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TMI Blog2021 (3) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess is the occurrence of default by the Debtor . In the case on hand resting upon the Gazette Notification of the Ministry of Finance dated 05.05.2017 whereby the Central Government had authorized the Reserve Bank of India to issue such directions to any banking company or banking companies which may be considered necessary to initiate insolvency resolution process in respect of default under the provisions of the Insolvency and Bankruptcy Code, 2016, the Reserve Bank of India had issued a letter dated 28.08.2017 (Annexure A- 7, Page 156 of Volume I of the Paper Book), whereby the Respondent/Company s name was shown at Sl No 20 in the List of Accounts of the Appellant /State Bank of India. Indeed, based on the recommendations of internal advisory committee (IAC) constituted pursuant to the Banking Regulation (Amendment) Ordinance, 2017 12 accounts were identified for immediate reference for resolution under the I B Code etc. Thus, by no stretch of imagination it can be said that there was no issuance of authorization by the Central Government to the Reserve Bank of India for issuance of such direction(s) to any banking company to initiate insolvency resolution process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in Paragraph No.5 to the Writ Petitions, SBI has stated in its counter affidavit that RBI has issued directions as per annexure 2 of the Writ Petition and instructions of RBI are complied with . Para 16. Above evidence is enough to hold that this proceeding Under Section 7 of the Insolvency and Bankruptcy Code, is filed against Corporate Debtor by SBI, is not filed independently but it is filed as per instructions of the RBI as contemplated Under Section 35 AA of the Banking Regulation Act, 1949. Para 17. Ld.Counsel for the SBI submitted that the initiation of proceeding Under Section 7 of IBC, against the Corporate debtor was taken by the bank independently which is reflecting in minutes and joint lender forum s meeting dated 4th August, 2017. As against this Ld.Counsel for the Corporate debtor pointed out that in fact initiation of proceeding Under Section 7 of IBC against Corporate Debtor was taken by the bank in meeting dated 28.11.2017 on the basis of RBI circular dated 28.07.2017 as appears from the minutes of joint lenders meeting dated 25.11.2017. Para 18. I have gone through both minutes of meetings. In meeting dated 4th August, 2017 there were subject ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Government. It appears to me from evidence on record that this proceeding is initiated by the State Bank of India against the Corporate Debtor as per instructions of the RBI and, ultimately allowed the Interlocutory Application No.21/CTB/2019 filed by the Corporate Debtor and dismissed the CP(IB)No.24/KB/2018(TP No.40/CTB/2019). 3. The Learned Adjudicating Authority , while passing the Impugned Order dated 10.1.2020 in CA No. 87/CTB/2019 (arising out of CA(IB).CTB/2019 (arising out of IA(IB) NO.21/CTB/2019 in TP No.40/CTB/2019 (arising out of CP(IB) No.24/KB/2018 ) at Paragraphs 11 and 12 had observed the following : Para 11. The Hon ble Supreme Court and Hon ble NCLAT has time and again held and also under the provisions of IBC, 2016, that there is no provisions under the IBC, 2016 nor under the NCLT Rules to review its own order. Hence, the Order of the Hon ble Supreme Court dated 29th July, 2019 cannot be interpreted as a direction given to this Adjudicating Authority to review the Order. With due respect to the Hon ble Supreme Court while permitting the applicant to withdraw its application has only granted liberty to explore and exhaust the remedies ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2018 which was struck down. 9. It is the version of the Appellant that the Adjudicating Authority (National Company Law Tribunal) had acted beyond his jurisdiction and in violation of the Hon ble Supreme Court s order dated 29.7.2019 in dismissing the Review Application on the ground of Lack of Jurisdiction without examining its merits, when the liberty to file Review Petition was expressly granted by the Hon ble Supreme Court. 10. The Learned Counsel for the Appellant contends that the Adjudicating Authority (National Company Law Tribunal) erroneously had interpreted the order of the Hon ble Supreme Court dated 29.7.2019 to the effect that it has no power of Review , inspite of the said order, because of the fact, the order dated 29.7.2019 of the Hon ble Supreme Court could not be interpreted as a direction given to the Adjudicating Authority (National Company Law Tribunal) to Review the first Impugned Order dated 25.6.2019. 11. The Learned Counsel for the Appellant points out that the order of the Hon ble Supreme Court dated 29.7.2019 is binding on the Adjudicating Authority ((National Company Law Tribunal) and the said Authority had no jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellant that as per the Reserve Bank of India Affidavit in Writ Appeal and as mentioned in Para 21 of the Hon ble Supreme Court judgement in Dharani sugars case, the Central Government Notification dated 5.5.2017 authorise Reserve Bank of India to identify specific cases on default for Resolution and if Resolution fails for initiation of the proceedings under the Insolvency Bankruptcy Code. Indeed, the Letter dated 28.8.2017 was pursuant to the authorised Notification dated 5.5.2017 which provided a list of specific details. 17. The Learned Counsel for the Appellant emphatically points out that the First Impugned Order dated 25.6.2019 of the Adjudicating Authority was passed contrary to the order of the Hon ble Supreme Court of India in Civil Appeal No.3169 of 2019 dated 14.3.2019 and the order of the Hon ble High Court dated 25.3.2019 in Writ Petition No.2511 and against the ratio passed by the Hon ble Supreme Court in Dharani Sugars case. 18. The Learned Counsel for the Appellant submits that the order dated 14.3.2019 of the Hon ble Supreme Court was passed in Writ Appeal No.237 of 2019, which arose out of the order dated 2.5.2018 which clearly w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgement of the Hon ble High Court of Orissa dated 25.3.2019. 23. The Learned Counsel for the Appellant contends that the Respondent / Corporate Debtor s position before the Hon ble High Court was recorded to the effect however it is not disputed that the bank has jurisdiction to approach the Tribunal under the Insolvency Bankruptcy Code, that in the order dated 25.3.2019 in WP No.2511 of 2018 on the file of Hon ble High Court of Orissa, detailed Counter Affidavit was filed by the Appellant/Reserve Bank of India and the matter was decided on merits, especially it was recorded and decided in the said order that the Resolution as per Reserve Bank of India Circular dated 13.6.2017 had failed and it was only after such failure, the Petition under Section 7 of the Insolvency and Bankruptcy Code was filed by the Appellant. 24. The Learned Counsel for the Appellant submits that the First Impugned Order dated 25.3.2019 passed by the Adjudicating Authority quotes the extracts from Dharani sugars judgement at Paragraphs 11 and 12 selectively but completely ignores the contents of Paragraphs 20, 21 and 66 and the ratio in the last Paragraph of Dharani Sugars ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptcy Code were not disclosed in the proceedings for the demerger while obtaining the sanction order dated 8.7.2019 from the Tribunal which was without notice to the Creditors of the Respondent and it was stayed by the Hon ble Supreme Court of India. 29. The Learned Counsel for the Appellant submits that when prejudice results from an order attributable to the mistake , error , or omission of the Tribunal , then it is the duty of the Tribunal to set right the same and further that in the present case the Tribunal cannot ignore its prime duty to correct its mistake which is an error apparent from the material on record. 30. The Learned counsel for the Appellant contends that the Hon ble Supreme Court through order dated 29.7.2019 permitted the Appellant to move a Review before the Adjudicating Authority for Review of order dated 25.6.2019 and that the Appellant filed the Review Application on 20.8.2019 and a period of 55 days was spent between the first Impugned Order dated 25.6.2019 and filing of Application for Review constituent with the order dated 29.07.2019 of the Hon ble Supreme Court in Civil Appeal No.3169 of 2019. Subsequently, the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stem as on 31-3-2017. This set of 500 accounts was arrived at as per the statement generated from the Central Repository of Information on Large Credits ( CRILC ) database. On the said top 500 exposures, it was noted that 71 accounts had been partly or wholly classified as NPAs while the other 429 were not classified as NPA by any bank. For the purpose of this first list, the following criteria were applied : (a) Accounts where the funded plus non-funded outstanding was more than INR 5000 crores; (b) Accounts where more than 60 per cent of the total outstanding by value was NPA as on 31.3.2016. Consequently, 12 accounts which met the above criteria were referred for resolution under the Insolvency Code vide RBI s direction dated 15-62017. It is pertinent to note that the accounts in the First List constituted around 25 percent of the NPAs in the system and the cumulative fund-based and non-fundbased outstanding therein amounted to INR 197,769 crores. Para 20. The IAC subsequently met again and decided, on 25-8-2017, that out of the 59 remaining NPA accounts of the top 500 exposures, accounts which are materially NPA (i.e., where 60 per cent of the total outstand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (Amendment) Ordinance, 2017 inserting two new Sections (viz., 35-AA and 35-AB) after Section 35-A of the Banking Regulation Act, 1949 enables the Union Government to authorise Reserve Bank of India (RBI) to direct banking companies to resolve specific stress assets by initiating insolvency resolution process, where required RBI has been empowered to issue other directions for resolution, and appoint or approve for appointments, authorities or committees to advise banking companies for stressed asset resolution. The action of the Union Government will have a direct impact on effective resolution of stressed assets, particularly in consortium or multiple banking arrangements, as RBI will be empowered to intervene in specific cases of resolution of non-performing assets, to bring them to a definite conclusion. The Government is committed to expeditious resolution of stressed assets in the banking system. The recent enactment of Insolvency and Bankruptcy Code(IBC), 2016 has opened up new possibilities for time-bound resolution of stressed assets. The SARFAESI and Debt Recovery Acts have been amended to facilitate recoveries. A comprehensive approach is being adopted for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed at any time. If such an application is filed within a reasonable time and if the court or tribunal finds that the contention raised before it by the applicant is prima facie correct, in order to do justice, which is being above law, nothing fetters the Judges hands from considering the matter on merit. Added further, in the aforesaid decision at P.366, it is observed as under : In a matter of this nature the Tribunal was required to consider the application (for rectification) filed by the appellants which was filed within a reasonable time. It should have also considered that the appellants had been bona fide pursuing their remedies before the Supreme Court where permission to withdraw appeal was granted with the liberty to the appellants to take recourse to the remedy of filing an appropriate application before the Tribunal [Para 25,26 and 10] b) The Learned Counsel for the Appellant points out the decision of the Hon ble Supreme Court in ACIT Rajkot V. Sourashtra Kutch Stock Exchange Limited reported in (2008) 14 SCC 171 Spl.Pg.173, wherein it is observed and held as under : A patent, manifest and self-evident error which does not require elabora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V Vijayakumar V. Iyer, Resolution Professional, Mumbai and Another in Company Appeal (AT)(Ins) No.871-872 of 2019 dated 24.1.2020 wherein at Para 30(iv) it is observed as under: Whether the Adjudicating Authority has power to modify its own order? Section 420(2) of the Companies Act, 2013 provides as under: The Tribunal may, at any time within two years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it, and shall make such amendment, if the mistake is brought to its notice by the parties. Rule 154 of the NCLT Rules, 2016 provides that: Any clerical or arithmetical mistakes in any order of the Tribunal or error therein arising from any accidental slip or omission may, at any time, be corrected by the Tribunal on its own motion or on Application of any party by way of rectification. According, the NCLT does not have power to modify its own order but can only correct mistake apparent from the record. The Hon ble Supreme Court has held in Assistant Commissioner, Income Tax, Rajkot Vs. Saurashtra Kutch Stock Exchange Limited that a patent, manifest and self-evident error which does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its applicability only to cases of defect of jurisdiction but it is applicable also to cases where the prior proceedings have failed on account of other causes of like nature. The expression other cause of like nature came up for the consideration of this Court in Roshanlal Kuthalia V. R. B. Mohan Singh Oberot(1975 4SCC 628) and it was held that Section 14 of the Limitation Act is wide enough to cover such cases where the defects are not merely jurisdictional strictly so called but others more or less neighbours to such deficiencies. Any circumstance, legal or factual, which inhibits entertainment or consideration by the court of the dispute on the merits comes within the scope of the section and a liberal touch must inform the interpretation of the Limitation Act which deprives the remedy of one who has a right. 15. The issue as to the legality and reasonability of the rates charged by the Railway Administration having been finally adjudicated upon by this Court, there is nothing wrong in the respondent West Coast Paper Mills Limited having proceeded on an assumption that what had remained to be done was a simple direction to the Railway Administration to refund the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igant has to take to initiate proceedings in a court and the actual pendency of those proceedings in the court. In other words, Section 14 of the Limitation Act excludes not only the period of pendency of infructuous proceedings in a court of law, but also the time occupied for taking indispensable and preparatory steps to institute further proceedings like obtaining certified copies of the judgments and orders. 17. In the instant case, the reliefs claimed in DROPS under Section 9 of Agricultural Debt Relief Act, 1970 and the reliefs claimed in the suits are the same. Parties are also same in both the proceedings. The subject matter is also the same. The appellants has been prosecuting the DROPS and CMAS thereby diligently and bona fide. In such a benefit of Section 14 of the Limitation Act. Therefore, the finding of the court below to that effect is wrong and has to be interfered with. g) The Learned Counsel for the Appellant adverts to the decision in Thirumareddi Raja Rao and Others V State of Andhra Pradesh, Represented by District collector, Visakhapatnam and others reported in AIR 1965 P 388 (FB), wherein at Para 61, it is observed as under: 37. The Full Bench h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r had admitted that the proceedings were filed before the Adjudicating Authority (National Company Law Tribunal, Cuttack Bench) because of the Reserve Bank of India circulars which among other things had granted time only upto 13.12.2017 to work out any resolution dehors the Insolvency and Bankruptcy Code and filed proceedings before 31.12.2017 (vide corrigendum dated 13.06.2017 issued by Chief General Manager of Reserve Bank of India). 40. The Learned Counsel for the Respondent points out that the Appellant/Bank had acted as per the Reserve Bank of Letter dated 28.08.2017 whereby and where under, it was made clear that the time was granted till 13.12.2017 for resolution outside the Code and thereafter, the Insolvency Proceedings where directed to be initiated before 31.12.2017. 41. The Learned Counsel for the Respondent emphatically takes a plea that the direction issued by the Reserve Bank of India through its letter dated 28.08.2017 addressed to the Chairman of the Appellant s Bank did not have any authorization from the Central Government in respect of a default , pertaining to the Respondent company and the direction given by the Reserve Bank of India was of a ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in Dharani Sugars and Chemicals case report in (2019) 5 SCC at page 480 the directions given by the Reserve Bank of India in its circular dated 13.06.2017 and the letter dated 28.08.2017 being general in character and admittedly without having any authorization from the Central Government is also ultra vires of the section 35AA of the Banking Regulation Act, 1949. 46. The Learned Counsel for the Respondent contends that the IBC proceedings being initiated by the Bank after 13.12.2017 and prior to 31.12.2017 in terms of the ingredients of the letter dated 28.08.2017 of the Reserve Bank of India is also resultantly affected by the ratio laid down in Dharani Sugars and Chemicals case and being faulted from the beginning, is to be declared to be non-est. 47. The Learned Counsel for the Respondent submits that in any event, the circular dated 05.05.2017 is general in nature and does not pertain to a default of a specific account. 48. It is the version of the Respondent that once the Appellant/ Bank took a stand that it had no other option but to act as per the mandate of the Reserve Bank of India in the circular dated 13.06.2017 and letter dated 28.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of judicial/quasi-judicial orders. In the absence of any provision in the Act granting an express power of review, it is manifest that a review could not be made and the order in review, if passed, is ultra vires illegal and without jurisdiction. (Vide Patel Chunibhai Dajibha V Narayanarao Kanderao Jambekar (AIR 1965 SC 1457) and Harbhajan Singh V Karam Singh (AIR 1966 SC 641). Para 13. In Patel Narshi Thakershi v Pradyuman Singhiji Aurnsinghji (AIR 1970 SC 1273(, Major Chandra Bhan Singh v Latagar Ullah Khan ((1979)1 SCC 321), Kuntesh Gupta (Dr) v Hindu Kanya Mahavidyalaya (AIR 1987 SC 2186), State of Orissa v Commr. Land Records and Settlement ((1998) 7 SCC 162, and Sunita Jain v Pawan Kumar Jain((2008) 1 SCC(Crl)537) this Court held that the power to review is not an inherent power. It must be conferred by law either expressly/specifically or by necessary implication and in the absence of any provision in the Act/Rules, review of an earlier order in impermissible as review is a creation of statute. Jurisdiction of review can be derived only from the statute and thus, any order of review in the absence of any statutory provision for the same is a nullity, being without j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as under: 6. In absence of any power of review or recall vested with the Adjudicating Authority, we hold that the Adjudicating Authority rightly refused to recall the order of admission dated 2nd May, 2017. 55. The Learned Counsel for the Respondent refers to the decisions (a) Bablu Ghosh Vs Amrit Fresh Private Limited reported in 2016 (3) CHN (Cal) 214 wherein at paragraph 21 and 22 it is observed as under: 21. The applicant respondent No. 1 filed a Special Leave Petition in the Supreme Court being SLP No. 22419 of 2014 challenging the judgment and order dated 18th February, 2014 of the Division Bench, of which review has been sought. It appear that on 15th September, 2014 Counsel appearing on behalf of the applicant respondent No. 1 in the Supreme Court, sought permission of the Supreme Court, to withdraw the Special Leave Petition, with liberty to approach the High Court by filing an appropriate review petition. Such leave was granted. 56. The averment in this review petition that the Supreme Court directed the applicant respondent No. 1 to file a review petition in this Court, is misleading. On the prayer made on behalf of the applicant respondent No. 1, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w in terms of Section 114 read with Order 47 Rule 1 CPC, but it is another thing to say that the decree passed in favour of the respondent merged with the order dismissing the review application etc. 59. The Learned Counsel refers to the order dated 10.7.2019 of this Tribunal in Company App.(AT)(Ins) No.702 of 2019 in Dinesh Goyal v.DCB Bank wherein at Paragraph 5, it was observed that in the present case, as there is no mistake apparent from the record and in the absence of any typogrophical error it was not open to the Adjudicating Authority to take any recourse of sub-section (2) of Section 420 of the Companies Act, 2013. 60. The learned Counsel for the Respondent while rounding up submits that in the absence of any power of Review or Recall vested with the Adjudicating Authority , the order dated 10.01.2020 in dismissing the CA (IB)No. 87/CTB/2019 for Review was correctly passed. EVALUATION (Comp.App.(AT)(Ins)No.294 of 2020 61. It is the stand of the Appellant/Bank that the liability of the VISA International Limited/Corporate Guarantor is co-extensive with that of the Respondent, the principal borrower and not alternatively. Further, it is represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) as the same as become non-est etc. 65. The main plea of the Respondent/Corporate debtor before the Tribunal as petitioner was that the Hon ble Supreme Court had interpreted the provisions of Section 35AA and 35 AB of the Banking Regulation Act, 1949 in the decision Dharani Sugars Chemicals Limited reported in (2019)5 SCC at page 480 at special page 533 wherein in paragraph 72 it is observed and held as under: There is nothing to show that the provisions of Section 45-L(3) have been satisfied in issuing the impugned circular. The impugned circular nowhere says that RBI has had due regard to the conditions in which and the objects for which such institutions have been established, their statutory responsibilities, and the effect the business of such financial institutions is likely to have on trends in the money and capital markets. Further, it is clear that the impugned circular applied to banking and non-banking institutions alike, as banking and non-banking institutions are often in a joint lenders form which jointly lend sums of money to debtors. Such non-banking financial institutions are, therefore, inseparable from banking institutions insofar as the application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt committed by it and further that the IA No 21 of 2019 filed by the Respondent/Petitioner/Corporate Debtor is to be dismissed because of the fact that the judgment of the Hon ble Supreme Court in Dharani Sugars and Chemicals case has nothing to do with the CP (IB) No. 24/KB/2018 filed by the Financial Creditor. 70. It is to be pointed that the Ministry of Finance (Department of Financial Services) New Delhi on 05.05.2017 issued Gazette Notification which runs as under: SO 1435 (E) In exercise of the powers conferred by Section 35AA of the Banking Regulations Act, 1949 (10 of 1949), the Central Government hereby authorizes the Reserve Bank of India to issue such directions to any banking company or banking companies which may be considered necessary to initiate insolvency resolution process in respect of a default under, the provisions of the Insolvency and Bankruptcy Code, 2016 71. A cursory perusal of the Minutes of the Joint Lenders meeting of Visa Steel Limited (Respondent) dated at 04.08.2017 (Annexure A-6- page 148 of Volume I of the Paper Book) indicates that a resolution was adopted at the meeting wherein it was decided by the lenders that the cut back amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Act makes it clear that RBI has a specific power to direct banks to move under the Insolvency Code against debtors in certain specified circumstances, it cannot be said that they would be acting outside of four corners of the statutes which govern them, namely, the RBI Act and the Banking Regulation Act. 76. In the case on hand resting upon the Gazette Notification of the Ministry of Finance dated 05.05.2017 whereby the Central Government had authorized the Reserve Bank of India to issue such directions to any banking company or banking companies which may be considered necessary to initiate insolvency resolution process in respect of default under the provisions of the Insolvency and Bankruptcy Code, 2016, the Reserve Bank of India had issued a letter dated 28.08.2017 (Annexure A- 7, Page 156 of Volume I of the Paper Book), whereby the Respondent/Company s name was shown at Sl No 20 in the List of Accounts of the Appellant /State Bank of India. Indeed, based on the recommendations of internal advisory committee (IAC) constituted pursuant to the Banking Regulation (Amendment) Ordinance, 2017 12 accounts were identified for immediate reference for resolution under the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 till the next date of hearing . Moreover, on 02.05.2018 the Hon ble High Court of Orissa, Cuttack in Miscellaneous Case No. 5353 of 2018 in WP (C) No. 2511 of 2018 had not extended the stay order passed on 15.03.2018 in Miscellaneous Case No. 2216 of 2018 and expressly recalled the order of the stay passed earlier. 80. It is brought to the fore that the Hon ble Division Bench of Orissa High Court, Cuttack in WA No. 237 of 2018 filed by the Respondent/VISA Steel Limited (Appellant therein) on 27.06.2018 had directed that the interim order which was granted by the writ court on 15.03.2018 passed in the writ petition will continue to operate till next date of listing or final decision in the writ petition, whichever was earlier. 81. As a matter of fact the Hon ble Supreme Court of India in Petition(s) for Special to Leave to Appeal (C) No. (s) 7009/2019 filed by the State Bank of India (as petitioner) (Appellant before this tribunal) against the Respondent/VISA Steel Limited and another against the impugned final judgment and order dated 27.06.2018 in WA No. 237 of 2018 passed by the High Court of Orissa, Cuttack wherein the operation of the order dated 27.06.2018 passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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