Reliance Commercial Finance Limited vs Mr. Tharuvai Ramachandra Ravichandran & Ors.

[Per: Shreesha Merla, Member (Technical)]

Aggrieved by the Impugned Order in IA/IBC/919(CHE)/2022 in IBA/812/2020 dated 12.09.2023 and in IA/IBC/1779/CHE/2023 in IA/IBC/669/CHE/2022 in IBA/812/2020 dated 11.10.2023, respectively passed by the Adjudicating Authority / Tribunal, NCLT, Bench – II, Chennai, Reliance Commercial Finance Limited, preferred these Appeals. Since both these Appeals refer to common facts and issues, they are being disposed of by this Common Order. IA(IBC)/919/CHE/2022 in IBA/812/2020 & IA(IBC)/972/CHE/2022 in IBA/826/2020, were preferred by the Resolution Professional (`RP’) of JBM Homes Private Limited and JBM Shelters Private Limited, respectively under Section 33 (2) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as `The Code’), seeking Liquidation of both the Corporate Debtor Companies and to appoint the Resolution Professional, as the Liquidator.

The Adjudicating Authority has disposed of both these Applications, with the following directions:

While the Applications for Liquidation were pending adjudication by the Adjudicating Authority, the LICHFL filed an Application IA/IBC/669/CHE/2022, seeking the following reliefs:

(Emphasis Supplied)

The Adjudicating Authority has observed that since the Liquidator has started working on the Order dated 12.09.2023 and taken steps in furtherance to the said Order, in order to protect the interests of Home Buyers, certain directions were given as to the completion of the Project and Allotment of Flats to the Home Buyers and the proceeds in respect of the sold flats to be distributed. It is stated in the Impugned Order dated 11.10.2023 that as there was no `Stay’ against the Order dated 12.09.2023, considering the facts in totality, the Second Respondent in IA(IBC)/669/CHE/2022 and the Appellant herein was restrained from enforcing the Mortgage, Hypothecation or any Security Interest on the Secured Assets and was also directed to handover all the documents, relating to the Secured Creditor, pending disposal of the Application, within three days from the date of the Impugned Order.

Aggrieved by the aforenoted directions, these Appeals are preferred. The Learned Senior Counsel Mr. V. Prakash, appearing for the Appellants strenuously argued that the Appellants were not a Party to the Liquidation Applications and that the directions given in the Impugned Order affect the interest of the Appellants with respect to the Secured Assets and also prejudice their rights. The Learned Senior Counsel submitted that the Corporate Debtor Company had availed Credit Facility from LICHFL Trustee Company Pvt. Ltd. of Rs.18,39,01,800/- and the said loan amount was secured by mortgage of Vandalur Project Property, Pammal Project Property and Anakaputhur Project and the Appellant was approached by the Corporate Debtor for Construction Finance Loan Facility and the Second Respondent on 31.05.2017 has sanctioned an amount of Rs. 11 Crores for developing a Residential Project (GST Grand) at Vandalur, Chennai. The loan facility advanced by the Appellant herein was secured by 1^st Charge on the Project land together with all buildings and structures thereon, both present and future and with further exclusive Charge on the schedule receivables from the customers of the Corporate Debtor Company, with respect to the Project.

It is stated that an equitable mortgage by deposit of Title Deeds dated 30.06.2017 was created by the Corporate Debtor Company with express consent of M/s. Vistra ITCL (India) Limited in its capacity as the Trustee of LICHFL Trustee Company Private Limited. It is submitted that the Appellant was given the 1^st Charge of the Project land through the Tripartite Agreement and LICHFL also issued a No Objection Certificate (NOC) for ceding of the 1^st Charge, in favour of the Appellant by Letter dated 14.06.2017 for the purpose of effecting the mortgage.

It is further submitted that as the Corporate Debtor could not discharge the 1^st Loan, had sought for restructuring of the said `Project Loan’, the Appellant, on the request of the Corporate Debtor has sanctioned a `Construction Loan’ of Rs.7,96,81,736/- in lieu of the Outstanding Loan Amount due. It is submitted that the Appellant through its Letter dated 12.03.2019 had conveyed the restructuring of the loan facilities to the LICHFL and the Corporate Debtor vide Letter dated 20.03.2019 also sought for an NOC with respect to the said restructuring. The Loan Account of the Corporate Debtor had become an NPA on 23.03.2021 and due to the Default in Repayment of the Loan Dues, the Appellant on 18.06.2021, had issued a Notice under Section 13(2) of the SARFAESI Act, 2002, recalling the Loan amount payable and the same was also communicated to LICHFL as per the terms of the Tripartite Agreement. After the Loan amount become NPA and initiation of SARFAESI measures for recovery of the Loan Dues, LICHFL issued a Legal Notice dated 11.08.2021 that the 1^st Loan having been discharged by the Corporate Debtor, the Appellant has no right over the Project land and even if such a right exists, it shall be sub-servient to the rights of LICHFL, since the NOC for 1^st Charge was only with respect to the 1^st Loan provided by the Second Respondent. It is argued that the Appellant vide their Reply dated 07.09.2021 had categorically denied that the loan availed by the Corporate Debtor was discharged in full and it was further clarified that the amount due and outstanding arises out of the restructuring of the 1^st Loan sanctioned by LICHFL on 31.05.2017 and therefore, the 1^st Charge of the Project land remains with the Appellant.

The Appellant being a secured Financial Creditor of the Corporate Debtor was a Member of the Committee of Creditors with a Claim of Rs.6,48,54,691/-, as on the date of the initiation of the Corporate Insolvency Resolution Process. During the pendency of the `CIRP’, there was only one Resolution Applicant, who was the Erstwhile Director of the Corporate Debtor and this Plan was rejected by the Corporate Debtor in its 16<sup>th</sup> Meeting held on 18.07.2022 and it was resolved to appoint the First Respondent as the Liquidator. It is contended by the Learned Senior Counsel for the Appellants that the Adjudicating Authority had erroneously held that the Appellant had filed their Reply in the Applications for `Liquidation’ and the Parties were heard and proceeded on the presumption that the Charge of the Project land vests with only LICHFL and issued directions without hearing the Appellant herein.

The Interim Order granted against the Appellant in IA(IBC)/1779/CHE/2023 in IA(IBC)/669/CHE/2022, stems from the directions in the Common Liquidation Order dated 12.09.2023, wherein the unsold 30 Residential Flats mortgaged to the Appellants were directed to be kept as part of the Liquidation Estate of the Corporate Debtor and after the completion of the Project, and handing over of the 71 Units to the Home Buyers, the remaining 30 Units which have the Security Interest of the Appellants were directed to be sold by the Liquidator and the proceeds were to be disbursed to the Financial Creditors as per the Waterfall Mechanism, under Section 53 of the `Code’.

It is vehemently contended by the Learned Senior Counsel that the Declaratory Reliefs sought for by the First Respondent are `Inter se’ disputes, between the Creditors and the Adjudicating Authority does not have Jurisdiction to entertain these disputes and the subject Reliefs can be granted only by Civil Courts. It is the further case of the Appellants that the 2^nd Loan is not a fresh Loan and it was given in lieu of the default committed by the Corporate Debtor in servicing the 1^st Loan and therefore, it was to be construed as a restructuring of the 1^st Loan as evinced in the Letters dated 12.03.2019 & 20.03.2019. It is also the case of the Appellants that in terms of the Tripartite Agreement dated 14.06.2017, the Appellant is entitled to retain the Security Interest over the Secured Assets for the 2^nd Loan. It was argued by the Learned Senior Counsel that the First Respondent had remained silent from 12.03.2019 to 11.08.2021 and therefore, it has to be construed that the First Respondent had consented to the Appellants 1^st Charge, by acquiesce.

The Learned Senior Counsel Mr. E. Om Prakash, appearing for the First Respondent and Ms. Elamathi, Learned Counsel appearing for the Liquidator strongly supported the Impugned Orders challenged in these Appeals on the ground that the Corporate Debtor Company availed Rs.11 Crores 1^st Loan from the Appellant vide Sanction Letter dated 31.05.2017 and in relation to the 1^st Loan, the Corporate Debtor, the First and Second Respondents, and the Appellants entered into a Tripartite Agreement dated 14.06.2019, under which, it was agreed that the First Respondent will cede the 1^st Charge on the Secured Assets in favour of the Appellant; that the 1^st Respondent will have the 2^nd Charge, until the 1^st Loan is settled; the First Respondent issued an NOC dated 14.06.2017 ceding the 1^st Charge over the Secured Assets and took the 2^nd Charge subject to the condition that the NOC was in respect of the 1^st Loan and on repayment of the 1^st Loan, the First Respondent will become the 1^st Charge Holder; that based on the NOC, the Mortgage Deed dated 30.06.2017 was executed in favour of the Appellant to secure the 1^st Loan; in 2019, the First Respondent received Letters from the Appellant and the Corporate Debtor Company requesting the First Respondent to provide similar NOC to provide Secured Assets as Collateral for another Loan of Rs.7,96,81,736/-, which is actually a 2^nd Loan Sanctioned vide a 2^nd Sanction Letter dated 31.03.2019 and that the NOC for the 2^nd Loan which was requested was never issued by the First Respondent and therefore, the First Respondent was not aware until June 2021 that the Appellant had claimed the Secured Assets as collaterals towards the 2^nd Loan.

The Learned Senior Counsel for the First Respondent submitted that the NOC dated 14.06.2017 was issued by the First Respondent only in respect of the 1^st Loan and therefore upon repayment of the 1^st Loan, the 1^st Respondent became the First and Exclusive Charge Holder. It is submitted that in the `CIRP’ of the Corporate Debtor Company, the Appellant was admitted as a Secured Creditor in respect of the 2^nd Loan with Security Interest over the Secured Assets, which were provided to secure the 1^st Loan. On becoming aware of it, the First and Second Respondents filed IA (IBC) / 669 / CHE / 2022, challenging the Classification of the Appellant as a Secured Creditor. Pending consideration of the said Application, the Corporate Debtor was ordered to be liquidated vide Order dated 12.09.2023 in IA (IBC)/919/CHE/2022.

It is further submitted that to protect the `Home Buyers’ interest and for completion of the Project, a direction was issued to restrain the Appellant from enforcing the Security Interest and to handover the Title Deeds to the Liquidator.

It is argued by the Learned Senior Counsel of the First Respondent that the Sanction Letter dated 31.01.2019 clearly states that the 2^nd Loan is a new Construction Finance Loan and there is no reference to the restructuring of the 1^st Loan in the Sanction Letter and that this Sanction Letter required a Fresh NOC which was never given and therefore, both the Loans are distinct and different. In fact, in the email dated 13.03.2019, the Appellant admitted that it did not have the 1^st Charge over the Project and requested the First Respondent to issue a Fresh NOC ceding the Charge. It is contended that the Tripartite Agreement was in relation to the 1^st Loan only and that the Adjudicating Authority has the Jurisdiction to decide the `Inter se’ disputes, between the `Creditors’, under Section 60(5) of the I & B Code, 2016 and such disputes need not be relegated to a Civil Court.

The main issue which falls for consideration in these Appeals is whether, the 2^nd Loan is a Fresh Loan or whether it was given in lieu of the default committed by the Corporate Debtor in servicing the 1^st Loan and whether it was given for restructuring of the 1^st Loan and hence, the Appellant is entitled to retain the Security Interest over the Secured Assets in terms of the Tripartite Agreement entered into on 14.06.2017.

Since the sanctioning and disbursal of the 1^st Loan vide Letter dated 31.05.2017, the Tripartite Agreement entered into on 14.06.2017 and the NOC issued on 14.06.2017, are not in dispute, we address to the main point for consideration stated in Paragraph No.15.

At the outset, the Sanction Letter dated 31.01.2019 is reproduced as hereunder:

The aforenoted Sanction Letter, given to the Corporate Debtor Company by the Appellant for `Construction Finance Loan’ for an amount of Rs.7,96,81,736/- does not anywhere state that it is for restructuring the 1<sup>st</sup> Loan or that it is in continuation of the 1<sup>st</sup> Loan. The terms and conditions appended to this Sanction Letter also do not refer to any restructuring of the 1<sup>st</sup> Loan. It is also seen from the record that the Loan Account Number of the 1<sup>st</sup> Loan is RHCFCHE000053223 and the Second Loan is RHCFCHE000074642. The Account Statements, which are part of the record also evidence that both the Loans have distinct Loan Account Numbers. The Account Statement as on 21.12.2021 of the Appellant clearly shows the status of the Loan Account as `CLOSED’. It is also seen from the record that the 2^nd Loan which was disbursed on 31.01.2019, vide the aforenoted Sanction Letter, was transferred into the 1^st Loan Account as repayment.

The Appellant places reliance on the Letters dated 12.03.2019 and 20.03.2019 stating that they have restructured the Loan Facility vide the 2^nd Loan Disbursal and requested the First Respondent herein to issue an NOC for the Revised Sanction Letter dated 31.01.2019. It is clear from the Letter dated 20.03.2019, addressed to the First Respondent that the NOC was yet to be issued. At this juncture, we find it relevant to reproduce the email dated 13.03.2019, which substantiates the contention of the First Respondent that the NOC for ceding of the 1^st Charge in favour of the Appellants was still pending and a request was being made for its issuance.

A perusal of the `Charges Registered’, under the MCA Website also establishes that no Charge was created or registered in relation to the 2^nd Loan.

The Tripartite Agreement relied upon by the Learned Senior Counsel for the Appellants is with respect to an amount of Rs.11 Crores sanctioned for the purpose of Construction Finance, against which, an NOC was also issued on 14.06.2017. It is clearly recorded that upon payment of the 1^st Loan, the First Respondent would become the 1^st Charge Holder and the Appellant is required to handover the Title documents. The record establishes that the 1^st Loan was `closed’ and the amount paid. This is further substantiated by the fact that the Mortgage Deed is confined only to the 1^st Loan and the fact that specific requests were made for Issuance of Fresh NOC from the First Respondent and a Fresh Mortgage and ROC Charge Registration.

Subsequently, after the matters were heard at length and the Appeals were Reserved for Orders on 01.12.2023 and the Parties were requested to file their short Written Submissions with relevant Citations, the Appellants filed IA No. 1371 / 2023 in Company Appeal (AT) (CH) (INS) No. 375 / 2023 and IA No. 1341 / 2023 in Company Appeal (AT) (CH) (INS) No. 376 / 2023, seeking to Re-open the matter and Re-hear the same. A Notice was issued on these Applications and all Parties were heard to determine, whether these Applications were required to be allowed.

It is the main case of the Appellants that the emails dated 08.04.2019, 18.05.2019 and 22.05.2019 were not brought on record and these emails were essential for deciding the subject issue on hand. The Learned Senior Counsel Mr. V. Prakash, appearing for the Applicants / Appellants drew our attention to email dated 22.05.2019 and the Letter dated 08.04.2019, in support of his case that the First Respondent was requested for issue of NOC in favour of the Appellants.

The Learned Senior Counsel Mr. E. Om Prakash appearing for the First Respondent, drew our attention to the date and time of retrieval of these emails showing that the emails were printed within a few minutes from the Email ID of the Promoter of the Corporate Debtor Company and that nothing turns on these emails as the fact remains that there is no evidence on record that the 2^nd Loan was taken to restructure the 1^st Loan. Subsequent to letter dated 08.04.2019, the email dated 20.05.2019, seeking for release of NOC establishes that the restructuring never took place and the NOC was never issued for the 2^nd Loan.

At this juncture, we find it apposite to reproduce the email dated 31.01.2019, subsequent to the Issuance of the Sanction Letter, which clearly evidences that the Appellants has agreed to Sanction of a New Loan, instead of rescheduling the existing Loan and close the existing Loan. This email clinches the issue that the Sanction of the Loan on 31.01.2019 is indeed a `Fresh Loan’.

(Emphasis Supplied)

Additionally, the subsequent correspondence dated 09.07.2019, requesting to issue NOC further establishes that the NOC was never issued and therefore, the First Respondent continues to have the 1^st Charge on the subject Assets.

For all the foregoing reasons, both these Company Appeal (AT) (CH) (INS) No. 375 / 2023 and Company Appeal (AT) (CH) (INS) No. 376 / 2023 are dismissed relying on the facts of these matters. Having heard the Parties in great detail, we do not see any grounds to Re-open and further Re-hear the matter. Hence, we are of the view that the IA No. 1371/2023 in Company Appeal (AT) (CH) (INS) No. 375 / 2023 and IA No. 1341 / 2023 in Company Appeal (AT) (CH) (INS) No. 376 / 2023 are misconceived and dismissed accordingly. All connected pending Interlocutory Applications in the main Company Appeals (Insolvency) are closed. No order as to costs.