KOTAK MAHINDRA BANK LIMITED vs INDAGE VINEYARDS PRIVATE LTD THROUGH THE OFFICIAL LIQUIDATOR on 30 January 2024

J U D G M E N T

1. The Original Application (O.A.) has been filed by the Applicant Bank against the Defendants before the Ld. DRT-II, Mumbai, which stands transferred to this Tribunal on 09.11.2016 as per Govt. Notification dated 26.09.2016. The OA has been filed for recovery of Rs.18,36,45,489,42 (Rupees Eighteen Crores Thirty Six Lakhs Forty Five Thousand Four Hundred Eighty Nine and paise Forty Two only) with further interest @24% p.a. upon the footing of compound interest on monthly basis from 04.01.2009 till repayment and/or realization.

2. Facts as succinctly set out in the OA are that the Defendant No.1, 4, 5 & 6 are Public Limited Companies interalia carrying business of manufacturing various types of wines. Defendant No.1 is the

Principal Borrower and Defendant No.2 & 3 are the Directors of the Defendant No.1 and also the Guarantor. Defendant No.4 to 6 are Group Companies of Defendant No.1 and jointed in their capacity as Corporate Guarantors. The Defendant No.4 also availed certain credit facilities repayment whereon was guaranteed by Defendant No.1, 4 and its guarantors and they failed to comply with their obligations therefore, a separate OA is being filed in connection therewith.

3. It is stated that the Defendant No.1 approached the Applicant seeking certain financial assistances. Pursuant thereof, the Applicant granted various financial facilities to Defendant No.1 such as Short Term Loan of Rs.1000 lakhs and Cash Credit (Crop Loan) of Rs.600 lakhs. In consideration thereof and to secure repayment of the amount due and payable by the Defendant No.1, the Applicant under and in respect of the aforesaid facilities and other moneys payable in respect thereof, the Defendants executed various documents and/or submitted various letters, inter alia, as follows:

(i) The Applicant issued sanction letter dated 21.07.2007; which was duly acknowledged by the Defendant No.1;

(ii) The Applicant issued sanction letters dated 03.03.2008, 13.03.2008, 13.02.2008 and 12.08.2008;

(iii) Defendant No.1 created mortgage of the Agriculture Land situated at Village Yedgaon (Bhorwadi), Taluka Junnar, District Pune and executed Deed of Mortgage dated 25.03.2008;

(iv) By Deed of Mortgage dated 16.01.2009, Defendant No.1 reconfirmed creation of mortgage of the Agriculture Land as mentioned above;

(v) In order to secure the financial facilities extended to Defendant No.1, the Defendant No.5 offered additional collateral security of Indage House, Plot No.82 of the Scheme 58, Worli Estate, Mumbai and executed Deed of Mortgage dated 20.03.2009;

(vi) Pursuant to the aforesaid, the Deed of Mortgage and Deed of Rectification both dated 24.06.2009 were duly executed and registered with the Sub-Registrar of Assurances, Narayangaon;

(vii) Defendant No.1 entered into Master Facility Agreement dated 10.09.2007 and Agreement for Loan and Hypothecation of Receivables dated 24.03.2008. The Applicant made disbursement of the sanctioned amounts in favour of the Defendant No.1 from time to time;

(viii) Defendant No.2, 3, 4, 5 & 6 also executed Deed of Guarantee dated 10.09.2007, 20.08.2008, 31.01.2009, 20.03.2009, 21.03.2009 and 30.03.2009 respectively.

4. It is stated that the Applicant forwarded a letter dated 08.12.2009 recalled the entire outstanding amount, apart from invoking the guarantees however, despite receipt thereof, failed and neglected to comply with the requisitions thereof. The Defendant No.1 also failed and neglected to file Annual Returns and Audited Accounts with the Registrar of Companies.

5. It is also stated that winding up Petition filed against the Defendant No.4 and Applicant took out a company application No.134 of 2010 in the said Company Petition No.477/2009 filed against the Defendant No.4. The said Company Petition alongwith various other Company Petitions filed against Defendant No.4 were taken up by the

Hon’ble High Court of Bombay for hearing and final disposal on 10.03.2010 and passed a detailed order for wound up against Defendant No.4 and directed the Liquidator to take possession of the properties of the Defendant No.4 however, at the request of the Defendant No.4 stayed the operation of the said order for a period of two weeks on conditions set out in the said order dated 19.03.2010. Defendant No.4 filed Appeal against the said order which is pending.

6. It is further stated that the Defendant No.1 forwarded a letter dated 06.01.2010 admitting having availed of the facilities of the aggregate amount of Rs.16 crores and falsely contended that some of the shares pledged by Defendant No.1 were sold by the Applicant and the sale proceeds thereof were appropriated against the outstanding principal and interest. Defendant No. 1 belatedly sought to seek details, though Defendant No.1 was all throughout aware of and had all the details. Defendant No.1 also falsely and dishonestly sought to allege that it was agreed by the Applicant that the Mortgage Deed in respect of Indage House would not be considered as security until NOC was received by Defendant No.1 from Consortium Bankers and SICOM Ltd for creating 2nd Charge. The Defendant No.1 also sought to contend that it had approached CDR Cell for complete restructuring of its liability and that CDR members had allowed the admission of the proposal and that therefore, it was not possible for Defendant No.1 to get any NOC for the securities. Defendant No.1 by the said letter sought time frame of 30 days to present to the Applicant detailed business plan and requested the Applicant to keep on hold any drastic actions like winding up etc. till such time. Defendant No.1 conveniently suppressed the fact that winding up petitions against it had already been admitted.

7. Thereafter, the Applicant forwarded a letter dated 02.02.2010, dealing with the contents of the said letter and placing on record the true and correct facts. In these circumstances, the Applicant has filed the present OA.

8. Notices were issued to the Defendants. Defendants put their appearance through counsel and filed the written statement. However, after 11.04.2018, no one appeared on behalf of the Defendants.

9. During the pendency of the OA, the Defendant No.1 Company has been ordered to be would up by the Hon’ble High Court of Bombay vide order dated 26.09.2014 in Company Petition No.198/2011 and appointed official liquidator for the Defendant No.1 Company. The Official Liquidator filed its written statement.

10. The Defendant No.4 Company is also ordered to be would up by the Hon’ble High Court vide order dated 19.03.2010 in Company Petition No.960/2009 and appointed Official Liquidator for the Defendant No.4 Company. The Official Liquidator filed its written statement.

11. The Official Liquidators of Defendant No.1 Company and Defendant No.4 Company, in their respective written statements have taken common grounds and stated that any claim/debts against the Company (in Liqns.) are to be proved by the Applicant and also the Applicant to claim the status of secured creditor to prove that a charge has been created in terms of the provisions of Section 125 of Companies Act, 1956 failing which it will be considered as an ordinary creditor.

12. In the written statement, the Defendant No.2, 3, 5 & 6 have denied each and every averments made in the OA however, specifically raised the following objections that:

(i) No NOC obtained from the consortium banks and the SICOM who already had a charge on the property i.e. Indage House, Plot No.82 of the Scheme 58, Worli Estate, Mumbai, therefore, the alleged mortgage is not a valid mortgage;

(ii) The alleged Master Facility Agreement and Deed of Guarantees are not property stamped;

(iii) The Applicant Bank has charged the exorbitant rate of interest.

13. In rejoinders to the written statements of Official Liquidators, the Applicant Bank denied all the allegations and produced the certificate of Registration of Mortgage (Exb.A in both the Rejoinders).

14. The Applicant has produced all the Original Loan documents and other relevant documents along with their Claim Affidavit filed through Harish Kumar Acharya, Vice-President of the Applicant.

15. I have heard the Ld. Counsel for the Applicant and perused the record.

16. Now hereinafter, I would like to decide the issue raised by the Official Liquidators as well as Defendant No.2, 3, 5 & 6 in their respective written statements.

17. The Official Liquidators of Defendant No.1 as well as Defendant No.4 Company has raised an objection that the Applicant may be directed to submit the documentary evidence in respect of the registration of

charges to establish their right over secured property of the borrower company in liquidation.

Record reveals that to secure the Financial Facilities, the Defendant No.1 Company (in Liqn). created mortgage of the Agriculture Land situated at Village Yedgaon (Bhorwadi), Taluka Junnar, District Pune and executed a Deed of Mortgage dated 25.03.2008. Further, the Defendant No.1 Company (in Liqn.) reconfirmed creation of mortgage and executed Deed of Mortgage dated 16.01.2009. Admittedly, the Applicant has placed on record the Certificate of Registration of Mortgage (Exb.A of Rejoinder to the Reply filed by Defendant No.1), in respect of mortgage/charge created on 16.01.2009 by Indage Vineyards Pvt. Ltd. in favour of the Applicant Bank. Therefore, the Applicant shall be considered as a “Secured Creditor” thus, objection of the Official Liquidator has no force hence, rejected.

18. (i) The Defendant No.2, 3, 5 & 6 have raised the first issue that no NOC obtained from the consortium banks and the SICOM who already had a charge on the property i.e. Indage House, Plot No.82 of the Scheme 58, Worli Estate, Mumbai, therefore, the alleged mortgage by the Defendant No.5 in favour of the Applicant Bank is not a valid mortgage.

Record reveals that at the time of creation of mortgage, the Defendant No.5 had confirmed that Defendant No.5 obtained necessary consent from concerned authorities/bodies to create the mortgage. The relevant clause 4 (ii) of the said Deed of Mortgage dated 20.03.2009, is reproduced herein below:

“Save and except the First Charge and encumbrances already created by the Mortgagor over the property to the extent of Rs.62,60 Crores for SBI, Rs.11.00 Crores for UCO Bank, Rs.30.00 Crores ICICI Bank, Rs.15.00 Crores for Barclays Bank and Rs.5.00 Crores for HSBC Bank Ltd., aggregating to Rs.123.60 Crorres, and Second Charge to the extent of Rs.25 crores for SICOM Ltd. the Mortgagor has not created any other charge, encumbrances, etc. over the mortgaged property described in Schedule F hereunder and the said property is free from all encumbrances, claims and demands of whatsoever nature and the mortgagor/confirming party have complied with all requirements, obtained necessary consent from concerned authorities/bodies to create this mortgage.” (emphasis provided)

Since the Defendant No.5 itself confirmed that it has complied with all requirements, obtained necessary consent from concerned authorities/bodies to create the mortgage therefore, the objection of the Defendants that no NOC obtained from the consortium banks and the SICOM who already had a charge on the mortgaged property, is an afterthought and having no force hence, declined.

(ii) The next objection raised by the Defendant No.2, 3, 5 & 6 is that the alleged Master Facility Agreement and Deed of Guarantees are not property stamped.

Record reveals that the Master Facility Agreement dated 10.09.2007, Deed of Guarantee dated 10.09.2007, Deed of Personal Guarantees dated 20.08.2008 are properly stamped. Even otherwise, as per clause 17 of the Deed of Corporate Guarantees dated 10.09.2007 executed by Defendant No.6 (Exb.42), Personal Guarantee executed by Defendant No.3 (Exb.49) Deed of Corporate

Guarantee dated 30.03.2009 executed by Defendant No.3 (Exb.52), Corporate Guarantee dated 20.03.2009 executed by Defendant No.5 (Exb.53), and clause 19 of the Personal Guarantee dated 20.08.2008 executed by Defendant No.2 & 3 (Exb.47), Personal Guarantee dated 20.03.2009 executed by Defendant No.2 (Exb.55), the guarantors agreed as follows: “The Guarantors agreed that notwithstanding any defect in or invalidation of the credit facilities and/or incomplete documents or writings, this guarantee shall be valid and operative and the Guarantors shall not be discharged from their liability hereunder except by performance of this guarantee….” (emphasis supplied)

Therefore, I find no merit in the objection raised by the Defendant No.2, 3, 5 & 6 hence, the same is hereby rejected.

(iii) The next objection raised by the Defendant No.2, 3, 5 & 6 is that the Applicant Bank has charged the exorbitant rate of interest.

I have gone through the record. As per the Sanction Letter dated 03.03.2008, the Borrower Company (In Liqn.) agreed for rate of interest, as under: “Minimum 14.00% p.a. Floating over the tenure of the facility. The rate of interest has been arrived at on the basis of the Bank’s Benchmark Prime Lending Rate (PLR) Less 2.50%. Currently the Bank’s Benchmark PLR is 16.50%. The Bank shall be entitled to vary/change the rate (including any change as may be directed by Reserve Bank of India and/or any other regulatory/statutory body) from time to time or method of computation of such rate of discounting or to charge an additional or penal rate by sending to the Borrower an intimation in that regard. Upon intimation of such change/variation in the Discounting rates Borrower shall be deemed to have consented to such change. The Borrower agrees/undertakes to pay Discounting charges at rates as may be revised from time to time. The Interest shall be debited to current account of the Borrower with the Bank on effective monthly basis.” (emphasis supplied)

Further, the Statement of Account reveals that the rate of interest is @13.75% p.a. As per the respective Guarantee Agreements executed by Defendant No.2, 3, 5 & 6, they have agreed for interest @18% p.a. Moreover, in para 26 of the Claim Affidavit of Applicant, the witness of the Applicant Bank has stated that the Defendant No.1 was required to repay the entire dues in accordance with the terms and conditions of such sanction letters and Agreements, and pay interest thereon at the rate of 13% and in case of default Penal Interest at the rate of 24% p.a. upon the footing of compound interest on monthly basis and other charges until payment/realization.

Accordingly, in the present OA, the Applicant Bank is claiming further interest @24% p.a. upon the footing of compound interest on monthly basis from 04.01.2009 till repayment and/or realization. The contract between the Applicant and the Defendants comes to an end. After the filing of OA, as per the provisions of section 19(20) of the Recovery of Debts and Bankruptcy Act, 1993, which is analogous to Section 34 of the CPC, the Tribunal/Court has discretion in awarding pendentelite and future interest. In the cases reported in State Bank of India vs. Sarathi Textiles & Ors. 2008(3) SCALE 409, C. K. Sansankan Vs. Dhanlakshmi Bank Ltd. 2009(2) D.R.T.C.

320 S.C. and Sardar Associates and Others Vs. Punjab & Sind Bank and others, AIR 2010 (SC) 218 it was held that it is the discretion of the court toward the pendentelite and future interest which has to be exercised fairly. I am also supported the view taken by Hon’ble Supreme Court in Central Bank of India Vs. Ravindra and others reported in 2001 SC page 3095. On the basis of the fore going discussion and considering the present fall in rate of interest, I am of the opinion that interest of justice will be served if pendentelite and future interest is awarded at the rate of 15% p.a. (simple) from the date of filing of the present OA till its realization.

19. The witness of the Applicant has fully corroborated the averments made in the OA, even otherwise the whole case of the Applicant is based on documents and the witness has duly proved all these documents as against the Defendants. In my view there is no question of disbelieving the evidence led by the Applicant and the Applicant has proved its case beyond reasonable doubt against Defendants.

20. In the light of above discussions, the Original Application filed by the Applicant deserves to be allowed against the Defendants.

O R D E R

(i) The present OA is hereby allowed and Defendant No.1 to 6 are hereby directed to pay to the Applicant Bank, within a period of 60 days, a sum of Rs.18,36,45,489,42 (Rupees Eighteen Crores Thirty Six Lakhs Forty Five Thousand Four Hundred Eighty Nine and paise Forty Two only) with further interest @15% p.a. (simple) from the date of filing of the present OA till its realization (after adjusting the amount, if any, recovered during the pendency of the OA).

(ii) Failing which the aforesaid amount shall be recovered from the sale of mortgaged properties, secured assets as well as other personal moveable and immoveable assets of the Defendant No.2, 3, 5 & 6.

(iii) Defendant No.2, 3, 5 & 6 are hereby directed not to deal with their properties/assets till further direction of the Ld. Recovery Officer.

(iv) The Official Liquidators of Defendant No.1 Company and Defendant No.4 Company are hereby directed to file their status report before the Ld. Recovery Officer of this Tribunal.

(v) Defendants shall also pay the cost and expenses of the OA.

(vi) Recovery Certificate be issued forthwith and be sent to the Recovery Officer of this Tribunal. Copy of this order be sent to the parties as per rules. File be consigned to record.

Place: Mumbai.

(Dr. Rekha G. Dhakar) Dated: 30.01.2024

Presiding Officer,

DRT-1, Mumbai

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