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Judgment
Per RAHUL BHATNAGAR, MEMBER (TECHNICAL)
The present application is filed by Bank of Maharashtra under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'the Code') read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of Corporate Insolvency Resolution Process (hereinafter referred to as 'CIRP') against M/s Newtech Promoters and Developers Pvt. Ltd. for the alleged default on the part of the Respondent in settling an amount of Rs. 77,89,10,700/- (Rupees Seventy Seven Crores Eighty Nine Lakhs Ten Thousand and Seven Hundred). The details of transactions leading to the filing of this application as averred by the Applicant are as follows:
That the Financial Creditor through its branch at Sector-62, Noida-201301, U.P. granted Term Loan of Rs. 50.00 crore to the Corporate Debtor for financing the development of Group Housing Project at Plot no. HRA-11, Surajpur Site C (Extention) Phase-II, Greater Noida, Distt. Gautam Budh nagar, U.P admeasuring 13,703.50 sq. mtrs. vide sanction letter dated 07.12.2012. The said loan was repayable in 6 quarterly instalments of Rs. 8.35 crore each payable from the quarter October 2015-December 2015 and ending in Jan- Mar. 2017 and was secured against both movable and immovable properties of Corporate Debtor and personal guarantees of its directors. The terms and conditions of sanction were duly accepted by the Corporate Debtor.
That for the said term loan, the Corporate Debtor pursuant to the board resolution dated 22.01.2013 had executed loan documents on 06.02.2013 in favour of Financial Creditor bank viz., Demand Promissory Note, Agreement for term loan, Composite deed of hypothecation. The Corporate Debtor had also executed escrow agreement dated 18.02.2013 in favour of Financial Creditor.
That as primary security to secure the dues of Financial Creditor, the Corporate Debtor besides creation of hypothecation charge on its movable assets, had on 06.02.2013 created exclusive first charge by way of equitable mortgage of its following property in favour of Financial Creditor: “Group Housing Plot no. HRA-11, Surajpur site-C (extension) Phase-II, Greater Noida, District Gautam Budhnagar, U.P. measuring 13,703.50 sq. mtrs.”
That for creation of mortgage the original title deeds of said property viz., lease deed dated 10.08.2011 registered with Sub-Registrar Gautam Budh Nagar, U.P. was deposited by Corporate Debtor with Financial Creditor. The Corporate Debtor had submitted to the Financial Creditor mortgagor’s declaration and had confirmed creation of mortgage vide letter dated 08.02.2013. For the said mortgage the lessor of the said mortgaged property viz., U.P. Industrial Development Corporation (UPSIDC) had granted necessary permissions for mortgage vide letter dated 04.02.2013 and letter dated 26.03.2012. The mortgage charge of the Financial Creditor was duly registered with Registrar of Companies, NCT of Delhi and Haryana vide certificate dated 26.03.2013.
That Corporate Debtor vide its letter dated 06.04.2015 had informed the Financial Creditor that the name of the corporate debtor has been changed from Aashiyana Promoters and Developers Private Limited to Newtech Promoters and Developers Private Limited with effect from 12.03.2015 and had submitted to the financial creditor the necessary certificate of incorporation issued by Registrar of Companies.
That at the request of the corporate debtor, the financial creditor had approved shifting of scheduled commercial operation date (SCOD) and the repayment schedule of term loan by one year vide sanction letter dated 15.01.2016, the terms and conditions of which were duly accepted by the corporate debtor. In terms of the terms of sanction the loan was repayable in 6 equal quarterly instalments of Rs 8.17 each starting from Oct-Dec 2016 on or before the last day of the quarter.
That the corporate debtor had on 16.03.2016 confirmed creation of equitable mortgage and sent letter of confirmation dated 17.03.2016. The modification of charge in favour of financial creditor was duly registered with the Registrar of Companies vide certificate dated 14.04.2016.
That the corporate debtor and the guarantors, by Balance and security confirmation letters both dated 29.02.2016, had acknowledged and confirmed execution of earlier loan documents and confirmed outstanding balance of Rs. 50,20,42,428.00 with further interest from 01.02.2016 in its term loan account.
That the Corporate debtor had duly availed the term loan granted by financial creditor from time to time but failed to adhere to the financial discipline and committed default in repayment of dues of financial creditor. Pursuant to the default in repayment the account of corporate debtor was classified as Non-performing asset in terms of Reserve Bank of India guidelines on 29.12.2016.
That after the account of corporate debtor had become irregular/N.P.A it was transferred to the Assets Recovery Branch at Karol Bagh Branch and then to the Stressed Assets Management Branch, B-29, Connaught Palace, New Delhi-110001 for monitoring of recovery of bank dues.
That the financial creditor with a view to enforce its securities to recover its dues had issued to corporate debtor statutory notice under the SARFAESI Act. The financial creditor vide its notice dated 13.03.2018 issued under Section 13(2) of the SARFAESI Act had required the corporate debtor to pay the then outstanding dues of Rs. 48,74,96,415/-with interest @14.70% per annum w.e.f. 1.10.16 within 60 days. However, the corporate debtor continued to default in repaying the dues of the financial creditor.
That in response to the said statutory notice dated 13.03.2018 sent by the financial creditor, the corporate debtor vide its letter dated 12.05.2018 had filed objections which were duly considered and found as unacceptable and untenable. The said representation was duly replied by financial creditor vide letter dated 17.05.2018.
That thereafter the financial creditor after issuing letter dated 18.5.2018, had taken symbolic possession of mortgaged property on 29.05.2018 under SARFAESI Act.
The financial creditor to recover its dues had filed O.A. No. 42/2019 for recovery of its dues of Rs. 61,80,55,099.00 as on 18.03.2018 in Debt Recovery Tribunal-II, Delhi which is pending for adjudication.
That the corporate debtor was again called upon by the financial creditor vide letter dated 08.01.2019 to pay the dues of the bank but corporate debtor continued to default in repayment.
That the financial creditor with a view to afford another opportunity and before filing the present proceedings had issued legal notice dated 11.01.2019 through its advocate to pay the then dues of Rs. 70,24,06,243.00. In response thereto, the corporate debtor and the guarantors through their advocate Sh. C.S. Gupta while admitting sanction of loan and their liability to pay, did not repay the bank dues.
That in the term loan account of corporate debtor, there remains an outstanding amount of Rs. 77,89,10,700/- as on 3.9.2019 with further interest till payment which is due and payable by corporate debtor.
Consequent to the notice issued by this Tribunal, the Respondent filed its reply in which the following contentions were made:
That the present application by the petitioner is barred by limitation and thus in view of provisions of Section 238A of the Insolvency and Bankruptcy Code 2016, the present Application is not maintainable under law. The last alleged loan agreements were dated 29.02.2016 and thus present application / proceedings are barred under law against the Corporate Debtor.
That the Applicant Bank is in the habit of forum shopping and hunting multiple legal forums for same cause of action and subject matter in issue. The same is impermissible under the law and well settled by Hon'ble Higher Courts that the litigant cannot be allowed for forum shopping by filing multiple proceedings for same subject matter.
That the Applicant bank has already filed Recovery Application being registered as OA No 42 of 2019 before Debt Recovery Tribunal, New Delhi for recovery of a sum of Rs 61,80,55,099/- which is pending adjudication. The subject matter is subjudice and pending adjudication which is admitted by the applicant bank itself in Part V of the application. Thus, having availed the remedy for filing the recovery of sum claimed against the Corporate Debtor before the Competent Court, the Applicant Bank is barred to seek recovery of same claim before this Tribunal.
That the present petition filed under Insolvency Code 2016 is for ulterior motive as the Applicant Bank has already invoked two legal proceedings by filing recovery suit and also proceedings initiated under SARFAESI Act 2002, hence in the principle of justice, the Applicant Bank can not be allowed to misuse provisions of IBC 2016.
That the Corporate Debtor is a long standing real estate company having good reputation and name in the real estate field. It has delivered several projects successfully over the decades well within time and allotteesare happily living in these completed projects.
That as on date, no debt, much less a Financial Debt is due or payable either in law or in fact by the Respondent to the Applicant and as such, there has been no default on the part of the Respondent. In fact, the Applicant has no claim against the Respondent.
That the notice and thereafter the present application has been filed by the Applicant with malafide intention with arm twisting tactic to put pressure upon the Respondent.
That the Corporate Debtor can not be put for Insolvency Proceedings as it is a solvent and working company.
The Counsel for the Financial Creditor has filed rejoinder to the reply of the Corporate Debtor stating that:
That the claim of the financial creditor has been filed within limitation period. The financial creditor had sanctioned term loan of Rs. 50.00 crore (Rupees Fifty crore only) to corporate debtor on 07.12.2012 which was revised to Rs. 49.00 crore on 15.01.2016. In terms of admitted and accepted sanction of terms by corporate debtor, the revised term loan of Rs. 49.00 crore was repayable by corporate debtor in 6 equal quarterly instalment of Rs. 8.17 crore each commencing from Oct.-Dec. 2016 quarter. The corporate debtor and its guarantor had executed loan and security documents for the said loan. The balance and security confirmation letter was also signed on 29.02.2016. The loan in question being in the nature of term loan repayable in instalments, the limitation period for recovery of dues thus commences from the due date of each instalment.
That the present application is filed by the financial creditor under the provisions of IBC and is an independent statutory remedy available to the financial creditor. The recovery proceedings and measures under the SARFAESI Act,2002 can be proceeded along with proceedings under IBC independently and simultaneously in the absence of any injunction or moratorium order by a Competent Court.
That the corporate debtor has committed serious breach of its contractual and statutory obligations for which it is liable for penal consequences under the law. The corporate debtor has failed to file any document like balance sheet or financial statements, to show that it is a solvent company as claimed by it.
That it is denied that no amount is due and/or payable by corporate debtor to the applicant. Admittedly, the corporate debtor had received the statutory notice dated 13.03.2018 issued under Section 13(2) of SARFAESI Act and the legal notice dated 11.01.2019 and also had knowledge of financial creditor filing the O.A proceedings in DRT and initiating measures under SARFAESI Act. The corporate debtor is a chronic defaulter and is a NPA borrower who in spite of receipt of various demand letters had defaulted in payment of dues of financial creditor.
Vide order dated 06.04.2022, both the parties were directed to file their written submissions. The written submissions have been filed by both the parties.
The Counsel for the Financial Creditor has filed its written submissions stating that:
That the Financial Creditor had granted to Corporate Debtor term loan of Rs. 50 crore payable in quarterly instalments. The said loan was rescheduled. The sanction letters of said loan were dated 07.12.2012 and 15.01.2016.
That the Corporate Debtor had accepted the terms of sanction of loan by its board resolution dated 22.01.2013 and letter dated 04.02.2013. Terms of rescheduled loan was also accepted by corporate debtor on copy of sanction letter as well as by way of board resolution dated 24.02.2016.
That the charge of Financial Creditor as secured creditor on the assets of Corporate Debtor was registered with ROC.
That the Corporate Debtor had acknowledged its liability towards the Financial Creditor vide balance and security confirmation letter dated 29.02.2016. The Corporate Debtor had also acknowledged its liability to pay the dues of Financial Creditor and had submitted letters offering One Time Settlement (OTS) viz., letters dated 18.06.2018, 28.06.2018, 06.02.2021.
The Corporate Debtor in its reply dated 25.01.2019 to legal notice had admitted sanction of loan, approval of resehedulement of loan, repayment schedule, receipt of notice u/s 13 (2) and filing objections/representation under SARFAESI Act, and execution of loan documents and creation of security and default in repayment. The Corporate Debtor had cited liquidity crunch as reasons for non-payment, of loan and had submitted that it is making efforts with Financial Creditor to settle dues by OTS.
That the nature of loan in question is Term loan repayable in 6 quarterly instalments of Rs. 8.17 crore from October-December 2016 quarter. It is a settled law that in case of term loan the limitation period is 3 years from the due date of each instalment. The Corporate Debtor had signed balance and security confirmation letter dated 29.02.2016 as well as by way of various letters viz letters dated 18.06.2018, 28.06.2018, 06.02.2021 had acknowledged its liability to pay dues of Financial Creditor. Further, with each deposit made and repayment of debt/amount in loan account, fresh limitation period commences from the date of each deposit. The limitation period thus stand extended from time to time in terms of provisions of Section 18 and 19 of Limitation Act.
The Counsel for the Corporate Debtor has filed its written submissions in respect to the submissions made in the application:
That the present IBC Petition has been filed beyond 3 years from the date of default.
That the first date of default is relevant for the purpose of filing IBC Petition. It is well settled that Article 137 of the Limitation Act will be applicable in the IBC proceedings, hence present IBC proceedings filed on 19-09-2019 is beyond 3 years from the date of default which admittedly is 31/12/2015.
That the IBC Application does not mention about settlement letters as referred by Bank during arguments. The bank has not admitted OTS, hence there is no admission. That even date of default is relevant for computation limitation and not the default amount.
That the present IBC Petition filed by FC is solely for the purpose of recovery and further against the very objective of IBC which is to maximize the value of assets and purpose of IBC is not the recovery proceedings.
That the FC has already filed Recovery Proceedings (OA No 42 of 2019) before DRT Delhi against the CD and guarantors which is still pending adjudication. The FC has already initiated SARFAESI proceedings by taking steps U/s 13(2) and further U/s 13(4) dated 18-05-2018 by taking symbolic possession on 29-05-2018. However physical possession is with the CD and now under monitoring committee appointed under RERA.
That the bank intends only recovery of debt and it has no concern for resolution plan or maximization of Assets of the CD.
That the project of the CD is presently under supervision and control of the UP RERA Authority in terms of Order dated 24-12-2021 passed by virtue of Section 8 R/w Section 11 and 37 of RERA Act, 2016.
That the Hon'ble Supreme Court in the recent landmark judgment (2019) 19 SCC161 in the case of Bikram Chatterjee and other Vs Union of India and Others has held that interest of the home buyers has to be considered and is of prime importance in the IBC proceedings.
That in terms of provisions of Section 89 of the RERA Act, 2016, the provisions of RERA will have overriding effect. That in view of order passed by RERA to monitor the project through monitoring committee constituted vide dated 24-12-2021, the present IBC proceedings filed by the FC solely for the objective of recovery ought to be dismissed.
We have gone through the documents filed by both the parties and heard the arguments made by the counsels. The Applicant has claimed the default on part of the Respondent for the Loan amount of Rs. 77,89,10,700/- (Rupees Seventy Seven Crores Eighty Nine Lakhs Ten Thousand and Seven Hundred).
The Corporate Debtor has raised a contention that the present Application is barred by limitation. However, the said contention of the Corporate Debtor dated 25.01.2019 cannot be sustained as the Financial Creditor has attached communication from the Corporate Debtor acknowledging the existence of debt thereby giving a fresh lease of limitation to the Financial Creditor for filing the present application.
Further, the Corporate Debtor has submitted that CIRP should not be admitted against it as it is working on a housing project that is presently being monitored through monitoring committee constituted under RERA in terms of order passed u/s 8 dated 24.12.2021 r/w section 11 and 37 of the RERA Act, 2016. If CIRP is inititated, the interests of the homebuyers would be in jeopardy.
Even though there is existence of debt, this tribunal is not bound to allow the present application as has been held by Hon'ble Supreme Court in the landmark case of Vidarbha Industries Power Ltd. v. Axis Bank Ltd.; 2022 SCC OnLine SC 841:
61.In our view, the Appellate Authority (NCLAT) erred in holding that the Adjudicating Authority (NCLT) was only required to see whether there had been a debt and the Corporate Debtor had defaulted in making repayment of the debt, and that these two aspects, if satisfied, would trigger the CIRP. The existence of a financial debt and default in payment thereof only gave the financial creditor the right to apply for initiation of CIRP. The Adjudicating Authority (NCLT) was required to apply its mind to relevant factors including the feasibility of initiation of CIRP, against an electricity generating company operated under statutory control, the impact of MERC’s appeal, pending in this Court, order of APTEL referred to above and the over all financial health and viability of the Corporate Debtor under its existing management.
86.Even though Section 7 (5)(a) of the IBC may confer discretionary power on the Adjudicating Authority, such discretionary power cannot be exercised arbitrarily or capriciously. If the facts and circumstances warrant exercise of discretion in a particular manner, discretion would have to be exercised in that manner.
87.Ordinarily, the Adjudicating Authority (NCLT) would have to exercise its discretion to admit an application under Section 7 of the IBC of the IBC and initiate CIRP on satisfaction of the existence of a financial debt and default on the part of the Corporate Debtor in payment of the debt, unless there are good reasons not to admit the petition.
In the present case, the interest of homebuyers cannot be ignored. The homebuyers have invested substantial amounts of money mostly through life savings in the project and the Corporate Debtor has already filed an IA bearing No 5474 of 2021 before this Tribunal submitting the present status of the project and construction. The order passed by Uttar Pradesh Real Estate Regulatory Authority dated 24.12.2021 u/s 8 r/w section 11 and 37 of the RERA Act, 2016 states as follows:
"10- The proposal of the Promoter and the Association was considered by the Authority, alongwith other relevant facts and documents available at its level, in its meeting held on 14th December 2021. The Authority, after careful and thorough deliberation on the proposal submitted by the Promoter and consented to by the Association and perusal of the recommendations of its Project Advisory & Monitoring Committee based on the report of its officers and the Project Management Division, arrived at the considered view that the proposal of the Promoter consented to by the Association is, prima facie, convincing, and can be accepted in fulfillment of its mandate to facilitate the completion of the Project under the present conditions i.e. where the registration has lapsed and the Authority needs to facilitate the remaining development work in order to protect the interests of the allottees of the Project.
11- Therefore, with a view to facilitate the completion of the Project in a time bound manner, to protect the interests of the allottees, the Authority, using the powers conferred upon it under section 8 of the RERA Act read with section 37 of the Act, other enabling provisions of the Act, the Rules and the Regulations made there under, and as per the principle laid down by the Hon'ble Bombay High Court in Neelkamal Realtors and others vs Union of India and others and in conformity with the U.P. State Government order dated 26th June 2020 stipulating the guidelines to be followed in such matters, resolved to authorize the Promoter, with consent of Association, to undertake the completion of the remaining development and the construction work of the Project."
In terms of the above order, the housing project of the Corporate Debtor is under the supervision of RERA and as is clearly stated in the order, the Association of the allottes of the project have consented to the completion of the project by the Corporate Debtor. If CIRP is initiated against the Corporate Debtor, it will be against the spirit of the order passed by RERA and against the interest of the allottes. In any case, the Applicant has sought remedy by filing recovery proceedings (OA No. 42 of 2019) before Debt Recovery Tribunal, Delhi against the Corporate Debtor and its guarantors which is still pending adjudication.
In light of the above judgment and keeping in view the fact that a housing project of the Corporate Debtor is presently under supervision and control of the UP RERA Authority in terms of Order dated 24.12.2021 passed by virtue of Section 8 R/w Section 11 and 37 of RERA Act, 2016 this Tribunal is of the view that initiating CIRP will not be in the best interest of the homebuyers. Therefore, in keeping with the intent and spirit of the judgement of the Hon'ble Supreme Court in the case of Vidarbha Industries Power Ltd. v. Axis Bank Ltd.; 2022 SCC OnLine SC 841, the petition filed under Section 7, IBC, 2016 stands dismissed.