CANARA BANK vs GRAPCO INDUSTRIES LTD & ORS on 28 September 2020

JUDGEMENT

This is a Transfer Application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 initiated by the applicant bank against the defendants/respondents No.1 praying for issuance of Recovery Certificate to the tune ot Rs.S,96,45,297.74 together with interest, cost and other usual reliefs. The brief facts of the case as made out ln the Transfer Application by the applicant bank is that the defendant no.1 is a public Limited Company duly incorporated under the provisions of The Companies Act, 1956. The defendant No.1 was formerly known as Grapco Granites Limited. The defendants No.z to 8 hold pari passu charge with the applicant in the immovable and movable properties ofthe defendant No.1. Canbank Mutual Fund (hereinafter calted,EMp) is a public trust constituted under the Indian Trust Act and registered under SEBI (Mutual Funds) Regulation. As per the objective of the mutual fund, it floats various investments schemes and raises money from the investors belonging to various segments of the public and deploys the moneys so raised in capital market an equity shares, debentures and other money market instruments

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4. with the objective of offering better returns to its investors. as is common to all mutual funds schemes.

3. The defendant no. 1, being desirous of issuing 1,4O,OOO _ 180/o Non_ Converti9bie Debentures of Rs. 1OO/- each aggregating to Rs. 140 lakhs (hereinafter called ,,NCU), approached CMF to subscribe to the same on private placement basis, Pursuant to the request of the defendant No. 1, CMF agreed to subscribe to the NCDS and released 8oo/o of the agreed sum i.e. Rs. 112 lakhs, on the condition that the balance 2oolo would be released upon creation of security. In consideration thereof, the defendant No. 1 aflotted the NcDs in favour of the Ct'lF on 6th July, 1992 and appointed the applicant bank as the Debenture Trustee to the Holders of the said NCDS and also for other purposes. To avail of the aforesaid credit facility and in consideration of the applicant bank having agreed to act such rrustees as stated above, the defendant No. 1 executed some documents on 22.d March, 1993 like (i) Subscription Agreement, (ii) Trustee Agreement, (iii) Declaration cum Undertaking and

(iv) Unattested Memorandum of Hypothecation in favour of the appticant bank according to their Terms and conditions. To collaterally secure the aforesaid facilities and advances the defendant no. 1 created an equitable mortgage in favour of the applicant bank by deposit of the Title Deeds relating to its several immovable properties situated at Attibele Unit, Anekal Taluk, Bangalore; Balasore Unit, Orissa and Alwar Unit in Rajasthan. Such mortgage ranks pari passu between the applicant bank herein as well as its Overseas Branch at Kolkata along with defendant Nos. 2 to 8. In terms of the Loan Agreement, the defendant No.l was required to pay interest thereon in accordance with the repayment schedule contajned in the Loan Agreement. The defendant No.1 failed and neglected to make payment to the applicant of interest due on the NCDS, CMF decided not to release the balance 20olo amount and accordingly, restricted its subscription to Rs. 112 lakhs, which was released to the defendant No, 1 in the first instance. The

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8. defendant No. 1 also failed to redeem the NCDS, which fell due on 6s July, 1998, 6th July, 1999 and 6s July, 2000. In view of the failure on the part of the defendant no. 1 and/or the defendants to redeem the said Non-Convertible Debentures in spite of repeated requests and reminders, the applicant bank was compelled to call upon the defendant No. 1 to clear the outstanding debenture dues through its Advocate's letter dated 11th November, 1997. In spite of such demand the defendant No. t has failed to liquidate the outstanding in the said account. After giving credit for all sums of moneys paid by and / or reallzed on behalf of the defendant no. l and after adjustment there became due from defendant no. 1 to the applicant bank as Trustee ofthe debenture holders an aggregate sum of Rs. 5,96,45,297.74 inclusive of interest calculated up to 31st January, 2004. The applicant bank is entitled to pendentelite and future interest on the said sum @ 22o/o pet annum with simple from the date of filing of the Original Application till the date of realization. Notices were issued to the defendants to show cause as to why the relief prayed for by the applicant bank be not granted. After issuance of the notice, the defendants No.1 had neither appeared nor had filed their show cause reply, The remaining defendants had appeared through their respective Counsels. I have perused the relevant documents/materials available on the record. The defendants No.l had not contested the case of the applicant bank. Thus, the point for determination in this case is (i) Whether the claim of the applicant is within time ? (ii) Whether the defendants had utilized the loan facilities granted by the bank ? (iii) Whether the defendants are liable to the amount due to the applicant or not ? During the pendency of the matter, the applicant bank i.e. Canara Bank has filed a note submitting that it is apparent from the report filed by the Joint Receivers on the point of disbursement made by them towards the secured and unsecured creditors of the company from the sale proceeds received

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17. after selling out all the moveable and immoveable secured assets of the company but the dues of the other respective creditors are yet to be made. It is also submitted that the C.O. No. 2060 of 2004 filed by the ICICI Bank against the order dated 29th June, 2OO4 passed by this Ld Trlbunal recalling its earlier order in terms of disbursement is dismissed on 20.08.201(1. It is also submitted that in view of such dismissal of the said C.O. No. 2060 of 2004 the order dated 29th lune, 2004, being Order No. 92 pass€d by this Ld. Tribunal, stands revived and as such, it is submitted that ICICI Bank as well as IDBI Bank or any other Bank and/or financial institution be directed to refund the amount received by them (Rs. 2.5 crores each) against their undertaking submitted before this Ld Tribunal with accrued interest forthwlth to the Registry of this Ld Tribunal with up to date interest on the sair, amount for enabling this Ld Tribunal to accumulate the entire amount and disburse it to the respective secured and unsecured creditors. It is further prayed that accordingly, the respective Original Applications filed by the respective Banks including the applicant herein be also disposed of and accordlngly (:ertificate be issued in favour of the respective secured creditors. During the pendency of the case, the 75 workers of Bangalore Unit (,f Grapco Industries Ltd. (In Liquidation) have filed their written submissions on 17th December, 2019 before this Tribunal and prayed thls Tribunal to implead them as parties to the instant proceedings and submit their adjudicated claim for Rs.16,99,398.00 and Rs.42,72,855.00 respective. Initially the workers had approached the Hon'ble High Court at Kanlataka in W.P. No.46216-462!7 of 2002 dated 28,07.2003 filed by the Work( rs where permission was given to approach this Tribunal. Accordingly, the application was filed. This Tribunal has passed the Order on 22nd February, 2020 in TA l'lo. 04 of 2012 directing the official liquidator attached with the High Court of Orissa, Cuttack of this Company in liquidation which is defendant No. 1 to flle a

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20. report along with adjudicated claim of the workers, if so invited along with their list and amount. The official liquidator has flled his report dated 9s March, 2020. As per the report the clalm of workers are yet to be invited' The official liquidator further claims that he has no funds of the Company i.e. defendant no. 1, which is in liquidation, in his hand to invite claims. The official liquidator has prayed for deposit of a sum of Rs. 3,Oo,ooo/- with his omce for publication of notices in newspapers in accordance with Companies (Court) Rules, 1959' In view of this the omcial liquidator's report is taken on record. The provisions of Section 19, Sub-Section L9 of the Recovery of Debts and Bankruptcy Act, 1993 provides as below : 'Y(lg) Where a ceftificate of recovery is issued against a company as defined under the Companies Act, 2013 and such company is under liquidation, the Tribunal may by an order direct that the sale proceeds of secured assets of such company be distributed in the same manner as provided in section 326 of the Companies Act, 2013 or under any other law for the time being in force.I " The applicant by oral and documentary evidence has established its case' The documentary evidence comprises from Annexure/Exhibit-A to Annexure/Exhibit-G, which are available in paper book filed by the applicant bank. From the perusal of the documents referred above and the certifled copy of the statement of account, which is filed as Annexure/Exhibit-A to I, it is established that the defendants had availed the financial facilities from the applicant bank and had withdrawn the amount through the account' From the perusal of the Statement of Account which is Annexure/Exhibit-G' the total outstanding comes to Rs. 5,96,45,297.74 wllicll the applicant is entitled to recover from the defendants no.1. In view of the above discussion and after considering the entire case records and the documents filed by the applicant, I have no hesitation to hold that 2t.

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the applicant is entitled to recover a sum of Rs,5,96,45,297.74 from the defendants no.1 who is liable forthe same. The applicant bank shall also be entitled to pendentelite and future interest on the said amount @ 22o/o per annum with simple from the date of flling of the Original Application till the date of realization.

ORDER

T.A. No. 828 of 2015 filed by the Applicant Eank is allowed and debt is determined \/ith cost against the defendant no.1. It is hereby ordered that applicant bank is entitled to recover from the defendants the total amount to the tune of Rs.5,96,45,297.74 (Rupees flve crores ninety six lakhs forty flve thousands two hundred ninety seven and paise seventy four only) with pendentelite and future interest @ 220lo per annum with simple on the amount due from the date of filing of the Transfer Application, i.e. 09.04.2015 till full and final realization of the claim amount. Amount, if any, paid by the defendants in the loan account or amount, if any, recovered by the Applicant Bank after filing of the T.A. the same be taken into account while arriving at the exact amount of dues/debt payable by the defendants. Accordingly, pendentelite and future interest shall be calculated on the reduced amount. The official liquidator is entitled to receive Rs. 3 lakhs out of the amount lying with the loint Receiver/Registrar of this Tribunal, who is directed to release Rs. 3 lakhs in favour of the officiat liquidator attached with the High Court of Orissa at Cuttack for inviting the claims of the workers. The petition of the 75 workers of Bangalore Unit of Grapco Industries Limited is disposed of with the direction to approach the offlcial liquidator attached with the High Court of Orissa at Cuttack of the Companies (in liquidation) as and when he will invite the claims of the workers. The official liquidator after adjudication of claims is entitled to receive the amount Accordingly, the Charge Holder Bank is directed to keep some amount out of the sale proceeds lying with the Joint Receiver/Registrar of this Tribunal, so that as and when official liquidator adjudicates the claims of the workers, this is distributed in the same manner as provided in Section 326 of the Companies Act, 2013 (18 of 2013) or under any other law for the time being in force' Defendants are debarred the properties belonging from the defendants. from disposing, alienating or dealing with any of to them till the aforesaid decretal debt is recovered a.

Defendants are given a time of thirty days from the date of the Judgement/Final Order for repaying of the above mentioned dues, so intimated to them. In case the defendants fail to pay the dues within the above mentioned time, the applicant bank is entitled to recover its dues by sale of secured assets, if any. Applicant bank is also entitled to proceed against personal properties of the defendants (Both movable and immovable) and also proceed against the defendants personally to recover the dues in accordance with law, Let the Certificate of Recovery be drawn up by Ld. Registrar forthwith in terms of Judqement for issuance of the same against defendants in favour of the applicant bank under Section 19 (22) of the Recovery of Debts and Bankruptcy Act, 1993 and put up the same for issuance of the Certificate. Ld. Recovery Officer shall realize the amount as per the Recovery certificate from the defendants in accordance with law. Ld. Registrar of this Tribunal is directed to deliver recovery certificate in term of the flnal order/judgement for recovery of the sum against the defendants in favour of the Applicant Bank under Section 19 (22) of the Recovery of Debts due to the Bank and Financial Institutions Act, 1993 now known as Recovery of Debts and Bankruptcy Act, 1993. Accordingly, the Original Application being T.A. No. 828 of 2015 is allowed and stands disposed of. Copy of the Judgement/Final Order be upload in the Tribunal's !4ebsite. File is consigned to the Record Room.

(B)

(e) f ,."T:',i::rl"ri'illiirl'"Ji,i,.t"3",i'"",lilin"ffi"t$$dnilrTo l'f 4,ln.'zt*'^ ( ANIL KUMAR CHATURVEDI ) PRESIDING OFFICER.

Order Sheet (Continuation) Canara Bank Vs. Grapco Industries Ltd. & ors. through Official Liquidator case No. TA No. 828 of 2015 Order with signature office action with date and dated Signature of parties when Order pronounced (Vide separate sheets). In the result, T.A. No. 828 of 2015 is allowed with costs. lssue Recovery Certificate accordingly. 2'Kc;.r$1.: (A, K.Chaturvedi) Presiding Officer DRT-3,Kolkata t of 2t