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Judgment
Ashok Bhushan, J:
These three Appeals raising common question of fact and law have been heard together and are being decided by this common Judgement. The Appellant is the Suspended Director of three Corporate Debtors. Three Corporate Debtors are (i) M/s. Shree Sai Prakash Alloys Private Limited, (Company Appeal (AT) Ins. No. 1003 of 2019; (ii) M/s. Shree Sai Rolling Mills (India) Limited, (Company Appeal (AT) Ins. No. 1004 of 2019) and (iii) M/s. Shree Sai Smelters (India) Limited, (Company Appeal (AT) Ins. No. 1005 of 2019.
Brief facts necessary to be noted for deciding these Appeals are:
Three Corporate Debtors as noticed above had been sanctioned credit facilities by the Punjab National Bank (hereinafter referred to as “Bank”). An amount of Rs. 58,29,00,000/-sanctioned to M/s. Shree Sai Prakash Alloys Pvt. Ltd. from 26th April, 2004 to 25th July, 2014. Credit Facility of Rs. 35,80,00,000/- was sanctioned to M/s. Shree Sai Rolling Mills (India) Ltd. from 20th May, 2005 to 29th August, 2014 and amount of Rs. 15,25,00,000/- was sanctioned to M/s. Shree Sai Smelters (India) Ltd. from 20th May, 2005 to 20th August, 2014.
The Account of the Corporate Debtors were declared Non-Performing Assets (NPA) by the Punjab National Bank. The Account of M/s. Shree Sai Prakash Alloys Private Limited, M/s. Shree Sai Rolling Mills (India) Limited and M/s. Shree Sai Smelters (India) Limited were declared NPA on 12th May, 2015, 31st March, 2016 and 27th July, 2015 respectively.
The amount became due and payable by the three Corporate Debtors, Bank filed Applications under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “The Code”). CP(IB) No. 24/GB/2019 against M/s. Shree Sai Prakash Alloys Private Limited, CP(IB) No. 22/GB/2019 against M/s. Shree Sai Rolling Mills (India) Ltd. and CP(IB) No. 23/GB/2019 against M/s. Shree Sai Smelters (India) Ltd.
Notices were issued by the Adjudicating Authority in all the three Section 7 Applications. After filing Section 7 Applications, Corporate Debtors approached the Financial Creditor for settlement under “OTS”. All the three Corporate Debtors submitted and prayed for One Time Settlement with the Bank in March, 2018. There was correspondence between all the three Companies with the Bank. The Bank sanctioned the OTS of Rs. 60 Crore by Letter dated 27.12.2018. Bank subsequently wrote on 29th June, 2019 to all the three Companies that deposit of only 6.79 Crore has been made whereas amount due till July, 2019 is 16.50 Crores as per OTS. Corporate Debtors were asked to deposit the amount within the stipulated time failing which OTS was to be treated as failed.
By letter dated 31st July, 2019, Bank wrote to Corporate Debtors that OTS has failed.
The Adjudicating Authority proceeded to consider Section 7 Application. The One Time Settlement was noticed. It was found that the Corporate Debtor failed to comply with the terms and conditions of OTS Proposal. Adjudicating Authority heard the parties and by Order passed on 23rd August, 2019 admitted all the three Company Petitions and initiated Corporate Insolvency Resolution Process and appointed Interim Resolution Professional as proposed by the Financial Creditor-the Bank.
Aggrieved by the Order dated 23rd August, 2019 passed by the Adjudicating Authority, three Company Appeals bearing CA (AT) Ins. No. 1003 of 2019, CA(AT) Ins. No. 1004 of 2019 and CA(AT) Ins. No. 2005 of 2019 have been filed before this Appellate Tribunal.
This Appellate Tribunal earlier heard all the three Appeals and by separate Order dated 18th June, 2020 passed in these Appeals allowed the Appeals by setting aside the Order dated 23rd August, 2019 passed by the Adjudicating Authority and remanded the matter back to the Adjudicating Authority to pass Order afresh.
Aggrieved by Judgement and Order of this Appellate Tribunal dated 18th June, 2020, both the Corporate Debtors as well as the Financial Creditor filed Appeals before the Hon’ble Supreme Court. Hon’ble Supreme Court heard the Civil Appeal No. 2997 of 2020 along with three other Appeals and by Judgment and Order dated 14th July, 2022 set aside the Order of this Appellate Tribunal, NCLAT dated 18th June, 2020 and restored the Company Appeals for hearing before the NCLAT. Consequently, by the Judgement of Hon’ble Supreme Court dated 14th July, 2022, these Appeals have been listed on 21st July, 2022 and has been heard by this Appellate Tribunal. It is also relevant to notice that before the Hon’ble Supreme Court, the Corporate Debtor again sought liberty of the Hon’ble Supreme Court to submit OTS proposal before the Bank. Hon’ble Supreme Court also noted in its Order that Bank is not agreeable to the proposal made by the Corporate Debtor which statement is recorded in the Order dated 12th July, 2021.
It appears that proposals were also submitted by the Corporate Debtors for Settlement with the Bank during the pendency of the Appeal which however was not acceded to by the Bank resulting Hon’ble Supreme Court heard the matter on merits and passed the Order dated 14th July, 2022 as noticed above.
Learned Counsel for the Appellant in support of these Appeals made following submissions: (i) The Bank arbitrarily did not accept the OTS proposal submitted by the Appellants whereas the Appellants were ready to deposit balance amount in reasonable time, the Bank once having accepted the OTS proposal ought to have revived the OTS proposal in view of the request made by the Appellants. (ii) The Corporate Debtors had filed proceeding in the High Court of Meghalaya at Shillong against the Punjab National Bank where the Hon’ble High Court vide its Order dated 19th August, 2019 directed the parties to maintain status-quo till 26th August, 2019 which Interim Order was continued by Order dated 26th August, 2019 in which subsequent Order dated 16.09.2019 was passed disposing of the Writ Petition while continuing the Interim Order for two weeks to enable the Writ Petitioner to avail the Appellate Remedy. It is submitted that in view of the Status Quo Order passed by the High Court, the Adjudicating Authority could not have admitted the Section 7 Applications. The Adjudicating Authority ought to have maintained judicial discipline in not proceeding further in Section 7 Applications.
We have considered the submissions of learned counsel for the parties have perused the record.
We may first notice the submission of the Appellants based on OTS. Prayer for OTS was made by the Corporate Debtors in March, 2018. After some correspondence the Bank vide Letter dated 27.12.2018 approved the OTS for amount of Rs. 60 Crores with regard to all the three companies. Bank vide letter dated 29th June, 2019 communicated that amount as per OTS Approval is not being paid, in event due amount is not paid, OTS to be treated as failed. Subsequently, by letter dated 31st July, 2019 Bank declared the OTS failed and the Order of the Admission by the Adjudicating Authority was passed on 23rd August, 2019 thereafter.
There is no dispute between the parties that offer of 60 Crores made by the Appellants in regard to the dues of all the three Companies was accepted by the Bank and deposit of Rs. 3 Crore was also noticed by the Bank. Under the OTS, Appellants were to deposit Rs. 1.5 Crore each month. The OTS Proposal has been cancelled on 31st July, 2019. The Adjudicating Authority in paragraph 3 of the Order has noticed that Corporate Debtor has failed to comply with the terms and conditions of OTS Proposal. The Adjudicating Authority held that the Corporate Debtor defaulted in making payment towards the liability of the Bank, Company Petitions deserve to be admitted. Learned Counsel for the Appellant submits that efforts were also made by the Appellants to enter into OTS both before the Hon’ble Supreme Court and this Appellate Court but Bank has not considered to revive the OTS proposal submitted by the Appellants. Even after the Order of the Hon’ble Supreme Court, the Bank having not accepted any further OTS proposal of the Appellants, Appellants cannot claim settlement of dues with the Bank. Even the terms and conditions of the OTS which was accepted by the Bank was not complied by the Appellant resulting cancellation of the OTS. It is well settled that although settlement between the parties to be encouraged but the Court/this Tribunal cannot direct the Bank to accept the OTS as claimed for by the Corporate Debtors.
We thus are of the view that on the basis of submission of Learned Counsel for the Appellant that they have submitted OTS Proposal to revive the OTS, no fault can be found with the Order of the Adjudicating Authority admitting Section 7 Applications.
Now we come to the next submission of Learned Counsel for the Appellants. Learned Counsel for the Appellants relying on the order of the High Court submits that once the High Court of Meghalaya at Shillong having granted order of maintaining status quo, the Adjudicating Authority ought not to have proceeded with Section 7 Applications. The Applications under Section 7 was filed by the Bank on 19th May, 2018. Writ Petition No. 6029 of 2019 filed by the Corporate Debtors. Copy of the Writ Petition filed before the Gauhati High Court has been brought on record along with convenience compilation filed by the Appellant. In the Writ Petition (C) No. 6029 of 2019, following prayers have been made:
“In the premises aforesaid it is most humble prayed that your Lordships may be pleased to admit this petition, call for the records, issue notice upon the Respondents to show cause as to why the impugned letter dated 31.07.2019 (Annexure No. 14) shall not be set aside and quashed and on cause or causes being shown be further be pleased to stay the proceeding of Dairy No. 03(064) 2018 (Annexure No. 1) pending before the Ld. National Company Law Tribunal, Guwahati and/or pass such further Order/Orders as your Lordships may deem fit and proper.
-AND-And for this act of kindness, Your petitioners as in duty bound, shall every pray.”
The Gauhati High Court passed an Interim Order in the Writ Petition on 19th August, 2019 which is to the following effect:
“Heard Mr. K.N. Choudhury, learned senior counsel appearing for the writ petitioner.
After hearing the arguments advanced by Mr. Choudhury, I am of the view that before passing any further order in the matter, the respondent bank must be heard.
In view of the above, Registry to list this case again on 26/08/2019 for motion as a fixed item.
The petitioner to serve a copy of the writ petition by hand upon the Branch Manager, PNB, Guwahati Branch, intimating him about the pendency of this proceeding and the next date fixed in the matter, so as to enable the bank to appear before this Court on the next date.
Till 26/08/2019, parties to maintain status quo in the matter.”
Before the National Company Law Tribunal, the Corporate Debtor filed an I.A. No. 57 of 2019 praying that in view of the Interim Order dated 19th August, 2019 passed by the Gauhati High Court, NCLT may not pronounce the order in Section 7 Applications. The Application 57 of 2019 was rejected by the Adjudicating Authority vide its Order dated 23rd August, 2019 in the Order rejecting I.A. No. 57 of 2019, following observations are made in Paragraph 3,4 and 5:
“3.Before dealing with the above application, it is important to mention here that the arguments in the above company petition were heard by this Tribunal on 14th August, 2019 and the matter was reserved for orders. The learned Advocate appearing for the CD submitted before this Tribunal on 14-08-2019 that the CD is once again approaching the highest authority of the FC/bank for a settlement on 16-08-2019 and requested to adjourn the matter. In view of the above submission this Tribunal assured both the parties that this Tribunal will not pass orders before 20-08-2019 and both the parties are at liberty to inform this Tribunal on or before 20-08-2019 about the outcome of the compromise. It was also clarified that if nothing is head from either of the parties before 20-08-2019, orders will be pronounced in the above company petition at any time after 20-08-2019, as the CD did not raise any serious legal pleas in opposing the main company petition except saying that the bank has unilaterally cancelled the OTS proposal.
4.Accordingly, orders were made ready and, therefore, the matter is listed today for pronouncement of the orders. The CD knowing very well about the above position appears to have filed the above Writ Petition on 19-08-2019.
5.We have carefully perused the order passed by the Hon’ble Gauhati High Court. The Hon’ble Gauhati High Court in its order merely directed the petitioner to serve copy of the Writ Petition by hand to the Branch Manager of the FC and intimate him about the pendency of the writ petition and the next date of hearing. While ordering the said notice to the respondent bank in the above Writ Petition, the Hon’ble High Court directed both the parties in the Writ Petition to maintain status quo. The said order does not contain any direction to this Tribunal in this regard. The CD is conscious of the fact that this Tribunal may pass final orders in all the matters of the group companies relating to the CD at any time after 20-08-2019.”
Reasons were given by the Adjudicating Authority in refusing to stay the pronouncement of the Order. When the Adjudicating Authority has heard the Section 7 Application on 14th August, 2019 and reserved for Orders, Interim Order passed by Gauhati High Court thereafter on 19th August, 2019 could not have stopped the NCLT to pronounce the Order. There is one more aspect of the matter which need to be noticed i.e. the Order of the High Court dated 19th August, 2019 as noted above directed “the parties to maintain status quo in the matter” the direction was only to the parties, the High Court has not passed any order staying proceeding before the NCLT. Although specific prayer to that effect was made by the Corporate Debtors before the High Court as noted above. When specific prayer made by the Corporate Debtors to stay proceeding before NCLT was not acceded to nor any Interim Order was passed by the High Court stopping pronouncement of the Order, submission of the Learned Counsel for the Appellants that NCLT did not follow judicial discipline cannot be accepted.
Learned Counsel for the Appellant has relied on Judgement of the Hon’ble Supreme Court to the effect that Judgement passed by a Coordinate Bench on higher forum has to be respected. There cannot be any quarrel to the preposition laid down by the Hon’ble Supreme Court in [(2000) 1 SCC 644] in the matter of “Sub-Inspector Rooplal and Anr. Vs. Lt. Governor Through Chief Secretary Delhi and Ors”, [(1985) 1 SCC 260] in the matter of “Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. & Ors” and [(1984) 2 SCC 488] in the matter of “Vishnu Ram Borah & Anr. Vs. Parag Saikia & Ors”. Principle of Judicial Discipline is to be adhered to by all to ensure hierarchical discipline and for proper dispensation of justice but as noticed above in the present case, there is no breach of any judicial discipline by the NCLT as claimed by the Appellants. There was no Interim Order of the High Court restraining the NCLT to proceed with the concerned applications or not to pronounce any Judgment when the matter was heard and reserved for order even prior to passing of the Interim Order of the High Court. Further the Interim Order of the High Court directed to maintain status quo by both the parties i.e. Bank and the Corporate Debtors that cannot be read as any restraint to the NCLT. We thus do not find any substance in this submission also raised by the Learned Counsel for the Appellant.
For all the fore-going discussion, we do not find any substance in the submission raised by the Learned Counsel for the Appellant. No error has been committed by the Adjudicating Authority in admitting Section 7 Applications against the Corporate Debtors. There are no merits in any of these Appeals. All the three Appeals are dismissed.
[Justice Ashok Bhushan]
Chairperson
[Justice M. Satyanarayana Murthy]
Member (Judicial)
[Mr. Barun Mitra]
Member (Technical)
NEW DELHI
02nd September, 2022 Basant