANT : MR.DHYAN CHINNAPPA, SR. COUNSEL A/W MR.NITYA KALYANI, ADV.) FOR THE RESPONDENT : MR.ANIMESH BISHT ADV. MR.SHARAN A. KUKREJA ADV. MR.TANVI KISHORE ADV. FOR MR.CYRIL AADARCHAND MANGALDAS ADVS. FOR R1 TO R3 MS.JAYATI GO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Performing Asset with respondent Nos.1 to 3 on 31.03.2016, 29.10.2016 and 31.03.2017 respectively. 3. On 25.07.2017, the company submitted a restructuring plan to consortium to standardize the accounts of the company. However, the proposal of the petitioners failed to evoke any response. Thereafter, on 12.02.2018 Reserve Bank of India promulgated a Circular dated 12.02.2018, by which all previous methods and modes of restructuring of debt being undertaken by the Scheduled Banks were superseded. The respondent No.1 initiated insolvency proceeding against the company before the Tribunal, Bengaluru. The Company in the light of Circular, on 17.02.2018, submitted a restructuring proposal. However, the Deputy General Manager of respondent No.1 vide email dated 09.02.2018 rejected the restructuring proposal. In the meeting of the consortium held on 20.03.2018, the representatives of the company as well as the consortium were present. The Corporation Bank proposed to recover the outstanding debts through invocation of pledge held by consortium over 73.71% shares of the company. The consortium thereafter, invoked the pledge of shares of the company in accordance with the Circular issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nior counsels for the petitioners submitted that in view of the judgment dated 02.04.2019 passed by the Supreme Court, by which the Circular issued by the Reserve Bank of India dated 12.02.2018 was quashed. The order of admission as well as proceeding initiated by respondent Nos.1 to 3 before the Tribunal under the Code are non est and void ab initio. While inviting the attention of this Court to Clauses 1, 3, 4, 5, 6 and 18 of the Circular dated 12.02.2018, it is urged that the aforesaid Circular stipulates formulation of resolution plan for resolution of stressed assets and as per Clause 5, the said resolution plan can only be implemented if it is approved by all lenders. It is also urged that the Circular dated 12.02.2018 issued by Reserve Bank of India applies to all debts. It is also pointed out that on 23.07.2018, all public sector Banks including respondent Nos.1 to 3 in order to give effect and comply with regulatory frame work as per Reserve Bank of India s Circular dated 12.02.2018 entered into inter creditor agreement, which defines borrowers as all entities having an aggregate outstanding amount of more than Rs.50 Crores. It is also submitted that in the writ petition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remedy of appeal under Section 61 of the Code. It is also pointed out that the Company in order to show its bonafides gave a resettlement proposal under Section 12(a) of the Code or submit a resolution plan under Section 30(4) of the Code. It is also submitted that company is in default since; march 2016 and the prior proposals submitted by it for restructuring of the Company were considered. It is also submitted that from close scrutiny of the judgment of the Supreme Court it is axiomatic that the Supreme Court was dealing with the issue viz., debts with an aggregate exposure of INR 2000 Crore and over on or after 01.03.2018. In this connection, attention of this Court has been invited to para 2 of the order. It is also urged that from perusal of the operative portion of the judgment of the Supreme Court, it is evident that it does not apply to the fact situation of the case and the proceeding filed by the petitioners before the Tribunal under the Code is maintainable. In support of his submissions, learned counsel has referred to decision of the Supreme Court in M/S INNOVENTIVE INDUSTRIES LTD. VS. ICICI BANK ANR., CIVIL APPEAL Nos.8337-8338/2017 and SWISS RIBBONS PVT. LTD. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssified as restructured standard assets which are currently in respective specified periods (as per the previous guidelines), RP shall be implemented as per the following timelines: (i) If in default as on the reference date, then 180 days from the reference date. (ii) If in default after the reference date, then 180 days from the date of first such default. 9. If a RP in respect of such large accounts is not implemented as per the timelines specified in paragraph 8, lenders shall file insolvency application singly or jointly, under the Insolvency and Bankruptcy Code, 2016 (IBC) within 15 days from the expiry of the said timeline. 10. In respect of such large accounts, where a RP involving restructuring / change in ownership is implemented within the 180 day period, the account should not be in default at any point of time during the specified period , failing which the lenders shall file an insolvency application singly, or jointly, under the IBC within 15 days from the date of such default. Specified period means the period from the date of implementation of RP up to the date by which at leas 20 percent of the outstanding principal debt as per the RP and interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative portion of the judgment of the Supreme Court, it is evident that all actions under the Circular dated 12.02.2018 including the actions in which insolvency has been triggered has been struck down by the Circular. It has further been held that consequently, all the cases in which the debtors have been proceeded against the financial creditors under Section 7 of the Code only because of the operation of the impugned Circular, which, being faulted at the very inception are declared to be non est. 13. In the instant case, it may be noticed that Section 7 of the Code confers a statutory right for initiation of Corporate Resolution Process on a financial creditor. The aforesaid right is a statutory right and is independent of the Circular dated 12.02.2018 issued by Reserve Bank of India. In the instant case, the decision to invoke the provisions of the Code was taken by respondent No.1 on 20.01.2018, which is evident from the Letter of Authorization, Annexure-A, by which decision was taken in exercise of powers conferred by the Board of Directors to file a claim petition before the Tribunal against the Company. It is pertinent to mention here that the Demand Draft for payment ..... 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