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TMI Blog2011 (1) TMI 1570X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Draft Rehabilitation Scheme pending consideration before the Board for Industrial & Financial Reconstruction (BIFR). Yet another relief of allowing HRML to match the highest bid received by IFCI for the assignment of its debts qua HRML is also claimed. Besides IFCI only BIFR was impleaded as the other respondent in the petition when filed. 2. W.P.(C) No.14999/2006 came up before this Court on 6th October, 2006 when while issuing notice of the petition, IFCI was directed "to maintain status quo with respect to Non-Performing Assets of the petitioner". On 26th April, 2007, in view of the plea of IFCI that it had transferred its debts qua HRML to Kotak Mahindra Bank Ltd. (KMBL) in terms of the Reserve Bank of India (RBI) circular dated 13th July, 2005 and finding that the rights of KMBL would be affected by any decision in the writ petition and being of the view that HRML ought to have made KMBL as a party to the proceedings this Court ordered KMBL to be impleaded as respondent no.3 to the petition. The interim order earlier made was continued. 3. On 19th December, 2007, the counsel for the IFCI informed this Court that the proposal submitted by HRML to IFCI vide its letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... els have been heard thereon. 8. CM No.11850/2006 of HRML for interim relief and on which the order aforesaid of status quo was made sought to restrain the auction/bid process initiated by IFCI to sell/assign the debts qua HRML; interim relief of restraining IFCI from selling or assigning the said debts was also claimed. Another CM No.12165/2006 for interim relief also claimed relief only of maintenance of status quo regarding financial assets held by IFCI qua debts payable by HRML. It is now the admitted position that the bids were invited, submitted, opened and the bid of KMBL accepted by IFCI before the institution of W.P.(C) No.14999/2006 and/or in any case before the order dated 6th October, 2006 of status quo. It is also worth mentioning that before that the writ petition was listed before this Court on 22nd September, 2006, 25th September, 2006, 26th September, 2006, 28th September, 2006, 4th October, 2006 & 5th October, 2006 when neither notice was issued nor any interim relief granted. It is also not in dispute that 25% of the bid amount was paid by KMBL to IFCI before 6th October, 2006. The only question which thus arises is whether the payment of the balance 75% of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing payment of 70% of the principal amount to the first charge holders and of 30% of the principal amount to the second charge holders; that the creditor banks/financial institutions in the meeting held on 30th June, 2006 considered the Revised Proposal and again asked HRML to better the proposal; a Revised Proposal envisaging payment of 85% of the principal outstanding within six months from the date of approval was submitted; however the same was also rejected on 7th August, 2006; that HRML on 13th September, 2006 further revised the settlement proposal at 100% payment of the principal amount entailing payment of ₹ 30.60 crores. It is further the case of HRML that IFCI while on the one hand asking HRML to submit Revised Proposals, behind the back of HRML on 11th May, 2006 invited bids for sale/assignment of the financial assets in the form of loans availed by HRML. HRML avers that IFCI had already identified/selected an entity to assign/sell the said financial assets and that the said entity was acting at the behest of certain third parties interested in the real estate of HRML. Though HRML pleaded so but neither mentioned the name of the third entity nor impleaded the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial assets qua HRML. It is however contended that since it was mandatory for IFCI as OA to frame a Rehabilitation Scheme of HRML, IFCI could not have sold its financial assets qua HRML. It is contended that the said sale is contradictory to the role of IFCI as the OA. It is argued that though HRML on 20th September, 2006 had offered to pay 5% over and above the best bid received by IFCI but IFCI on 20th September, 2006 itself accepted the bid of KMBL for ₹ 35 crores. 16. It is further argued that the bona fides of HRML are apparent from the fact that HRML in December, 2007 settled with the other creditors on payment of 35% of the working capital term loan. It is informed that in December, 2007 itself EXIM Bank being the other first charge holder assigned its financial assets qua HRML to Yes Bank with the consent of HRML. 17. The counsel for IFCI has urged that the role of IFCI as OA is different from its role as a lender of HRML. It is informed that as on the date of filing of the counter affidavit, a sum of over ₹ 140 crores was due from HRML. On enquiry it is informed that as on 20th September, 2006, over ₹ 100 crores was due and HRML was offering to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that made by KMBL in that case. The Division Bench held that the sale of such financial assets by IFCI was in accordance with the guidelines of the RBI and which did not permit the sale of such assets to entities other than financial institutions/non-banking financial companies. It was thus held that IFCI could not have sold the financial assets to HSAL. It was further held that what was sold by IFCI did not belong to borrower i.e. HSAL but was the financial asset of IFCI and IFCI was entitled to deal with the same for the purpose of resolving its NPAs. It was held that it was not an asset of HSAL to which it could claim a right. It was yet further held that the borrower HSAL had not been able to show as to how it stood to lose by the NPAs being sold by IFCI to KMBL and the result whereof would only be of KMBL stepping into the shoes of IFCI and the extent of NPA shall remain same even upon transfer. The reason given by HSAL and in fact which reason is given by HRML also, that the sale/transfer would result in depressing the net worth of HSAL was not accepted. It was yet further held that no direction or order could be issued to IFCI to enter into an OTS with its borrower. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RML. Reliance in this regard is placed on the communication dated 26th August, 2006 of HRML to KMBL, filed by HRML itself along with the contempt case which records :- "However no termination fee will be payable if termination is caused by participation of "KOTAK" in auctioning process or assignment of debt by IFCI to any other institutions/party." 23. The senior counsel for the HRML has in rejoinder contended that the factum of the HRML being a defaulter qua banks/financial institutions will not displace equities. It is contended that SICA is concerned with defaulters only. It is argued that it is in the interest of IFCI as well as the public in general that the IFCI receives maximum monies for its debts qua HRML and if IFCI is found to be indulging in disposing of/assigning the said debts at anything lower than what it can receive, the Court can certainly intervene in the same. Reliance in this regard is placed on Divya Manufacturing Company Pvt. Ltd. v. Union Bank of India (2000) 6 SCC 69 (paras 13, 15) and the judgments cited therein. However the said judgment is found to be in the context of sale of assets of a company in liquidation. The senior counsel for HRML however co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to secure the best price for the property to be sold and that a Financial Corporation is always expected to try and realize the maximum sale price by selling the assets by following a procedure which is transparent and acceptable. 27. I am unable to find HRML entitled to any relief. Most of the arguments raised are covered by the judgment of the Division Bench in Haryana Steel & Alloys Ltd. 28. The senior counsel for KMBL is correct in contending that there is no basis in the pleadings qua arguments raised distinguishing the judgment in Haryana Steel & Alloys Ltd. Both the petitions i.e. the present one and the one by Haryana Steel & Alloys Ltd were filed at about contemporaneous time by the same Advocate. The argument of the present case being different owing to IFCI having also been appointed as the OA and action of KMBL also being malafide for the reason of HRML negotiating with it to finance debt re-structuring proposal have been raised as an afterthought without caring to amend the petition. The same cannot be permitted. The pleas/observations in this regard in the rejoinder cannot be a substitute in as much as IFCI and KMBL have had no opportunity to rebut the same. 29. Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osts money and time. IFCI as on 20th September, 2006 had completed the said process with KMBL. If IFCI had abandoned the auction/bid process initiated by it, for the reason of the offer of HRML, there is nothing to show that HRML would have within the promised time made the payment. Upon such default by HRML, IFCI would have been again required to initiate the process of auction/bid causing expenditure / loss of money and time. The difference in amount over and above the bid offered by HRML was not such owing whereto a commercial person would defer receipt of monies. 33. There is another serious aspect of the matter. The senior counsel for KMBL and the counsel for IFCI have stated that HRML by filing the present petition and obtaining the interim order has for the last over four years again created a situation to the detriment of IFCI and KMBL. It is contended that owing to the situation created of IFCI having agreed to assign the debts and the assignment in favour of KMBL having not come into force because of the interim order, in the last four years, neither any proceedings could take place before BIFR nor could anyone take any steps for recovery of the dues. It is contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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