IDBI BANK vs OSIAN CONNOISSEURS OF ART PRIVATE LIMITED on 15 December 2023

J U D G M E N T

1. The Original Application has been filed by the Applicant before the Ld. DRT-II, Mumbai, which stands transferred to this Tribunal on 17.02.2017 as per Govt. Notification dated 26.09.2016 and registered as TA No.1633/2016. The OA has been filed for recovery of the following amount from the Defendant No.1 & 2:

a. Rs.15,19,93,952/- (Rupees Fifteen Crores Nineteen Lakhs Ninety Three Thousand Nine Hundred Fifty Two only) in Working Capital with further interest thereon at contractual rates of BPLR+100bps with monthly rests from the date of filing of the present OA till its realization. b. Rs.35,52,726/- (Rupees Thirty Five Lakhs Fifty Two Thousand Seven Hundred Twenty Six only) in Rupee Term Loan, with further interest at contractual rate @15.25% p.a. from 02.08.2013 till its realization. c. Rs.18,70,47,697.41 (Rupees Eighteen Crores Seventy Lakh Forty Seven Thousand Six Hundred Ninety Seven and paise Forty One only) in Short Term Loan, with further interest at the contractual rates of BPLR + 200bps with monthly rests from the date of filing of the present OA till its realization. d. Rs.3,27,593/- (Rupees Three Lakh Twenty Seven Thousand Five Hundred Ninety Three only) in respect of Expense Account, with further interest at contractual rates of BPLR with monthly rests from the date of filing of the present OA till its realization.

2. Facts as succinctly set out in the OA are that the Defendant No.1 is the principal Borrower and Defendant No.2 are sued as guarantor. The Defendant No.3 to 5 are claiming their charge in respect of certain assets of the Defendant No.1 thus, they are jointed as a parties in the present OA. The Defendant No.3 to 5 filed their respective Original Applications i.e. OA No.167/2010 filed by Defendant No.3, OA No.115/2011 filed by Defendant No.4 and OA No.105/2010 filed by Defendant No.5 before this Tribunal. It is stated that the Defendant No.5 has settled their claim and has relinquished its securities therefore, the OA filed by Defendant No.5 was disposed off by this Tribunal and no recovery certificate was issued.

3. It is stated that the Applicant granted three facilities to the Defendant No.1 i.e. (i) Working Capital Facility of Rs.1500 lakhs

(ii) Rupee Term Loan of Rs.3500 lakhs and (iii) Short Term Loan of Rs.1000 lakhs. WORKING CAPITAL FACILITIES OF RS.1500 LAKH.

4. It is stated that on 10.03.2006, the Defendant No.1 made a proposal to grant financial assistance to the Applicant. By this proposal, the Defendant No.1 recorded that it was enjoying Working Capital Facility of Rs.500 lakh from Defendant No.3 which was enhanced to Rs.1500 lakh. It was further recorded that total working capital requirement for 2006-07 was Rs.3000 lakh, out of which Defendant No.3 has the capacity to fund 50% and hence, requested the Applicant to participate to fund the balance 50% in Multiple Banking.

5. On 04.05.2006, the Applicant sanctioned the Working Capital Facility by issuing the sanction letter. By the said sanction, the Applicant conveyed its approval, to grant Working Capital Facility not exceeding Rs.1000 lakh subject to the terms and conditions as contained therein and also the terms and conditions as set out in appendix appended to the said sanction letter. On 12.05.2006, the Defendant No.1 signed and executed the Facilities Agreement under which the Defendant No.1 agreed all the terms and conditions mentioned therein.

6. It is further stated that aforesaid loan was secured by a first charge by way of hypothecation of goods and assets in favour of the Applicant of all the movable of Defendant No.1 and entire raw materials, finished and semi-finished goods, stocks in process, consumable stores, spares, packing materials, entire book debts and bills covering dispatch of goods and receivable etc. Further the Defendant No.1 signed and executed Agreement of Hypothecation of goods and assets dated 12.05.2006.

7. In consideration of the Applicant having agreed grant the Working Capital Facilities of Rs.1000 lakhs to the Defendant No.1, the Defendant No.2 executed unconditional and irrevocable Deed of Guarantee dated 12.05.2006 in favour of the Applicant. The Defendant No.1 & 2 also signed and executed an undertaking for non-disposal of shareholding. Thereafter, on 14.05.2007, the Defendant No.1 signed and executed Indenture of Mortgage in favour of the Applicant which was duly registered with the office of Sub-Registrar of Assurance at Mumbai and charged created by the Defendant No.1 in favour of the Applicant was duly registered by the Registrar of Companies, Maharashtra. Further, on

15.06.2007, the Defendant addressed letter to the Applicant and forwarded the original copy of the Indenture of Mortgage. RUPEE TERM LOAN OF RS.3500 LAKH

8. It is further stated that on 10.03.2006, the Defendant No.1 made a proposal for grant of financial assistance. By the said proposal, the Defendant No.1 recorded that the total cost of acquisition of the theatre will be about Rs.3050 lakhs including stamp duty and registration charges. The Defendant No.1 requested the Applicant to consider granting Term Loan of Rs.4000 lakhs. On 15.06.2006, the Applicant issued Letter of Intent and conveyed its approval, its principal, to Defendant No.1. By the said Second Sanction letter, the Applicant conveyed sanction to Defendant No.1 with respect to the Rupee Term Loan not exceeding Rs.3500 lakh subject to the general terms and conditions and other conditions as set out in Rupee Term Loan Agreement and Appendix-I, II and III to the Second Sanction Letter. Defendant No.1 duly accepted the terms and conditions of the said sanction letter.

9. Pursuant to the sanction of the Rupee Term Loan, on 23.06.2006, the Defendant No.1 entered into a Rupee Term Loan Agreement and agreed all the terms and conditions of the said agreement. On 29.06.2006, the Applicant by its letter addressed to the Defendant No.1 and modified some of the clauses of the Rupee Term Loan Agreement which was duly accepted by the Defendant No.1. Thereafter, on 31.05.2007, the Applicant addressed letter to

Defendant No.1 and further modified the Rupee Term Loan Agreement, which was duly accepted by the Defendant No.1.

10. In consideration of the Applicant having agreed grant the Rupee Term Loan of Rs.3500 lakh to Defendant No.1, the Defendant No.2 executed Deed of Guarantee dated 23.06.2006 in favour of the Applicant. Defendant No.1 & 2 signed and executed an undertaking for non-disposal of shareholding. Further, on 06.07.2007, the Defendant No.1 signed and executed Indenture of Mortgage which was duly registered with the office of Sub- Registrar of Assurances at Mumbai and charged created by the Defendant No.1 in favour of the Applicant was duly registered by the Registrar of Companies, Maharashtra. SHORT TERM LOAN OF RS.1500 LAKH

11. It is further stated that the Defendant No.1 made a proposal to the Applicant for grant of further financial assistance. On 17.11.2008, the Applicant issued Letter of Intent and conveyed its approval, its principal, to Defendant No.1. By the Third Sanction letter the Applicant conveyed its sanction to grant to Defendant No.1 Short Term Loan not exceeding Rs.1500 lakh subject to the terms and conditions contained in the said sanction letter which were duly accepted by the Defendant No.1.

12. Pursuant to the sanction of the Short Term Loan, on 20.11.2008, the Defendant No.1 entered into a Loan Agreement and agreed all the terms and conditions of the said agreement. On 20.11.2008, the

Defendant No.1 signed and executed the Demand Promissory Note and agreed to pay the said loan with interest @14.50% p.a. with monthly rests.

13. It is further stated that aforesaid loan was secured by a first charge by way of hypothecation of goods and assets in favour of the Applicant. Further the Defendant No.1 signed and executed Agreement of Hypothecation of goods and assets dated 20.11.2008 and charged created by the Defendant No.1 in favour of the Applicant was duly registered with office of the Registrar of Companies, Maharashtra.

14. In consideration of the Applicant having agreed grant the Short Term Loan of Rs.1500 lakh to Defendant No.1, the Defendant No.2 executed Guarantee Agreement dated 20.11.2008. The Defendant No.1 also signed and executed Power of Attorney dated 20.11.2008 for creation of mortgage and charge by deposit of title deeds as security for the loan and interest, compound interest etc. in favour of the Applicant. The Defendant No.1 signed, executed and handed over the share transfer form for transferring 2 lakh shares bearing distinctive numbers from 0240021 to 0440020 certificate No.96.

15. It is also stated that on 25.03.2009, the Defendant No.1 addressed letter to the Applicant and requested for restructure the loan. On 10.07.2009, the Applicant addressed letter to Defendant No.1 and partly considered the request of the Defendant No.1. The

Applicant restructured the STL on the terms and conditions recorded therein as also in Appendix thereto. Rs.280 lakh towards STL principal and Rs.220 lakh towards overdue interest to be paid on or before 15.07.2009. The remaining outstanding STL of Rs.1220 lakh shall be repayable in 6 EMIs of Rs.203.4 lakh each commencing from 01.10.2009 to 01.03.2010.

16. However, the Defendant No.1 failed and neglected to repay the principal and payment of interest, etc. to the Applicant. Therefore, the Applicant issued recall notice dated 18.10.2010 and called upon the Defendant No.1 to make the payment of the outstanding dues. Further, recall notice dated 08.09.2010 issued to the Defendant No.2 and called upon him to pay the outstanding dues. Despite receipt of the said notices, the Defendant No.1 & 2 failed to pay the dues.

17. It is further stated that on 27.12.2010, Smt. Hema Thakur (DGM) of the Applicant acting as the true and lawful attorney of Defendant No.1, delivered to and deposited with Smt. Smita Kuber (DGM), the title deeds with intent to create security by way of mortgage by deposit of title deeds on Defendant No.1’s immovable properties know as Minerva theatre situated at 186, Dr. Dadasaheb Bhadkamkar Marg, Mumbai-400007 together with all buildings and structures thereon and all plant and machinery to secure the due repayment, discharge and redemption by Defendant No.1 to the Applicant its short term loan of Rs.1500 lakh together with interest.

18. It is further stated that on 05.02.2011, the Applicant addressed letter to Defendant No.1 and requested the Defendant No.1 to pay the stamp duty charges of Rs.3,06,804/- which was paid by the Applicant on the Memorandum of equitable mortgage. On 09.02.2011 Defendant No.1 by its letter informed that it was working on some plans so that the account of the Applicant is regularized at the earliest and further requested to withdrawal the recall notices. Thereafter, on 25.02.2011, the Applicant issued notice to Defendant No.1, the Applicant withdraw its earlier recall notices and further called upon the Defendant No.1 to make the payment of the outstanding dues as per Annexures III & IV thereto. On 03.03.2011, the Applicant again issued letter to Defendant No.1 and recorded that there was some typographical error in Annexure III as stated therein. The Annexure II at page 11 of the said letters dated 25.02.2011 was substituted with the corrected/revised Annexure sent with the letter dated 03.03.2011. Further, on 15.03.2011, the Memorandum of Understanding was made and entered into between Defendant No.1; AAP Minerva Builtcon Private Limited (Purchaser) and the Applicant. Pursuant to which the Defendant No.1 agreed to sell to the Purchaser and the Purchaser agreed to purchase from Defendant No.1 the Minerva property at or for the price of Rs.71 crore and upon the terms and conditions recorded therein. On 18.03.2011, the Applicant also issued notice to the Defendant No.2 invoking his guarantee and called upon him to make the payment of the outstanding dues but neither any response nor any payment has been received. On 25.03.2011, the Escrow Agreement was made and entered into between Defendant No.1; AAP Minerva Builtcon Private Limited (Purchaser) and the Applicant. The Escrow Agreement which was in line with the MOU dated 15.03.2011.

19. It is further stated that on 15.12.2011, the Applicant issued notice under Section 13(2) of the SARFAESI Act, 2002 and called upon the Defendant No.1 to pay the outstanding dues but the Defendant No.1 failed to pay the dues.

20. It is also stated that the Applicant have taken steps/measures under the SARFAESI Act, and have attempted to sale of the secured assets on 15.09.2012 and 07.11.2012 but no bids were received. Further, the secured assets were put to public auction vide notice dated 22.02.2013 and auction was scheduled on 25.03.2013. It is stated that as previous both public auctions held were unsuccessful due to wants of bids therefore, the Applicant as per the recent amendments in the SARFAESI Act, participated in the bid process for purchase of the secured assets at the reserve price of Rs.5508 lakhs. Since no other bidder had participated in the auction sale, the authorized officer confirmed the sale in favour of the Applicant. Accordingly, the Applicant deposited the amounts on 26.03.2013 towards the sale consideration and the amount has been appropriated after defraying the expenses towards the outstanding due under the Rupee Term Loan of Rs.35 crores. Thus, it is stated that the total outstanding amount as on

01.08.2013 is Rs.43,97,93,776.41/- after adjusting the amount received by sale of secured assets. Hence, the present OA.

21. Notices were issued to the Defendants. Defendant No.1 to 3 put their appearance through counsel. The Defendant No.1 & 2 filed their WS however, despite opportunities, no CAOD has been filed on their behalf thus, right to file the CAOD was forfeited vide order dated 19.04.2017. None appeared for the Defendant No.4 & 5.

22. During the pendency of the OA, it was informed by the Applicant that the Ld. NCLT vide order dated 09.12.2021 initiated Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor and declared Mr. Girish Juneja as Interim Resolution Professional. In view of the fact that the Defendant No.1 is undergoing the Corporate Insolvency Resolution Process, there is moratorium period against the Defendant No.1 therefore, the proceeding qua the Defendant No.1 shall remain in abeyance.

23. In the written statement filed by the Defendant No.2, the Defendant No.2 has denied his liability and execution of the loan documents however, no specific objection has been raised by the Defendant No.2. He has raised objection that the Applicant has concealed the various material facts before this Tribunal; and complete statement of account has not been filed; further the OA has not been filed by the authorized officer.

24. The Applicant has produced all the Original Loan documents and other relevant documents along with their Claim Affidavit filed through Sh. Sanjay Parwani, Manager of the Applicant.

25. I have heard the Ld. Counsel for the Applicant and Defendant No.2 & 3 and perused the record.

26. Now hereinafter, I would like to decide the objection raised by the Defendant No.2 in his written statement as well as written submission.

27. The first objection raised by the Defendant No.2 is that the Applicant has not approached this Tribunal with clean hands. However, the Defendant No.2 has not explained which material fact required for the just decision of the case has been twisted or suppressed by the Applicant. I have gone through the O.A. It contains all the material facts required for the just decision of the case. The objection raised by the Defendant No.2 is devoid of force hence, rejected.

28. The next objection raised by the Defendant No.2 is that the Applicant has not filed the complete statement of account.

Record reveals that the Applicant has filed the Statement of Accounts in respect of all the loan accounts as (Exhibit MM to Exhibit PP of OA) alongwith the particulars of claim. The Defendant No.2 has failed to point out any single entry, which is incorrect in the statement of account. Therefore, the objection raised by the Defendant No.2 is baseless hence, rejected.

29. The next objection raised by the Defendant No.2 is that the OA has not been filed by a duly authorized person.

The present OA has been signed and verified by Ajay Wanjari, Assistant General Manager of the Applicant, who was duly authorized by the Applicant to sign, verify and institute the present OA. Even otherwise, the OA cannot be dismissed on this technical ground as held by Hon’ble Supreme Court in UBI Vs Naresh Kumar & Ors., AIR 1997 SC 3. Therefore, the objection raised by the Defendant No.2 is rejected.

30. The Defendant No.2 in the written statement also denied execution of the loaning and security documents.

Record reveals that 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 such as Exhibit A to Exhibit PP. The Applicant has also proved the Guarantee Agreements dated 12.05.2006 (Exhibit “I”), 23.06.2006 (Exhibit “Q”) and 20.11.2008 (Exhibit “Z”) which are duly signed and executed by the Defendant No.2. 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 Defendant No.1 & 2.

31. Since in terms of the order of the Ld. NCLT, the moratorium period is continue against the Defendant No.1 therefore, proceeding qua the Defendant No.1 shall remain in abeyance. The Defendant No.2

being a Guarantor is liable to pay the claim amount of the Applicant. The Defendant No.3 to 5 are the proforma Defendants and no relief has been claimed against these Defendants.

32. In view of the above discussions, the present Original Application deserves to be allowed against the Defendant No.2.

O R D E R

(i) The present OA is hereby allowed and Defendant No.2 is hereby directed to pay to the Applicant, within a period of 60 days, the following sums: a. Rs.15,19,93,952/- (Rupees Fifteen Crores Nineteen Lakhs Ninety Three Thousand Nine Hundred Fifty Two only) in Working Capital with further interest thereon at contractual rates with monthly rests from the date of filing of the present OA till its realization. b. Rs.35,52,726/- (Rupees Thirty Five Lakhs Fifty Two Thousand Seven Hundred Twenty Six only) in Rupee Term Loan, with further interest at contractual rate @15.25% p.a. from 02.08.2013 till its realization. c. Rs.18,70,47,697.41 (Rupees Eighteen Crores Seventy Lakh Forty Seven Thousand Six Hundred Ninety Seven and paise Forty One only) in Short Term Loan, with further interest at the contractual rates with monthly rests from the date of filing of the present OA till its realization. d. Rs.3,27,593/- (Rupees Three Lakh Twenty Seven Thousand Five Hundred Ninety Three only) in respect of Expense Account, with further interest at the contractual rates with monthly rests from the date of filing of the present OA till its realization.

(ii) Failing which the aforesaid amount shall be recovered from the sale of personal moveable and immoveable assets of the Defendant No.2.

(iii) Defendant no.2 is hereby directed not to deal with his properties till the further direction of the Ld. Recovery Officer of this Tribunal.

(iv) The Defendant No.2 shall also pay the cost and expenses of the present OA.

(v) 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: 15.12.2023

Presiding Officer,

DRT-1, Mumbai