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2018 (5) TMI 576 - HC - Companies LawBreach of contract - jurisdiction of court - alternative remedy of statutory appeal - petitioner-Company has availed credit facilities from Bank Consortium headed by respondent no.4, i.e., State Bank of India but failed to make payment as per the financial discipline laid-down between the parties and there were efforts for restructuring of the petitioner-Company s loan account - Held that - The petitioners cannot be heard to say that writ jurisdiction is the only remedy merely because they have chosen to add some new reliefs or the respondents in the writ petition. There is nothing on record to suggest that the petitioners have ever approached the State of Madhya Pradesh for the release of the due amount of alleged subsidy hence they cannot spring surprise on the Ministry of Textiles or State of Madhya Pradesh by seeking a writ of mandamus without even once agitating the matter before those agencies. Similarly, the question whether RBI guidelines have been followed or consciously violated by the SBI, is also essentially a question of fact which can be effectively adjudicated by the learned Appellate Tribunal. Assuming that there is some merit in the petitioners contention that all these issues were raised before the Adjudicating Authority and the same have not been decided on merits, yet it would not be a sufficient ground to entertain the writ petition. There is a sea difference between erroneous exercise of jurisdiction or lack of jurisdiction in a Tribunal. The erroneous or failure to exercise jurisdiction by a Tribunal is a ground which can be effectively taken before the Appellate Authority. It appears to us that the petitioners cannot be heard to say that notwithstanding the powers expressly conferred under Section 60(5) of the Code, the NCLT lacks jurisdiction to entertain or dispose of the issues raised by them. Undisputedly, equally efficacious and effective remedy of appeal is available under Section 61 of the Code to the petitioners. More-so, the petitioner-Company had submitted to the jurisdiction of Adjudicating Authority and in that process, continued to appear and associate before the Adjudicating Authority during 15 effective hearings in a long span of 6 months. Unfortunately, instead of approaching the National Company Law Appellate Tribunal under Section 61 of the Code, the petitioner-Company has now preferred to invoke the writ jurisdiction of this Court. With a view to enable the petitioners to avail the alternative remedy of statutory appeal, as directed above, we deem it appropriate to direct that the Interim Resolution Professional appointed by the Adjudicating Authority vide order dated 19.04.2018 shall not take over management of the first petitioner- Company till 15.05.2018 so as to meanwhile enable the petitioners to file their statutory appeal.
Issues Involved:
1. Realization and adjustment of capitalized loss subsidy. 2. Implementation of Master Restructuring Agreement (MRA)/Corporate Debt Restructuring (CDR) Package. 3. Compensation for loss or profits by the respondent-Banks. 4. Accountability of public sector Banks by the Ministry of Finance. 5. Grant of subsidy by the Ministry of Textile and State of Madhya Pradesh. 6. Declaration of Insolvency Petition as frivolous and vexatious. 7. Restraint on pursuing Insolvency Petition before NCLT. 8. Setting aside the NCLT order dated 11.04.2018. Detailed Analysis: 1. Realization and Adjustment of Capitalized Loss Subsidy: The petitioners sought a directive for the Bank Consortium to realize and adjust the capitalized loss subsidy of ?542 crores in the loan due amount. The petitioners argued that the subsidy amount was noted in various Joint Lenders Forum (JLF) meetings, but the Banks failed to provide the promised working capital and did not ensure the timely release of the subsidy from the Central and State Governments. 2. Implementation of Master Restructuring Agreement (MRA)/Corporate Debt Restructuring (CDR) Package: The petitioners requested the implementation of the MRA/CDR Package dated 30.06.2014, including the release of working capital of ?800 crores. Despite the agreement, the Bank Consortium failed to disburse the necessary working capital and term loan, leading to the petitioner's financial distress. The petitioners claimed that the Bank Consortium's actions were arbitrary, discriminatory, and contrary to RBI guidelines. 3. Compensation for Loss or Profits by the Respondent-Banks: The petitioners sought compensation for the losses incurred due to the respondent-Banks' failure to release the necessary funds and subsidies. The petitioners argued that they fulfilled all their obligations, but the Bank Consortium did not comply with the provisions of the MRA, leading to financial instability. 4. Accountability of Public Sector Banks by the Ministry of Finance: The petitioners requested the Ministry of Finance to make public sector Banks accountable and formulate policy guidelines to prevent borrowers from being prejudiced. The petitioners argued that the lack of accountability and support from the Banks and the Ministry of Textile led to their financial difficulties. 5. Grant of Subsidy by the Ministry of Textile and State of Madhya Pradesh: The petitioners sought a directive for the Ministry of Textile and State of Madhya Pradesh to grant the subsidy amount to the first petitioner. The Ministry of Textile contended that the petitioner-Company had never approached them for the release of the interest subsidy and that the entitlement to subsidy is governed by the fulfillment of conditions set out in the applicable scheme. 6. Declaration of Insolvency Petition as Frivolous and Vexatious: The petitioners argued that the Insolvency Petition filed by respondent No.4 (SBI) before the National Company Law Tribunal (NCLT) was frivolous, misconceived, vexatious, and violative of RBI guidelines. The petitioners contended that the loan exposure was less than the mandate, and the Bank Consortium should have given an opportunity for debt restructuring. 7. Restraint on Pursuing Insolvency Petition before NCLT: The petitioners sought to restrain SBI and other lender-Banks from pursuing the Insolvency Petition pending before NCLT. They argued that the Bank Consortium's actions were arbitrary and discriminatory and that the Tribunal's order admitting the petition was based on untenable grounds. 8. Setting Aside the NCLT Order Dated 11.04.2018: The petitioners requested the setting aside of the NCLT order dated 11.04.2018, which admitted the Insolvency Petition. They argued that the Tribunal's decision was arbitrary and discriminatory, and the issues raised in the writ petition could not be adjudicated by the Tribunal or under the Code. Court's Observations and Decision: The Court noted that the petitioner-Company had availed credit facilities from the Bank Consortium and failed to maintain financial discipline. The restructuring efforts, including the MRA, were not fully complied with by the petitioners. The Court observed that the issues raised were primarily questions of facts, which could be effectively adjudicated by the Appellate Tribunal under Section 61 of the Insolvency and Bankruptcy Code, 2016. The Court declined to entertain the writ petition, emphasizing the availability of an alternative remedy of appeal. The Court directed that the 'Interim Resolution Professional' appointed by the Adjudicating Authority should not take over the management of the first petitioner-Company till 15.05.2018, enabling the petitioners to file their statutory appeal. The writ petition was disposed of with the direction to avail the alternative remedy of appeal.
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