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TMI Blog2019 (2) TMI 1763X X X X Extracts X X X X X X X X Extracts X X X X ..... e Joint Lenders Restructuring Agreement (JLRA) dated 27th June, 2015. FACTS 3. The facts as averred in the appeal are that the appellant Lakshmi Energy, a Company incorporated under Companies Act, 1956 is involved in the business of processing paddy and exporting rice. In the year 2010, it had availed of certain financial assistance from a Consortium of Banks comprising of respondent nos. 2 to 5 herein with respondent no.2 (Punjab National Bank, hereinafter referred to as PNB) being the lead banker. Sometime in 2014 on account of non-conducive market conditions in the paddy / rice industry which adversely affected the appellant's business, the drawing power of the appellant suffered heavily and the appellant company informed the consortium of banks accordingly. However, the account was not an NPA at that point of time. 4. Meanwhile, the Reserve Bank of India in exercise of its powers under the Banking Regulations Act, 1949 ("Act of 1949' in short) issued Guidelines on 30th January, 2014 by way of which it introduced the framework of identifying stressed assets and prescribed detailed steps that had to be taken by banks in order to re-vitalize such stressed assets. These Guide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed blueprint for the next 10 financial years, wherein the lenders work to infuse working capital in terms of the TEV report into the appellant's business on a proportionate basis and the same had to be repaid by the appellant company over a period of 10 years following a moratorium of two years. In terms of the said report and proposal contained therein the cut-off date was fixed as 1st October, 2014 on which date the term loan outstanding was Rs. 32 Crores and cash credit outstanding was Rs. 860.88 Crores. The restructuring plan involved converting the drawing power shortfall of Rs. 436 Crores into a working capital term loan bearing an interest @ 10.75% per annum. Interest on the said loan was to be converted into a term loan (Funded Interest Term Loan-FITL), the repayment of which would start after the aforementioned moratorium (a period of 24 months from the cut-off date). The proposal also included another Working Capital Term Loan (WICTL-II). The interest on cash credit facility was also proposed to be converted into a term loan. 7. Since the total exposure of the appellant company was more than Rs. 500 Crores in terms of the RBI Guidelines the TEV study had to be sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition. Consequently, the appellant company's efforts and ability to meet the projected cash flow as envisaged in the approved JLF package was severely impeded and jeopardised. 12. It was the case of the appellant that on 1st December, 2015, following several representations and requests made by the appellant company for the release of the remainder of the working capital in terms of the approved JLF package, Punjab National Bank, (PNB) formally sanctioned the release of ad-hoc facilities of Rs. 59.68 Crores against furnishing of further additional third-party ad-hoc securities commensurate with the said amount. However, only Rs. 30 Crores were released out of the said sanctioned amount. It was the appellant's case that since the adhoc limit was merged with the approved JLF package, it was entitled to release of remainder of total sum envisaged for the fiscal year 2015-16 by the other banks according to their pro-rata share. Despite several letters sent to respondent banks repeatedly requesting release of additional working capital no further limits / funds were released. 13. The moratorium period envisaged in the restructuring package was to get over by December, 2016, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany filed the subject writ petition being W.P(C) 5555/2018 inter alia seeking implementation / compliance of RBI circulars dated 30th October, 2014, 26th February, 2014 and 5th May, 2017, vis-a-vis JLRA dated 27th June, 2015. The Learned single judge has dismissed the writ petition. APPEAL 20. Challenging the impugned order, it is the appellant company's case that the learned Single Judge has erred in concluding that the Projected Cash Flow Statements and Working Capital Assessment as contained in the D&B TEV report was not a part of the "Approved JLF package" and therefore it was not entitled to any additional working capital over and above Rs. 75 Crores. It is further stated that Clause 2.6.1 of the JLRA has been completely misconstrued inasmuch as the respondent banks' stand that the Approved JLF Package is limited to Schedule - X of the JLRA and therefore did not envisage provision of fund based working capital beyond Rs. 75 Crores, being a complete afterthought was raised for the first time only before the learned Single Judge. It is stated that the respondent banks had never disputed or objected to the appellant company's request for enhancement of fund based working ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was referred to the Joint Lenders' Forum (hereinafter referred to as the "JLF"), a non-statutory voluntary mechanism for the efficient restructuring of corporate debt. Pursuant thereto, the Lenders at their meeting held on March 19, 2015 agreed for restructuring of Existing Loans as corrective action plan. Pursuant thereto Dun and Bradstreet (D&B) was requested to draw a Techno Economic Viability Report (the "TEV Report") on the restructuring of Existing Loans and it submitted its TEV Report on March 27, 2015 along with the final restructuring package and after perusal of the said report, the Lender / Lead Bank have agreed to restructure the Existing Loan subject to the terms and conditions as decided by the JLF, in its meeting dated March 27, 2015 and finally approved in JLF dated June 23, 2015 (hereinafter referred to as the "Approved JLF Package") 23. It is the appellant's case that upon a conjoint reading of the aforesaid clauses it becomes clear that the restructuring package (proposal) as contained in the D&B TEV report is an integral part of the restructuring under the JLRA. It is stated that the learned Single Judge's conclusion that the proposed enhancement of working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproved and sanctioned by the Banks in their favour a right had crystallized in favour of the appellant. Therefore, if even after sanction the banks failed to disburse the said funds the said right accrued in favour of the appellant ought to have been enforced by the learned Single Judge. 26. It is further stated that the stand adopted by PNB and ICICI Bank that the said sanction of additional working capital limits was a separate transaction altogether is factually incorrect inasmuch as the said stand was taken only during the course of oral arguments and not in any of the pleadings filed by them. Moreover, treating the said transactions as a separate one would in fact be a violation of extent RBI Circulars which stipulated that the decisions of the JLF were binding on all constituent members. It is stated that a perusal of the minutes of the JLF meeting dated 22nd December, 2016 would show that a decision to enhance working capital limits for FY 2015-16 was taken by the JLF in October, 2015 itself and therefore the said decision cannot be termed as being independent of JLF. Further, even from PNBs sanction letter dated 5th December, 2015 it can be seen that the same had been ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t" CMA data requested that enhanced working capital be released for FY 2015-16 thereby demonstrating the understanding that the Approved JLF Package included enhancement of working capital limits in the subsequent years. It is their case that the aforesaid letter has been read completely out of context inasmuch as several other letters written by the appellant company requesting sanction and release of enhanced working capital have not been considered by the learned Single Judge. 30. It is stated that a TEV Study plays an important role in the framework established to deal with stressed assets by the RBI vide Circulars dated 30th January, 2014 and 26th February, 2014. Reliance is placed on the following Clauses from the Circular dated 26th February, 2014: "4.3 Restructuring by JLF 4.3.1 If the JLF decides to restructure an account independent of CDR mechanism, the JLF should carry out the detailed Techno-Economic Viability (TEV) study, and if found viable, finalise the restructuring package within 30 days from the date of signing off the final CAP as mentioned in paragraph 3.3 above. 4.3.3. For accounts with AE of Rs. 5000 million and above, the above-mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equence of events: DATE EVENT 19.03.2015 JLF in its meeting appointed D&B as the TEV Consultant. 27.03.2015 D&B TEV Report is finalized and submitted to JLF wherein a "restructuring scheme" was proposed. 27.03.2015 On the same day, the JLF approved the aforesaid D&B TEV Report in its entirety which included the Annexure-2 (Balance Sheet) and Annexure - 3 (Projected Cash Flow Statement) and (Assessment of Working Capital Limits) showing enhancement of fund based working capital which later on became the basis of the consequent JLRA executed between the parties. 30.03.2015 PNB and Syndicate Banks issued Sanction Letters in terms of the restructuring package as proposed in the D&B TEV Report. 30.03.2015 On the same day, PNB and Syndicate Bank, restructured the Appellant Company's loan account as WCTL, TL, FITL etc., as proposed in the D&B TEV Report. 10.04.2015 ICICI Bank also issued a Sanction Letter as per the restructuring scheme proposed in D&B TEV Report. 11.05.2015 IEC approved the D&B TEV Report in its entirety. 25.06.2015 Axis Bank issued a Sanction Letter as per the Restructuring scheme proposed in D&B TEV Report. 27.06.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l which hindered the appellant company's ability to meet cash flow statements as envisaged in the D&B TEV Report. 36. It is also stated that in light of the fact that the contents of the PNBISL TEV Report had specifically been admitted by PNB and ICICI Bank in their respective counter affidavits before the learned Single Judge, there was no occasion to discredit and refuse to rely on the said Report on the ground that the findings / observations contained therein were not informed or backed by specific analysis. Relevant extract of the said Report is as follows: "The Company complied with all the conditions of restructuring scheme including payment of interest till 3009-2016. But WC limits were not released by Banks as per TEV report / approved restructuring scheme. Consequently, the restructuring scheme could not be taken forward after 01.10.2016 and the Company could not achieve its projections as per TEV report. Amounts payable to Banks became overdue and loan accounts of Company have been classified as Non-performing Assets by the lending banks" 37. It is further the appellant's case that in terms of Clauses 7.3.1 and 7.3.2 of the JLRA the respondent Banks were man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was no meeting convened by the JLF between 22nd December, 2016 and 24th April, 2017. Moreover, the meeting held on 8th February, 2017 was attended by low ranking officers and as such they were not competent to take any decision with regard to changing the CAP. 40. Attention is drawn to the fact that in the meeting held on 21st June, 2017 the JLF had formally invoked S4A Scheme thereby waiving and abandoning its right to initiate recovery proceedings following the purported decision taken in the meeting held on 8th February, 2017. The appellant therefore states that the learned Single Judge's decision to uphold the action of the respondent banks in initiating recovery proceedings is completely unjustified and misconceived. 41. The appellant has sought to distinguish the Judgment of the Supreme Court Innoventive Industries Ltd. v. ICICI Bank and Anr. 2018 1 SCC 407 by contending that Section 238 of IBC cannot override Section 35AA and 35AB of the Act of 1949, which was introduced after the enactment of IBC, 2016. The learned Single Judge had relied on the said judgment to state that in view of Section 238 of IBC, insolvency proceedings once initiated cannot be interdicted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns on part of the appellant company that the respondent banks would comply with the same. It is stated that implementation / compliance of the aforesaid Circulars is not only important vis-à-vis the stressed assets in particular, but is also critical in view of larger public policy involved and affects the fiscal health of the nation at large. 44. The appellant states that the learned Single Judge has erred in arriving at the finding that the appellant company could have obtained credit facilities from outside the JLF. It is stated that in terms of various clauses of the JLRA the appellant company was precluded from obtaining multi-banking credit facilities from outside the JLF. In fact, faced with delays / failure on part of the respondent banks in disbursing necessary amounts, the appellant had made a specific request to the JLF to permit multi-banking facilities, the same was however denied. 45. The appellant also alleges malafides on part of the respondent banks inasmuch as the S4A Scheme, in terms of RBI Circulars dated 13th June, 2016 and 10th November, 2016, had to be invoked and implemented within a period of 180 days, however, the respondent banks failed to adhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 2nd December, 2015 executed and given by the appellant company to the answering respondent Bank. 6. Agreement of Hypothecation of current assets dated 2nd December, 2015 executed and given by appellant Company to the answering respondent Bank. 7. Agreement of Guarantee dated 2nd December, 2015 executed and given by appellant Company to the answering respondent Bank. 8. Agreement of 2nd Charge of Hypothecation of moveable assets forming part of fixed / blocked assets dated 2nd December, 2015 executed and given by appellant Company to the answering respondent Bank. SUBMISSIONS:- 48. Mr. Kapil Sibal, learned Sr. Counsel appearing on behalf of the appellant submitted that the main issue arising out of the present appeal is that respondent Banks failed to release Fund Based Working Capital (FBWC) to the appellant Company as envisaged in the Approved JLF Package that forms a part of the "Restructuring" that was done by the Banks pursuant to statutory framework introduced by RBI vide its Circulars dated 30th January, 2014, 26th February, 2014 and 5th May, 2017. It was on account of this failure to release Working Capital in terms of the said Package that the Banks failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res is contrary to the language of Clause 2.6.1 itself. He would refer to the several letters written by the appellant to the respondent Banks seeking release of additional working capital limits which had never been denied / disputed by the Banks to submit that their present contention is merely an afterthought. 53. Mr. Sibal would submit that the sanction of Rs. 59.68 Crores by PNB is not a separate transaction but is in fact its pro-rata share of the enhanced working capital limits envisaged in the D&B TEV Report. He would submit that the said stance adopted by the respondent Banks, which had never been taken before the learned Single Judge, is false and misconceived inasmuch as after the issuance of the said sanction letter dated 5th December, 2015, PNB, vide letter dated 7th December, 2015, informed the other Banks that it had sanctioned "it's share in the Consortium" and requested the status of sanction by the other Banks. The Permissible Banking Finance (PBF) note appended to the said letter categorically states that working capital limits of Rs. 592.7 Crores had been sanctioned "as already accepted in the TEV Study submitted at the time of restructuring". 54. Mr. Sibal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 35AB of the Act of 1949, must be tested for "default" in terms of the procedure laid down in the JLRA (Clauses 7.3.1 and 7.3.2) unlike a situation which is governed by Section 35AA of the said Act which specifically incorporates the definition of "default" from IBC. The respondent Banks' reliance on the definition of "default" as given in Section 3(12) of IBC 2016 would therefore be completely misconceived. According to him, resorting to IBC proceedings would be in grave violation of the procedure given in the JLRA. 58. He would further submit that Section 238 of IBC cannot override Section 35AB of the Act of 1949 and the Circulars issued thereunder inasmuch as Section 238 seeks to override such laws that stood in force as on date of enactment of IBC, whereas Section 35AB had been introduced in the year 2017, i.e., after the enactment of IBC, 2016. Reliance is placed on Shri Ram Narain (Supra) and Ajoy Kumar Banerjee v. Union of India and Ors. (1984) 3 SCC 127. Reiterating the stand already adopted regarding reliance placed by the learned Single Judge on Innoventive (supra), Mr. Sibal would further submit that the Supreme Court therein merely declared supremacy of IB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t company passed a Board Resolution on 6th November, 2015 "to avail credit facility from PNB" to obtain cash credit hypothecation for execution of fresh document of agreement and furnishing of securities by way of hypothecation, mortgage and charge on fixed assets. Consequently, the appellant executed separate documents such as Deed of Hypothecation of Goods and Book Debts, Current Assets, Guarantee, Second Charge of Hypothecation of Movable Assets etc. on 2nd December, 2015. He would submit that the managing Committee of PNB in the meeting held on 1st December, 2015 had sanctioned cash credit limit of Rs. 270.45 Cr. (i.e. enhancement of Rs. 59.68 Cr. from existing Rs. 210.77 Cr.). According to him, it is therefore clear that the said sanction of Rs. 59.68 Cr. was a separate transaction on a separate request made on 22nd September, 2015 and was on execution of separate documents. 62. He further submitted that PNB had released only Rs. 30 Crores out of the said amount on account of the fact that the appellant had failed to provide additional security equivalent to the proposed enhancement limit. Even though, the PNB had, vide letter dated 7th December, 2017, informed the other Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on viz., financial, stock statements etc. immediately so that a resolution strategy is put in place in good time. Meanwhile the bankers shall also take up internally regarding the S4A option which shall be again discussed in the meeting proposed to be held in the first week of June, 2017, after the Company submits a formal proposal accompanied by the requisite documents. It was also decided to for a core committee of Bankers with a representative from the Company to coordinate the matter. The Company was advised to ensure that all the sale proceeds are routed through the designated TRA account." 64. It is further submitted that the S4A Scheme could not be implemented on account of the appellant company failing to meet the eligibility criteria. In the JLF meeting held on 21st June, 2015 a Core Committee was constituted for the implementation of S4A Scheme including for appointment of a Forensic Auditor. On 30th December, 2017 PNBISL TEV Report, Stock Audit Report and the progress of Forensic Audit were considered. On 12th January, 2018 the JLF agreed to approach the RBI for condonation of delay in implementation of S4A Scheme subject to Forensic Audit Report being satisfactory. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Ltd and Anr. v. V. Sadasivam and Ors. reported in 2005 (6) SCC 657 and State of Kerala and Ors. vs. M.K. Jose reported in 2015 (9) SCC 433. 67. Finally, he would submit that in terms of the law laid down by the Supreme Court, a corporate debtor cannot seek stay of proceedings initiated under IBC 2016 and remedy against proceedings initiated under SARFAESI Act would lie with the borrower only in terms of the Section 17 of the Act. 68. Mr. Ramji Srinivasan, learned Senior Counsel appearing for the respondent No.3 would, in addition to supporting the stance adopted by Respondent No. 2, submit that the appellant company was in continuous default on almost all its payment / repayment obligations due to which the JLF package failed: a. Default on interest payment and repayment; b. Default in routing transactions through Trust and Retention Account (TRA); c. Default in payment of Promoters' Contribution of Rs. 18.44 Cr. (out of which only Rs. 12.49 Crores was paid much later). 69. He would refer to Clause 2.6 of the JLRA to submit that release of additional funds was subject to the discretion of the lending Banks. Further, by virtue of Clause 5.1 (t) of the JLRA the repa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of SARFAESI Act to the appellant company. However, only as a matter of goodwill gesture, in the meeting held on 24th April, 2017, the lenders agreed to implement any viable proposal for resolution of the appellant's debt in terms of S4A Scheme of the RBI subject to satisfactory Forensic Audit Report. The proposal of S4A Scheme was considered in light of the appellant's financial indiscipline which had resulted into a substantial portion of the debt becoming unsustainable. It was only on account of non-closure of the Forensic Audit Report within 180 days that ICICI Bank withdrew its consent for the S4A Scheme on 23rd January, 2018. Subsequently, the appellant was also issued a recall notice whereby it was requested to pay a sum of Rs. 1,77,77,60,053.15/- within 7 days from receipt of said notice and not to alienate or dispose of any of its properties and assets. The said notice, having been received by the appellant on 8th January, 2018, and failure to repay in terms thereof led to the appellant being in further default. 73. Accordingly, it was on 18th January, 2018 that ICICI Bank issued notice under Section 13 (2) of SARFAESI Act. In the JLF meeting held on 9th February, 2018, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same would be at the Bank's sole discretion. 76. Mr. Srinivasan would point out that the appellant has also defaulted with respect to several other stipulations contained in the JLRA namely, (i) upfront promoter's contribution of Rs. 18.44 Crores; (ii) requirement to route all trading transactions through TRA; and (iii) regular payment of monthly interests as per respective due dates mentioned in the payment schedule in the JLRA. Even though the respondent Banks had given liberal extensions to the appellant to regularize its accounts, it continued to default and, in such circumstances, it cannot demand additional funding as a matter of right. 77. According to Mr. Srinivasan it would be incorrect to state that the Banks have taken an unlawful step in initiating recovery proceedings against the appellant. He would refer to minutes of the JLF meeting held on 8th February, 2017, where the CAP was changed from "restructuring" to "recovery" and the meeting held on 22nd March, 2018 where all the Banks agreed to initiate CIRP proceedings. He would submit that the appellant's contention that the decision to initiate "recovery" was abandoned by the Banks once the decision to impleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structuring package will have to be subjected to an evaluation by an Independent Evaluation Committee (IEC) of experts fulfilling certain eligibility conditions. The IEC will look into the viability aspects after ensuring that the terms of restructuring are fair to the lenders." 81. As regards the appellant's contention that sanction of additional package by PNB vide letter dated 5th December, 2015 formed a part of the JLRA, Mr. Srinivasan would submit that had the same additional facility formed the part of the package, there would not have been requirement of any further "sanction" and "creation of separate additional securities" and the said facility would have found a mention in the JLRA package itself. The very fact that the appellant executed separate bilateral documents with PNB and provided additional securities confirmed that the said facility was not a part of the restructuring package. He would refer to Inter Creditor Agreement dated 27th June, 2015 which clearly states that all credit decision and additional facilities would be subject to decision of the respective lender's competent authority. 82. It is submitted that the provisions of the amendments incorporated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed JLF Package" is completely misconceived inasmuch as the JLF itself in its meeting held on 19th March, 2015 had commissioned D&B to carry out the TEV Study, having adopted "Restructuring" as the CAP. The TEV recommended the enhancement of working capital which was adopted in its entirety in the meeting held on 26th March, 2015; sanction letter issued by the PNB to the appellant on 30th March, 2015; IEC comprising of Senior RBI officials had approved the TEV report in its entirety without expressing any reservation with regard to the subject Annexures. (iii) The restructuring envisaged comprised of "Restructuring" contained in the JLRA as well as the one envisaged under the "Approved JLF Package". So, the Approved JLF Package is distinct from the phrase "this agreement" which phrase has been used separately in the JLRA itself. (iv) As per Clause 2.6.1 of the JLRA, the Banks have undertaken to extend working capital limits as per "Approved JLF Package" in terms of the projections contained in D&BTEV Report. (v) Restructuring was to be done in terms of the "Approved JLF Package" instead of "this agreement" and therefore the respondents Banks' contention that they are not oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de Section 35AB of the Act of 1949 and the Circulars issued thereunder inasmuch as Section 238 seeks to override such laws that stood in force on the date of enactment of IBC, whereas Section 35AB was introduced in the year 2017. (xii) Reliance placed by the ld. Single Judge on the Judgement of the Supreme Court on Innoventive (Supra) is misconceived, inasmuch as the Supreme Court had only declared supremacy of the IBC over Maharashtra Relief Undertaking Act, 1958 which is admittedly hit by Section 238 unlike Section 35AB in the present case. (xiii) He refers to the Judgment of the Supreme Court in Arcelor Mittal India Pvt. Ltd. (supra) to submit that the entertainment of the writ petition by a Resolution application at a stage after the petition has been admitted by the NCLT and an IRP has been appointed must bediscouraged. However, in the present case, it is the corporate debtor / borrower which approached this court and therefore the said judgment has no application. 87. We are not in agreement with the arguments put forth by Mr. Sibal. In fact, the submissions made by Mr. Sibal are similar to the ones made by him before the learned Single Judge. The learned Single Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp;34.49 34.12 24.62 31.07 27.95 24.57 20.84 14.60 7.71 1.29 Interest Converted to FITL - III 34.49 17.25 iii. Working Capital Term Loam (WTCL)-I Irregularity of INR 4,360 million considering all fund based limits is proposed to be converted into WCTL-I. To assess the irregularity, the Drawing Power is considered at INR 3,869.20 million as on Cut-off date 1st October, 2014. Indicative breakup of WCTL- I shall be as detailed under - (INR Millions) Particulars Value CC Outstanding 8,636.80 Less: Interest debited after cut-off date 407.60 Less: MPBF/Available DP 3,869.20 DP Shortfall (WCTL - I) 4,360.00 Total WCTL - I 4,360.00 Interest Rate on WCTL -I is proposed at 10.75% through the restructuring tenure. Moratorium on Principal repayment is proposed to be 24 months (upto 30th September, 2016) from Cut-off Date. The interest moratorium is proposed to be 24 months from cut-off date and is proposed to be funded and converted into FITL. Repayment of WCTL proposed to be made in 32 quart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng power is arrived at INR 3,869.20 million. The rate of interest on working capital post restructuring is proposed to be 10.75%. Assessment of Fund Based Requirement for the restructuring period is as given in table below: (INR Million) Particulars Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25 Opening Balance 3,869.20 3,869.20 3,869.2 0 3,869.20 3,869.20 3,869.20 3,869.20 3,869.20 3,869.20 3,869.20 3,869.20 Addition / Disbursement Repayment Interest Rate 10.75% 10.75% 10.75% 10.75% 10.75% 10.75% 10.75% 10.75% 10.75% 10.75% 10.75% Interest Charged to P&L 415.94 415.94 415.94 415.94 415.94 415.94 415.94 415.94 415.94 415.94 Interest Converted to FITL - II 415.94 207.97 v. Funded Interest Term Loan (FITL) Interest on sustainable part CC / fund based working capital, WCTL and TL is proposed to be funded for 24 months from cut-off date and converted to FITL. Interest on FITL is proposed to be charged at 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 23.02 7.67 0.00 Interest Charged to P&L 3.88 7.47 5.91 7.45 6.70 5.89 5.00 3.51 1.85 0.31 The detailed repayment schedule of FITL - IV (on WCTL - II) is as under - (INR Million) Particulars Mar15 Mar-16 Mar-17 Mar18 Mar-19 Mar-20 Mar21 Mar-22 Mar-23 Mar-24 Mar-25 Opening Balance 24.50 24.50 36.76 34.87 32.05 28.28 24.51 18.85 11.31 3.77 Addition /Disbursement 13.20 Repayment 0.00 0.00 0.94 1.89 2.83 3.77 3.77 5.66 7.54 7.54 3.77 Closing Balance - 24.50 36.76 34.87 32.05 28.28 24.51 18.85 11.31 3.77 - Interest Charged to P&L 0.00 1.09 3.60 3.82 3.58 3.20 2.79 2.30 1.52 0.70 0.05 52. It is apparent from the above that restructuring proposal did not include induction of any immediate funds. However, the D&B TEV Report also contained a tabular statement depicting the projected Financial highlights of the petitioner. This statement was not a part of the restructuring proposal as set out hereinbefore. The said table is reproduced below:- "The bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted on 27.03.2015. Thereafter, the respondent banks (other than Axis Bank) issued sanction letters for restructuring of the existing facilities. PNB and Syndicate Bank issued their respective sanction letters on 30.03.2015; ICICI Bank issued its sanction letter dated 10.04.2015 and Axis Bank issued its sanction letter on 25.06.2015. The sanction letter issued by PNB also indicated a reference to Rs. 75 crores as additional working capital limit. The same was in reference to the condition requiring the petitioner to secure a working capital limit of Rs. 461.93 crores the breakup of which was indicated as "Current DP of Rs. 386.93 C + Rs. 75.00 Cr as additional proposed". None of the sanction letters had any reference of any further funding in addition to Rs. 75 crores. XXXXX XXXXX XXXXX 61. In any view of the matter, the parties had reduced their agreement in writing by entering into the JLRA. Thus, the question whether the respondent banks had any commitment to provide additional funding must be examined on the basis of the express terms of the JLRA. 62. The term "approved JLF Package" is defined under Article 1 of the JLRA to have the same meaning as given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XI. Schedule III provides the details of all "Facilities' agreed to be provided by the respondent banks. 65. The expression "Facilities' is defined in the JLRA to mean collectively "Facility A, Facility B, Facility C, Facility D, Facility E, Facility F, Facility G, Facility H and Facility I. Schedule II sets out the particulars of existing loans and Part A of Schedule III sets out details of all Facilities. Schedule IV to Schedule XI includes details of separate facilities. The working capital limit agreed to be provided by the respondent banks was referred to as Facility H in the JLRA. Facility "H' is defined in the JLRA as under:- "Facility H" means the revised Fund based working capital limits including Cash Credit/LOCSTL/EPC/PCFC/PSCFC Facility (FBWC) to be extended to the Borrower by continuation of regular portion of existing fund based working capital limits, more specifically defined in Schedule X." 66. The particulars of working capital facility were set out in Schedule X. Part B of the said Schedule included the terms and conditions of such facility. 67. Part A of the Schedules II and III and Schedule X to the JLRA are relevant and are set out below: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores) Bank NFB PNB - ICICI Bank* 9.70 Syndicate Bank - Axis bank 5 Total 14.70 (*Derivate) PARTICULARS OF FACILITY J (FCNR - B LOAN) (Rupees in crores) Bank NFB PNB - ICICI Bank 64.96 Syndicate Bank - Axis bank - Total 64.96 Total Particulars of all the facilities (Rupees in crores) "SCHEDULE X PART A Particulars of facility H-Fund Based Working Capital Facilities (Rupees in crores) Bank FBWC-1 FBWC-2 TOTAL FBWC PNB 176.55 34.22 210.77 ICICI Bank 57.35 11.12 68.47 Syndicate Bank 117.70 22.82 140.52 Axis Bank 31.39 6.08 37.47 Total 382.99 74.24 457.23 ICICI Bank has sanctioned single limit with additional facilities. PART B Terms and Conditions of Facility H Facility H shall carry an interest rate of Base Rate+ 0.50% payable monthly. Lenders shall have right to reset interest rate every year from the date of approval. Interest would be payable monthly, on the last date of each month or as and when levied. However interest on existing working capital facitielies for a period of two years from cut of date will be funded as FITL-2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imits in proportion to their respective exposure.-" 72. Paragraph 2.6.1 of the JLRA must be read in its context. It is apparent that the respondent banks had agreed to provide working capital limits as per the approved JLF package and the details of such facilities were expressly mentioned in Schedule III to the JLRA. Insofar as any additional working capital is concerned, it was expressly provided that the same would be at the sole discretion of the lenders. 73. In terms of paragraph 2.6.1 of the JLRA, the respondent banks were required to reassess the working capital limits. However, that does not mean that they were obliged to provide additional funding. The decision whether to provide additional funding would depend on various factors including the confidence in the business and the management. Funding an ongoing business is a dynamic process and requires to be re-evaluated and reassessed. Whilst the respondent banks had agreed to reassess the same, they had also made it expressly clear that additional funding would be at their discretion. 74. It also evident from the Minutes of the Meeting of the JLF held on 22.12.2016 that the decision to process the petitioner's req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect of non provision of the additional working capital and, therefore, the observation that the petitioner could not achieve the financial projections due to lack of additional funding is not supported by any reasons/analysis." 88. A reading of the aforesaid conclusion of the learned Single Judge reflects the following position: - (i) The sanction letter issued by PNB also indicated a reference to Rs. 75 crores as additional working capital limit. The same was in reference to the condition requiring the petitioner to secure a working capital limit of Rs. 461.93 crores, the breakup of which was indicated as "Current DP of Rs. 386.93 C + Rs. 75.00 Cr as additional proposed". (ii) The term "approved JLF Package" is defined under Article 1 of the JLRA to have the same meaning as given to the said term in recital "F' of the JLRA. Recital "F' of the JLRA reads as under: - "F. At the request of the Borrower and in consideration of the Borrower's commitment to improve its operations, the request of the Borrower was referred to the joint lenders forum (hereinafter referred to as the "JLF"), a non-statutory voluntary mechanism for the efficient restructuring of corporate debt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In terms of paragraph 2.6.1 of the JLRA, the respondent banks were required to reassess the working capital limits. However, that does not mean that they were obliged to provide additional funding. The decision, whether to provide additional funding, would depend on various factors including the confidence in the business and the management. Funding an ongoing business is a dynamic process and requires to be reevaluated and reassessed. Whilst the respondent banks had agreed to reassess the same, they had also made it expressly clear that additional funding would be at their discretion. 89. Suffice it to state, we agree with the conclusion arrived at by the learned Single Judge. The aforesaid shows that the Banks had never committed to infuse working capital in favour of the appellant over and above Rs. 75 Crores. During the course of his submissions Mr. Sibal had relied upon the action of the PNB in sanctioning a sum of Rs. 59.68 Crores (out of which it had also disbursed Rs. 30 Crores), that there was an obligation on the Banks to release capital beyond Rs. 75 Crores. It was the stand of the PNB that the sanction of Rs. 59.68 Crores was part of a different transaction. Mr. Siba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , essentially, the petitioner seeks specific enforcement of the JLRA, which entails (i) restraining ICICI Bank from proceeding under the IBC; and (ii) direction to provide additional working capital. 79. This Court is unable to accept that any such directions for providing additional working capital to the respondent banks can be issued by this Court or the RBI. As noticed above, in terms of the Circular dated 26.02.2014, the respondent banks were obliged to form the JLF for exploring the CAP. In the present case, even if the respondent banks are directed to once again examine an appropriate CAP, it is apparent that the result would be different. The respondent banks had already agreed to change the CAP to Recovery instead of Restructuring in a meeting held on 08.02.2017. Although, the petitioner has raised several disputes in relation to the minutes of the aforesaid meeting, it is apparent that the consensus amongst the respondent banks is to proceed with recovery. This is also reflected in their stand in these proceedings. 80. Clearly, a specific performance of the JLRA cannot be granted. The events that have unfolded subsequent to the parties entering into the JLRA indicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it is conceded position that the existing indebtedness of the petitioner company cannot be serviced by the revenue being generated by the petitioner company. The approved JLF Package (the JLRA), which the petitioner now seeks enforcement of (albeit by issuance of directions to the RBI) was premised on restructuring the financial facilities by converting the outstanding interest as loans and a moratorium in payment of interest. Undisputedly, the said scheme is not feasible where the revenue generated is insufficient to service the same. This is accepted by the petitioner and is evidenced from its agreement to accept the S4A Scheme (where the level of sustainable debt is not less than 50% of the total debt can be adopted.). 92. That apart, we note the writ petition was filed by the appellant on 21st May, 2018 much after the ICICI Bank approached the NCLT, Chandigarh on 9th March, 2018. So, it is clear that the writ petition was filed as an afterthought, only with a view to possibly interdict the proceedings already initiated by ICICI. 93. Insofar as the plea of Mr. Sibal that Section 35AB of the Banking Regulation Act, 1949 will override Section 238 of the IBC is concerned, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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