9911796707
TMI Blog2024 (7) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... be noticed for deciding the Appeal are: (i) The State Bank of Travancore has sanctioned loan to the tune of Rs. 99 crores on 17.03.2012 to the Corporate Debtor. On 08.04.2013, the working capital limit of Rs. 99 crores was renewed for a further period of 12 months. (ii) On 31.03.2013, the accounts of the Corporate Debtor was declared as Non-Performing Assets ("NPA"). The SBI along with other consortium lenders entered into Master Restructuring Agreement with the Corporate Debtor on 28.09.2013. Various documents were executed by the Corporate Debtor in support of Master Restructuring Agreement on 30.09.2013. On 14.02.2014, the erstwhile State Bank of Travancore restructured the credit facilities in favour of the Corporate Debtor and an amount of Rs. 89,46,00,000/- was sanctioned. On 26.03.2014, Deed of Accession and Modification on Master Restructuring Agreement was executed. On 23.12.2015, the State Bank of Travancore additionally sanctioned the limit of Rs. 36,74,00,000/-. Various documents thereafter were executed. On 28.12.2015, State Bank of Travancore sanctioned the limit of Rs. 1,26,20,00,000/- in favour of the Corporate Debtor. (iii) On 30.09.2016, the loan account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraphs 19 and 20, which are as follows: "19. The petitioner even after filing of this petition for initiation of Corporate Insolvency Resolution process against the respondent, simultaneously proceeded with T.A.No.179 of 2020 before DRT II-Kolkata, for recovery of the said debt amount. Of course, pending of petition before DRT is no bar to proceed with petition under section 7 of IBC 2016. The facts alleged in this petition is almost similar to the averments made in petition T.A.No.179 of 2020. The DRT is the competent civil forum established for adjudication and recovery of debts due to banks and financial institutions. The petitioner and respondent are parties in T.A.No.179 of 2020. The order passed in T.A.No.179 of 2020 is now under appeal before the DRAT and not reached finality hence, the principal of resjudicata does not apply. However, the order passed in T.A.No.179 of 2020 is valid and existing order in force, hence we cannot simply ignore the said order and proceed with this petition. If this Adjudicating Authority proceed with this petition, there is a possibility of passing of inconsistent order on the same set of facts. This leads to chaos and confusion, this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Shri Abhijeet Sinha, learned Senior Counsel for the Appellant, challenging the order of the Adjudicating Authority submits that proceedings under Section 19 of the 1993 Act is no bar for entertaining an Application under Section 7. The proceedings under Section 19 are for different purpose, i.e. for recovery of the dues of the Bank, whereas the proceedings under Section 7 of the IBC is for different purpose and object, i.e., insolvency resolution of the Corporate Debtor. The pendency of the proceedings under Section 19 (at present which is pending before the Calcutta High Court), which was dismissed by DRT vide order dated 17.06.2022, cannot be a ground to reject Section 7 Application. It is submitted that the Adjudicating Authority has also committed error in relying on Section 10 of the Code of Civil Procedure ("CPC") by holding that Section 7 proceedings, which is subsequent, needs to be stayed, in view of Section 10 of CPC. It is submitted that by Section 238 of the IBC overriding effects has been given to the proceedings under IBC and neither Section 10 of the CPC is available, nor pendency or decision of proceedings under Section 19 of the 1993 Act, can be a reason to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the OTS proposal dated 07.07.2021. Before we come to the respective submission of the parties, it is relevant to notice the pleadings in Section 7 Application. Particulars of financial debt have been mentioned in Part-IV of Section 7 Application. The 'date of default' has been mentioned as 30.09.2016. Part-IV of the Application is as follows: "Part - IV PARTICULARS OF FINANCIAL DEBT 1 TOTAL AMOUNT OF DEBT GRANTED DATE(S) OF DISBURSEMENT 28.12.2015:- Rs. l,26,20,00,000/- (Rupees One Hundred Twenty Six Crore Twenty Lakhs Only) 23.12.2015:- Rs. 36,74,00,000/- (Rupees Thirty Six Crore Seventy Four Lakhs) 14.02.2014:- Rs. 89,46,00,000/- (Rupees Eighty Nine Crore Forty Six Lakhs Only) 08.04.2013:- Rs. 70,00,00,000/- (Rupees Seventy Crore Only) 17.03.2012:-Rs. 99,00,00,000/- (Rupees Ninety Nine Crore Only) The sanction letters for the said limits is hereto annexed and collectively marked as Annexure E'. 2 AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH DEFAULT OCCURRED (ATTACH THE WORKINGS FOR COMPUTATION OF AMOUNT AND DAYS OF DEFAULT IN TABULAR FORM) Rs. 144,70,88,690/- (Rupees One Hundred Forty Four Crore Seventy Lakhs Eighty Eight Thousand Six Hundred Nin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Bank of India Respected Sir, Without prejudice to any of our rights available under applicable rules and laws, we are submitting herewith our OTS Proposal for consideration at your end. a) We will settle the account of Abhijeet Ferrotech Limited maintained with State Bank of India at Rs. 21.29 Crs as full and final settlement. b) The broad terms and condition of OTS proposal will be as per below provisions:- I. Final OTS proposal will be submit to bank along with an upfront payment of 10% of the OTS amount i.e. Rs. 2.13 Crs and the same will be deposited with State Bank of India's Non-Lien Loan Account. This upfront payment will be refundable if the proposal does not get approved by competent authority due to any of the reasons; 2. Part 25% i.e. Rs. 5.32 Crs will be* deposited within 3 months from the date of approval of OTS Sanction. 3. Remaining 65% amount will be payable within 9 months time period along with a simple interest and same shall be calculated after successfully completion of first 3 month of OTS proposal. As you are aware that Covid-19 has adversely effected the business of the company and.in the present circumstance and as per curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor's assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through its entrepreneurial skills, resuscitate the corporate debtor to achieve all these ends." 11. The proceedings, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiate proceedings under the Multi-State Co-operative Societies Act, 2002 to recover debts, whether due before or after the date of commencement of the Enforcement of the Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 from any person instead of making an application under this Chapter. (1B) In case, a bank being, multi-State co-operative bank referred to in sub-clause (vi) of clause (d) of section 2 has filed an application under this Chapter and subsequently opts to withdraw the application for the purpose of initiating proceeding under the Multi-State Co-operative Societies Act, 2002 to recover debts, it may do so with the permission of the Tribunal and every such application seeking permission from the Tribunal to withdraw the application made under sub-section (1A) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application :- Provided that in case the Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor.] [Inserted by Act No. 1 OF 2013]" 12. Section 7 of the IBC is a provision f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties, or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other Court in 1[India] have jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court]. Explanation.--The pendency of a suit in a foreign Court does not preclude the Courts in India from trying a suit founded on the same cause of action." 16. Section 238 of the IBC as extracted above, gives overriding effect to the proceedings under Section 7. Thus, despite the provision of Section 10 of CPC, the proceedings under Section 7 has to be proceeded with. The clear intendment of the statute is that the provisions of the Code shall have effect, notwithstanding anything inconsistent therewith in any other law for the time being in force. Even if for argument sake, it is accepted the provisions of Section 10 CPC will be attracted, the clear intendment of the statute is that proceedings under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g its debt, there is contributory negligence by the State Bank of India as well as Punjab National Bank. The fact that certain portion of sanction amount of financial facilities could not be disbursed by the Financial Creditors can be ground for rejecting Section 7 Application has already been answered by the Hon'ble Supreme Court in its judgment in Innoventive Industries Limited (supra). We need to notice some submissions, which were raised before the Hon'ble Supreme Court in Innoventive Industries Limited and the views, which were expressed by the Hon'ble Supreme Court in the above case. In Innoventive Industries Limited, a Section 7 Application was filed by the Financial Creditors. Nineteen Banking entities had extended credit to the Innoventive Industries Ltd. In the above case also restructuring proposal given by the Corporate Debtor was approved in the meeting of Joint Lenders Forum. A Restructuring Agreement was entered into on 09.09.2014, under which funds were to be infused by the creditors and certain obligations were to be met by the debtors. Insolvency resolution process was set in motion by filing a Section 7 Application. In reply to Section 7 Application, Corporate De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es", Clause 20(t) states as follows: "(t) Nature of Obligations The obligations under this Agreement and the other restructuring documents constitute direct, unconditional and general obligations of the borrower and the reconstituted facilities, rank at least pari passu as to priority of payment to all other unsubordinated indebtedness of the borrower other than any priority established under applicable law." 64. The obligation of the corporate debtor was, therefore, unconditional and did not depend upon infusing of funds by the creditors into the appellant Company. Also, the argument taken for the first time before us that no debt was in fact due under MRA as it has not fallen due (owing to the default of the secured creditor) is not something that can be countenanced at this stage of the proceedings. In this view of the matter, we are of the considered view that the Tribunal and the Appellate Tribunal were right in admitting the application filed by the financial creditor ICICI Bank Ltd." Further, in paragraph 24, following was held "24. Under the Scheme of IBC, when a Corporate Debtor is unable to pay its debt, which becomes payable, it is a warning signal for Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Navinchandra Steels Pvt. Ltd. vs. SREI Equipment Finance Ltd. - (2021) 4 SCC 435. In the above case, the Hon'ble Supreme Court had occasion to notice few fundamentals with regard to IBC legislation. The observation was also made that Companies Act, 2013 is the general statute as compared to IBC. In paragraph 16, 17 and 18, following was held: "16. Having heard the learned counsel for all the parties, it is important to restate a few fundamentals. Given the object of the IBC as delineated in paras 25 to 28 of Swiss Ribbons (P) Ltd. v. Union of India [Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] ["Swiss Ribbons"], it is clear that the IBC is a special statute dealing with revival of companies that are in the red, winding up only being resorted to in case all attempts of revival fail. Vis-à-vis the Companies Act, which is a general statute dealing with companies, including companies that are in the red, the IBC is not only a special statute which must prevail in the event of conflict, but has a non obstante clause contained in Section 238, which makes it even clearer that in case of conflict, the provisions of the IBC will prevail. 17. In Allahabad Bank v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atively, the Companies Act, 1956 and the RDB Act can both be treated as special laws, and the principle that when there are two special laws, the latter will normally prevail over the former if there is a provision in the latter special Act giving it overriding effect, can also be applied. Such a provision is there in the RDB Act, namely, Section 34. A similar situation arose in Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd. [Maharashtra Tubes Ltd. v. State Industrial & Investment Corpn. of Maharashtra Ltd., (1993) 2 SCC 144] where there was inconsistency between two special laws, the Finance Corporation Act, 1951 and the Sick Industries Companies (Special Provisions) Act, 1985. The latter contained Section 32 which gave overriding effect to its provisions and was held to prevail over the former. It was pointed out by Ahmadi, J. that both special statutes contained non obstante clauses but that the '1985 Act being a subsequent enactment, the non obstante clause therein would ordinarily prevail over the non obstante clause in Section 46-B of the 1951 Act unless it is found that the 1985 Act is a general statute and the 1951 Act is a special one'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of the discussion as above, we think it proper to sum up the legal position thus: (i) A Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in-liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (ii) A District Court entertaining an application under Section 31 of the SFC Act will have the power to order sale of the assets of a borrower company-in-liquidation, but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. (iii) If a financial corporation acting under Section 29 of the SFC Act seeks to sell or otherwise transfer the assets of a debtor company-in-liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the Company Court and acting in terms of the directions issued by that court as regards associating the Official Liquidator with the sale, the fixing of the upset price or the reserve price, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other laws.- The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.' 20. Shri Dave's ingenious argument that since Section 434 of the Companies Act, 2013 is amended by the Eleventh Schedule to the Code, the amended Section 434 must be read as being part of the Code and not the Companies Act, 2013, must be rejected for the reason that though Section 434 of the Companies Act, 2013 is substituted by the Eleventh Schedule to the Code, yet Section 434, as substituted, appears only in the Companies Act, 2013 and is part and parcel of that Act. This being so, if there is any inconsistency between Section 434 as substituted and the provisions of the Code, the latter must prevail. We are of the view that NCLT was absolutely correct in applying Section 238 of the Code to an independent proceeding instituted by a secured financial creditor, namely, the Alchemist Asset Reconstruction Company Ltd. This being the case, it is difficult to comprehend how the High Court could have held [Jaipur Metals & Electricals Ltd., In re, 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Given the object sought to be achieved by the IBC, it is clear that only where a company in winding up is near corporate death that no transfer of the winding-up proceeding would then take place to NCLT to be tried as a proceeding under the IBC. Short of an irresistible conclusion that corporate death is inevitable, every effort should be made to resuscitate the corporate debtor in the larger public interest, which includes not only the workmen of the corporate debtor, but also its creditors and the goods it produces in the larger interest of the economy of the country. It is, thus, not possible to accede to the argument on behalf of the appellant that given Section 446 of the Companies Act, 1956/Section 279 of the Companies Act, 2013, once a winding-up petition is admitted, the winding-up petition should trump any subsequent attempt at revival of the company through a Section 7 or Section 9 petition filed under the IBC. While it is true that Sections 391 to 393 of the Companies Act, 1956 may, in a given factual circumstance, be availed of to pull the company out of the red, Section 230(1) of the Companies Act, 2013 is instructive and provides as follows: "230. Power to compromis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any effect in deciding a Section 7 petition on the basis of the provisions contained in the IBC. Equally, it cannot be said that any subterfuge has been availed of for the same reason that Section 7 is an independent proceeding that stands by itself. As has been correctly pointed out by Shri Sinha, a discretionary jurisdiction under the fifth proviso to Section 434(1)(c) of the Companies Act, 2013 cannot prevail over the undoubted jurisdiction of NCLT under the IBC once the parameters of Section 7 and other provisions of the IBC have been met. For all these reasons, therefore, the appeal is dismissed and the interim order that has been passed by this Court on 18-12-2020 [A. Navinchandra Steels (P) Ltd. v. Srei Equipment Finance Ltd., 2020 SCC OnLine SC 1141] shall stand immediately vacated." 23. The above judgment of the Hon'ble Supreme Court clearly lays down that proceedings under Section 7 can neither be held to be barred by any order passed by DRT under the 1993 Act, nor pendency of proceedings at DRT (which is now pending at the stage of Calcutta High Court) shall preclude decision on Section 7 Application on merits. 24. Learned Counsel for the Respondent to support his subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub- section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be." 25. There can be no doubt to the proposition laid down by the Hon'ble Supreme Court in Innoventive Industries Ltd. as above, but the question, which have been framed in the present case was as to whether the proceeding under Section 7 is barred in view of the order passed by DRT on 17.06.2022. the judgment of the Innoventive Industries Ltd. does not support the view taken by the Adjudicating Authority in the impugned order. 26. The learned Counsel for the Respondent has also placed reliance on judgment of the Hon'ble Supreme Court in Hope Plantations v Taluk Land Board - (1999) 5 SCC 590 stating that any finding of court of competent jurisdiction as binding between parties, even in subsequent proceedings in reference to issue estoppel or issue preclusion. Paragraph 26, on which reliance has been placed by learned Counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the judgment of the Hon'ble Supreme Court in Hope Plantations Ltd. does not render any assistance to the Respondent. 28. The learned Counsel for the Respondent has also relied on another judgment of the Hon'ble Supreme Court in (2016) 14 SCC 49 - Satyendra Kumar v. Raj Nath Dubey, where reliance has been placed on paragraph 15, which is as follows: "15. The distinction drawn by the High Court in the impugned judgment [Raj Nath Dubey v. Director of Consolidation, 2013 SCC OnLine All 10523] that an erroneous determination of a pure question of law in a previous judgment will not operate as res judicata in the subsequent proceeding for different property, though between the same parties, is clearly in accord with Section 11 CPC. Strictly speaking, when the cause of action as well as the subject-matter i.e. the property in issue in the subsequent suit are entirely different, res judicata is not attracted and the competent court is therefore not debarred from trying the subsequent suit which may arise between the same parties in respect of other properties and upon a different cause of action. In such a situation, since the Court is not debarred, all issues including those of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asad Bajoo Jaiswal [Mathura Prasad Bajoo Jaiswal v. Dossibai N.B. Jeejeebhoy, (1970) 1 SCC 613 : AIR 1971 SC 2355] , where the decision is on a pure question of law then a court cannot be precluded from deciding such question of law differently. Such bar cannot be invoked either on principle of equity or estoppel. No equitable principle or estoppel can impede powers of the court to determine an issue of law correctly in a subsequent suit which relates to another property founded upon a different cause of action though parties may be same. As explained earlier, in such a situation the principle of res judicata is, strictly speaking, not applicable at all. So far as principle of estoppel is concerned, it operates against the party and not the court and hence nothing comes in the way of a competent court in such a situation to decide a pure question of law differently if it is so warranted. The issues of facts once finally determined will however, stare at the parties and bind them on account of earlier judgments or for any other good reason where equitable principles of estoppel are attracted." 30. The above judgment, in no manner support the submissions of the Respondents in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
