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TMI Blog2022 (3) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Debtor (CD) together with all the underlying 'Security interest' created, with all the rights, title & interest therein were assigned in favour of the Appellant under the provisions of the 'Securitization And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002' (SARFAESI Act, 2002) under an 'Assignment Agreement' dated 28.03.2016 by 'Karur Vysya Bank Limited' as 'Assignor' and thereby the Appellant has become the 'Secured Financial Creditor' to the 'Pacific Pipe Systems Pvt. Ltd' (CD). The CD availed financial assistance from 'Karur Vysya Bank Limited' etc. in terms of 'Sanction Letter' dated 11.06.2008 (Annexure A-2 appearing at page 31 of the Appeal Paper Book) and further enhanced the 'credit facilities' vide its letter dated 04.03.2014 (Annexure A-3 appearing at page 38 of the Appeal paper Book). The Appellant is aggrieved that it should have been paid at the interest of 19.40% in terms of 2015 circular issued by the Bank page 2 para 2.ii. wherein maximum lending rate were defined as 19.75% p.a whereas it has been paid at the 'Cash Credit' rate applicable to the utilization of the Cash Credit facilities and accordingly, seeking the relief of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 137 of the Appeal paper book). What the Appellant has stated that the rate of interest will be charged as per bank circular and sanction letter dated 11th June, 2008 which should be for a maximum lending rate of 20% p.a plus penal interest. The Appellant, thereafter, approached the Adjudicating Authority challenging partial reduction of its claim and its claim has been rejected vide impugned order dated 04th October, 2021 of the Adjudicating Authority and, accordingly, the Appellant has preferred the instant appeal. 4. The Adjudicating Authority in its impugned order dated 04.10.2021 vide para 3, 4 & 9 as depicted below has substantiated its stands on rejections of their balance claim resulting from reasons including charging of such anormal high rate of interest: "3. The reason for acceptance of partial claim is that the rate of interest charged by the Financial Creditor was much higher than agreed interest rate for Ld. Counsel between lender and the CD. Hence, the liquidator admitted the claim by accepting interest at the rate applicable to working capital loans/ term loan plus penal interest. In response, the Applicant provided the copy of the sanction letter, bank circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 17.08.2013 is only binding and applicable to all times to come. Thus, reliance on one circular by the Appellant is not sufficient to justify its claim. Even on the bank Statement no counter signature or acceptance by CD exists. Financial statements of the CD have also not been brought on record. In these circumstances, we are of the view that the Applicant has failed to establish its claim for charging interest on such a high rate without bringing any corroborative material to substantiate the same. As per Rule 8(2)(b)(i) of CIRP Regulations, 2016, apart from loan agreement, Financial Statements are required to establish the fact of debt which essentially would include accrued interest thereon. In absence of such agreement and denial of RP on behalf of CD, it is incumbent upon the Applicant to prove its claim by adducing necessary evidence." 5. The Liquidator has submitted that it has complied with Regulation 16(2) of the IBBI (Liquidation Process) 2016 which deals submission of claim and also to prove its claim and has followed Regulation 18(2)(b) of the IBBI (Liquidation Process) 2016 which requires the manner in which existence of due to the Financial Creditor requires to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, the 'Liquidator' has allowed the rate of interest applicable to the Cash credit facilities to Letter of Credit facilities. b. It is not a case of providing term loan or other temporary non -fund based facilities to be guided by rates provided in the sanction letter and for Letter of Credit facilities no such rate of interest was provided specifically to be charged at a higher rate of interest of 20% p.a plus penal interest or so. The Appellant being an 'Assignor' is only producing the 'Ledger Account' of the Karur Vysya Bank who is the 'Assignor' of the Agreement and the same is not supported by the requisite authority letters. It is reflected at page 230 of the appeal paper book that the Appellant is charging upto 23% p.a. which is irrational. Section 39 of the Code empowers the Liquidator to verify the claim and he has full authority to ask for production of any other documents or evidence which he feels necessary for the purpose of verification of the claim. In the corresponding period as per details provided at page 230 of the Appeal paper book the base rate was 9% p.a and that over base rate a spread of 4% p.a. was provided with maximum lending rate of 20% p.a. c. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the liquidator to take out the letter of administration or recover the money, be deemed to be due to the liquidator himself; (i) to obtain any professional assistance from any person or appoint any professional, in discharge of his duties, obligations and responsibilities; (j) to invite and settle claims of creditors and claimants and distribute proceeds in accordance with the provisions of this Code; (k) to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor; (l) to investigate the financial affairs of the corporate debtor to determine undervalued or preferential transactions; (m) to take all such actions, steps, or to sign, execute and verify any paper, deed, receipt document, application, petition, affidavit, bond or instrument and for such purpose to use the common seal, if any, as may be necessary for liquidation, distribution of assets and in discharge of his duties and obligations and functions as liquidator; (n) to apply to the Adjudicating Authority for such orders or directions as may be necessary for the liquidation of the corporate debtor and to report the progress of the ..... 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