TMI Blog2023 (11) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt expressed its opinion that Amendment Application which was filed by the ARCIL for 22% interest was based on the Sanction Letter dated 28.02.2011. The High Court observed that when the Sanction Letter was itself revoked on 17.06.2013, there is no question of enforcement of rate of interest of 22% by carrying out amendment in the Original Application. The said observation made by the High Court fully support the submission raised by counsel for the Appellant - the fact cannot be lost sight that the Hon ble Supreme Court by order dated 03.01.2019 while dismissing the SLP, clarified that the Tribunal shall, if it considers appropriate having regard to the circumstances of the case, decide on the appropriate rate of interest after hearing both sides. Thus, the determination of rate of interest was left open to the Tribunal after hearing both the sides. The reason for the Adjudicating Authority for taking the decision for rate of interest as 22% essentially rest on the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order dated 21.07.2023 is erroneous and unsustainable. In the facts of the present case, the Resolution Professional may re-verify the claim of the ARCIL as per the rate of interest of 14.85% within two weeks and submit it before the CoC as well as to the Successful Resolution Applicant who shall prepare an Addendum to be placed before the CoC within a period of two weeks thereafter. The Resolution Professional should compute the claim of the ARCIL on the basis of rate of interest as indicated above. The Addendum after approval, if any, be placed before the Adjudicating Authority to be considered along with the application for approval of the Resolution Plan - The Resolution Professional as well as CoC to complete the process, within a period of 60 days from today. Extension in CIRP process is granted for further 60 days from today to complete the process. Appeal allowed. - [Justice Ashok Bhushan] Chairperson And [Barun Mitra] Member (Technical) For the Appellant : Mr. Virender Ganda, Sr. Advocate with Mr. Raghav Anand, Mr. Ayandeb Mitra, Mr. S.J. Khera, Mr. Rahul Narula, Advocates For the Respondents : Mr. Arun Kathpalia, Sr. Advocate with Mr. Abhishek Swa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @12.85% + 2% as penal interest. iii. In 2009-10, Bank of India, Punjab National Bank and Union Bank of India and Vijaya Bank assigned their debt in favour of Asset Reconstruction Company (India) Ltd. (ARCIL). iv. The Corporate Debtor on 10.02.2011 submitted proposal for settlement of Term Loan dues assigned to ARCIL under the SARFAESI Act, 2002. The letter contained offer for settlement of outstanding dues of Bank of India, Punjab National Bank, Union Bank of India and Vijaya Bank for an amount of Rs.150,75,83,970/-. The Corporate Debtor also offered to pay an interest @22% p.a. at monthly rest w.e.f. 01.07.2010 upto 30.09.2011 as a measure of settlement. v. In pursuance of letter dated 10.02.2011, ARCIL issued a letter dated 28.02.2011 regarding settlement of dues (Sanction Letter). As per the Sanction Letter, the Corporate Debtor was to pay Rs.150,75,83,970/- along with accrued interest @ 22% p.a. with compounding at monthly rest from 10.07.2010. As per the terms of settlement Rs.10 Crore was to be made upfront payment and rest of the amount was to be paid till 31.09.2011. vi. On 29.09.2011, a Modification Agreement was executed between the Corporate Debtor and all o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that Tribunal shall, if it considers appropriate having regard to the circumstances of the case, decide on the appropriate rate of interest after hearing both sides. xiii. On 03.04.2018, ARCIL filed Company Petition No. 532 (IB) of 2018 under Section 7 of the I B Code which application was admitted by the NCLT vide order dated 31.05.2019. By order dated 31.05.2019, the Adjudicating Authority, observed that it shall decide question of rate of interest whether 22% or 14.85% after filing of complete information by the Resolution Professional. xiv. An MA No. 2886 of 2019 was filed by the Resolution Professional before the Adjudicating Authority requesting determination of rate of interest applicable to the Corporate Debtor. The Resolution Professional filed an Additional Affidavit before the Adjudicating Authority opining that rate of interest has to be 22% p.a. xv. Against order of Adjudicating Authority dated 31.05.2019 appeal was allowed by this Tribunal by order dated 11.12.2019 setting aside the admission order. ARCIL filed Civil Appeal No. 84-85 of 2020 before the Hon ble Supreme Court challenging the NCLAT order. The Hon ble Supreme Court by order dated 01.08.2022 set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o proceeding with consideration/deliberations of resolution plans, voting upon them, approving resolution plans in terms of Section 30(4) of the Code and issuing letters of intent to the resolution applicants. ii. The relevant agendas, decisions, resolutions resolved by the COC in its 26th meeting dated 07.06.2023, which pertain to proceeding with consideration/deliberations of resolution plans, voting upon them, approving resolution plans in terms of Section 30(4) of the Code and issuing letters of intent to the resolution applicants. iii. The relevant agendas, decisions, resolutions resolved by the COC in its 27th meeting dated 19.06.2023, which pertain to proceeding with consideration/deliberations of resolution plans, voting upon them, approving resolution plans in terms of Section 30(4) of the Code and issuing letters of intent to the resolution applicants. iv. The voting upon the approved plans and choosing of the successful resolution applicant 'Macrotech Developers Limited' by the COC. v. The letter of intent dated 22.06.2023 issued by the Resolution Professional upon the successful resolution applicant. The acceptance of the said offer by the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e next date. We make it clear that this order shall not be read to mean that the Adjudicating Authority may not proceed in the orders which have already been reserved. List this application on 24.08.2023. xxi. Meanwhile, Contempt Case (AT) No. 21 of 2023 was filed by the Appellant on 10.07.2023 praying for initiating contempt proceedings for violation of the order dated 02.02.2023. xxii. After order dated 20.07.2023, the Adjudicating Authority on 21.07.2023 delivered order in MA No. 2886 of 2019 and I.A. No. 3114 of 2022. The Adjudicating Authority by the impugned order decided the rate of interest @ 22% p.a. MA No. 2886 of 2019 filed by the Resolution Professional for determination of rate of interest was allowed and I.A. No. 3114 of 2022 filed by the Appellant was rejected. Appellant aggrieved by the order dated 21.07.2023 has filed Company Appeal (AT) (Ins.) No. 1114-1115 of 2023. 5. We have heard Shri Virender Ganda, learned senior counsel appearing for the Appellant, Shri Arun Kathplaia, learned senior counsel has appeared on behalf of the Resolution Professional. Shri Ramji Srinivasan, learned senior counsel has appeared for ARCIL (Financial Creditor). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor. The Resolution Professional has unduly helped the Financial Creditor by not pressing for determination of rate of interest by the Adjudicating Authority. The Resolution Professional has also wrongly reflected the rate of interest as 22% in the Balance Sheet prepared whereas rate of interest was only 14.85%. It is submitted that the Adjudicating Authority itself by its order dated 31.05.2019 has directed that rate of interest shall be determined by the Adjudicating Authority which order was not complied and before aforesaid determination the CIRP was wrongly proceeded by the Resolution Professional. It is submitted that the order dated 21.07.2023 determining the rate of interest @22% is unfair and unreasonable had at relevant time rate of interest would have been determined, Appellant would have been in condition to settle the outstanding dues. It is submitted that the Resolution Professional was also obliged to determine correct amount of debt after adjusting the amounts already paid by the Corporate Debtor which was also not done. It is submitted that the Resolution Professional has withdrawn the Appeal which was filed before the DRAT being Appeal No. 104 of 2016, which was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly determined the rate of interest by order dated 21.07.2023. Shri Kathpalia has submitted that the Resolution Plan itself contemplates determination of the claim of ARCIL both on the basis of rate of interest of 14.85% and 22%. Hence, whatsoever rate of interest is finally determined in the proceedings that can be given effect to in the Resolution Plan. 8. Shri Ramji Srinivasan, learned senior counsel appearing for the ARCIL contended that the Corporate Debtor having committed to pay interest @22% from 01.07.2010, he cannot now turn round. He has referred to Clause 8 of the Modification Agreement dated 29.09.2011. The Corporate Debtor always agreed to pay interest @22% p.a. compounded at monthly rest. OA No. 114 of 2005 filed by original lender in which Amendment Application was filed by the ARCIL in the year 2016 seeking rate of interest of 22%, which was rejected. The order refusing amendment was upheld by DRAT and High Court, the consequence that the amendment was never allowed, cannot lead to the conclusion that rate of interest of 22% was decided in the said proceedings. Coming to the order of High Court dated 19.10.2018, Shri Ramji Srinivasan has referred to order of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... request, we are agreeable for settlement of dues of V Hotels Limited (hereinafter referred to as the Borrower ) acquired by Arcil from Bank of India (BOI), Punjab National Bank (PNB), Union Bank of India (UBI) and Vijaya Bank (hereinafter collectively referred to as Lender ) as set out in the Annexure hereto and subject to the, terms and conditions set out therein, which is deemed to be part of this Sanction Letter Kindly note that in the event of default of any of the terms and conditions given in the Annexure, Arcil reserves the right to cancel, reduce, suspend or modify any or the entire aforesaid settlement of dues and/or vary the terms and conditions thereof. The other terms and conditions of the diverse original loan agreements executed by the Borrower with the Lender shall without limitation apply mutatis mutandis hereto save and except the rate of Interest which shall be applicable at the rate of 22% p.a. with compounding at monthly rests from July 01, 2010 with the revised repayment schedule as if the same are reproduced herein in extension. This letter is being issued to you in duplicate. Kindly have the duplicate copy of the letter signed by any of the Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A modification of agreement was entered on 29.09.2011 between the Corporate Debtor and the lenders. The Modification Agreement at Clause 3 records the terms and conditions for payment as contained in Settlement Agreement dated 28.02.2011. Clause 8 on which the Respondent has placed much reliance provides as follows: 8. In the event of default, all the original liabilities shall stand reinstated and the terms and conditions of loan agreements and other financing documents together with revised rate of interest of @ 22% per annum compounded with monthly rests from July 01, 2010 shall be reinstated and shall continue to remain in full force and effect and Arcil shall be at liberty to take any action for recovery of its dues under any other law or contract. 14. Now, we may also look into Revocation Letter dated 17.06.2013. The Revocation Letter dated 17.06.2013 provides as follows: BG /VN/FY14/1062 June 17, 2013 V Hotels Ltd Chandar Mukhi Narimen Point Mumbai-400 021 Kind Attn: Mr. A. S. Ananthraman, CFO Dear Sir, Re: Revocation of sanctioned settlement We refer to our sanction letter No, BG3/PQ/FY 11/13979 dated February 28, 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the said notice. While calculating this amount, the respondents have charged the Interest 22% per annum with compounding at monthly rests from 1.7.2010 to 30.06.2013. Since the respondents vide letter dated 17.06.2013 revoked the Settlement dated 28.02.2011 between the parties, I deem it just and proper to direct that while calculating the demand amount on 10.07.2013 which according to the respondents comes to Rs. 2,35,46,34,381/-, the interest should be charged 14.85% per annum with monthly rests from 1.7.2010 to 30.06.2013 instead of 22% per annum. It is also directed that after calculating the debt due towards the appellant @ 14.85% per annum with monthly rests for the said period as mentioned, a sum of Rs. 25.00 crores is also to be reduced which has been paid by the appellant on 25.02.2014 after issuance of the demand notice dated 10.07.2013 in pursuance of the order of the Tribunal below. In view of the law laid down in Narayan Chand -Ghosh Vs. UCO Bank others (supra) and the vision of section 18(1) of the SARFAEST Act, 2002, 1 deem it just and proper to direct that for entertaining the present appeal, the appellant shall deposit 25% of the amount as directed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with law. We clarify that all contentions of both sides, as far as the merits are concerned, are kept open. We clarify that all observations and findings in the earlier orders of the DRAT are tentative and prima facie and shall not prejudice the claim and case of both sides. Needless to clarify that the DRAT then to endeavor to dispose of the appeal as expeditiously as possible and within a period of three (03) months after its revival and restoration. 17. When we look into the observation of the High Court contained in Para 7, it is clear that all contentions of both the parties, as far as the merits, were left open and the earlier orders passed by the DRAT were held to be tentative and prima facie. Hence, we find support to the submission of counsel for the Respondent that there is no final determination of the rate of interest in the said proceeding under Section 18 of the SARFAESI Act. 18. Now, we come to the second proceedings on which reliance has been place by Shri Ganda i.e. the proceedings emanating from Application for Amendment filed by ARCIL for amending the rate of interest in the OA, which was filed by the lender. In OA No.114 of 2005, the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing order on 03.01.2019: ORDER We have heard learned Senior Counsel appearing for the parties perused the record. We see no reason to interfere with the impugned order passed by the High Court except to clarify that the Tribunal shall, if it considers appropriate having regard to the circumstances of the case, decide on the appropriate rate of interest after hearing both sides. In view of the above, the instant special leave petition is disposed of. Pending interlocutory applications, if any, stand disposed of. 20. When we look into the observations of the High Court as extracted above, it is clear that the High Court expressed its opinion that Amendment Application which was filed by the ARCIL for 22% interest was based on the Sanction Letter dated 28.02.2011. The High Court observed that when the Sanction Letter was itself revoked on 17.06.2013, there is no question of enforcement of rate of interest of 22% by carrying out amendment in the Original Application. The said observation made by the High Court fully support the submission raised by counsel for the Appellant. We, however, cannot lose sight of the fact that the Hon ble Supreme Court by ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment has made following observation: 27. Further the Modification Agreement dated 29.09.2011 also stipulated that the Corporate Debtor is required to pay the outstanding amount along with 22% interest. Further it is also observed and noted that the Modification Agreement has not been referred in the revocation letter dated 17.06.2013 nor the Financial Creditor has any point of time cancelled or revoked the Modification Agreement. The relevant clause of the Modification Agreement specifying the rate of interest in the event of default is as under :- 8. In the event of default, all the original liabilities shall stand reinstated and the terms and conditions of loan agreement and other financing documents together with revised rate of interest of @22% annum compounded with monthly rest from July 01 2010, shall be reinstated and shall continue to remain force...... 28. Hence, on the basis of the Modification Agreement, which continues to bind the parties, the Financial Creditor is entitled to the outstanding dues along with the Applicable rate of interest at the rate of 22% p.a. compounding rests monthly. Further the issue in the proceedings pending before the DRT, DRAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause 8 of the Modification Agreement, which is as follows: 8. In the event of default, all the original liabilities shall stand reinstated and the terms and conditions of loan agreements and other financing documents together with revised rate of interest of @ 22% per annum compounded with monthly rests from July 01, 2010 shall be reinstated and shall continue to remain in full force and effect and Arcil shall be at liberty to take any action for recovery of its dues under any other law or contract. 24. The Modification Agreement dated 29.09.2011 was a modification of Sanction Letter dated 28.02.2011. Modification Agreement Para 3, 4 and 5 states as follows: 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 Arcii- V. Hotels Ltd Trust, Arcil-V. Hotels Ltd 11 -Trust, Arcil-V. Hotels Ltd - III -Trust and Arcil-V. Hotels Ltd - IV -Trust from Bank of India, Punjab National Union Bank of respectively, are now rescheduled IN TWO INSTALIMENTS Dank, India and Vijaya Bank AS UDNER in terms of terms of settlement letter dated 28.02. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 and Modification Agreement dated 29.09.2011 was not revoked. When the Sanction Letter dated 28.02.2011 which for the first time provided for rate of interest of 22% p.a. with compounding at monthly rest from 01.07.2010 itself was revoked, we fail to see now Modification Agreement dated 29.09.2011 shall be operative. Modification Agreement dated 29.09.2011 is nothing but modification agreement in continuation of the Sanction Letter dated 28.02.2011 and when the original sanction letter itself was revoked, modification of agreement cannot survive. The Hon ble Bombay High Court has also noted above in its order dated 19.10.2018. The High Court in its order dated 29.10.2018 has held that once the Sanction Letter itself is revoked by ARCIL by their revocation of sanction letter dated 17.06.2013, there is no question of enforcement of the same by carrying out amendment in Original Application. 26. It is further relevant to notice that Revocation Letter dated 17.06.2013 does not confine only to Sanction Letter but refers to extension letters granting extension of time till May 31, 2013 to make deposits. The Modification Agreement dated 29.09.211 was nothing but reiteration of last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Unfortunately, the determination could not take place by the Adjudicating Authority till 21.07.2023 and before that CIRP proceeded too far. The Resolution Professional ought to have taken steps for determination of rate of interest as that has direct nexus with the claim admitted in the CIRP and which are to be taken in the Resolution Plan. Without determination of the rate of interest, the Committee of Creditors proceeded to approve the Resolution Plan and application has been filed before the Adjudicating Authority for approval of Resolution Plan. 30. One more submissions which was advanced by Shree Ganda was that under the order of the Adjudicating Authority dated 31st May, 2019, the debt owed to the Corporate Debtor was also to be determined but the Adjudicating Authority in the Impugned Order has not determined the debt. The debt which was owed to the Corporate Debtor is to be reflected in the aggregate of claims which has been admitted by Resolution Professional in accordance with the Code and the CIRP, Regulations, 2016. The Correct amount of claim of ARCIL was dependent on determination of the rate of interest. The Resolution Professional has admitted the claim on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
