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TMI Blog2024 (7) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... a slip to the proceedings initiated by the Wilful Defaulter Identification Committee of the Respondent Bank. Even after being declared a defaulter, the Appellant continued not to respond to the notices issued by the Respondent Bank. The Appellant Company was selectively approaching the Bank requesting for some reprieve but was deliberately avoiding the Bank in the proceedings being conducted for being a wilful defaulter. This glaring duplicity in the conduct of the Appellant as pointed out by the Respondent Bank has also been taken cognisance of by the Adjudicating Authority in concluding that the Appellant has come before it with unclean hands. It does not escape notice that the Appellant was trying to embroil the Respondent Bank in multiple layers of litigation. It is an undisputed fact that the Appellant had filed securitization application SA-365 of 2019 before the DRT, Lucknow for stay on the auction of its properties by the Respondent Bank. Apart from moving the securitization application before the DRT, the Appellant had also knocked at the doors of the Hon ble Allahabad High Court by filing a Writ petition - the Appellant made incessant efforts to put a spanner in the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the Covid pandemic. The net worth having suffered an erosion, it was not in a position to repay the loan which it had availed from the Respondent-Bank of Maharashtra which led to the Respondent Bank declaring the account of the Corporate Applicant as NPA on 28.10.2018. It is further submitted that thereafter the Respondent Bank issued a Demand Notice on 11.01.2019 under Section 13(2) of the SARFAESI Act, 2002. In their reply to the demand notice, the Corporate Debtor had sought additional loan facility from the Respondent Bank which proposal was not accepted by the Respondent Bank. Though having defaulted in making repayment of outstanding loan to the Respondent Bank but being of the view that the Corporate Debtor company had fair chance of revival, the Appellant filed Section 10 application under IBC. 3. Stating that the Section 10 application was complete in all respects and all documents/information as envisaged under Section 10 of the IBC had been provided, it was vehemently contended that the Respondent Bank had no valid grounds to object to the Section 10 application specially when the twin ingredients of existence of debt and default stood established and the Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent Bank therefore invoked Sections 13(2) and (4) of the SARFAESI Act and after issue of notice took possession of the properties of the Appellant mortgaged to the Bank and placed notice of sale/public auction. The sale bid had also been confirmed to the successful bidder before the filing of Section 10 application. In the interregnum, the Corporate Debtor realising that their attempts to obtain a One Time Settlement ( OTS in short) with the bank was turning futile and recovery of the outstanding debt by the Respondent Bank loomed imminent, they chose to file the Section 10 application with a view to take undue advantage of the moratorium provisions of IBC to stall further recovery proceedings. Further basis the investigation report conducted through an expert third party agency, it was asserted that the ground of business revival raised by the Corporate Debtor is a false claim and the Section 10 application was filed to avoid recovery of debt and not for insolvency resolution. Further the fact that the Corporate Debtor also filed a writ petition before the Hon ble Allahabad High Court challenging the proceedings under Section 13(4) of the SARFAESI Act shows that the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings before the appropriate forum in accordance with law, the Appellant tried to create a logjam by filing a securitisation application before the Debts Recovery Tribunal, Lucknow ( DRT in short) and subsequently a writ petition before the Hon ble Allahabad High Court. Having not succeeded in their objective to scuttle recovery proceedings, the Appellant then filed an application under Section 10 IBC purely to wriggle out of their liability to pay. Thus, according to the Respondent Bank, the Section 10 application was filed for reasons other than for insolvency resolution and thus fell foul of the objectives of the IBC. 9. The short question that arises before us is whether the Adjudicating Authority committed any error in rejecting the Section 10 application. 10. Coming to our analysis, basis the factual matrix and the sequence of events, it is an undisputed fact that the Corporate Debtor had taken a loan facility from the Respondent Bank and had clearly defaulted in the payment of the outstanding debt and filed a Section 10 application on 04.08.2022. When we look at the material on record, we have no hesitation in also agreeing with the Appellant that the procedural presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly distinct from the facts of this case. In Unigreen and Leo Duct supra, the issue which arose for consideration was whether nondisclosure of facts relating to third party civil suits by the Adjudicating Authority amounted to over-reaching the statutory requirements under Section 10 of IBC read with relevant regulations. In the present case, the Adjudicating Authority has not sought any third-party information but only endeavoured to find out whether the Appellant has come up with unclean hands by filing the Section 10 application for purpose other than insolvency resolution. Hence, the above judgments do not come to the aid of the Appellant. 13. We would like to next dwell upon the SARFAESI proceedings initiated by the Respondent Bank in juxtaposition to the contention of the Appellant that the Adjudicating Authority failed to appreciate that pendency of SARFAESI proceedings cannot be a ground to reject the Section 10 application. Chronologically seen, the SARFAESI proceedings in the present facts of the case clearly preceded the Section 10 application. The Respondent Bank had issued Section 13(2) notice under SARFAESI Act to the Appellant-Corporate Debtor on 11.01.2019. The Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on 16.07.2022 as per the sale auction notice issued by the Financial Creditor/ Bank by following due procedure. 29. We have also noted that the Bank in its para no. 14 of the reply/ objection has also stated that it has handed over the enquiry to the detective agency for enquiring the net worth and asset details of the applicants and the Bank have sufficient cause to believe that the applicant having sufficient means is still not ready to repay the loan. In view of this, the intentions of the Corporate Applicant to preempt any such similar proceedings for recovery by the Bank deserves to be deprecated. 30. The application filed U/s 10 thus lacks bonafide from all perspectives, and therefore deserves to be dismissed. 15. When we take a holistic view of the entire conspectus of facts, it does not escape notice that the Appellant was trying to embroil the Respondent Bank in multiple layers of litigation. It is an undisputed fact that the Appellant had filed securitization application SA-365 of 2019 before the DRT, Lucknow for stay on the auction of its properties by the Respondent Bank. Apart from moving the securitization application before the DRT, the Appellant had also knocked a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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