Indian Bank vs Bartronics India Limited

The corporate debtor has been sanctioned, inter alia, various financial assistances, viz., term loan of Rs. 1400.00 lakhs, foreign currency loan of Rs. 800.00 lakhs an DPG of Rs. 850.00 lakhs vide sanction letter dated 04.05.2007 (page 85). The corporate debtor had defaulted in payment of interest and the principal instalments of the said advances and had failed and neglected in making such payments. The amount defaulted as on 02.05.2019 was Principal amount: Rs. 11,99,41,277.00, interest amount: Rs. 27,95,71,588.61, legal and other expenses: Rs.1,01,849/-. Thus, total dues amounted as on 20.02.2019 were Rs.39,96,14,714.61.

The respondent has raised the following preliminary objections in para 3 of the Counter:

The power of attorney was executed on 15.09.2012, viz. much before enactment of the I & B Code, 2016. The Code was enacted on 28.05.2016 and came into effect on 01.12.2016. However, the applicant has signed the petition on 03.05.2019 on behalf of the financial creditor on the strength of the said power of attorney dated 15.09.2012, which is invalid.

The petition proceeds on the premise that the Insolvency and Bankruptcy Code, 2016 is meant for recovery of money claim rather than initiation of Corporate Insolvency Resolution process.

The respondent relied on a decision of the Hon'ble Apex Court in the case of BK EDUCATIONAL SERVICES PRIVATE LTD Vs. PARAG GUPTA AND ASSOCIATES (CIVIL APPEAL No.23988 of 2017). The respondent submitted that in order to dispel the contradictions created by various decisions of NCLT/ NCLAT Insolvency and Bankruptcy (Second Amendment) Act, 2018 has been enacted by introducing section 238A to the Code. Such stance has further been reaffirmed in the decision of the Hon'ble Apex Court in the case of BK EDUCATIONAL, wherein the Hon'ble Supreme Court observed that from the commencement of Code the legislature intended to apply limitation period on applications instituted under sections 7 and 9 of the Code. The Hon'ble Apex Court interpreted clarificatory intention from 2018 amendment that expressly made the Limitation Act applicable to the Code. In said judgment the Hon'ble Supreme Court has pronounced the common law of maxim, namely, "vigilantibus et non dormientibus iura subveniunt", which means the law helps those who are vigilant and not those who sleep over their rights.

The respondent has brought out the following in para 4 of the Counter as CORRECT FACTS:

The corporate debtor has been facing severe cash flow problems due to various external factors from the financial year 2011-12. The respondent/ corporate debtor, having explored various options to revive its business, has proposed One Time Settlement (OTS) through a third party investor, namely, M/s Triterras Smart ID Systems India Pvt Ltd. (Triterras). Said Triterras has come forward and deposited a sum of Rs.38 lacs being 10% of the proposed settlement. It was in response to the acceptance of the compromise offer proposed by the corporate debtor on 07.03.2017 and 07.08.2017 for settlement of loan accounts with petitioner/ financial creditor and in respect of three other banks, namely, Bank of Baroda, Andhra Bank and Bank of India (Copies of letters are at Annexures 'R-2' and 'R-3'). The OTS could not get through as there was delay in accepting OTS offer by Andhra Bank and Bank of India. Joint Lenders Meetings were held on various dates with the participation of Strategic Investor, who conveyed its final offer. The corporate debtor as conveyed the proposal vide letter dated 21.09.2016 (copy at Annexure 'R-9). The financial creditor has conveyed its acceptance of OTS vide letter dated 08.12.2017 (copy at Annexure 'R-10'). The respondent/ corporate debtor has paid the agreed OTS amount to Bank of India on 115.03.2019 and settled the dues. (Copies of relevant communications are at Annexures 'R-12 to R-14').

It is averred in the counter that all the above facts have been suppressed by the petitioner/ financial creditor

The respondent/ corporate debtor has answered, in para 5 of the counter, the application filed by the petitioner/ financial creditor as under:

The strategic investor has made initial payment of Rs.38 lacs to the financial creditor and the amount was kept in 'No Lien Account' on 02.06.2016. The corporate debtor has addressed letters dated 20.12.2011 and 23.05.2012 (copies at Annexure 'R-17 and R-18') for restructuring the credit facilities. The strategic investor made a consolidated offer of Rs.54 crore to the consortium of banks including the petitioner-bank. The investor has clarified that only if all the banks accept the proposal it would be feasible for him to proceed with the transaction.

It is submitted in the counter that though the account has been classified as NPA on 11.12.2012, an amount of Rs.39,96,14,714.61 has been claimed by the financial creditor with exorbitant interest.

It is further submitted by the respondent that post JLM Meetings, the corporate debtor vide letter dated 27.09.2016 submitted revised OTS proposal to all the banks/ lenders including the petitioner- financial creditor (Revised proposal is at Annexure 'R-19'). OTS approval has been received from Indian Bank on 08.12.2017 (copy of said letter is at ANNEXURE 'R-1'). However, the corporate debtor/ strategic investor was waiting for other banks/ lenders to approve the OTS.

It is submitted in the counter that in order to show the bona fides of strategic investor in settling the liabilities of the corporate debtor, the strategic investor has cleared some of the debts as per the books of the corporate debtor besides depositing in 'no lien account' of the financial creditor as detailed hereunder :

It is submitted that if this application under section 7 of the IB Code, 2016 is admitted it will affect about 6000 direct/ indirect employees working with the corporate debtor and their respective families.

The Bench hereby prohibits the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); the recovery of any property by an owner or lessor where such property is occupied by or in possession of the corporate Debtor;