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TMI Blog2023 (11) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.07.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Court-2 in MA No.2886 of 2019 and I.A. No. 3114 of 2022 in CP (IB) No. 532 of 2018 by which order the Adjudicating Authority has allowed MA No. 2886 of 2019 and dismissed I.A. No. 3114 of 2022. 2. I.A. No. 3022 of 2023 has been filed in Company Appeal (AT) (Ins.) No. 1546 of 2022 which Company Appeal was disposed of by judgment and order of this Tribunal dated 22.02.2023. I.A. No. 3022 of 2023 has been filed praying for certain directions. In I.A. No. 3022 of 2023, this Tribunal passed an order on 20.07.2023 issuing notice in the application and directing the Adjudicating Authority to not consider approval of Resolution Plan till next date. 3. Contempt Case (AT) No.21 of 2023 has been filed by the Appellant praying for initiating contempt proceedings against the Resolution Professional and various Directors and other persons of Asset Reconstruction Company (India) Ltd. alleging wilful disobedience of order dated 20.07.2023 passed by this Tribunal in I.A. No. 3022 of 2023 in Company Appeal (AT) (Ins.) No. 1546 of 2022. In the Contempt Application notices have not been issued and it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reinstated with revised rate of interest @22% p.a. compounded with monthly rests from 01.07.2010. vii. The Corporate Debtor having committed default in complying to the settlement terms, the ARCIL by its letter dated 17.06.2013 revoked the sanctioned settlement agreement. Revocation letter stated that all the monies paid pursuant to the Sanction letters stands forfeited and adjusted towards the total outstanding dues of the Corporate Debtor. viii. After revocation, the ARCIL issued notice under Section 13(2) of the SARFAESI Act to the Corporate Debtor claming aggregate amount of Rs.235,46,34,381/- together with further interest @22% p.a. compounded at monthly rest. ARCIL filed proceeding under Section 14 of the SARFAESI Act, where Chief Metropolitan Magistrate passed an order dated 03.01.2014. ix. Aggrieved by the order dated 03.01.2014, the Corporate Debtor filed Securitization Application No.02 of 2014 before the DRT under Section 17 of the SARFAESI Act, which was dismissed on 23.03.2016. Against dismissal of the Securitization Application, Appeal No. 104 of 2016 was filed by the Appellant before the DRAT. The DRAT dismissed the appeal for failure to make deposit. x. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined. xvii. On 08.12.2022, NCLT allowed I.A. No. 3727 of 2022 filed by the Resolution Professional to take on record the updated list of creditors as on 11.12.2022. xviii. Against the order dated 08.12.2022, Company Appeal (AT) (Ins) No. 1546 of 2022 was filed by the Appellant, which appeal came to be disposed of by this Tribunal by order dated 02.02.2023. In Para 11 of the order of this Tribunal dated 02.02.2023 following was held : "11. We are of the view that the Adjudicating Authority should determine the rate of interest as per its order dated 31.05.2019 before any Resolution Plan reaches at the stage of approval. Determination of rate of interest having bearing on the total claims of the Financial Creditors, the Adjudicating Authority should make a decision regarding the above before any Resolution Plan is approved. The order impugned dated 08.12.2022 is not interfered with, but the said order shall be subject to any order passed by the Adjudicating Authority as indicated above. We dispose of the Appeal accordingly." xix. Subsequent to order 02.02.2023, the Adjudicating Authority proceeded to hear application MA No. 2886 of 2019 and I.A. No. 3114 of 2022 and reserved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution applicant. vii. The Application, filed by the Resolution Professional before the Hon'ble NCLT, Mumbai in the subject insolvency proceedings seeking approval of the Resolution Plan of the successful resolution applicant in terms of Section 31 of the Code. b) Restrain the RP and the COC from proceeding further in CIRP. c) Ad-interim and Interim Reliefs in terms of prayer clause (a) and (b) above; d) Cost and professional costs be provided for; e) Pass any or such other Order(s) as this Hon'ble Tribunal may deem fit and appropriate in the facts and circumstances of the case." xx. In the I.A. No.3022 of 2023 following order was passed on 20.07.2023: "ORDER 20.07.2023: I.A. No. 3022 of 2023: This I.A. has been filed by the Appellants relying on order passed by this Tribunal on 02.02.2023. In order dated 02.02.2023, Para 11 of the order proceeds as follows: "11. We are of the view that the Adjudicating Authority should determine the rate of interest as per its order dated 31.05.2019 before any Resolution Plan reaches at the stage of approval. Determination of rate of interest having bearing on the total claims of the Financial Creditors, the Adjudicatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the DRAT in its order dated 17.05.2016 in Appeal No. 104 of 2016 has held that interest could not be charged @22% p.a. at monthly rest from 01.07.2010 to 30.06.2013 since the ARCIL has by letter dated 17.06.2013 has revoked the settlement. It is submitted that order passed by DRAT directed Corporate Debtor to deposit 25% of the amount so calculated. It is further submitted by Shri Ganda that in the OA filed before the DRT rate of interest was 14.85% and application was filed for amendment of rate of interest to 22% which was rejected by DRT as well as by DRAT, against which ARCIL has filed Writ Petition No. 904 of 2018 which too was dismissed by the Hon'ble Bombay High Court by order dated 19.10.2018. The High Court in its judgment has clearly held that the ARCIL has revoked the settlement dated 28.02.2011 by letter dated 17.06.2013, there is no question of enforcement of rate of interest @22% by carrying out amendment in Original Application. It is submitted that having the aforesaid observation made issue of rate of interest which was claimed by the ACRIL from 01.07.2010 to 30.06.2013 stood determined and the Adjudicating Authority in the impugned order without adverting to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not arise since the settlement dated 28.02.2011 which is basis of 22% interest was revoked by ARCIL by letter dated 17.06.2013 and after revocation of Settlement Agreement, ARCIL cannot charge 22% interest on the dues of the Corporate Debtor. When the Settlement Agreement dated 28.02.2011 is revoked, the Modification Agreement dated 29.09.2011 also loses its importance. 7. Shri Arun Kathpalia, learned senior counsel for the Resolution Professional submits that the order dated 17.05.2016 of the DRAT was in context of pre-deposit and the said order cannot be read as determination of rate of interest. Pre-deposit was not made by the Corporate Debtor and appeal was dismissed on 05.04.2017. In order of the High Court dated 25.04.2017 clarification was made by the High Court that all contentions of both the parties are left open. Further, the Hon'ble Supreme Court vide its order dated 03.01.2019 has kept the determination of rate of interest at large. Hence, neither the order of DRAT nor Bombay High Court, on which reliance has been placed by the Appellant, finally determine the rate of interest. The issue pertaining to the rate of interest having never been decided there is no qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s approved by the CoC on 22.06.2023 and the application has already been filed for approval of Resolution Plan before the Adjudicating Authority. Any order passed by this Tribunal in Company Appeal (AT) (Ins.) No. 1114-1115 of 2023 has to be given effect to. 9. We have considered the submissions of learned counsel for the parties and perused the record. 10. The Adjudicating Authority while admitting Section 7 application filed by the ARCIL, in Para 40 has already observed that whether 22% can be treated as rate of interest or charging 14.85%, it shall be decided by the Bench on filing complete information by the Resolution Professional. Para 40 of the order has already been noticed and extracted by this Tribunal in its order dated 02.02.2023. The Adjudicating Authority has now determined the rate of interest by the impugned order dated 21.07.2023 holding the rate of interest as 22%. The main question thus which need to be considered is whether the rate of interest applicable for determining the claim of the ARCIL in CIRP proceeding is 22% or the rate of interest has to be 14.85%. We, at this stage, may recapitulate the Settlement Agreement dated 28.02.2011, the Modification Agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly upon Borrower providing/entering into appropriate agreements with Arcil, as required and compliance of this Sanction Letter, Yours faithfully, Agreed and Accepted For V. Hotels Limited Satish Kumar Gupta A. S. Anantharaman Senior Vice President Chief Financial Officer & Group Head Guarantors: 1. 2. 3." 12. Terms and conditions of settlement were incorporated in Annexure to letter dated 28.02.2011. Para 1.1 and 1.2 of Annexure is as follows: "1.1) Conditions Precedent: The Settlement shall be subject to fulfilment of the conditions precedent being: a) Confirm and undertake to pay Rs.150,75,83,970/- along with accrued Interest at the rate of 22% pa. with compounding at monthly rests from July 01, 2010 till September 30, 2011 under this Settlement Terms as per Schedule I; b) Pay Rs.10 crore-upfront payment to be paid upon issuance of this latter (the upfront payment will be adjusted against the Settlement amount as mentioned in clause 1.1(a) above); and c) VHL/Promoters/Guarantors shall execute and submit the Board resolutions of the Barrower and Guarantor(s) to give effect to the Settlement Terms herein, to the satisfaction of Arcil/Arcil Trust. 1.2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Punjab National Bank, Union Bank of India, Vijaya Bank respectively. As per the terms and conditions of the Sanction Letters, VHL was required to make payments of settlement amount as stipulated in the last extension letter dated May 29, 2013 to Arcil. However, VHL failed to make payment of Rs.17.50 crore due on April 30, 2013 despite reminder letter BGIII/VN/FY14/636 dated May 10, 2013 and also defaulted in payment of Rs.17.50 crore due on May 31, 2013. VHL has defaulted in making payments of settlement amount in accordance with the terms and conditions stipulated in the Sanction Letters, Arcil hereby revokes the sanctioned settlement. All the monies paid till date pursuant to the Sanction Letters stands forfeited and adjusted against the total outstanding dues of VHL. Yours faithfully, Manesh Chakraborty Head Business Group III" 15. After noticing the above relevant documents, we now proceed to look into the order of DRAT and order of Bombay High Court on which much reliance has been placed by Shri Ganda. Shri Ganda submits that the said orders finally determine rate of interest as not being 22%, which order is binding on the ARCIL and the ARCIL cannot make any conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the facts and circumstances of the present case and in the interest of justice, I deem it just and proper to direct that the respondents-Financial Institution shall not take any coercive steps against the appellant till the next date. It is made clear that if the appellant falls to deposit the mandatory pre-deposit amount as directed above within a period of one month from today, the interim order shall stand automatically vacated. List this case for further hearing 28.06.2016 as jointly prayed." 16. An MA was filed for review/clarification of the order. There was delay in filing the application which was not condoned by the DRAT. Application was filed by the ARCIL that deposit having not been made by the Appellant appeal should be dismissed and the Appeal was dismissed by the DRAT, against which order Writ Petition (L) No.1046 of 2017 and Writ Petition (L) No.1100 of 2017 was filed by the Corporate Debtor. In Para 6 and 7 of the order of the High Court following was held: "6. Having heard both sides on this point, and since the Petition is not being pressed, we direct that the sum of Rs.34 crores should be deposited in installments and as stipulated by Mr. Chinoy. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion letter dated 28.02.2011 by which the Respondents agreed to settle the dues by OTS, wherein they agreed to pay interest @ 22% pa. On the basis of the said sanction letter, the Petitioners as well as the Respondents entered into modification of agreement dated 29.09.2010, Bare reading of the said modification of agreement, shows that the same is based on sanction letter dated 28.02.2011. Clause 3 of the said modification agreement dated 29.09.2011 reads thus: "3. The borrower expressly agrees and undertakes that outstanding of the Loans acquired by Arcil from Punjab National Bank along with outstanding of the loans acquired by Arcil under various trust Arcil - V. Hotels Ltd. Trust, Arcil -V Hotels Ltd. II Trust, Arcil-V Hotels Ltd. - III Trust and Arcil -V Hotels Ltd. IV Trust from Bank of India, Punjab National Bank, Union Bank of India and Vijaya Bank respectively, are now rescheduled IN TWO INSTALLMENTS AS UNDER in terms of terms of settlement letter dated 28.02.2011, aggregates as under: a. Rs.10 Crores on acceptance of sanction letter dated February 28, 2011. b. On September 30, 2011, the balance amount after adjusting the said Rs.10 crores from the aggregate am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become res judicata and finalised. More so, observation of the Hon'ble Supreme Court in order dated 03.01.2019 were with regard to determination of rate of interest by DRAT. We having found that in view of the clarification issued by Hon'ble Supreme Court and the finding of the High Court, the determination of rate of interest was to be done by the DRT and obviously the rate of interest can be determined by the NCLT in proceedings under Section 7, more so, when NCLT in order dated 31.05.2019 in Para 40, while admitting the Section 7 application observed that rate of interest is to be determined. We also by our order dated 02.02.2023 had held that the Adjudicating Authority should determine the rate of interest as per its order dated 31.05.2019 before any Resolution Plan reaches stage of approval. Para 11 of the order dated 02.02.2023 as already been extracted above. 21. Now we come to the order impugned dated 21.07.2023 passed by the Adjudicating Authority which is impugned in Company Appeal (AT) (Ins.) No. 114-115 of 2023. The Adjudicating Authority after noticing the submissions of parties has noticed the letter dated 10.02.2011 submitted by the Corporate Debtor, Settlement Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter of the Corporate Debtor dated 10.02.2011, Sanction Letter dated 28.02.2011 and Modification Agreement dated 29.09.2011 as well as the Revocation Letter dated 17.06.2013. We now again revert to the aforesaid letters to find out the true import of the decision of the Adjudicating Authority. There is no dispute that the Corporate Debtor himself submitted the letter dated 10.02.2011 offering to pay 22% interest from 01.07.2010. According to the Corporate Debtor the offered settlement amount was Rs.150.76 Crore along with rate of interest w.e.f. 01.07.2010. Sanction Letter dated 28.02.2011 accepted the offer of settlement and as per the terms and conditions of the settlement, the Corporate Debtor has confirmed and acknowledged to pay Rs.150,75,83,970/- along with accrued interest @22% with compounding at monthly rest from 01.07.2010 till 30.09.2011. After Settlement Agreement dated 28.10.2011 extension was granted by ARCIL for payment upto May, 2013. Settlement Agreement has also noticed due amounts payable to respective lenders as on 30.06.2010. What is the consequence of Revocation Letter dated 17.06.2013 on the rate of interest of 22% is the question which has arisen for consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om July 01, 2010 upto 30th September, 2011 on or before the abovesaid due date i.e. 30th September, 2011 without fail. 5. Notwithstanding anything herein or in the financing documents contained, the Loans shall become forthwith due and payable by the Borrower to Arcil and Arcil will be entitled to enforce its securities upon the happening of any of the following events, namely : - (a) Installment being unpaid upon due for payment thereof; (b) Any interest arrears; remaining unpaid and/or in c) The Borrower's committing any breach or default in the performance or observance of these presents and/or the financing documents or any other term or condition relating to the Loans: (d) The Borrower's committing insolvency: any set of (e) Execution or distress being enforced or levied against the whole or any part of the Borrower's property/ies; (f) The Borrower's going into liquidation: (g) A Receiver being appointed in respect of the whole or any part of the property/ies of the Borrower: (h) The Borrower of ceasing, or threatening to cease, to carry on business; (i) The occurrence of any circumstances which is prejudicial to or impair, imperils or depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement of dues on fulfilment of terms as condition precedent as contained in letter dated 28.02.2011 that Rs.10 Crore was to be made upfront payment and rest of the amount was to be paid till 31.09.2011. The said settlement was granted on the condition that w.e.f. 01.07.2010 rate of interest shall be @22% p.a. When the Settlement Agreement dated 28.02.2011 itself was revoked on 17.06.2013, the offer of the Corporate Debtor to pay interest @22% p.a. from 01.07.2010 cannot be enforced and the Modification Agreement dated 29.09.2011 has to be treated as modification in the same Sanction Letter dated 28.02.2011 and Modification Agreement cannot survive independently from Sanction Letter 28.02.2011. Modification Agreement itself has referred to Sanction Letter dated 28.02.2011, where terms and conditions which also have been reiterated in the Modification Agreement were noted. 28. We, thus, are of the view that the Adjudicating Authority has not correctly appreciated the consequence of the Revocation Letter dated 17.06.2013. By Revocation Letter dated 17.06.2013, the Settlement Agreement dated 28.02.2011 which provided for 22% rate of interest from 01.07.2010 came to an end. The Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Letter dated 17.06.2013. 32. One more submission which was made by Mr. Ganda that the Resolution Professional has withdrawn the Appeal which was filed by the Corporate Debtor in which the amount was deposited by the Corporate Debtor which amount was also withdrawn by the Resolution Professional. After withdrawal of the Appeal, the amount which was deposited in Appeal No. 104 of 2016 before the DRAT was amount deposited by the Corporate Debtor which could not be given to ARCIL and was lying in the Court which ultimately was permitted to be withdrawn by the Resolution Professional. Hence, the said amount has to be come into the kitty of the Corporate Debtor. We are, thus, of the view that redetermination of claim of ARCIL as directed by this order shall also lead to determination of the correct amount of debt which was owed by the Corporate Debtor. It goes without saying that entitlement of ARCIL as per the Resolution Plan has to be in accordance with its admitted debt which factor need to be noted by the Resolution Applicant and to be included in the Addendum as hereinafter directed by this order. 33. In the facts of the present case, we are of the view that the Resolution Profes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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