Business Combine Limited vs IDBI Bank Limited

This Petition has been filed by Business Combine Ltd (Petitioner) seeking return of Rs. 1 crore along with interest accrued which was deposited in

no lien, interest bearing account with the Respondent i.e. IDBI Bank pursuant to the directions of The Board for Industrial and Financial

Reconstruction (BIFR) vide its order dated 29.07.2020 under the Sick Industrial Companies Act, 1985 (SICA). The Petitioner mentions that SICA,

1985 has been repealed w.e.f. 01.12.2015 and proceedings before BIFR stood abated in terms of Sec. 4(b) of Sick Industrial Companies (Special

Provisions) Act, 1985.

Background to the case:

In 2001, the petitioner company on account of erosion of its net worth had filed a reference before BIFR under section 15 (1) of the Sick Industrial

Companies (Special Provisions) Act, 1985. The BIFR intended to declare the Petitioner company as a sick industrial company in terms of Section 3(1)

of SICA and had appointed Dena Bank as the operating agency.

BIFR subsequently vide its order dated 12.07.2007 appointed IDBI as the operating agency replacing Dena Bank. The relevant portion of the said

order is as under.

“After considering the submissions made and the material on record, the Bench observed that in the last hearing the company was

directed to examine the prospect of merging it with their profit making Group Company and submit the rehabilitation scheme accordingly.

Though the company has settled the dues of its secured creditors and has shown some improvement in its operations, they could have

submitted the proposed merger proposal long back. However, keeping in view the fact the company has paid the entire dues of the secured

creditors and their submissions that is can now be revived, the company is directed to forthwith submit balance sheets of the last two years

in respect of their own and that of their group company and to submit their revival proposal within 4 weeks to IDBI who are now appointed

as OA in place of Dena Bank. IDBI (OA) to examine the proposal in a Joint Meeting in further six weeks and submit the DRS/status report

to the Bench immediately after expiry of 10 weeks for taking further appropriate action in the matter. Since IDBI is not a secured creditor,

company would pay OA fees of Rs. 2.00 lakh to IDBI. The next hearing was fixed on 15.10.2007.â€​

Thereafter BIFR vide its order dated 29.01.2014 directed the Petitioner company to deposit a sum of Rs. 1 crore in no lien account with operating

agency i.e. IDBI Bank. The relevant portion of the said order is as under:

“2.5 Having considered the submissions made in the hearing and the material on record, the Bench issued the following directions:

(i).......

(ii) Company to deposit Rs. One Crore in NLA with IDBI (OA) as agreed before the next date of hearing.

(iii)....

(iv)......

The Petitioner in compliance with the direction of the BIFR of 29.01.2014 deposited a sum of Rs. 1 crore with the Operating agency i.e. IDBI

Bank in no lien interest bearing account vide Cheque No. 000353 drawn on Bank of India. A snapshot of the covering letter dated 09.03.2014 as

submitted by the Petitioner is as under:

The Petitioner company mentions that subsequently the operation of company and its turnover started to increase significantly. Therefore, vide

order dated 12.07.2007, BIFR also noted the improved financial health of the Petitioner company which is reflected in the order of 12.07.2007.A

portion of which is reproduced below.

“The Advocate representing the company submitted that the dues of Dena Bank have been fully paid. There was a lock out in the

company since 2001 which was lifted in 2005. The company was doing job work for their associate concern and has now started

operations. The turnover of the company has increased significantly and there is good demand for the company’s product in the market.

They propose to merge the company with their group company. The Advocate representing the company further requested to appoint IDBI

as the operating agency in lieu of Dena Bank and stated that the company was wiling to pay OA fees to IDBI.â€​

“After considering the submissions made and the material on record, the Bench observed that in the last hearing the company was

directed to examine the prospect of merging it with their profit making group company and submit the rehabilitation scheme accordingly.

Though the company has settled the dues of its secured creditors and has shown some improvement in its operations, they could have

submitted the proposed merger proposal long back. However, keeping in view the fact the company has paid the entire dues of the secured

creditors and their submissions that is can now be revived, the company is directed to forthwith submit balance sheets of the last two years in

respect of their own and that of their group company and to submit their revival proposal within 4 weeks to IDBI who are now appointed as

OA in place of Dena Bank. IDBI (OA) to examine the proposal in a Joint Meeting in further six weeks and submit the DRS/status report to

the Bench immediately after expiry of 10 weeks for taking further appropriate action in the matter. Since IDBI is not a secured creditor,

company would pay OA fees of Rs. 2.00 lakh to IDBI. The next hearing was fixed on 15.10.2007.â€​

The Petitioner company here mentions that over a period of time it settled all its dues with a Financial Creditor who were mainly Dena Bank, Apna

Sahakari Bank Ltd. and SBI which subsequently assigned its debt to Asset Reconstruction Company of India Limited (ARCIL).

Dena Bank

In the order dated 12.07.2007 based on submissions made by Dena Bank, a settlement of dues has reached the Petitioner Company. The BIFR in

its order observes the following:

“At today’s hearing, the representative of Dena Bank submitted that their dues have been fully settled by the company and they are

no more a secured creditor in this case.â€​

Apna Sahakari Bank ltd

Before this Bench has been produced a no due certificate dated 04.10.2016 issued by Apna Sahakari Bank Ltd recording that the loan account of

the Petitioner i.e. M/s. Business Combine Ltd has been fully settled and there is no outstanding.

SBI

As has been mentioned earlier, SBI had assigned its debt to ARCIL under as assignment agreement dated 26.03.2014. In settlement of all its dues

ARCIL also issued no due certificate to the Petitioner on 07.08.2017 confirming that there are no outstanding dues with respect to the Petitioner

company.

This satisfaction of all charges and the fact that Petitioner has released all charges registered to its secured creditor is also recorded with MCA as

reflected at (exhibit J).

Therefore, the Bench notes that by August,2017, the Petitioner company has settled all the dues of the secured creditor to their satisfaction.

Subsequent to SICA repeal, BIFR did not have requisite forum to conduct hearing since 29.01.2014. SICA repeal was notified on 01.11.2016 with

effect from 01.12.2016 and therefore all proceedings before BIFR stood abated in terms of Section 4 (b) of SICA. It is in this background that

Petitioner requested the Respondent i.e. IDBI to return the sum of Rs. 1 crore which was deposited in IDBI in the capacity of Operating Agency in a

no lien interest bearing account. The Petitioner sent this request vide letter dated 05.04.2017, in response the IDBI Bank while agreeing to the

Petitioner to return the sum of Rs. 1 crore lying in the no interest bearing lien account also mentioned that for the sake for good order, the Petitioner

may approach NCLT and obtain suitable direction to OA/IDBI for no lien bearing account. The relevant portion of the letter from IDBI Bank dated

17.04.2017 is as under:

“On the backdrop of repeal of SICA, we have considered your request and for the sake of good order, hereby request you to approach

NCLT as mentioned above and obtain suitable directions to OA/IDBI bank for releasing the amount under ‘No Lien Account’.â€​

IDBI neither filed their reply nor appeared before the Bench during the hearing. However, the letter quoted above which has been produced as

part of the submissions by the Petitioner makes it amply clear that IDBI does not have any objection to the return of the money with interest which is

lying in the no lien account with IDBI.

In view of the above, the Bench directs that IDBI to release a sum of Rs. 1 crore along with interest accrued in the no lien account deposited by

the Petitioner i.e. M/s. Business Combined Limited within a week’s time.

Accordingly, CP No. 1271 of 2020 is allowed and disposed of on the above terms.