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TMI Blog2007 (3) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... perty) to secure the said debentures. AFL issued the said debentures of 75 crores to 6 debenture holders being 5 Nationalised Banks and to a Limited Company. The Nationalised Banks were Dena Bank, Bank of Baroda, United Bank of India, UCO Bank and Syndicate Bank. A first charge on the right, title and interest inter alia of the suit property together with the plot on which it stood and the furniture, fittings and fixtures thereon came to be created in favour of Canara Bank as the Debentures Trustee who filed the above Suit. 2. The AFL failed to redeem the debentures and pay off the various loans granted by the Debenture Holders. Consequently the Plaintiffs sued to obtain interim reliefs including appointment of the Court Receiver. 3. The Receiver was directed to sell the suit property. Several offers resulted in failure. On 23-12-2005 the offer by Jet Airways of Rs. 206 crores came to be received which until then was the highest offer. 25 per cent of the amount of the offer as required to be deposited by the Offerer at the auction sale under the provisions of Order XXI Rule 84 of the CPC came to be deposited in the Court. Under the Court Receiver s report the said offer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchaser/offerer would have no locus or any crystallized right in the property to be purchased. Navalkhe Sons v. Ramanuja [1970] 40 Comp. Cas. 936. It may be mentioned that the reserve price fixed for the sale of the suit property shown by the Court Receiver to this Court was Rs. 250 crores. The offer of Jet Airways at the auction sale was Rs. 206 crores. The further offers received by the aforesaid two offerers of Rs. 225 crores and Rs. 235 crores is also below the reserve price. Judicial notice is required to be taken of the considerable escalation of prices as held by the Division Bench of this Court in the case of Niwas Builders v. Chanchalaben Gandhi 2003 (3) MLJ 312. 9. The Suit property has been charged in favour of a Nationalised Bank acting as a Debenture Trustee for and on behalf of 5 other Nationalised Banks and a Limited Company, it would be totally against public interest to accept any of the offers which are below, not only the market price, but the reserve price fixed more than a year ago before an auction sale was held. The mandate contained in the judgment of the Apex Court in the case of Rajasthan Housing Board v. G.S. Investments 2007 (1) SCC 477 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e holders and other creditors whose dues have not been paid off though an attempt in that regard is made. 13. The most material of such applications is by Dena Bank in Notice of Motion No. 1453 of 2006 in the aforesaid Suit No. 162 of 2002 in which they have applied essentially for the continuation of the sale of the property and the satisfaction of their claim under the AAA-III Debentures held by them and for leave to intervene in the suit. Paragraph 6 of the Plaint shows Dena Bank holding 500+2000 Debentures of the aforesaid series, since 30-12-1997 and 25-6-1998. 14. It is their case that after the appointment of the Court Receiver and before the auction sale being held by the Court Receiver, Kotak entered into an agreement with AFL under which they, as the debenture holders, were to be paid off along with the other debenture holders. Their total claim in the suit is 10 crores in series to AAA-III and Rs. 25 crores in series AAA-II along with interest of Rs. 5.35 crores and penal interest of approximately 48 crores. Under the OTS they are to be paid off Rs. 32.95 crores which represents the principal amount for the aforesaid 2 series of Debentures together with the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund the Company to revitalise its functions. They offered Dena Bank full and final settlement of the dues under the OTS. The brake-up of the dues was the entire principal amount under the 2 series of Debentures and interest at the contractual rate up to 15-8-2001 (the date of claim) aggregating to the liquidated sum of Rs. 32.95 crores. The letter further states that once AFL receives the approval of Dena Bank along with the approval of the other Creditors they would apply for revival of the scheme to the High Court under section 391 of the Companies Act, 1956 and shall make payment of the sum of Rs. 32.95 crores after the scheme is approved by the High Court. 16. A further letter dated 9-11-2005 of AFL to Dena Bank for the OTS shows that they had approached other debenture holders with similar OTS proposal as offered to Dena Bank, which was being considered by them and their response was awaited. The letter shows the principal amount along with interest at the contractual date till 15-8-2001 (the date of the filing of the Suit). Hence, it can be seen that the other proposals would also essentially show the offer of the entire principal amount and the contractual rate of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to adjourn the auction sale to be held since without auctioning the suit property of AFL it could be paid off as would the other beneficiaries. Though AFL was to propose the scheme under section 391 of the Companies Act before the High Court in a Petition for its revival and rehabilitation and was to pay off the debenture holders upon such scheme being sanctioned, AFL/Kotak made payment of the OTS amount of Rs. 35.35 crores which represented the principal amount and interest at the contractual rate up to 15-8-2001 on the date of the agreement itself. 20. Dena Bank learnt later through the proceedings in the Writ Petition No. 328 of 2006 that Bank of Baroda has been preferentially treated and that they have been discriminated against. The discrimination was allowed to prevail upon the representation of AFL that they had made similar proposals to the other debenture holders and were to receive approval of all the creditors with an illustration of only United Bank of India. Dena Bank therefore, by their letter dated 28-3-2006 to Kotak as well as AFL put on record the representation and called upon them to return the Debentures transferred to Kotak. That is their claim in the Notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected. The other debenture holders including UBI must similarly be paid their contractual rate of interest until the date of settlement, if AFL desires to wash its hands off the liabilities of creditors and the Court Receiver got appointed by the Debenture Trustees on behalf of the beneficiary debenture holders, and the consequent auction sale called for by the Court Receiver under the directions of the Court. 24. Gujarat Gems Private Limited who are minority shareholders of Dena Bank, Syndicate Bank, UCO Bank and Bank of Baroda have applied by way of a derivative action in the Notice of Motion No. 271 of 2006 in the above suit No. 162 of 2006 as well as filed a sepa-rate suit being suit No. 1075 of 2006, in which they have taken out Notice of Motion No. 1212 of 2006. In both of which they have applied essentially for restraining Kotak from dealing with the interest of the debenture holders as also for confirmation of the sale by auction of the suit property. They hold shares in the aforesaid bene- ficiary Banks. They claim that the interest in their holding is prejudi- cially effected by the private agreements entered into by AFL with Kotak to pay off the Bankers lesser than t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh bids. 28. SICOM Ltd. who is a secured Creditor of AFL to the extent of 25 crores has applied under Notice of Motion No. 2216 of 2005 in the aforesaid suit No. 162 of 2002 for protection of its interest as such Creditor and for payment to it out of the surplus sale proceeds from the auction sale conducted by the Receiver. 29. Yet another application is made by one Apple Credit Corporation Ltd. (ACCL) who has sued Apple Finance Limited (AFL) in suit No. 3975 of 2002 by way of Chamber Summons No. 53 of 2006 for setting apart and excluding apart of the suit property belonging to the AFL from the sale to be conducted by the Court Receiver or for the payment of its outstanding dues from AFL upon surplus sale proceeds being received. The part of the suit property to be excluded has been shown as Exhibit-1 to the Chamber Summons No. 53 of 2006. The suit filed by the said ACC Ltd. is upon payment of Rs. 95.33 crores to AFL initially upon an agreement to assign receivables and later upon an agreement to create security in their favour for the payment of the said sum. The security entitled ACC Ltd. to acquire a portion of the suit property being the premises of AFL to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secured Creditors has to be protected by the Court. Each of the Creditors desire to be paid off as the bottomline of their claim. Interest of justice as well as commercial exigency, therefore, demand a balance to be drawn. AFL may be allowed to carry on its business with the assistance of Kotak but only after repayment in full of all the debenture holders and other creditors if it desires to salvage its property from the on-slaught of the bidders at the public auction, which AFL has invited upon itself by its initial defaults constraining the Debenture Trustees to sue. 33. It is contended by AFL that the suit property is in prime locality and pristine condition and its market value is about 600 crores. This far exceeds the total claim of all the creditors and debenture holders, secured and unsecured Creditors. Kotak is the recipient of such bounty. AFL would be sheltered by Kotak upon the worth of its property. Pending the tenure of the Court Receiver no party who is an outsider can be allowed to take advantage of a property which the Receiver was meant to protect. Allowing AFL and Kotak to go on with their arrangement would be to put a premium on back-door entry in a takeover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebenture holders in the aforesaid two suit No. 162 of 2002 and suit No. 2584 of 2002 (ICICI Bank) at par with their arrangement with Bank of Baroda for payment of the interest at the contractual rate of 14 per cent p.a. until the date of settlement with them as also the seperate claims of Canara Bank, SICOM Ltd., ACCL and the other similar small unsecured Creditors. 3.The Court Receiver shall not act in respect of the suit property any further for a period of 8 weeks. 4.If these claims are not settled, the debenture holder beneficiary Banks shall be entitled to be brought on record as party Defendants in terms of the applications made by them. The amendments in the Plaint to that effect shall be carried out. 5.In that event the Court Receiver shall obtain a fresh valuation of the suit property and get a fresh reserve price fixed. 6.All the parties including Jet Airways, Financial Technology Limited, Parasvnath Developers Ltd., any other parties interested shall be entitled to bid after the reserve price is fixed by the Court and made known to the bidders. 7.All the above applications and Court Receiver s Report disposed off accordingly. 8.This order is stayed for two we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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