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TMI Blog2019 (3) TMI 1634X X X X Extracts X X X X X X X X Extracts X X X X ..... on granted by the Bank is a continue cause of action till loan is repaid to the Bank. As per definition of debt, it means a liability or obligation in whole or in part of the Claim - It is not in dispute that Provisions of the Limitation Act, 1963 is applicable to the provisions of the Code - the instant Company petition is within limitation. Admissibility of petition - HELD THAT:- There is no solution to the issue and Respondent has not come forward to pay even part amount and thus three is no other alternative for the Tribunal except to consider the question of admission. The Respondent committed default not only in respect of instant petitioner but also to the State Bank of India apart from other banks as per the Debt Recovery Tribunal Certificate - the Corporate Debtor is prima facie become insolvent and thus it is a fit case to admit. Since the instant Company petition IS filed under Section 7 0 Code, the Adjudicating Authority has to examine, whether Company Petition is filed in accordance with the provisions oj Section 7 of the Code or not. It is relevant to refer law on the points to be considered while considering a petition/ application filed under provisions of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g capital. In pursuant to the request of the Corporate Debtor, the Financial Creditor had sanctioned the credit facility vide Sanctioned the credit facility vide Letter dated 04.07.2007. Subsequently, the parties have entered into a Working Capital Consortium Agreement dated 11.07.2007. The working Capital Consortium includes State Bank of India(SBI), State Bank of Hyderabad (SBH), State Bank of PatialaTSBP), State Bank of Travancore (SBT), ICICI Bank and the Financial Creditor. The meeting of the consortium designated State Bank of India as Lead Bank of the consortium under the Inter-creditors Agreement dated 11.07.2007 4) The consortium together had sanctioned total working capital of Rs. (Rupees Three Hundred and Eighy Crores Only) which consists of State Bank of India(SBI), State Bank of Hyderabad (SBH), State Bank of Patiala (SBP), State Bank of Travancore (SBT), ICICI Bank and the Oriental Bank of Commerce(Financial Creditor). Accordingly, respective Banks have issued separate sanction letters. Under the said arrangement, the Corporate Debtor had availed working capital credit limit of (Rupees Thirty Eight Crores Only) from the Financial Creditor(OBC) under the W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following facilities were provided by Applicant No. I to 5 Banks: a) Working Capital Credit limit of ₹ 75 Crores b) LC Limit of ₹ 50 Crores c) Bank Guarantee Limit of ₹ 255 Crores and the limits sanctioned by each of the above said Banks are as hereunder: a. State Bank of India (SBI) ₹ 95 Crores b. Oriental Bank of Commerce ₹ 38 Crores c. State Bank of Patiala ₹ 76 Crores d. State Bank of Travancore ₹ 76 Crores e. ICICI Bank ₹ 95 Crores Total ₹ 380 Crores 8) Wherein Oriental Bank of Commerce has issued a Sanction letter dated 04.07.2007, by inter alia seeking a following reliefs: i. ₹ 73,46,64,105/- (Rupee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( which includes the Petitioner herein) to deposit total amount of including interest as on 31.10.2010 along with future interest and cost till realisation is due against them, within 15 days from the date of receipt of the notice, failing which recovery proceedings shall be initiated as per rules. Therefore, as on 30.11.2018 the Corporate Debtor is liable to pay an amount of Rs. (Rupees One Hundred and Six Crores Eighty Seven Lakhs Fifty Thousand Only). However, the Corporate Debtor failed to pay said outstanding till today by forcing the Financial Creditor to initiate the instant CIRP against the Corporate Debtor under the Code. 3. The Respondent/Corporate Debtor has opposed the petition, by filing a Statement of Objection dated 05.02.2019 by inter alia contending as follows: 1) At the outset it is submitted that the instant Petition filed by the Financial Creditor is not maintainable, and it liable to be dismissed in limine for the following reasons: i. According to the Financial Creditor in Form -1, the total amount of the debt disbursed is Rs. Rupees Thirty -Eight Crores Only), and the amount claimed to be in default is Rs. Rupees Hundred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be communicated in writing by the Lead Bank to the other Banks and the other Banks Shall immediately or as soon as possible after receipt of such notice demand repayment of the moneys due under the relative Cash Credit Account(s) or other Account(s) of the Borrower with it and notify its intention in writing either to act jointly in such action then the said Banks shall act jointly and in case of failure, neglect or refusal by the Other Banks to join in any action, the Lead Bank taking action shall make the Banks so refusing a defendant/ respondent in any action which it may take against the Borrower . It is contended that there is an irrevocable letter of authority was executed by the Financial Creditor to State Bank of India (Lead Bank). iii. Subsequently, the Corporate Debtor and Financial Creditor along with the other members of the Consortium reached a Settlement on 30.10.2014 in OA 862/2010 before the Hon'ble Debts Recovery Tribunal. iv. The aforesaid Settlement was approved by the Hon'ble Debt Recovery Tribunal on 30.10.2014 as evident in the order sheet dated 30.10.2014 passed by the Hon'ble Debt Recovery Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Consortium. As per Memorandum of Understanding (MOU) with the Consortium signed on 06.10.2017 and which is pursuant to the earlier Agreement dated 09.05.2012 and agreement dated 10.09.2014, the parties have agreed as per Clause No.35 in Agreement dated 09.05.2012 that no Recovery Proceedings shall be commenced or continued under the terms of the said Agreement are fulfilled. Clause 35 reads as follows: Clause 35However the working capital lenders may proceed with legal proceedings already initiated against the Borrowers/ Guarantors and others and mortgaged properties before the DRT Bangalore in OA 862 of 2010 and obtain decrees against the Borrower/ Guarantor and the mortgaged properties but shall not execute the said decrees during the pendency of this MOU . The Consortium including the Financial Creditor has vide aforesaid MoU's dated 06.10.2017 has admitted that there has been good progress to date in recovery of loans and extended the term of the MOU till 31.03.2020. 6) The Corporate Borrower has filed Writ Petition vide W.P No.56059 of 2017 challenging the continuation of the proceedings before the Recovery Officer of the Debt Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame and realise the dues payable under the Recovery Certificate . c) In pursuance of OA decreed the Debt Recovery Tribunal , Bangalore, the Corporate Debtor is liable to pay an amount of ₹ 36, (Rupees Thirty Six Crores Eighteen Lakhs Fifty Two thousand Nine Hundred and Ninety Four Only) towards the facility granted by the Financial Creditor. Later on 25.04.2016 the Recovery officer DRT-I at Bangalore had issued Dernand Notice in respect of the same. Therefore, as on 30.11.2018 the Corporate Debtor is liable to pay an amount of d) The understanding as per paragraph 35 of the MOU was confirmed to the said immoveable properties and cannot be extended to state or mean that all the recovery proceedings have been agreed to be stalled during the pendency of the said MoU. It is further submitted that the subject matter of OA 862 of 2010 are charged exclusively to the Consortium Banks and L T has nothing to do with it. This has been further clarified by Paragraph 38 of the MOU, which is extracted herein below: In this regard, it is to be expressly noted by the Borrower (Corporate Debtor) that the Lenders (Consortium Bankers) are entering into the MOU without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... degree. In Mills v. Duckworth, (1938) 1 All E.R.318, a plaintiff, who had been awarded damages for negligence had taken the judgment sum out of a larger sum paid into Court and have been appealed against the quantum of damages, and was met by a similar objection to his appeal. Greer, L.J, in overruling the objection, pointedly said, at p. 321. the plaintiff said: I am not going to blow hot and cold. I am going to blow hotter. Here the Applicant is not faced with a choice between the alternative rights. He has exercised an undisputed right to compensation, and claims to have a right to more. One has not lost one's right to a second help because one has taken the first. When secured creditors like the Respondent are driven from pillar to post to recovery what is legitimately due to them, in attempting to avail of more than one remedy at the same time, they do not blow hot and cold , but they blow hot and hotter. The appeals are accordingly dismkissed with no order as to costs. 5. Subsequently to the filing of the instant petition, I.A No. 75 of 2019 is filed by State Bank of India (Petitioner) U/ R 1 1 of the NCLT Rules, 2016 by inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 380 Crores in terms of the Working Capital consortium Agreement dated 11.07.2007 in terms of sanction letter dated 12.07.2007. On committing default, all the consortium Banks together have filed O.A No. 862 of 2010 before Debt Recovery Tribunal (DRT) at Bangalore. Subsequently, DRT decreed the amount and also issued a recovery certificate to all the consortium Banks including the present petitioner/ financial Creditor. Subsequently, the Recovery Officer issued a demand notice dated 25.04.2016 to all the Respondents of OA , which includes the Respondents herein, by demanding to pay the outstanding amount to all the Banks including the Petitioner. Since, the Petitioner failed to pay the outstanding amount in question, it is aggregated to 106, 87,500,000/-(Rupees Hundred and Six Crore Eighty Seven Lac Fifty Thousand Only) which includes principal and interest. Therefore, the impugned outstanding amount is calculated in accordance with terms of decreed passed by the Debt Recovery Tribunal and there is no deviation/ discrepancy in the claim as alleged by the Respondent/Corporate Debtor. The decree and Recovery certificate in question confers rights to all Banks jointly and several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor when it has committed a default. Therefore, Oriental Bank of Commerce admittedly the financial Creditor, which has extended loan to the Corporate Debtor and it has committed default and suffered a decree passed by the DRT and issued Recovery Certificate entitling all the consortium Banks to recover the their outstanding amount jointly and severally. Therefore, the instant Company Petition is maintainable singly. 12. So far as the allegations of Corporate Debtor with regard to the discrepancies in the outstanding amount is concerned, it is not in dispute that the Corporate Debtor/ Respondent has initially availed the loan amount of Crores from the Petitioner. When it committed default, the Consortium Banks lead by SBI has filed original application and obtained joint decree entitling the Banks to recover their respective outstanding amount jointly and severally from the Corporate Debtor. As per the Compromise Petition has filed before DRT under Regulation 88 of the Debts Recovery Tribunal Regulations of Practice as mentioned above, the settlement with regard to the Petitioner/ Financial Creditor (Oriental Bank of Commerce) is for sum of ₹ 48.42 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract which is deemed as a finance or capitat lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on nonrecourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause; 3(10) CREDITOR means any person to whom a debt is owed and included a financial creditor, on operation creditor, a secured creditor, an unsecured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recting the Tribunal to dispose of the case in accordance with law. And there is no stay granted in pending appeal, by the Debt Recovery Tribunal. It is not in dispute that Provisions of the Limitation Act, 1963 is applicable to the provisions of the Code and it is also held by Hon'ble Supreme Court in B.K.EducationaI case referred supra. Therefore, we are of the considered opinion that the instant Company petition is within limitation. 18. In order to find as to whether any solution to the issue in question is possible or not, the Tribunal granted several opportunities to the parties. However, there is no solution to the issue and Respondent has not come forward to pay even part amount and thus three is no other alternative for the Tribunal except to consider the question of admission. The Respondent committed default not only in respect of instant petitioner but also to the State Bank of India apart from other banks as per the Debt Recovery Tribunal Certificate mentioned above. Therefore, the Corporate Debtor is prima facie become insolvent and thus it is a fit case to admit. 19. So far as the impleading of State Bank of India is concerned, as stated s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of other evidence furnished by the financial creditor under sub-section(3) . 57) Sub-section (5) of Section 7 Of the 1 B Code provides for admission or rejection of application of a financial creditor. Where the Adjudicating Authority is satisfied that-.........the documents are complete or incomplete. 58) The Adjudicating Authority post ascertaining and being satisfied that such a default has occurred may admit the application of the financial creditor. In other words, the statute mandates the Adjudicating Authority to ascertain and record satisfaction as to the occurrence of default before admitting the application. Mere claim by the financial creditor that the default has occurred is not sufficient. The same is subject to the Adjudicating Authority's summary adjudication, though limited to 'ascertainment' and 'satisfaction'. 21. The Hon'ble Supreme Court has also upheld the above judgement in Civil Appeal Nos. 8337-8338 Of 2017 vide judgement dated 31 st August, 2017. The Hon'ble Supreme Court has adverted to the Section 7, at para 28 , which reads as_under: 28 When it comes to financial Creditor tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicating Authority/ Tribunal has to examine the instant case with regard to debt and default, whether Application/ petition is complete/ incomplete, such default is supported by evidence; named qualified Interim Resolution Professional. As stated supra, the instant Company petition is filed in accordance with law. The total/overall outstanding dues in favour of the Financial Creditor is Rs. (Rupees Hundred and Six Crore Eighty Seven Lac Fifty Thousand Only) with future interest cost, suggested name of Shri ValayudhamJayavel,79, Concorde Cupertino, Electronic City Phase 1, Bengaluru 560 100, Registration No.1BB1/1PA-001/1P- P01012/2017-2018/11663 as Interim Resolution Professional and he has filed written Communication dated 03.12.2018 under rule of I B(AAA) Rules, 2016 by inter alia declaring that he is a qualified Insolvency Resolution Professional, he is not undergoing any disciplinary proceedings, he is willing to accept to appointment as such if the Tribunal appoints him etc. Therefore, we are satisfied that debt and default in question has occurred in the instant case, and thus it is a fit case for admission to initiate CIRP in respect of Corporate Debtor. 23. ..... 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