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Judgment
Ashok Bhushan, J.
This Appeal has been filed by the Financial Creditor challenging the Order dated 07th April, 2022 passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata Bench, Kolkata) in CP (IB) No. 772/KB/2019 by which Application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “The Code”) by the Appellant has been dismissed.
The brief facts of the case giving rise to this Appeal are:-
i. On 30.11.1994, Industrial Development Bank of India wrote to Respondent informing that it agreed to subscribe to the Respondent’s secured non-convertible debentures aggregating to Rs. 500 Lakhs on private placement basis.
ii. IDBI and the Respondent executed a non-convertible debentures subscription agreement on 01.02.1995 of aggregate nominal value of Rs. 500 Lakhs. On 23.12.1998, IDBI and the Respondent executed a Rupee Term Loan agreement aggregating to Rs. 750 Lakhs. On 04.03.2004, the IDBI wrote to the Respondent intimating the Respondent that amount of the IDBI in the Loan have become due with interest accrued aggregating to Rs. 24,69,59,120/-. The Respondent was called upon to pay the amount within 15 days. On 29.09.2004, Central Government executed a Turst Deed to create the Stressed Assets Stabilization Fund, the Appellant, which was declared on 29.09.2004 as financial institution. On 04.12.2008, the Appellant executed a negotiated settlement with the Respondent whereby it agreed to accept the amount of Rs. 850 Lakhs in full and final settlement of Respondent’s dues. Amount of Rs. 850 Lakhs consisted cash portion of Rs. 750 Lakhs and 10 Lakhs equity shares with face value of Rs. 10 per share each in Delta International Limited. Negotiated settlement contained the other terms of settlement. The Appellant modified the negotiated settlement vide letter dated 15.01.2009, 26.03.2009, 02.04.2009, 23.12.2009 and 14.10.2011. On 28.01.2011, Respondent pledged its share in favour of the Appellant. The Respondent made entire payment of cash component of 750 lakhs by 30th April, 2014. The Appellant had extended the payment of cash till 01st May, 2014. On 14th May, 2014, the Respondent requested the Appellant to provide the data which may be due from the Respondent to the Appellant. The Appellant vide letter dated 28th May, 2014 intimated that over due as on 01st April, 2014 is Rs. 1,92,769/-.
iii. On 11th July, 2014, the Appellant revoked the approved negotiated settlement. The letter mentions that in terms of settlement as modified from time to time Company was required to allot 10 lakhs equity shares with face value of Rs. 10 per share and buy back the share at a price giving minimum yield of 13 % per annum and company defaulted in complying with equity allotment and execution of buy back agreement, which was stated to be reason for cancelling the negotiated settlement. The Respondent wrote a letter dated 02nd July, 2015 to the Appellant informing that Respondent have already handed over 10 lakhs equity shares of each by one of promoter to the Appellant vide letter dated 28th January, 2011 along with share transfer deed for which no action has been taken. On 03.10.2017, the Respondent again wrote to the Appellant proposing and submitted a proposal to buy back of shares of Rs. 1 Crore within 60 days of your approval and payment of interest amounting to Rs. 271.69 lakhs and 13% yield on shares amounting to Rs. 117 Lakhs totaling Rs. 388.69 Lakhs to be paid in 24 equal monthly installments, the Appellant did not accept the proposal. On 5th April, 2019, Section 7 Application was filed by the Appellant before the NCLT, Kolkata to which a Reply was filed by the Respondent, in the Reply filed by the Respondent, plea was taken that Application is barred by time. It was pleaded that under the negotiated settlement between the parties dated 04.12.2008, the Respondent has discharged its obligation by paying the entire cash component of Rs. 750 Lakhs. By letter dated 28th May, 2014, the Appellant informed that over dues amount as on 28th May, 2014 is Rs. 1,92,679/-. It was further pleaded that amount of Rs. 4,88,66,626.92 was due and payable by Respondent as on the date of payment of cash component i.e. 30th April, 2014 upto 31st December, 2017 on buy back of share of Rs. 1 Crore and the Respondent was also ready and willing to pay the amount by way of installments and in the Application amount of Rs. 2,00,65,450/-has been wrongly claimed. Details of proceedings before the AAIFR with regard to the Company were also given in the Reply. It was pleaded that despite letter dated 03.10.2017 Appellant has chosen neither to accept the same nor any further communication was made. The Appellant has also filed O.A. No. 281 of 2017 before the Debt Recovery Tribunal.
iv. The Adjudicating Authority noticed the submissions of the Corporate Debtor that Application is barred by limitation as well as principal of acquiescence and estoppel. The Adjudicating Authority however did not consider the plea of limitation. Adjudicating Authority returned a finding that out of total outstanding of Rs. 8.5 Crores, Rs. 7.5 Crores had already been paid and for remaining amount of Rs. 1 Crore shareholding was to be issued to the Financial Creditor but it could not be done because according to the corporate debtor paper shares scrips were to be dematerialized. The Adjudicating Authority held that after payment of Rs. 7.5 Crores on 30th April, 2014 remaining of Rs. 1 Crore only with regard to the equity share that was pledged with the Financial Creditor and only default of Corporate Debtor was not buy back the shares of Rs. 1 Crore with minimum yield of 13% p.a. The Adjudicating Authority held that financial creditor has based its claim on a glaringly unconscionable agreement just to pressurize the corporate debtor. The Application filed under Section 7 was for an amount of more than Rs. 265 Crores. The Adjudicating Authority found that claim of the financial creditor is not genuine and adjudicating authority exercising its discretion rejected Section 7 Application. In paragraph 44-47, following has been held by the Adjudicating Authority:
“44. The way, the financial Creditor has swelled up and inflated its amount disproportionately and on the basis of whimsical interest rates, penal interest rates and liquidated damages imposed on the corporate debtor, it seem the financial creditor has tried to reintroduce the age old obsolete practices so that it may raise heavy claim against Corporate Debtor. But claim has increased from Rs. 1 Crore to unimaginable figure of Rs. 265 Crores and odd which is unheard of in the modern commercial world, particularly when the Financial Creditor is stated to have been the creation of the Government of India. It reminds us of an old Mahajans/Sahukars (Money Lenders) who would suck each and every drop of the borrower but even then there interest would not be repaid.
Without going into the quantum of principal debt or interest, we are convinced that there was no claim of money that could have made the basis of this petition. After payment of Rs. 750 Lakhs on 30th April, 2014 it is very clear from the letter dated 11th July, 2014, that the remaining claim of Rs. 1 Crore was pledged with the Financial Creditor, which was not lodged for getting it transferred in its name. The only default of the Corporate Debtor, if at all, was its failure to buy back its shares of Rs. 1 Crore with minimum yield of 13% p.a. The Financial Creditor has based its claim on a glaringly unconscionable agreement just to pressurize the Corporate Debtor with all times high and inflated claims based on the rate of interest, penal interest and liquidated damages against its only claim to the tune of 10 lacs equity shares of Rs. 10 each, which according to the Financial Creditor, the Corporate Debtor could not buy back with minimum yield of 13% pa. This fact is also disputed by the Corpora Debtor because Ld. Counsel has submitted that the Corporate Debtor has always been ready and willing to pay the sum of Rs. 1 Crore along with interest totaling up to Rs. 5 Crore but the Financial Creditor refused to accept the amount and has filed this petition.
In the aforesaid facts and circumstance, we are not at all convinced that this is genuine claim of the financial creditor which could form the foundation of these proceedings under Section 7 of the Code. The Corporate Debtor has in straight forward manner proved that the amount of Rs. 750 lakhs had been paid in term of the settlement between the parties and for the remaining Rs. 1 Crore also towards equity buy back which was pledged with the Financial Creditor and was not lodged for transfer. The Corporate Debtor is still ready and willing to pay the amount of Rs. 1 Crore on accounts of equity long with accrued minimum yield @13% pa, which is stated to have been refused by the financial creditor on the contrary the Financial Creditor has suppressed certain facts relating to repayment by the Corporate Debtor, and instead unilaterally cancelled the settlement after receipt of payments.
We have carefully gone through the petition, reply, rejoinder along with the documents placed on record by the parties. In view of the arguments and the records placed before us, we do not find it to be a fit case for admission of the application or for initiation of CIRP in respect of the Corporate Debtor. We are compelled to reject the application of the Financial Creditor under Section 7 of the Code because there was no financial debt due or default in repayment of the said debt in terms of the provisions of the IB Code, 2016. The Financial Creditor may avail other legal remedies, if so advised.”
This Appeal has been filed challenging the Order dated 07.04.2022 rejecting Section 7 Application under Insolvency and Bankruptcy Code, 2016.
Mr. Abhijeet Sinha, Learned Counsel for the Appellant challenging the Order of the Adjudicating Authority contends that after withdrawal of the negotiated settlement by the Letter dated 11.07.2014, the original liability of the Respondent stood restored and the Application was filed by calculating the original liability since 2004. It is submitted that Appellant is a trust established and controlled by the Government of India. The Appellant was legally bound to calculate and set default amount as per records maintained by it pursuant to Bankers’ Book Evidence Act, 1891 and the Appellant has stated the default amount of Rs. 265.02 Crores by relying upon the records maintained by it. It is further contended that issue of limitation raised by the Respondent is frivolous and baseless since Respondent has already appeared and acknowledged the liability towards the payment from time to time including its balance sheets and correspondence of the issue. Learned Counsel for the Appellant has relied on balance sheets of the Respondent for the years 2013-14, 2015-16, 2016-17 and 2017-18. The Appellant has also relied on letter dated 02.07.2015, 03.10.2017 given by the Corporate Debtor proposing one time settlement which clearly indicates that there was acknowledgement of debt and the Application was not barred by time. It is settled law that any acknowledgement of debt in writing in the balance sheets which result in extending the limitation period for proceeding under IBC.
Learned Counsel for the Respondent-Mr. Sumesh Dhawan refuting the submissions of Learned Counsel for the Appellant submits that the Application was clearly barred by time. In the Application filed under Section 7, under Part-IV, the date of default has been mentioned as 04.03.2004 which is date of loan recall notice. It is submitted that as per negotiated settlement dated 04.12.2008 cash component of Rs. 7.5 Crores out of total amount of Rs. 8.5 Crores was admittedly paid within the time as was granted by the Appellant by different extensions and it was only default alleged was not buying back the share to the extent of Rs. 1 Crore. That the pledge of share of Rs. 1 Crore was also made in favour of the Appellant and allotment of 10 Lakhs equity shares to the Appellant was delayed due to some technical issues with respect to dematerialization of physical shares due to which pledge was created. On 28th May, 2014, the Appellant communicated that the total outstanding due is Rs. 1,92,769/-along with expenses amounting about to Rs. 37,905/-, hence there was no occasion for filing application for recovery of Rs. 265.02 Crores. It is submitted that at no point of time, the respondent have acknowledged the debt of Rs. 265.02 Crores. Respondent was always contending that only amount due is pertaining to the equity share of Rs. 1 Crore and buy back of said share value with 13% minimum yield. Respondent never gave any acknowledgement for original loan amount which was claimed by the recall notice dated 04.03.2004. Respondent submits that present is a fit case where the Application need to be dismissed being malicious proceedings under Section 65 of the Code. Respondent having been paid entire principal amount of Rs. 7.5 Crores in terms of negotiated settlement and failure of the Respondent to allot 10 Lakhs shares of Rs. 10 each and to arrange for buy back of the same cannot be basis for filing an application under Section 7 demanding an amount of Rs. 265.02 Crores.
We have considered the submissions of Learned Counsel for the parties and have perused the record.
As noted above, the Respondent in their reply, have raised plea of limitation which plea was not adjudicated by the Adjudicating Authority although the Application was rejected for the reasons which we have already extracted above.
Both the Learned Counsel for the parties have made their submissions on the issue of limitation and the Appellant has also filed additional affidavit bringing relevant materials including the balance sheets of the Corporate Debtor to show the acknowledgements. We thus proceed to first examine the question of limitation.
Section 7 Application which has been filed by the Appellant for amount of Rs. 265,02,59,410/- in Part-IV, date of default mentioned is 04.03.2004. Item No. 2 of Part-IV of the Section 7 Application is as follows:
“ Part-IV
PARTICULAR OF FINANCIAL DEBT
1
.
………..
…….
2
.
Amount claimed to be in default and total amount claimed to be in the date on which the default occurred (attach the
workings for computation of amount and days of default in tabular form)
(i) The outstanding amount claimed to be in default as on 01.12.2018 is Rs. 265,02,59,410/-
(ii) The outstanding amount claimed to be in default on the date on which default occurred as on 04.03.2004 i.e. date of loan recalled is Rs. 24,69,59,120/-
Copy of Statement of Accounts of DELTA INTERNATIONAL LIMITED (up to 01.12.2018) and loan recalled letter dated 04.03.2004 are enclosed as Annexure A-5
Section 7 Application was filed by the Appellant on 05th April, 2019. There was negotiated settlement between the parties dated 04.12.2008. It can safely be accepted that the period of limitation did not expire till the parties entered into negotiated settlement. Under the negotiated settlement, payments were made by the Respondent from time to time. Last payment was made on 30th April, 2014, the negotiated Settlement was cancelled by the Appellant by Letter dated 11th July, 2014. Letter dated 11th July, 2014 which is relevant is as follows:
“Ref No 232/SASF/DIL July 11, 2014
WITHOUT PREJUDICE
The Managing Director,
Delta International Ltd,
4, Council House Street,
Kolkata – 700001
Dear Sir,
Negotiated Settlement (NS) of Dues-Revocation
Please refer to our letter of approval (LoA) Ref No 198/SASF/DIL dated December 04, 200 regarding negotiated settlement (NS) of dues and subsequent modifications granted in the terms and conditions thereof vide our letters dated January 15, 2009, April 2,2009, December 23, 2009 and October 14, 2011. In terms of the settlement and as modified time to time, promoters/company was required to allot 10 lakh equity shares with face value of Rs. 10/- per share in DIL/MPL and buyback shares at a price giving a minimum yield of 13%p.a.
However, the company is in default in compliance of equity allotment and execution of buy back agreement thereof. Despite grant of sufficient time and opportunity, you have failed to submit an acceptable proposal to regularize the default committed. Further, the company has unilaterally altered the terms of allotment of equity to pledge of equity and has made no provision for buyback of equity/payment in lieu thereof in the DRS formulated at Hon’ble BIFR.
In view of the defaults committed by you, we hereby revoke the approved NS of dues and reverse the waiver of dues and restore the original liability as per the terms of loan agreement entered into by the company and adjust he payment received, if any, towards the dues.
Yours faithfully,
(Y A Mankad)
Deputy Gen Manager
July 11, 2014
Endt: Ref No 232A/SASF/DIL
Copy forwarded for information to:
DGM, BIFR, Cell, IDBI Bank Ltd. (Operating Agency), Videocon Towers, 1st Floor, Jhandewalan Ext. New Delhi – 110055
Munira S Manda
Assistant Gen Manager”
There can be no doubt that when the settlement was cancelled on 11th July, 2014, the amount became due with effect from 11th July, 2014. The Application under Section 7 has been filed on 05th April, 2019. We need to first examine as to whether there is any acknowledgement by the Corporate Debtor during the said period for the extension of limitation since without extension of limitation during the period, the Application was obviously filed beyond three years from the date when amount became due.
Learned Counsel for the Appellant to support his submissions contends that there has been numerous acknowledgements by the Corporate Debtor and has relied on balance sheets which has been brought on record along with the application seeking permission to file additional documents. Copy of the Letters written by the Corporate Debtor dated 02.07.2015 and 03.10.2017 relied on by the Appellant, has been filed along with the Appeal. We may first come to the letters of the Corporate Debtor which has been relied on by the Appellant to support his case of acknowledgement.
First Letter is dated 02nd July, 2015 written by the Corporate Debtor to the Appellant. It is useful to extract the entire letter which is to the following effect:
“ 2nd July, 2015
The Deputy General Manager
Stressed Assets Stabilization Fund (SASF)
IDBI Tower, WTC Complex
5th Floor, Cuffe Parade,
Colaba, Mumbai – 400005.
Kind Attn: Shri Yatin A Mankad
Dear Sir,
Reg: Negotiated Settlement
As directed by the Hon’ble AAIFR vide order dated 05/06/2015 our representative Sri Narayan Agarwal CA met with you to find a solution to the current impasse created by your wrongful cancellation of our negotiated settlement with you.
During the discussion with you Mr. Narayan Agarwal came to know that negotiated settlement has been revoked due to a so called default in compliance of allotment of 10 Lacs equity shares of Rs. 10 each in DIL/MPL. We would like to record our discussions in this regard.
1) As regard to fresh issue of 10 lacs equity shares of Rs. 10/- each, this is already informed to you vide letter dtd. 05/01/2011 (copy annexure A) that as per sec 81(4) of the Companies Act, 1956, we have to take Central Govt. permission before preferential allotment which is practically not possible. Hence we have handed over 1-0 lac equity shares of Rs. 10/- each of DIL along with transfer deed duly signed held by one of the promoter Mr. Suneel Jhunjhunwala.
2) Our inability to issue the shares in demat form because a per NSDL/CDSL Norms, Company’s whose networth eroded more than 50% of the paid up capital cannot be demated. Please refer our letter dtd. 16/01/2014 explained in details (copy enclosed annexure B).
Please note that we have already handed over 10 lacs equity shares of Rs. 10/- each of DIL held by one of our promoter Mr. Suneel Jhunjhunwala to you under the cover of his letter dated 2/01/2011 along with share transfer deed for necessary transfer in you name and till now no action has been taken from your end for such transfer. So, therefore the default is from your end and not from our side. Hence your revocation is wrong, illegal and not acceptable.
Please note that we have duly complied with all the formalities relating to the transfer of 10 lacs equity shares in your name. This was also agreed by you during our meeting and you had observed that you would be makng an internal enquiry/investigation into the same.
We once again request you to accept the scheme mentioned in DRS package as you are kindly aware that we have already paid the principal amount of Rs. 7.50 crores as per negotiated settlement. The outstanding dues have been provided in DRS as under:
“Buy-back of shares of Rs. 1 Crore with a yield @13% per annum in 18 nstallments and thereafter deferred interest on principal amount in next 18 equal monthly installments”.
More than three and half thousand workers affecting and more than 20,000 people are affected by your decision since the Mills, which are located in an isolated rural areas are lying closed in the absence of a sanctioned DRS.
We once again request you to give your consent to AAIFR for sanction of DRS.
Thanking you,
Yours Faithfully,
For Delta International Limited
Director
Encl: as above.”
The above letter indicates that letter mentions about the default in compliance of allotment of 10 lac equity shares of 10 each. Letter never acknowledged any default of the original amount or the amount which became due in loan recall notice issued by the Appellant on 04.03.2004. As noted above by cancelling the negotiated settlement vide letter dated 11th July, 2014 original liability of the Respondent under the loan agreement was sought to be restored. When we look into the loan recall notice dated 04.03.2004, the amount which was claimed in the loan recall notice, was Rs. 24,69,59,120/- with further interest with effect from 01st January, 2004. The letter dated 2nd July 2015 is neither any acknowledgement of amount referred to in recall notice nor can be treated to be acknowledgement of the amount as claimed by the Appellant in the Section 7 Application.
We come to the next letter which has been relied on by the Appellant is letter dated 03.10.2017. Letter dated 03.10.2017 was written by the Corporate Debtor to the Appellant with regard to buy back shares of Rs. 1 Crore which according to the Respondent was only default of the negotiated settlement. The Letter dated 03.10.2017 stated as follows:
“ 3rd October 2017
To
Stressed Assets Stabilization Fund (SASF)
IDBI Tower, WTC Complex
5th Floor, Cuffe Parade,
Mumbai – 400005.
Kind Attn: Mrs S.S. Abhyankar
Respected Madam
Without prejudice
This refers to our iscussions for making an amicable out of Court settlement. As discussed we outline our proposal as follows:-
1) Buy back of shares of Rs. 1.00 crore within 60 days of our approval.
2) Payment of interest amounting to Rs. 271.9 lacks and 13% yield on shares amount to Rs. 117.00 lacs totaling Rs 388.69 lacs to be paid in 24 (twenty four) equal monthly instalments of Rs. 16.20 lacs each, commencing from the 3rd month of your approval.
These takes care of the shares buy back as well as the interest on both the loan portion & 13% yield on the shares buy back.
Should you require any other clarification, please let us know, if required, we can come and meet you to resolve the issue.
Thanking you
Yours faithfully
DELTA INTERNATINAL LTD.
DIRECTOR”
The above letter also cannot be treated to be acknowledgement of liability and amount claimed by the Appellant in the loan recall notice dated 04.03.2004 or the amount which became due as per Appellant after the revocation of negotiated settlement on 11th July, 2014. The letter dated 03.10.2017 cannot be read to be any acknowledgement or dues as is now claimed by the Appellant in their application.
In Section 7 Application, date of default was mentioned as 04.03.2004 and the letter cannot be read to be acknowledgment of the dues which are now sought to be claimed in Section 7 Application nor can be said to be any acknowledgment of the amount as referred to in the Loan Recall Notice dated 04.03.2004 or the amount which according to the Appellant became due after cancellation of the negotiated settlement dated 11th July, 2014.
Now we come to the balance sheets on which reliance has been placed by the Appellant, for the purposes of deciding the issue of limitation. We permitted the Appellant to rely on and refer to the balance sheets. Learned Counsel for the Appellant has referred to note 30(c) of the balance sheets for the year 2012-13. Note 30(c) is as follows:
“Note 30
(a)…..
(b)…..
(c) After a protracted negotiations, the Company has arrived at a settlement with Stressed Assets
Stabilization Fund (SASF) for the dues of Industrial Development Bank of India (SASF) principal amounting to Rs. 1147 Lakhs at negotiated amount of Rs. 850 Lakhs (being cash component Rs. 750 Lakhs and buy back of shares of Rs. 100 Lakhs of the Company to be pledged by the promoters with SASF and further interest @13%p.a. on reducing basis on payment of settlement amount in monthly installments (including interest) on settlement amount. Since loans of SASF have been transferred to Delta Ltd. & Meghdoot Projects Ltd on demerger as per Hon’ble High Court, Calcutta, payment of Rs. 7,50,00,000/ upto 31.12.2014 were accounted for in the books of these companies. SASF has s per their letter dated 11.07.2014 revoked the negotiated settlement mentioned above as according to them Company has failed to allot 10 lacs equity shares of Rs. 10/- each to SASF and buy back of the same later. It has reversed the waiver of dues and restored the original liabilities and interest dues although 10 lacs shares of the Company belonging to the promoters were pledged with them at the time of negotiated settlement.”
The above note 30(c) refers to negotiated settlement between the parties and the revocation of the settlement on 11th July, 2014. It also noted that Company failed to allot 10 lacs equity shares of Rs. 10/- each to SASF and buy back of the same later. The above note only notices the details as per letter dated 11th July, 2014 of the Appellant. It also noted that revocation of negotiated settlement was made according to the Appellant due to reason that Company has failed to allot 10 lacs equity shares of Rs. 10/- each to SASF and buy back of the same later. The above note cannot be read to mean that Respondent acknowledged their entire liabilities to pay the amount as contained in the loan recall notice with up to date interest. Balance sheets for the year 2015-16 also contains the same note as note 30(c). The balance sheet of 2016-17 noted about the loan and the proceedings initiated under the SARFAESI Act, 2002 by notice dated 19th May, 2017. No acknowledgement of debt as per recall notice dated 04.03.2004 or the amount due as per revocation of negotiated settlement dated 11th July, 2014 can be read into the said balance sheets. The fact of the matter is that there is no acknowledgement of the dues which are now being sought to be claimed in section 7 application. As noted above, in Section 7 Application, the dues which are sought to be claimed are dues as per loan recall notice dated 04.03.2004 upto date interest as per payments calculation amount to Rs. 265.02 Crores. None of the letters noted above and the balance sheets contained any acknowledgement by the Corporate Debtor to make the payment of amount as per recall notice dated 04.03.2004 or amount upto date with interest. The Respondent has been contesting throughout that as per negotiated settlement out of 8.50 crores total amount of negotiated settlement, cash component of Rs. 7.50 crores was paid by the Respondent within time and only default is non-allotment of 10 Lakhs equity shares of Rs. 10 each to the Appellant and buy back of the share with 13% minimum yield p.a. which can be held to be only acknowledgement by the Respondent. The debt as claimed by the Appellant under Section 7 of the Application has never been acknowledged and taking into the consideration the date of last payment by the Corporate Debtor i.e. 30th April, 2014 or the date when the negotiated settlement was cancelled on 11th July, 2014 there has been no acknowledgement which may extend the limitation for the Appellant to file Section 7 Application on 05.04.2019. Application having not been filed within three years when the right to sue accrued to the Appellant, the Application was liable to be dismissed by the Adjudicating Authority on this ground also.
Now we come to the reasons given by the Adjudicating Authority for rejecting the Application as contained in Paragraphs 44 to 47 as noted above. It is clear that Adjudicating Authority was convinced that there is no genuine claim by the Financial Creditor. We fully endorse the view taken by the Adjudicating Authority that after negotiated settlement between the parties on 04.12.2008, cash component of Rs. 7.5 Crores was paid admittedly within time allowed and default was only of non-allotment of 10 lakhs equity shares of Rs. 10 each. The cancellation of negotiated settlement was only on the ground that Respondent failed to comply the allotment of equity shares and execution of buy back agreement. We have already extracted the letter dated 11th July, 2014 by which negotiated settlement was cancelled by the Appellant. When the cancellation of negotiated settlement was only on the ground that Respondent failed to allot 10 lakhs equity shares with face value of Rs. 10 each and failed to buy back the shares at price giving minimum yield of 13%p.a. the claim at best could have been confined to the above amount. Application having been filed for claiming amount of Rs. 265.02 Crores is clearly exorbitant and unconscionable and not genuine. The Appellant (SASF) has been constituted by a Trust Deed executed on 24.09.2004 with the object of trust as given in clause 4 which is to the following effect:
“4. Objects of the Turst
The Trust shall manage, administer and realize the Stressed Assets and for the purpose do all such acts, deeds and things as may be required including without limitation taking action for realization and recovery of dues with or without intervention of the courts/tribunals and as if it were an arrear of land revenue, arriving at one time settlements, negotiated settlements and taking measures to enforce the available securities for effective and efficacious recovery under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or securitization, restructuring and reconstruction of Stressed Assets and for this purpose act as trustees, managers, administrators, receivers, valuers or otherwise and engage, appoint, discharge, remove and replaced any intermediaries, agents, professionals or consultants.”
One of the object of the Trust is to arrive at One Time Settlement and taking measures to enforce the available securities for effective and efficacious recovery under the SARFAESI Act, 2002 restructuring or reconstruction of assets was to act as trustee, managers and administrators. The object of trust is not to completely annihilate the Corporate Debtor. The action of the Appellant in completely ignoring the negotiated settlement and after realizing the entire cash component again embarking on recovery of entire amount, is not in accordance with the object and purpose for which trust has been created.
We thus do not find any reason to interfere with the Order of the Adjudicating Authority rejecting Section 7 Application. There is no merit in the Appeal, the Appeal is dismissed.