STATE BANK OF INDIA vs MS ABHIJEET FERROTECH LIMITED on 17 June 2022

1. 1. **Abhijeet Ferrotech Ltd**, The Knowledge Hub, 5^th floor, Plot No. DN-23, Sector-V, Salt Lake, Kolkata-700091.

2. 2. **Sri Abhishek Jayaswal**, Son of Manoj Jaiswal, Usha Sadan, Pt. R. S. S. Marg, Civil Lines, Nagpur-440001

3. 3. **Sri Manoj Jaiswal**, Son of Basant Lal Shaw, Usha Sadan, Pt. R.S.S. Marg, Civil Lines, Nagpur-440001.

4. 4. **Abhijeet Ventures Limited**, EN-1, Insignia Tower, 3^rd Floor, Salt Lake City, Sector-V, Kolkata-700091.

.... Defendants

1. 5. **Assets Care & Reconstruction Enterprise Limited**, a company incorporated under the Companies Act, 1956 and registered as an Asset Reconstruction Company pursuant to Section 3 of the SARFAESI Act, 2002, having its registered office at 2^nd Floor, Mohan Das Building, 13, Tolstoy Marg, New Delhi-110001 acting in its capacity as Trustee of the Acre-26-Trust.

2. 6. **UCO Bank**, FC Branch, Mafatlal Centre, 1^st Floor, Nariman Point, Mumbai-400021.

3. 7. **Indian Overseas Bank**, International Business Branch, 2, Wood Street, Kolkata-700016.

4. 8. **Indian Bank**, Nariman Point Branch, 210, Mittal Tower, "B" Wing, Nariman Point, Mumbai-400021.

9. **Punjab National Bank** a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings Act), 1970, having its corporate office at Dwarka, New Delhi-110075, and inter-alia, a branch office at Zonal Sastra, United Tower, 3^rd floor, 11, Hemanta Basu Sarani, Kolkata-700001.

Proforma Defendants

Counsel for the parties :

For the Applicant Bank : Ms. Aparajita Rao with Ms. F.Yasmin, Ld. Counsel For the Defendants : Mr. Jishnu Saha, Ld. Senior Counsel, Mr.Souritra Ganguly along with Mr. K.Bhatta, Ld. Counsel for Defendant No.1 to 4. For Proforma Defendants : Mr. Debasish Chakraborty & Ms. Anindita Das for proforma Defendants No.8 & 9.

**FINAL ORDER/JUDGEMENT**

Delivered on 17.06.2022

The Applicant State Bank of India filed the instant application being O.A. No. 742 of 2018 against Abhijeet Ferrotech Ltd. & Others. on 11.09.2018 for realization of a sum of Rs.113,32,74,525.88 as on 26.08.2018 from Defendant Nos. 1 to 4.

The Applicant States that Applicant is a body corporate constituted under the provisions of State Bank of India Act, 1955 having its Corporate Centre at State Bank Bhawan, Madame Cama Road, Nariman Point, Mumbai-400021 and its Branch Office at Stressed Assets Management Branch-1, The Arcade, 2^nd floor, World Trade Centre, Cuffe Parade, Colaba, Mumbai-400 005. The Defendant No. 1 was extended credit facilities from erstwhile State Bank of Travancore, Corporate Finance Branch, Mumbai, subsequently merged with State Bank of India. After the merger of the State Bank of Travancore with the State Bank of India the loan account/s of Defendant No.1 on account of being classified as NPA has been migrated/transferred for recovery/resolution purposes to the branch office of the Applicant at Stressed Assets Management Bench-1, 'The Arcade', 2^nd floor, World Trade Centre, Cuffe Parade, Colaba, Mumbai-400005. The Applicant further states that the Proforma Defendants No. 5 to 9 are the joint lenders along with the Applicant of credit facilities to the Defendant No.1.

The Applicant Bank, i.e. State Bank of India filed O.A./742 of 2018 before the Ld. Debts Recovery Tribunal-III Kolkata on 11.09.2018 The reliefs prayed for in the said O.A. are as follows :

- (a) To allow the O.A. and issue a joint certificate in favour of the Applicant for recovery of Rs. 1,13,32,74,525.88 from Defendant Nos.1 to 4 jointly and severally as on 26.08.2018 with further interest thereon from 27.08.2018 at the contractual rate with monthly rest till realization.

- (b) An order directing the sale of shares of the Defendant No. 1 being owned by the other defendants in terms of the pledge agreements as mentioned hereinabove towards protanto satisfaction of the claim of the applicant;

(c) An order for attachment and sale of the hypothecated assets & mortgaged properties as mentioned in Schedule 'A' and 'B' to this O.A. with liberty to the Applicant to appropriate the sale proceeds thereof in protanto satisfaction of applicant debts/claim herein; (d) An order of attachment before Judgment be passed and a Ld. Receiver be appointed over the movable and immovable properties as described in Schedule 'A' & 'B' with a direction to the Ld. Receiver to make inventory and file report to that effect before the Ld. Tribunal. An order be passed for sale of the said properties towards protanto satisfaction of the claims of the Applicants and proforma defendants; (e) The defendants be directed to disclose on oath the properties owned by them. And the properties described in Schedule 'A' and 'B' hereto and other properties as may disclosed/discovered by/from the Defendant Nos. 1 to 4 be sold by an order of this Ld. Tribunal and the net sale proceeds thereof be applied in or towards protanto Applicant's claim; (f) The hypothecated goods / assets be ordered to be sold and the proceeds be permitted to be appropriated towards the dues due from the defendants to the applicant; (g) Award costs of this application to the Applicant; And for other incidental reliefs.

Subsequently pursuant to the order dated 16.09.2019 of the Hon'ble Chairperson, DRAT Kolkata vide letter No. 4/6/DRAT/KOL/2018 the instant matter has been transferred to DRT-2 Kolkata for adjudication.

That consequent to the transfer from DRT-III to DRT-II the case has been renumbered as TA No.179 of 2020 vide order no. 15 dated 02.12.2019. The details of the debt and assets have been mentioned at Para 3A of the O.A. (Page Nos. 6 to 19). The entire claim of the Applicant Bank is secured by the mortgage of immovable property, more detailed in para 3A of the O.A.

The Applicants declared in the claim petition that the claim of the Applicants under the present application is within the limitation prescribed under Section 24 of the Recovery of Debts and Bankruptcy Act, 1993 read with Limitation Act, 1962 inasmuch as the defendants have executed various loan and security documents on 17.03.2012, 08.04.2013, 28.09.2013, 30.09.2013, 31.09.2013, 31.12.2013, 26.03.2014, 27.03.2014, 23.12.2015, 29.12.2015, 18.02.2016, 14.03.2016, 16.03.2016 as such this application is said to be within the period limitation and is being filed within limitation as aforesaid.

The Applicant Bank has filed IA/897 of 2021, to grant leave to the Applicant to rely on the Evidence on Affidavit filed before this Tribunal on 18.08.2021 in place of the existing evidence on affidavit filed along with the original application incorporating the recitals of consortium lending, the same was allowed and copy of the same has been served upon the Defendant Nos.1 to 4. The Defendant Nos. 1 to 4 have filed additional written statement in respect of the said Evidence on Affidavit and copy has been served upon the Ld. Counsel for the Bank Ms. Aparajita Rao and, Ld. Counsel for Proforma Defendant Nos. 5 to 9, Ms. Anindita Das as is evident from the Order No. 27 dated 15.02.2022.

2. **The brief facts of the case** as set out by the Applicant Bank in its Original Application are, as under :

(i) The Defendant No.1 had availed the credit facility from the Applicant for the purpose of manufacture of Ferro Manganese and Silicon Manganese at its plant at Achutapuram, Vishakapatnam, Andhra Pradesh. The defendant nos. 2 and 3 are the Directors and have given their personal guarantee to secure the said credit facilities which have been sanctioned in favour of Defendant No.1. The defendant no.4 is the Corporate Guarantor and has agreed to secure the credit facilities sanctioned in favour of the defendant no.1.

(ii) The Defendant No.1 approached and requested the Applicant to provide financial assistance for implementation of the said project. Upon request of Defendant No.1, the Corporate Finance Branch, Mumbai of the erstwhile State Bank of Travancore sanctioned the credit facilities to the tune of Rs.99,00,00,000.00 (Rupees Ninety Nine Crores only) on interest rates under various terms and conditions mentioned/contained in the Sanction Letter dated 17.03.2012 which were accepted by the defendant no. 1 as well as Defendant Nos. 2, 3 and 4. Thereafter, pursuant to a request made by the defendant no. 1 by an application dated 09.10.2012 the Applicant renewed the credit facilities which have been sanctioned in favour of Defendant No. 1, the terms and conditions of such renewal as contained in the sanction letter dated 08.04.2013 were duly accepted by Defendant Nos. 1 to 4 vide its respective Board resolution.

(iii) The defendant no.1 requested the Applicant and the Proforma Defendants for restructuring/rescheduling of the outstanding amount of the existing facilities as the operations of the project and the business of the Defendant No.1 had come under strain due to various internal and external reasons. At the request of the defendant no. 1 and in consideration of the Defendant No.1 and the promoters to improve the operations of the Defendant No.1 the borrower was referred to the CDR Cell, a non-statutory voluntary mechanism set up under the aegis of the Reserve Bank of India for the efficient restructuring of corporate debts. The CDR EG at their meetings held on 26.09.2013 approved the restructuring package in terms of which the existing facilities are to be restructured/rescheduled and certain additional financial assistance is to be extended to the Defendant No. 1 by the CDR Lenders being the Applicant and the Proforma Defendants herein. Consequently the Defendant No. 1 entered into a Master Restructuring Agreement dated 28.09.2013 with the Applicant and the Proforma Defendants. Pursuant to the execution of the said Master Restructuring Agreement dated 28.09.2013 the defendant no. 1 executed a Common Term Loan Agreement dated 30.09.2013 with the Applicant and the Proforma Defendants. The defendant No. 1 also executed on 30.09.2013 a Working Capital Facility Agreement with the Applicant and the proforma defendants.

(iv) That in terms of the said sanction and Board Resolutions, Abhijeet Ventures Ltd. executed a Deed of Guarantee on 30.09.2013 in favour of Axis Bank Ltd. as the Security Trustee, the proforma defendant no. 5 acting for and on behalf of Applicant and Proforma Defendants, thereby secured/guaranteed the due repayment of the loan sanctioned / granted to Defendant No. 1. The Defendant No. 3 Sri Manoj Jaiswal, also executed a Deed of Guarantee on 30.09.2013 in favour of the Applicant and the Proforma Defendants, thereby secured/guaranteed the due repayment of the loan sanctioned/granted to Defendant No.1. Pursuant to the said sanction and Board Resolutions, the Defendant No.1 executed a pledge agreement on 30.09.2013 in favour of proforma defendant no. 5 thereby the said Pledgor had agreed that the Applicant at any time and at their sole discretion may complete and transfer the registered shares and/or any of them and in that event the Pledgors shall execute all such instruments and to do all such acts, deeds and things as may be required or necessary to enable the proforma defendant no. 5 to do the transfer. It has also been undertaken by the Defendant No. 1 that if the loan and other money or any portion thereof remain unpaid, the Applicant, without prejudice to the rights conferred on the proforma defendant no. 5 as per the clause of the Agreement of Pledge of Shares, may at any time thereafter and without giving any notice to the Pledgor sell the said shares or any of them. It has also been undertaken by the Defendant No. 1 that the Agreement of Pledge of Shares and the security created there under shall be the continuing security and shall remain in force and effect until the secured obligation are duly and fully discharged.

(v) That the Defendant No.1 has also executed a Registered Indenture of Mortgage on 31.09.2013 with the proforma defendant no. 5 acting for and on behalf of Applicant and proforma defendants, wherein the said defendant No. 1 has mortgaged property being, *"All that piece or parcel of freehold non-agricultural land known as Plot No. 30, admeasuring 219 square meters or thereabouts, forming part of Survey Nos. 34/2 and 35 both of Mouje Ashtami of Roha Taluka in the district of Raigad, together with permanent easement of right of way and other rights on the internal approach road land abutting in Gram Panchayat Road to Pingsalsai Village and further together with the rights in common with the other holders of other plots in or upon or under the said internal approach road land and open space in the larger land with equal responsibility for the preservation and maintenance of the said, internal approach road "*

in favour of the Lenders as security for due repayment of the loan and/or advances granted to the Defendant No. 1. Further Sponsor Support Agreement dated 31.09.2013 was executed between Defendant Nos. 1 to 3 in favour of Applicant and the Proforma Defendants.

(vi) The Defendant No.1 has also executed an unattested Deed of Hypothecation on 31.12.2013 in favour of the proforma defendant no. 5 acting for and on behalf of Applicant and Proforma Defendants wherein the said Defendant No. 1 created charge of the hypothecated assets in favor of the Applicant and Proforma Defendants. That one Sri Dhritabrata Biswas, being the authorized official of Defendant No. 1 vide its Board Resolutions dated 30.09.2013 and 20.12.2013 gave a declaration on oath that the Defendant No. 1 is the owner of the properties situated at mouza Fatehpur and Mouja Sandalpur, in the district Purba Medinipur and that the defendant no. 1 being seized and possessed of the said properties is competent to create mortgage of the said properties. Further one Sri P. N. Ravindra kumar, being the authorized signatory of Defendant No. 1 vide its Board Resolutions dated 30.09.2013 and 20.12.2013 gave a declaration on oath that the defendant no. 1 is the owner of the properties situated at Special Economic Zone, Vishakapatnam, Andhra Pradesh and that the Defendant No. 1 being seized and possessed of the said properties is competent to create mortgage of the said properties.

(vii) That pursuant to various Consortium meetings with the Defendant No. 1, the erstwhile State Bank of Travancore restructured the credit facilities in favour of Defendant No. 1 and an amount of Rs. 89,46,00,000.00 was sanctioned on 14.02.2014 in favour of Defendant No. 1 on the terms and conditions as mentioned therein which were accepted by the Defendants. That after the credit facilities sanctioned in favour of the defendant no. 1 was restructured on the request of the Defendant No. 1, the Defendant No. 1 thereafter on 26.03.2014 executed the Deed of Accession and Modification to the Master Restructuring Agreement in favour of the consortium member banks and that pursuant to the said sanction and Board Resolution, Abhijeet Ventures Limited executed the Deed of Guarantee on 26.03.2014 in favour of Axis Bank Limited as the Security Trustee, the proforma defendant no. 5 acting for and on behalf of Applicant and Proforma Defendants, thereby secured/guaranteed the due repayment of the loan sanctioned/granted to Defendant No.1. The Defendant Nos. 2 and 3 executed Deed of Guarantee on 26.03.2014 in favour of Applicant and the proforma defendants, thereby secured/guaranteed the due repayment of the loan sanctioned/granted to Defendant No. 1.

(viii) That consequent to the restructuring of the credit facilities in favour of Defendant No. 1, the Defendant No. 1 on 26.03.2014 executed a Deed of Accession and Modification to the Security Trustee Agreement with the proforma defendant No. 5 acting for and on behalf of Applicant and Proforma Defendants as the Security Trustee and also as the Monitoring Institution and the other proforma defendants and the Applicants as the parties to the said Security Trustee Agreement. That the Amendment Agreement to the Sponsor Support Agreement was executed on 26.03.2014 between Defendant Nos. 1 to 3 in favour of Applicant and the proforma defendants. That consequent to the restructuring of the credit facilities in favour of the Defendant No. 1, the Defendant No. 1 on 26.03.2014 executed the Unattested Supplemental Deed to the Deed of Hypothecation in favour of proforma defendant no. 5.

(ix) The Defendant no. 1 has also executed an Registered Supplemental Deed of Indenture of Mortgage on 29.03.2014 with the proforma defendant no. 5 acting for and on behalf of the Applicant and the Proforma defendants wherein the said Defendant No. 1 reiterated that it has mortgaged the property together with permanent easement right of way and other rights on the internal approach road land abutting in Gram Panchayat Road to Pingsalsai village and further together with the rights in common with the other holders of other plots in or upon or under the said internal approach road land and open space in the larger land with equal responsibility for the preservation and maintenance of the said internal approach road in favour of the Lenders as security for due repayment of the loan and/or advances granted to Defendant No. 1. It is stated that creation of such mortgage was recorded in the Memorandum of Entry dated 02.01.2014.

(x) Thereafter, on the request of the Defendant No.1 the erstwhile State Bank of Travancore sanctioned limit of Rs.36,74,00,000.00 on 23.12.2015/28.12.2015 and the terms and conditions of the said sanction was accepted by the defendants. Thereafter the defendant no.1 by its letter dated 02.01.2016 requested the Applicant to modify the letter of sanction in terms of the assessment by the lead Bank Axis Bank Ltd. That by a resolution of the Board of Directors of the Defendant No.1 adopted in the meeting held on 23.12.2015, the Board of Directors of the Defendant No.1 accepted the grant of credit facility to the tune of Rs.36,74,00,000.00. In the said meeting it was also resolved that the Defendant No.4 would provide corporate guarantee and the Defendant Nos. 2 and 3 would provide personal guarantee for the purpose of availing the said credit facility. It is stated that Abhijeet Ventures Ltd. executed its Deed of Guarantee on 23.12.2015 in favour of the Applicant, thereby secured/guaranteed the due repayment of the loan sanctioned/granted to Defendant No.1. The defendant No.3 by his letter dated 23.12.2015 requested the State Bank of Travancore to permit him to execute the Deed of Guarantee in Maharashtra. The Defendant Nos.2 and 3 executed Deeds of Guarantee on 29.12.2015 in favour of the Applicant thereby secured/guaranteed the due repayment of the loan sanctioned/granted to Defendant No.1.

(xi) That the defendant no.1 vide its Board Resolution dated 28.12.2015 gave a declaration on oath that the Defendant No.1 is the owner of the properties situated at Mouza Fatehpur and Mouza Sandalpur, PS. Nandakumar in the District of Purba Medinipur and that the Defendant No. 1 being seized and possessed of the said properties, is competent to create mortgage of the said properties. The defendant no.1 executed the Agreement to create Equitable Mortgage on 23.12.2015. that one Sri Rajesh Tiwari, being the authorized signatory of Defendant No.1 vide its Board Resolution dated 28.12.2015 gave a declaration on oath that the Defendant No.1 is the owner of the properties situated at Special Economic Zone, Vishakapatnam, Andhra Pradesh and that the Defendant No.1 being seized and possessed of the said properties is competent to create mortgage of the said properties. The defendant nos.2 and 3 executed Deeds of Guarantee on 18.02.2016 in favour of the Applicant, thereby secured/guaranteed the due repayment of the loan sanctioned/granted to the Defendant No.1 for Rs.80.56 crores. That the mortgage was created by the Defendant No.1 and was extended from time to time and such creation of mortgage and extension was recorded in the Memorandum of Entry.

(xii) That the Defendant No.1 on 30.09.2018, executed a Security Trustee Agreement with the proforma defendant no. 5 as the Security Trustee acting for and on behalf of Applicant and Proforma Defendants and also as the Monitoring Institution and the other proforma defendants and the Applicants as parties to the said Security Trustee Agreement. That pursuant to the signing of the Master Restructuring Agreement, the Defendant No.1 on 30.09.2018 executed a Trust and Retention Agreement with the proforma defendant no.5 as the Security Trustee acting for and on behalf of Applicant and Proforma Defendants and also as the Monitoring Institution and the other proforma defendants and the Applicants as the parties to the said TRA. That in compliance of Section 9.4 of the Trust and Retention Agreement dated 30.09.2018 the Defendant No.1 had undertaken and agreed to irrevocably appoint the Security Trustee acting for and on behalf of Applicant and Proforma Defendants, being the proforma defendant no.5 as its attorney in fact, to accomplish the purpose of the Trust and Retention Agreement with full authority in terms of the said Trust and Retention Agreement, the defendant no.1 executed on 30.09.2013 power of attorney in favour of proforma defendant no.5.

(xiii) That the Applicant had disbursed various amounts from time to time to the Defendant No.1 and The Defendant No.1 had utilized the credit facilities. However, despite repeated requests and reminders, the defendant no.1 has failed and neglected to pay the dues of the Applicant Bank. Consequently the loan accounts became irregular and the loan accounts of the defendant no.1 have been declared as NPA from 31.03.2013 as per guidelines/directives of the Reserve Bank of India. Thereafter, the Applicant Bank issued Demand Notice dated 18.05.2018 and called upon the defendants to pay a sum of Rs.109,91,11,273.47 (Rupees One Hundred Nine Crores Ninety One Lacs Eleven Thousand Two Hundred Seventy Three and Paisa Forty Seven only) inclusive of interest in respect of loan accounts as on 30.04.2018 with further interest thereon from 01.05.2018 @ applicable % interest p.a. with monthly rests plus penal interest and other applicable charges till realization, jointly and severally. The Defendant Nos.2 to 4 have executed Guarantee Agreements to indemnify the Applicant from any non-payment of dues by the Applicant No.1. Since the Defendant No.1 has failed to repay its dues and a substantial sum is due and payable by the Defendant No.1 to the Applicant, the Defendant Nos. 2 to 4 are also jointly and severally liable to pay the dues of the Applicant.

(xiv) That a sum of Rs.113,32,74,525.88 is due and payable by the Defendant Nos.1 to 4 on account of various loan accounts maintained with the Applicant. The movable properties are hypothecated with the Proforma Defendant No.5 for the benefit of the Applicant and other Proforma Defendants on pari passu basis. The mortgaged properties are mortgaged with the

Proforma **Defendant No.5** for the benefit of Applicant and other Proforma Defendants on pari passu basis. The charge over the securities mentioned in Schedule A & B are also duly registered with Registrar of Companies. It is submitted that the transaction entered into between Applicant and the Defendants are commercial transaction and as such, the Applicant is entitled to pendent lite and future interest at the grant on contractual rate per annum with monthly rests. The interest/compound interest has been charged at such rates and capitalized at such periodicals as are permitted by, and do not run counter to the directive of RBI.

3. Pleadings of Defendant No.1

In the instant case the defendant no.1 through the authorized signatory, viz., Jayanta Maiti, working for gain as Principal Officer of the Defendant No.1 filed affidavit of Evidence in Chief on 2^nd March, 2022 as is recorded by the Ld. Registrars order dated 02.03.2022, wherein it was stated inter alia that –

(a) The present application is hopelessly barred by limitation which fact is evident from the allegations made in the application; It is stated that in order to allege that the said application is being filed within the period of limitation prescribed in law the applicant bank has made out valiant attempt to make allegations which are erroneous both in fact and in law. Furthermore the present application is barred by principle of waiver, estoppel and acquiescence; (b) It is stated that the alleged dispute that has been raised by the applicant bank cannot be tried by this Ld. Tribunal as the same is grossly hit by the principle of res judicata. Further there was no cause of action to initiate and/or to proceed against the defendants. The suit is also bad for non-joinder and mis-joinder of necessary parties. It is stated that the applicant bank has purportedly raised allegations against the defendants, but the actual claim of the bank, if at all, is against the other defendants. However, the applicant bank has deliberately not raised any dispute nor placed any claim from the other defendants and as such the present application is liable to be dismissed. Furthermore the present application is not filed in terms of the provisions of Recovery of Debts due to Banks and Financial Institutions Act, 1993 and thus liable to be dismissed.

(c) The deponent states that sometime in 2009, the defendant no.1 approached the Axis Bank, Indian Bank, Indian Overseas Bank, UCO Bank and United Bank of India and requested for financial assistance for its proposal for setting up a Ferro Alloy Plant consisting of eight semi-closed electric arc furnaces of 13.05 MVA capacity at Haldia in East Midnapur District of the State of West Bengal. The total cost of construction and development of the project was estimated to be Rs.555,33,00,000.00 (Rupees Five Hundred Fifty-Five Crores and Thirty-Three Lacs only), which was proposed to be funded. That an amount of Rs.185,33,00,000/- (Rupees

One Hundred and Eighty Five Crore and Thirty Three Lakhs only) was required to be contributed by way of equity contribution which was duly complied with subject to modification. The deponent states that an amount of Rs.370,00,00,000/- (Rupees Three Hundred and Seventy Crore only) on account of financial assistance from Financial Institutions was agreed to be disbursed.

(d) It is stated that the consortium members for the purpose of sanctioning financial facilities conducted due diligence of the project and after being satisfied with the viability and profitability of the project, agreed to provide financial facilities to Defendant No.1. The defendant no.1 at that point of time was named as Coastal Ferro Tech Limited, which was subsequently changed on 21.01.2010 to Abhijeet Ferrotech Ltd. It is stated that the Financial Institutions apart from State Bank of India (erstwhile State Bank of Travancore) entered into a Loan Agreement dated 14.08.2009. In terms of the common loan agreement the total lending advancement by 5 (Five) Financial Institutions was agreed to be fixed at Rs.370 Crores and that the repayment of the financial assistance was required to be made in 24 installments with the first installment and the last installment due on 31.12.2012 and 30.09.2018 respectively.

(e) That subsequently due to political intimidation at Haldia, the project was relocated to Vishakhapatnam, Andhra Pradesh. The consent for the same was granted to the defendant no.1 in the consortium meeting dated 29.12.2009 by the consortium lenders. In this regard the minutes of the consortium meeting is marked as **Exhibit D-2**.

(f) The Defendant No.1 subsequently followed up with the consortium member banks for approval of location change of plant and got the separate approvals from the consortium banks, whether they gave their consent for relocation of plant and disbursement of the financial assistance under the earlier loan document. The consent provided by the Lead Consortium Member is annexed and marked as "Exhibit D-3". The defendant no. 1 subsequently utilized the funds to the best of its ability and installed eight sub-merged electric Arc furnaces of enhanced capacity of 22.5 MVA each at Plot No. 50 and 51, APSEZ, Atchutapuram, Vishakhapatnam-531011. The plant was thereafter built at a capacity of 300000 Metric Tons per annum.

(g) The plant was successfully commissioned and the commercial production of the Ferro Alloy from the plant began sometimes around June, 2012. That the promoters of the Defendant No.1 company contributed Rs.373.65 Crores as equity which was fully utilized for setting up of the project. It is stated that though the plant was fully ready and commissioned to start production of the unit in 2012, however due to the shortage of electricity this defendant was not able to run the plant to its full capacity. The Applicant along with other earlier consortium lenders sanctioned the Working Capital facilities to the Defendant No.1 for the operations of the plant. However, due to misery to the commercial production of the plant, there was a nationwide power crisis especially in District - Vishakhapatnam in Andhra Pradesh. The power availability at the said time was below 40% of the installed/required capacity and in such circumstances the plant was operating at less than 40% capacity utilization. Due to unforeseen circumstances, being inter-alia shortage of electricity, the production of Ferro Alloy got severely affected and this defendant was not able to make optimum usage of the capacity of the plant which severely affected its revenues. Such issue was within the knowledge of the Financial Institutions/Lenders and various meetings in this regard ensued between the Defendant No.1 and the Lenders to chalk out a strategy whereby the defendant no.1 is able to run its plant effectively.

(h) That the consortium members keeping in mind the temporary slowdown due to the shortage of electricity and other factors, further undertook an in-depth study of the project and after intense deliberation found the project not only to be feasible but also economically viable. It is stated that the Financial Institutions accordingly based upon the financial model of this Defendant and also the in-depth study carried out by them in respect of the plant, unanimously agreed to restructure the entire existing debt advanced to this Defendant and further also agreed to extend facilities as would be required to achieve the optimal utilization of the capacity of the plant. Further the lenders were at ad-idem that the project of this defendant was a stupendous project with erroneous potential. The lenders in terms of the guidelines framed by the Reserve Bank of India, after appreciating work on the project and its viability for the purpose of restructuring the loan as advanced to this Defendant, submitted the proposal/flash report for the restructuring of the debts under the Corporate Debt Restructuring Mechanism to the Corporate Debt Restructuring Cell on 21.06.2013. The proposal/flash report to Corporate Debt Restructuring Cell is marked as "Exhibit D-4".

(i) It is stated that the Corporate Debt Restructuring (CDR) Mechanism is a voluntary non-statutory system based on Debtor-Creditor Agreement. Further in terms of the Letter of Approval, the existing financial assistance was restructured and the repayment was required to be made in the next ten years, with no repayment in the financial years 2014 and 2015. In addition to the above, the Letter of Approval also converted the existing irregular portion of the Working Capital Limits into Working Capital Term Loan, which was also required to be repaid only after financial year 2016. The deponent states that fresh working capital was also issued, whereby the Fund Based and Non-Fund Based Working Capital for the financial year were assessed at Rs.70 Crores and Rs.117.80 Crores respectively.

(j) That Axis Bank Ltd. UCO Bank, Indian Overseas Bank, Indian Bank, and State Bank of India (Erstwhile State Bank of Travancore) being the lenders for the purpose of restructuring and in furtherance of the Letter of Approval entered into a Master Restructuring Agreement on 30.09.2013 which was marked as Exhibit D-6. It is stated that the terms and conditions of MRA governed the terms of the disbursal and restructuring of the loan amount. It is stated that the Lenders in terms of the MRA, inter alia agreed for rescheduling of the outstanding interest and principal amounts of the existing term loans and working capital facilities provided by the

existing **CDR Lenders**, conversion of irregular portion of the existing Working Capital limits into **Working Capital Term Loan**. That as per clause 2.3 (iv) of the said MRA the Lenders were required to extend the renewed Working Capital facility to the extent of Rs.188,00,00,000/- (Rupees One Hundred and Eighty Eight Crores only) in the Fiscal Year 2013-14 comprising of (i) Rs.70,20,00,000/- in the form of Fund Based Working Capital Facilities from the CDR Lenders listed in paragraph 5 of Schedule III of the said MRA and (ii) Rs.117,80,00,000/- in the form of non-fund Based Working Capital facilities from the CDR Lenders listed in part 5 of Schedule III.

(k) That subsequently on 26.03.2014 a Deed of Accession and Modification was entered into between Defendant No.1 as the Borrower, Axis Bank Limited as the Monitoring Institution and the existing CDR Lenders with United Bank of India as the acceding CDR Lender. In terms of the Deed of Accession, the acceding CDR Lender agreed for rescheduling of outstanding interest and principal amounts of the existing term loans and working capital facilities provided by it. In terms of the said Deed of Accession, United Bank of India was deemed to be a party in the MRA. In terms of the Deed of Accession, the additional loan facilities are provided under the MRA were amended. Copy of the Deed of accession and Modification dated 26.03.2014 is marked as "**Exhibit D-7**".

(l) That on 30.09.2013 in terms of the Letter of Approval for the purpose of facilitating the cash flow from the project a Trust and Retention Account Agreement was entered upon by this Defendant and Axis Bank Limited copy whereof is marked as Exhibit D-8. It is stated that the TRA Agreement provided for the composition of sub-accounts and Clause 3 of the TRA Agreement provided for the composition of sub-accounts, which were required to be opened as rupee denominated bank accounts and opened with branches of the Account Bank as mutually agreed between the borrower and the Account Bank. It was expressly agreed between the parties that the deposits and withdrawals from such accounts would be made in the manner as set out in the agreement. In terms of clause 3.3 it was mandated that all the monies deposited in the accounts would be used and applied in the manner as prescribed in the said TRA Agreement. Further in terms of clause 3.3.1 of the Trust Retention Account Agreement, monies deposited in the General Proceeds Account shall on each monthly distribution date falling after the opening of the Trust and Retention Account be withdrawn and deposited into the following and in the priority as provided below and from such accounts shall be utilized and applied in the manner as indicated for such account

1. i) First, to the Tax and Statutory Dues Account;

2. ii) Second, to the O&M Account;

3. iii) Third, to the Capex Account;

4. iv) Fourth, to the Interest Payment Account

5. v) Fifth, to the Principal Repayment Account;

6. vi) Sixty, to the Surplus account.

(m) The Defendant No.1 after the execution of the MRA, Deed of Accession and the Trust and Retention Account, complied with all obligations under the said agreements to the satisfaction of the consortium lenders. In this connection it is pertinent to mention that one of the obligations under one of the Agreement required the promoters of this Defendant to infuse additional equity. That relying upon the assertion and the representations of the consortium lenders, for the restructuring of the loan and disbursement of the additional amounts, the promoters infused the equity as required in terms of the agreement. It is stated that the said proposal was circulated to the other consortium lenders including the Applicant Bank on 27.03.2015 and being the Monitoring Institution, Axis Bank was accorded sanction to the Defendant No. 1 and other consortium lenders were required to implement the same.

(n) It is stated that the sanction letters, whereby the existing facilities were changed and formed part of the Master Restructuring Agreement, the consortium lenders were required to abide by it. A copy of the proposal for enhancement of working capital dated 27.03.2015 by the Axis Bank (Lead Bank) is annexed and marked as Exhibit D-9". Further the Axis Bank vide letter dated 07.05.2015 and United Bank of India vide letter dated 26.06.2015 accorded sanction to enhance the limit of the working capital. Copies of letter dated 07.05.2015 and 26.06.2015 is annexed and marked with Exhibit "D-10" and "D-11". However, despite several requests the other lenders did not accord their sanction to the Defendant No. 1 for enhancement of working capital limit including Applicant Bank. It is stated that various Joint Lender Meetings were held, wherein the repayment plan in terms of the CDR package was discussed. That in the meetings held on 09.03.2015, 20.05.2015, 27.07.2015 at Axis Bank Mumbai, it was agreed by all the Lenders that the CDR package repayment could only be done when the plan is operated at 65% capacity utilization and as such the enhanced working capital was a necessity for repayment of the existing facilities. In this regard the minutes of the meeting held on 09.03.2015, 20.5.2015 and 27.07.2015 are annexed and collectively marked as Exhibit "D-12".

(o) That on 29.05.2015 the Lenders took a unanimous decision to provide the Defendant No.1 with additional funds to enable it to improvise its plant capacity and in turn make payment of the debts. The above stated proposal to enhance the working capital limit was approved and sanctioned by the CDR Empowered Group vide letter dated 29.06.2015. Letter dated 29.06.2015 by the CDR empowered Group is annexed as Exhibit "D-13". That in terms of the said letter, the CDR Group expressed that lender to sanction and disburse the enhanced working capital to the Defendant No.1 Company. Further, the joint decision of the CDR Cell as well as the other consortium lenders made the defendant believe in the disbursal of the working capital and in terms thereof this defendant restructured its business plans accordingly. In this connection, it is noteworthy to state that the Corporate Debt Restructuring Cell, thereafter vide letter dated 22.07.2015, while admitting that the defendant had complied with all the terms and conditions, requested Applicant Bank, UCO Bank and Indian Overseas

Bank to comply with the directions of the CDR Empowered Group. It was highlighted in the letter that failure to comply with the directions would deteriorate the performance of this defendant. The said letter dated 22.07.2015 is annexed and marked as **Exhibit "D-14"**.

(p) That thereafter a Joint Lenders Meeting took place on 27.07.2015 at Axis House, Mumbai when the Lenders were again requested to sanction and release the enhanced working capital limits within one month, when during the meeting it was again observed and recorded that as on the said date the assets of this defendant were standard assets and operating as such, urgent steps were required to be taken by the consortium banks to prevent the account from slipping into sub-standard category. The minutes of the said meeting of the consortium members dated 27.07.2015 is annexed and marked as **Exhibit D-15"**

(q) It is stated that the consortium lenders despite having the knowledge that the sanctioning of the enhanced working capital was a necessary requirement as the same would enable this Defendant to meet its repayment obligations, the lenders, due to the reasons best known to them, in an utmost malafide approach failed and/or neglected to sanction letters and disburse the amounts which had been sanctioned. The said mala fide approach of the consortium lenders is evident as the CDR cell in its letter dated 22.07.2015 admitted that this defendant had complied with all the terms and conditions as had been laid down in financial agreements accordingly, there was no reason for the lenders to refuse the sanction and disbursement of the enhanced facilities. It is stated that due to non-release of the sanctioned limits, caused severe problems to operations of this Defendant and due to non-availability of funds, the Defendant was not in a position to operate the plant to its full extent. When the Defendant approached the lenders and begged for their co-operation, however, the requests were not adhered to despite specifically being informed about the non-disbursement would turn the companies account into a Non Performing Asset. Instead of adhering to the representations and warranties, the Lenders refused to disburse the sanctioned limit. Further the Defendant vide letters dated 24.07.2015, 03.08.2015, 04.08.2015, 10.08.2015, 13.08.2015, 18.08.2015, 25.08.2015 and 26.08.2015, wrote to the lenders and requested for the sanction and disbursement of the enhanced working capital. It was brought to the notice of the Lenders that the non-disbursement of the working capital would turn this Defendant's Account into a Non-performing asset and therefore it was necessary that the sanction in terms of the directions of the CDR empowered Group may be expedited. Copies of the above letters are annexed and collectively marked as **Exhibit D-16"**. The defendant No.1 thereafter requested the lenders to abide by the guidelines issued by the Reserve Bank of India vide Circular dated 26.02.2014, in such circular the Reserve Bank of India mandated lenders to adhere to the CDR mechanism. The said Circular dated 26.02.2014 issued by the Reserve Bank of India is marked as **Exhibit "D-17"**.

(r) It is stated that the EBITDA of the defendant no.1 was also in positive that too while operating at 45% of the capacity. In case the additional working capital was provided, the defendant would have been able to run the plant more effectively and would have been able to generate more revenue which would help to repay the loans of the lenders, due to the uncertainty and increasing costs, the plant was not able to function to its optimum capacity. That due to the status of the plant, the defendant left no stones unturned and vide letters dated 08.10.2015, 29.10.2015, 23.10.2015 and 26.10.2015 addressed to lenders and requested to accord sanction to the enhanced working capital amount. Copies of the letters are collectively marked as **Exhibit "D-18 and D-19, D-20 and D-21"**. That as the lenders were not taking any corrective measures vide letter dated 29.10.2015 the Defendant wrote to the Governor, Reserve Bank of India with a request that directions may be issued to the Lenders so that they may disburse their respective share of the financial package. Copy of the letter dated 29.10.2015 is annexed and marked as **Exhibit D-22"**. That in spite of receipt of the letter dated 29.10.2015 no action was taken by the Reserve Bank of India when again vide letter dated 21.12.2015 the non-complying banks were requested to sanction and disburse the amounts immediately. Copy of the letter dated 29.10.2015 and 21.12.2015 are annexed and marked as **Exhibit D-23 and D-24"**.

(s) It is stated that the defendant was not in default of any of its obligations as the lenders were aware that for this defendant to be able to function at a capacity of 65% utilization, additional working capital was required. In this regard the lenders had also promised and assured the answering defendant company for releasing the said funds which were necessary for the functioning of the plant accordingly on the assurances and the representations of the Lenders also incurred additional exposure, which would not have been made otherwise. It is stated that in the month of December, 2015 it came to the knowledge of this defendant that the lenders without adhering to their assurances and representations and without disbursing the sanctioning limits, called a meeting of lenders with a view to invoke the security of the pledged shares. It is stated that on account of sanction of the lenders in sanctioning of the working capital funds and also the threat of invoking the security, the defendant approached the Hon'ble High Court of Delhi in Writ Petition being W. P. (C ) No. 12333 of 2015. The said writ petition is annexed and marked as **Exhibit "D-25"**. The Hon'ble High Court at Delhi vide order dated 23.12.2015 was pleased to issue notice to the consortium lender banks and directed them not to take any coercive steps when the Defendant immediately vide letter dated 24.12.2015 addressed to the Lead Bank brought the factum of non-adherence of obligations under the TRA by the Lenders to its knowledge. The copy of the order and copy of letter dated 24.12.2015 are collectively marked as **Exhibit D-26 and D-27"**.

(t) It is stated that in terms of the TRA agreement, account bank need to use the fund as per the clause no.3 mentioned in the TRA agreement, however lenders utilized the funds for interest recovery of its accounts rather than provide for operation of the plant, thus, the operations of plant severely affected due to act of the consortium lenders including the Applicant Bank. It was brought to the notice of the Lead Bank that the lenders in utter disregard to the provisions of the TRA, instead of depositing the amounts in terms of the Cash Flow Priorities as stated in the TRA agreement, Lead Bank were adjusting the said monies for recovery of interest portion of lenders. It was brought to the notice of the lenders that the illegality being committed by the Lenders was resulting in sharp decline in the capacity utilization of the plant, as such, the defendant requested the Lead Bank to take appropriate measures. That upon filing of the above stated petition, it is relevant to mention that the Applicant Bank immediately gave its sanction to the enhancement of the working capital on 23.12.2015. The during the pendency of the aforementioned writ petition, the Reserve Bank of India vide letter dated 07.01.2016 directed the defendant no.1 to approach the CDR Cell and banks for the redressal of the grievances and RBI, being body, which formulated the CDR mechanism ought not to act as a spectator and was obligated to step in and directed the banks to take appropriate action. Sanction letter of Applicant Bank dated 23.12.2015 and RBI letter dated 07.01.2016 are collectively marked as **Exhibit "D-28 and D-29"**.

(u) That pursuant to the letter dated 07.01.2016 the Defendant No.1 again approached the Lenders as well as the CDR Cell, however, the lenders requested the defendant to withdraw the petition pending before the Hon'ble High Court before the working capital limits could be enhanced. The lenders coerced the defendant and warned that the pendency of the writ petition would not be favourable for the interest of the defendant no.1. It is stated that the defendant was advised to withdraw the petition vide email dated 21.01.2016 and letter dated 05.01.2016 as such the defendant on assurance of compliance of MRA withdraw the petition and by order dated 05.02.2016 the said writ petition was withdrawn. The e-mail dated 21.01.2016, the letter dated 05.01.2016 and copy of the order dated 05.02.2016 are collectively marked as **Exhibit "D-30, D-31 and D-32"**. It is stated that the Defendant withdrew the petition and informed about the said factum to the lenders vide letter dated 05.02.2016 in view of the withdrawal requested the lenders to abide by the guidelines issued by the Reserve Bank of India and give effect to the Master Restructuring Agreement. Copy of the letter dated 05.02.2016 is marked as **Exhibit D-34"** It is stated that this defendant at the time of withdrawal of the petition was promised by the Lenders for sanctioning the enhanced working capital, however, as was utilized by this Defendant, the assurance by the lenders was only a ploy to make this defendant to withdraw the said petition. It is stated that the Applicant Bank along with other consortium lenders played a fraud upon this Defendant and in the garb of sanctioning the enhanced working capital made this Defendant withdraw the petition. It is stated that only to put up a show the Lead Bank, being Axis Bank called the Joint Lenders meeting on 12.02.2016 and directed all the Lenders to release of enhanced working capital. The minutes of the meeting dated 12.02.2016 is marked as **"Exhibit D-35"** That in the meantime in order to check the working of the plant, an inspection was also conducted by the representatives of the Axis Bank, who on 23.02.2016 visited the plant and circulated the inspection report and the Inspection report clearly stated that the Plant was operational and was in a very good condition. The said report dated 23.12.2016 is annexed as **Exhibit D-36**".

(v) It is stated that the Defendant No.1 was again constrained to write to the lenders with a request for sanctioning and disbursement of the enhanced working capital as per the Master Restructuring Agreement, and the decision taken in the Joint Lender Forum meetings as it was brought to the notice of the Lenders that the plant was being operated at a good capacity and on the disbursement of the enhanced working capital the accounts of the lenders would be regularized. That instead of disbursing the amounts in terms of the sanctioned limits the lenders started threatening to close the plant of this Defendant when Defendant was constrained to again file a writ petition before the Hon'ble Delhi High Court being W. P. ( C ) No. 5485 of 2016. The said writ petition along with copy of the orders are annexed and collectively marked as **"Exhibit D-37 and D-38"**. The Hon'ble Delhi High Court through various orders directed the Lenders to convene a meeting as to how the sanctioned limits were required to be disbursed, however, the lenders keep on changing their stand at each meeting and on 12.08.2016 took a stand that the funds cannot be disbursed. Copy of the minutes of meeting dated 12.08.2016 is annexed and marked as **Exhibit "D-39"**.

(w) Thereafter the defendant filed a case of mandatory injunction and declaration before the Ld. Civil Judge, Patiala House Court, wherein the lenders took an objection of the territorial jurisdiction. It is stated that even without sanctioning the enhanced working capital limits by lenders, the present management of this Defendant has been able to run the plant effectively. Further it is more clear from the inspection report, conducted by Axis Bank on 21.06.2016, wherein it has been clearly stated that the plant is functioning at a capacity of 40% and has been maintained well. The inspection report dated 21.06.2016 is annexed and marked as **Exhibit D-40**. The defendant had fulfilled all its obligations under the Agreement. Thereafter the defendant filed a commercial suit for specific performance of Master Restructuring Agreement dated 30.09.2013 and other associated agreements and in the alternative recovery of an amount of Rs.1186,43,00,000/- (Rupees One Thousand One Hundred and Eighty-Six Crores and Forty Three Lakhs only) on account of damages caused to the evidencing defendant by the lenders before the High Court of Judicature at Bombay and the said suit was numbered as Commercial Suit No. COMSL/980 of 2018. Copy of the plaint is annexed and marked as **"Exhibit D-41"**

The written statement has been filed on behalf of Defendant No.2,3 & 4 on 03.04.2022, denying and disputing the claim application filed by the applicant bank but however the same cannot be considered since the same is filed beyond the stipulated period of 45 days and in view of the Hon'ble Madhya Pradesh High Court in Crest steel and power (P) Ltd Vs Punjab

National Bank which was affirmed by the Hon'ble Supreme Court of India, this Tribunal is not inclined to discuss the same.

ORDER

With this background and the pleadings and evidences of parties on affidavit which are extracted above, this Tribunal felt that it would be apposite to frame issues for the sake of convenience and to answer various contentions raised by the parties to this OA. Hence questions that fell for consideration of this Tribunal are:

1. 1. Whether the written statement filed by the contesting defendants (i.e., defendants 1 to 4) is beyond the period of limitation provided under Section 19 (5) (i) of RDBD Act?

2. 2. Whether the Applicant Bank is estopped in the facts of the case from filing this O.A. on account of laches committed by the applicant bank, as claimed by the contesting defendants (i.e., defendants 1 to 4)?

3. 3. Whether the contention of the Defendants 1 to 4 that unless the applicant bank fulfilled all its contractual obligations vis-à-vis the grant of loan the applicant bank could not have filed O.A./Suit for realization of loan amount is tenable?

4. 4. Whether the terms of Master Restructuring agreement entered by and between parties consequent to CDR Scheme prevail over earlier terms of loan agreements contract? if so to what extent and what are the consequences that would emanate?

5. 5. Whether the Applicant Bank is entitled for the realization of O.A claim amount as prayed for by them?

This O.A. has been filed by the Applicant bank for realization of a sum of Rs.113,32,74,525.88 as on 26.08.2018 from Defendant Nos.1 to 4; Defendant No.1 company is the borrower and defendants 2 to 4 being guarantors to the loan account. Both parties have taken a number of pleas and contentions in support of their respective case; though this being O.A. the core issue that fall for consideration is whether the Applicant bank has proved the debt and default and the defendant has any tenable defence to urge that the claim of the applicant bank is untenable. Though, framing of issues is not contemplated in an Application filed under Section 19 of RDBD Act for realization of loan amount by secured creditor-bank and to issue Recovery certificate, in view of multifarious contentions and contentious issues raised by both parties this Tribunal felt that it is in fitness of things to frame issues so that the focus would be on those issues which will have bearing on the core issue to be decided ultimately, viz., whether the applicant bank is entitled for issuance of recovery certificate as prayed for?

19TA/179/2020 – DRT-2/Kol**Issue No.1:**

a) It is to be noted at the outset that this O.A was originally filed on the file of DRT-III Kolkata and later on the directions of the Hon'ble DRAT, stood transferred to this Tribunal for adjudication and disposal.

b) The learned counsel for the applicant bank, at the outset, vehemently contended that the contesting defendants No.1 to 4 failed to adhere to the mandatory nature of time limit prescribed under Section 19 (5) (i) of the RDBB Act in filing written statement within an outer limit of 45 days the Written statement filed by the 1^st defendant with inordinate delay ought to be rejected and cannot be looked into by the Tribunal. She further contended that in the absence of written statement by the defendant, which means the pleadings of defendant, the evidence on affidavit filed by 1^st defendant also deserves to be ignored. In support of her contention the learned counsel for the Applicant Bank relied upon a Division Bench decision of M.P. High Court between Madhya Pradesh Crest Steel and Power PVT. Ltd., and others Vs Punjab National Bank and others reported in 2019 (1) M.P.L.J page 703 (downloaded from SCC Online) wherein it was held that the period of limitation for filing written statement by the opponent in O.A is 30 days only under Section 19 (5) (i) of RDBB Act and the Tribunal can extend the said period by a period not exceeding 15 days and the said period is mandatory in nature and not directory and hence no written statement could be received by the Tribunal beyond the period of 45 days.

c) Per contra, the learned senior counsel Mr. Jishnu Saha and Mr. Souritra Ganguly representing the 1^st defendant repelled the said contention and stated that the Written Statement was filed within the prescribed period of 30 days when the O.A was on the file of DRT-III, Kolkata but copy of the same was served on the Applicant later due to the covid-19 pandemic and as there was no physical hearings and in view of filing of written statement within the prescribed period the applicant bank cannot raise any objection in this regard.

d) A perusal of the record clearly manifest that the Written Statement had actually been filed before the Registry on 20.09.2019 when the matter was still on the file of DRT-III, Kolkata. However, copy of the same along with additional written statement of defendant no.1 was served on the applicant bank on 05.03.2022. Obviously, for the said reason, the applicant bank had taken objection that the 1^st defendant's written Statement was only to be rejected from consideration. But, it is to be seen that what is important and mandatory in nature is filing of written statement before the Tribunal within the time frame fixed by the statute. The written statement of contesting defendants viz., defendants 1 to 4, in fact was filed when the matter stood on the file of DRT-III i.e., on 20.09.2019. Non service of copy of written statement on the other side immediately or with an inordinate delay is only a curable defect and that itself would not have the effect of rejecting the written statement from zone of consideration by the Tribunal. The decision cited by the learned counsel for the bank has no application to the facts of the case, since the proposition in the said decision is with regard to mandatory nature of the provision governing filing of written statement into the Tribunal. Hence, in view of the facts prevailing in the case the contention of the applicant in this regard only deserves to be rejected.

Whereas the written statement of Defendant No.2,3,&4 was filed on 3^rd March 2022 way beyond the stipulated period and hence the same is not considered and cannot be looked into.

This Tribunal opines that answering issues No.2 and 3 will mostly cover answer of the other issues also, since these issues are core issues and evidence and pleadings on record centered around these issues :

**Issue No.2.**

Whether the Applicant Bank is estopped, in the facts of the case, from filing this O.A, on account of latches committed by it, as claimed by the contesting defendants (i.e., defendants 1 to 4) ?

**Issue No.3.**

Whether the contention of the Defendants 1 to 4 that unless the applicant bank fulfilled all its contractual obligations vis-à-vis the grant of loan the applicant bank could not have filed O.A/Suit for realization of loan amount is tenable ?

1. a) The case of the applicant bank is that the defendant no.1 Abhijeet Ferrotech Ltd availed the credit facility from the erstwhile state bank of Travancore, corporate finance branch, Mumbai, which has subsequently been merged with State Bank of India, the applicant bank. The defendant no.1 was extended credit facilities for the purpose of manufacture of Ferro manganese and silicon manganese at its plant in Achutapuram, Vishakapatnam, Andhra Pradesh (page no.21, para 5.2 of O.A); That the defendants no.2 and 3 are the directors and have given their personal guarantee to secure the credit facilities which has been sanctioned in favour of the defendant no.1, that defendant no.4 is the corporate guarantor and agreed to secure the credit facilities sanctioned in favour of the defendant no.1. That upon the request of defendant no.1, the corporate finance branch, Mumbai of the erstwhile state bank of Travancore sanctioned the credit facilities to the tune of Rs.99,00,00,000/ (Rupees ninety nine crores) vide sanction letter dated 17.03.2012 which were accepted by the defendant no.1 and as well as defendant no.2, 3 & 4 which are annexed as annexure 'B' para 5.3 (page nos. 79 to 92 of claim application)

2. b) That pursuant to the request of defendant no.1 vide its application dated 09.10.2012 the applicant bank renewed the credit facilities as per sanction letter dated 08.04.2013, which were accepted by the defendant no.1 to 4 vide its board resolutions, annexed as annexure 'C' para 5.4 (page no's 93 to 109)

3. c) Thereafter on the request of the defendant no.1, for restructuring /rescheduling of the outstanding amounts of the existing facilities as the operations of the project and the business of the defendant no.1 had come under strain due to various internal and external reasons the borrower was referred to the CDR-cell , a non statutory voluntary mechanism set up under the aegis of the RBI for efficient restructuring of corporate debts, (annexure C para 5.5).

d) Guideline issued by Reserve Bank of India *The objective of the CDR framework is to ensure a timely and transparent mechanism for restructuring of the corporate debts of viable corporate entities affected by internal or external factors, outside the purview of BIFR, DRT and other legal proceedings, for the benefit of all concerned.*

- i) In the CDR EG meeting held on 26.09.2013 a consortium banks have approved a restructuring package in terms of which the existing facilities are to be restructured /rescheduled and certain additional financial assistance is to be extended to defendant no.1 by the CDR Lenders, of whom pro-forma defendants No.5 to 9, along with applicant bank are parties. Consequently the defendant no.1 entered into Master Restructuring Agreement dated 28.09.2013 with the applicant and the proforma defendants. Consequent to the execution of the MRA dated 28.09.2013, defendant no.1 executed a common term loan agreement dated 30.09.2013 and further executed a working capital facility agreement with the applicant and the pro-forma defendants. That pursuant to the said sanction and Board resolutions, Abhijeet Ventures Ltd executed its Deed of Guarantee and, Pledge agreement, on 30.09.2013 in favour of Axis Bank Ltd as the security Trustee, the pro-forma defendant no.5 acting for and on behalf of applicant and pro-forma defendants.

- ii) It is submitted that Sri. Manoj Jaiswal, defendant no.3, executed a deed of guarantee on 30.09.2013 in favour of the applicant and the proforma defendants thereby secured/guaranteed the due repayment of the loan sanctioned /granted to defendant no.1.

- iii) That pursuant to the said sanction and Board resolutions defendant no1, executed Pledge agreements on 30.09.2013 in favour of the proforma defendant no.5 acting for and on behalf of the applicant and proforma defendants, thereby said pledgor had agreed that the applicant at any time and at their sole discretion may complete and transfer the registered shares and/or any of them and in that event the Pledgors shall execute all such instruments and to do all such acts, deeds and things as may be required or necessary to enable the proforma defendant no.5 to do the transfers.

- iv) That the defendant no.1 has executed registered indenture of mortgage on 31.09.2013 with the pro-forma defendant no.5 acting for and on behalf of the applicant and proforma defendants, wherein the said defendant no.1 has mortgaged property being , secured asset which was described in schedule -B therein.

v) The sponsor support agreement dated 31.09.2013 was executed between defendant no's 1 to 3 in favour of applicant and the proforma defendants.

e) From these facts, it is important to note that pursuant to the various consortium meetings and meetings with the defendant no.1, erstwhile State Bank of Travancore restructured the credit facilities in favour of the defendant no.1 and an amount of Rs.89,46,00,000/- was sanctioned on 14.02.2014 in favour of defendant no.1 in the terms and conditions as mentioned therein which were accepted by the defendants. (which is Annexure 'D'). Thus, it can be seen that that at the request of the defendant no.1 erstwhile SBT sanctioned limit of Rs.36,74,00,000/- on 23.12.2015 and by a resolution the Board of directors of the defendant no.1 accepted the grant of credit facility to the tune of Rs.36,74,00,000/-. In the same meeting it was also resolved that the defendant no.4 would provide corporate guarantee and defendant nos. 2 & 3 would provide personal guarantee for the purpose of availing the said credit facility.

f) That pursuant to the said sanction and Board resolutions, Abhijeet Ventures Ltd executed its Deed of Guarantee on 23.12.2015 in favour of Applicant thereby the secured/guaranteed the due repayment of the loan sanctioned /granted to the defendant no.1.

g) However, It is an admitted fact that none of the members of the Consortium member banks including the Applicant Bank, State Bank of Travancore i.e., State Bank of India at present after merger, disbursed/released funds to the defendant company. The contention of the applicant bank is that the defendant no.1 having been classified as willful defaulters, none of the banks including applicant bank did release funds though the amounts were sanctioned as part of Corporate Debt Restructuring plan and consequent Master Restructuring Agreement with consortium of banks.

h) The learned senior counsel Mr. Jishnu Saha vehemently argued that the applicant bank along with other members of consortium have committed breach of contract and violated the terms of various agreements entered into as part of Master Restructuring Agreement (MRA for brevity) and consequently the CDR plan was deliberately jinxed by them which action on their part is illegal and that unless the applicant bank fulfill its obligations arising out of the contractual terms the applicant bank cannot raise claim to realize the debt.

i) In support of his contentions the learned senior counsel drawn the attention of this Tribunal to the documents filed by them being part of CDR as well as MRA Transaction/contract in relation to Restructuring process agreed to by the applicant bank and other consortium banks which is on the anvil as well as to various clauses of Master circulars issued by the Reserve Bank of India which are to be followed by the commercial banks, since Master circulars being the beacon lights in aiding the corporate debtors in servicing their loan amounts to the optimum level, as well as the creditor banks in guiding them in the said process of restructuring the loans.

- j) It is pertinent to refer to the Document titled as Flash Report (emanated from Corporate Debt Restructuring Cell) which is given page no.70 as Annexure B the Assets of the 1^st defendant company was shown as Standard Asset as on 31^st March 2013, which is the alleged date of NPA as per legal notice dt.18-09-2018.

- k) In this connection it is relevant to look at the conditions of Master Restructuring Agreement (Ex.D-6 at page no.91 of the Evidence affidavit of Defendant no.1) covering the field –

2.4.1 (v) – Subject to Sec.7.3 here of each of the CDR lenders **hereby waives any Existing Events of Default relating to such CDR lender**. For avoidance of doubt, it is clarified that the CDR lenders do not hereby waive their right to recover their respective Facilities, unpaid interest, penal interest and liquidated damages, compound interest and any other interests, charges, expenses as on Cut-off Date in accordance with the terms of this Agreement.

2.4.2 – Waiver of Liquidated Damages/Interest/Further Interest

(i) **Each CDR Lender hereby waives the obligation of the Borrower to pay any liquidated damages or penal interest, or charges, Further interest or excess interest, charged by the CDR Lender in excess of the document interest rates specified in the Existing Financing Documents of such CDR Lender during the period commencing on the cut-off Date and ending on the Effective Date.**

(ii) For the purposes of this Section the document interest Rates in relation to any CDR Lender shall mean the rate of interest applicable to the outstanding amounts under the Existing Facilities of such CDR Lender under its Existing Financing Documents prior to the cut-off Date.

- l) A reading of clause 2.4.1 (v) makes it manifestly clear that CDR lenders have waived Existing Events of Default relating to such CDR lender and undisputedly the applicant bank is one of such members of CDR lender. Thus, it is clear that the applicant bank had waived off the then existing event of default i.e., the classification of the loan account as NPA as on 31-03-2013. On such waiver of event of default only the Assets of the 1^st defendant company have been classified as Standard as on 31^st March 2013. If at all the loan account had remained NPA the Restructuring of the Account would not have been possible with fetters on the loan account as well as on the secured assets firmly in place and banks not giving any liberty or leeway to the secured creditor to run the business in a competitive manner.

- m) However, clause 2.4.1 (v) reserved the right of secured creditor to recover the debt after clearing off the incidences of default in relation to the debt as on cut-off date, which is 1-4-2013. Thus, as on the date of cut-off date i.e., 1-4-2013 the incidence of NPA had been waived off by the applicant bank and if the Applicant bank were to recover the debt it had to classify the account as Non-performing Asset or bad debt, since the earlier incidence of NPA was waived off by the bank. But the applicant bank did not undertake such an exercise but relied or banked upon the earlier incidence of NPA dt.31-03-2013, which according to bank itself was waived off vide clause 2.4.1 (v) of Master Restructuring Agreement.

n) In this connection the contention of the applicant bank in its legal notice got issued prior to filing of O.A is quite interesting. It stated that **the loan accounts became irregular and the loan accounts of the Defendant No.1 have been declared as NPA from 31-03-2013 due to failure of restructuring, as per guidelines/ restructuring of the Reserve Bank of India** and that the same has given cause of action to the bank to realize and recover the debt with interest.

In the written arguments the applicant bank stated that –

*"The CDR was sanctioned and the Banks had decided to sanction additional limits to make the defendant No.1 viable subject to the results projected by the company in the CDR. The Company failed to achieve the projected result. The Company unilaterally stopped its project. The consortium Banks were hesitant in sanctioning additional sum or in disbursement of the same. Axis Bank and United Bank of India had sanctioned additional limits but not disbursed the same. The remaining members of the consortium viz., SBT, Indian Overseas Bank (IOB), and UCO Bank did not disburse. The defendant No1 kept agitating and SBT sanctioned additional limits on 23-12-2015 (Annexure E at page 126). However, by then the account of the Defendant No.1 was classified as NPA with other members of the consortium. The defendant failed to repay the dues of SBT for a continuous period of 90 days and the account was classified as NPA in the Books of SBT. SBT issued legal notice claiming payment (Annexure I Page 231). There was no reply to the same. The Bank filed its application for recovery"*

o) It is further contended in the written arguments by the applicant bank by drawing attention to page 156 of OA (D6-Pagé 91 Master Restructuring Agreement) and referring to clause (xxvi) (e) which records that lenders rights review or withdraw CDR package at any time during currency of CDR in case of default in Repayment or payment of facilities on due date by borrower.

p) However, the applicant Bank is not forthcoming as to whether the CDR package was withdrawn or recalled by the consortium banks and whether any such notice had been issued to 1^st defendant in this regard. From the record it is obvious that no such notice has been issued by the applicant bank withdrawing or recalling CDR facilities extended to the 1^st defendant. It is further obvious that amounts sanctioned under CDR package were not disbursed by consortium banks including the applicant bank to the 1^st defendant. The 1^st defendant contended that some of the consortium banks have adjusted such of those funds released/disbursed under CDR scheme for servicing interest due and the very purpose of infusing CDR package funds for working capital needs of the company was totally defeated. It is not even the case of the applicant bank that it had ever released/disbursed any funds sanctioned under Restructuring CDR scheme or that the CDR scheme had been withdrawn, thereby making it clear that the 1^st defendant company was placed in its original position that prevailed prior to entering into MRA consequent on CDR Scheme. This Tribunal is of the opinion that the applicant should have issued notice recalling CDR scheme which was extended to the 1^st defendant due to failure of Restructuring or any other reason and such an opportunity is part of principles of natural justice, since the 1^st defendant was assured by consortium lenders to infuse funds for the 1^st defendant to give a lease of life to the ailing industry and make the industry viable. Of course, the 1^st defendant company is mandatorily obliged to service the debt, but the approach of the bank of not affording any opportunity to the 1^st defendant by recalling the CDR scheme would definitely jeopardize the interests of 1^st defendant company in as much as while still the opportunity for restructuring its business is hanging in air, the process of recovery or realization of earlier debt would take precedence. It is not the intendment of the various schemes floated by RBI or Government to come in aid of ailing industries, though, ultimately Banks interests or the safeguarding public money should be the goals of the bank.

- q) In this connection the Learned Senior Counsel for the 1^st defendant submits that the mala fide approach of the consortium lenders is evident as the CDR cell in its letter dated 22.07.2015 admitted that this defendant had complied with all the terms and conditions as had been laid down in financial agreements; accordingly, there was no reason for the lenders to refuse the sanction and disbursal of the enhanced facilities. It is further stated that a Joint Lenders Meeting took place on 27.07.2015 at Axis House, Mumbai when the Lenders were again requested to sanction and release the enhanced working capital limits within one month, when during the meeting it was again observed and recorded that as on the said date the assets of this defendant were standard assets and operating as such urgent steps were required to be taken by the consortium banks to prevent the account from slipping into sub-standard category. The minutes of the said meeting of the consortium members dated 27.07.2015 is annexed and marked as **Exhibit D-15**

- r) The defendant No.1 thereafter requested the lenders to abide by the guidelines issued by the Reserve Bank of India vide Circular dated 26.02.2014, in such circular the Reserve Bank of India mandated lenders to adhere to the CDR mechanism. The said Circular dated 26.02.2014 issued by the Reserve Bank of India is marked as **Exhibit "D-17"**

- s) The Learned senior counsel further drawn the attention to the letter dt.28-09-2013 addressed/issued by Chartered Accountants by name Chandak Khanzode & Shenwai wherein they have stated/certified that the 1^st defendant company had infused fresh equity of an aggregate amount of Rs.18.50 Crores (Rupees Eighteen Crores Fifty lacs only) in the company towards its contribution required to be brought in as upfront Equity as per terms and conditions of the CDR LOA. Thus, it is clear that the 1^st defendant had made attempts to fulfill its obligations, and tried to do its duty to the satisfaction of the consortium. But, the Applicant Bank cannot abdicate its duty of putting the 1^st defendant on notice by recalling the CDR scheme and placing the 1^st defendant company prior to the acceptance of CDR scheme in which case the account needed to be classified as NPA, since the earlier classification was waived off by the bank. This Tribunal is of the opinion that until this exercise is done by the applicant bank by affording opportunity to the 1^st defendant this O.A is premature.

t) It is also to be seen that an inspection was also conducted by the representatives of the Axis Bank on 23.02.2016 who visited the plant and circulated the inspection report and the Inspection report clearly stated that the Plant was operational and was in a very good condition. The said report dated 23.12.2016 is annexed as **Exhibit D-36**. In this connection, upon perusal of Ex.D.36 filed by the applicant bank along with O.A shows that the 1^st Defendant, after entering into Master Restructuring Agreement under CDR Scheme had continued with and carried on production activity in its Achutapuram Plant. It is the contention of the 1^st Defendant company that operations of the company were ceased afterwards that due to non disbursal of the funds by consortium member banks including the present applicant bank, even the working capital needs were not met and consequently the production had come to a halt and this had a spiraling impact on servicing of loans and interest due on them.

u) It is contended by the 1^st defendant that it had approached the Hon'ble Court of Delhi in Writ Petition being W.P (C) No. 12333 of 2015. The said writ petition is annexed and marked as **Exhibit "D-25**. The Hon'ble High Court at Delhi vide order dated 23.12.2015 was pleased to issue notice to the consortium lender banks and directed them not to take any coercive steps when the Defendant immediately vide letter dated 24.12.2015 addressed to the Lead Bank brought the factum of non-adherence of obligations under the TRA by the Lenders to its knowledge. The copy of the order and copy of letter dated 24.12.2015 are collectively marked as **Exhibit D-26 and D-27**. Learned counsel for the 1^st defendant submitted that the 1^st defendant was advised to withdraw the Writ Petition vide email dated 21.01.2016 and letter dated 05.01.2016 as such the defendant on assurance of compliance of MRA withdraw the petition and by order dated 05.02.2016 the said writ petition was withdrawn but the applicant bank failed to adhere its promise of considering its case and went back, despite the 1^st Defendant's vehement requests in this regard. There is no counter or denial by the applicant bank in this regard. The said conduct would have caused prejudice to the interests of the 1^st defendant in restructuring its business.

v) But the Learned counsel for the applicant bank contended that the applicant and other members of the consortium were given leave by the High Court of Delhi in W.P No. 22846

/2016 by its order dt.3-6-2016 to proceed for recovery against the company. A perusal of the order reveals that the Hon'ble Delhi High Court has given liberty to the banks to proceed with the matter, but nowhere the Hon'ble High court has given a *carte blanche* to the applicant bank to disregard the principles governing recovery process.

Hence, the 2^nd issue viz., Whether the Applicant Bank is estopped, in the facts of the case, from filing this O.A, on account of laches committed by it, as claimed by the contesting defendants (i.e., defendants 1 to 4) is answered in affirmative in view of the fact that the applicant bank had failed to follow the Master Restructuring Agreement terms and given opportunity to the 1^st Defendant as opined supra above.

Issue No.3:

Whether the contention of the Defendants 1 to 4 that unless the applicant bank fulfilled all its contractual obligations vis-à-vis the grant of loan the applicant bank could not have filed O.A/Suit for realization of loan amount is tenable ?

The learned senior counsel for the 1^st Defendant contended that unless and until the consortium banks disburse the funds they cannot force or subject the 1^st defendant to recovery process. In nutshell the contention of 1^st Defendant is that the Master Restructuring Agreement is a reciprocal contract or a contingent contract.

In view of the above detailed discussion this Tribunal is of the opinion that it is evident that the Reciprocal obligations were not fulfilled at the end of the applicant bank and the other consortium lenders which ultimately lead to a fundamental breach of contract. The Ld. Counsel referred to Sec.51 to 54 of the Indian contract Act, 1872 and has also shown the authorities relied upon.

At any rate, the applicant bank should have given sufficient opportunity to the 1^st defendant, having initially agreed to support it by way of CDR along with other consortium members. It is contended by the 1^st Defendant in its pleadings that it had filed a suit in Delhi claiming damages against the consortium banks including, applicant bank alleging that their failure to disburse the sanctioned loan had caused pecuniary loss to it.

Issue No.4:

Whether the terms of Master Restructuring agreement entered by and between parties consequent to CDR Scheme prevail over earlier terms of loan agreements contract ? if so to what extent and what are the consequences that would emanate ?

The terms of Master Restructuring Agreement which is the offshoot of CDR Scheme agrees to infuse funds under different heads of loan subject to the 1^st Defendant fulfilling certain conditions. Clauses 2.4.1 (v) and 2.4.2 of Master Restructuring Agreement read with other clauses clearly mandated that the earlier events of defaults are waived off, but however the right of realization of debts is reserved. Though it cannot be said that the agreement/contract is a contingent contract, yet the applicant bank is bound to follow the terms of MRA in its letter and spirit in order to avoid the company becoming completely bankrupt, though the bank is bound to follow and take the measure to realize the debt to an optimum level. In view of the facts prevailing in this matter this issue is answered to the extent that such of the terms of MRA will prevail over earlier classification of debt which is waived off in terms under MRA.

**Issue No.5:**

Whether the Applicant Bank is entitled for the realization of O.A claim amount as prayed for by them ?

In view of the above discussion this Tribunal is of the opinion that, the Applicant bank ought to have given an opportunity or to have issued notice withdrawing CDR Scheme relating to its participation in the scheme and consequently put the 1^st defendant on notice that the account would become NPA in terms of Master Restructuring Agreement, in which case the 1^st defendant would have opportunity to answer its case or honour the demand of repayment by the bank, failing which the bank is at liberty to realize the defaulted amount by recourse to procedures available to it. Terms of Master Restructuring Agreement which is offshoot of CDR Scheme is applicable to both the Secured Creditor as well as Secured debtor which includes Corporate creditor and debtor also. Since there is no NPA as on 31.03.2013 there cannot be any claim subsisting. Hence, this issue is answered affirmatively that institution of this O.A is premature.

The 1^st defendant further contended that the account statements filed by the applicant bank are not correct and are not in consonance with and in compliance to the rules of Banker's Books Evidence Act, 1891 and Indian Evidence Act, 1872. However, the allegations are vague in nature and in the absence of any particular and pointed violation; it is difficult for this Tribunal to go into the said aspect.

The Learned Senior Counsel for the 1^st Defendant cited a number of Judgments of Hon'ble Supreme Court and other High Courts in support of his contentions. But those Judgments mostly dealt with facts emerging under Insolvency and Bankruptcy Code or other Acts and are not applicable to the facts of the case.

Hence, this Tribunal is of the opinion that this O.A is premature since there is no default and the 1^st Defendant is not given sufficient opportunity of notice in view of existence of CDR scheme and Master Restructuring Agreement. Accordingly the instant TA.No. 179 of 2020 arising out of OA.No.742 of 2018 is disposed of.

No order as to cost.

File be consigned to record room.

The matter is dictated and corrected by the undersigned and pronounced on this the 17^th day of June 2022.

None appeared for either of the parties.

The Final Order / Judgment be uploaded in the Tribunal's website.

Sd/-

(Makena Srinivasa Rao) Presiding Officer DRT-2, Kolkata