FEDERAL BANK vs GHAN SHYAMBHAI PATEL on 9 October 2023

J U D G M E N T

1. The Original Application has been filed by the Applicant against the Defendants before Ld. DRT-II, Mumbai, which stands transferred to this Tribunal as per the Govt. Notification dated 26/09/2016 and registered as TA No. 1649/2016. The OA has been filed by the Applicant for recovery of following amount:

a. Rs.9,69,26,838.80 (Rupees Nine Crores Sixty Nine Lakhs Twenty Six Thousand Eight Hundred Thirty Eight and Paise Eighty only) from Defendant No.1, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

b. Rs.6,92,33,456.29 (Rupees Six Crores Ninety Two Lakhs Thirty Three Thousand Four Hundred Fifty Six and Paise Twenty Nine Only) from Defendant No.2, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

c. Rs.6,92,33,456.29 (Rupees Six Crores Ninety Two Lakhs Thirty Three Thousand Four Hundred Fifty Six and Paise Twenty Nine Only) from Defendant No.3, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

d. Rs.9,70,58,075.36 (Rupees Nine Crores Seventy Lakhs Fifty Eight Thousand Seventy Five and Paise Thirty Six Only) from Defendant No.4, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

e. Rs.6,93,27,195/- (Rupees Six Crores Ninety Three Lakhs Twenty Seven Thousand One Hundred Ninety Five Only) from Defendant No.5 , 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

f. Rs.6,93,50,631.78 (Rupees Six Crores Ninety Three Lakhs Fifty Thousand Six Hundred Thirty One and Paise Seventy Eight Only) from Defendant No.6, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

g. Rs.8,31,92,636/- (Rupees Eight Crores Thirty One Lakhs Ninety Two Thousand Six Hundred Thirty Six Only) from Defendant No.7, 10 & 11, with further interest at the rate of 16.50 % per annum monthly rest from 18/01/2012 till realization.

h. Rs.6,93,27,196.68 (Rupees Six Crores Ninety Three Lakhs Twenty Seven Thousand One Hundred Ninety Six and Paise Sixty Eight Only) from Defendant No.8, 10 & 11, with further interest at the rate of 16.50 % per annum monthly rest from 18/01/2012 till realization.

i. Rs.6,39,16,874.72 (Rupees Six Crores Thirty Ninety Lakhs Sixteen Thousand Eight Hundred Seventy Four and Paise Seventy Two Only) from Defendant No.9, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

j. Rs.68,06,97,627.95 (Rupees Sixty Eight Crores Six Lakhs Ninety Seven Thousand Six Hundred Twenty Seven and paise Ninety Five Only) from Defendant No.10 & 11 with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

2. Facts as succinctly set out in the present OA/TA are that Defendant No.10 is the Private Limited Company engaged in the business of manufacturing of castor oil and derivatives etc. Defendant No.1 to 9 are the Village Level Aggregator who are authorised by group of farmers on their behalf to avail post harvest loan facilities from the Applicant at the instance of Defendant No.10. Defendant No.11 to 13 are the Directors of Defendant No. 10 Company who stood as guarantors of the facilities availed by the Applicant. Defendant No.11 & 12 are the brothers and Defendant No. 13 is a close relative of Defendant No.11 & 12 and are residing in the same address.

3. It is stated that Defendant No.10 proposed a scheme for post harvest short term loans and approached the Applicant bank for providing financial assistance to the total sum of Rs.50 Crores. Defendant No.10 through Defendant No.11 & 13 who are its directors represented to the Applicant that there were number of agriculturists in command and allotted to the Defendant No.10 by the state government to sell their agricultural produce to the Defendant No.10 and procure castor seeds from them through the VLAs. Pursuant to the request of the Defendants, Applicant bank sanctioned a demand loan aggregating to Rs. 50 Crores on 04/08/2009 in account of “Biotor Industries Limited – Farmers Receivable Account” operated by Defendant No. 10. Thereafter, at the request of Defendant No.10, the said amounts were transferred from Defendant No.10 account to tranche through RTGS to the accounts of Defendant No.1 to 9. The details of the amounts transferred are as under: Sr. No. Name Amount (in Crores)

1. Patel Ghan Shyambhi Bhogilal 7.00

2. Patel Thakorbhai Nanalal 5.00

3. Vasava Shantilal Kabhaybhai 5.00

4. Vasava Ramanbhai Bhatubhai 7.00

5. Vasava Maehshbai Jasubhai 5.00

6. Vasava Rameshbhai Gulshanbhai 5.00

7. Maheshwari Rajesh Ghanshyambhai 6.00

8. Vasava Rajubhai Laxmanbhai 5.00

9. Patel Ketanbhai Ratibhai 5.00

Total 50.00

4. In consideration of sanction of the said facility, Defendants executed loaning and security documents on 01.09.2009:

a. Board resolution of Defendant No.10.

b. Management agency agreement executed by Defendant No.1.

c. Agreement for loan and hypothecation of receivables executed by Defendant No.1 to 9 with Defendant No.10 as confirming party.

d. Tripartite agreement executed by Defendant No.10.

e. Demand promissory note executed by Defendant no.1 to 9.

f. Security Delivery letter

g. Demand promissory note executed by Defendant No.1 to 10

h. Security delivery letter

i. Undertaking by Defendant No.10.

j. Agreement of guarantee executed by Defendant No.10.

k. Agreement of guarantee executed by Defendant No.11 to 13 guaranteeing the payment of the loan amount with interest and other charges.

l. Request for fund transfer through RTGS to the account of Defendant No.1 to 9 by Defendant No.10.

m. Receipts issued by Defendant No.1 to 9 submitted to the Bank by Defendant No.10.

5. It is also stated that as per the Management Agency Agreement, the Defendant No.10 among other terms inter alia agreed:

(i) To assist the Bank in the administration of the scheme.

(ii) To identify the farmers who have sold/agreed to sell the agricultural produce to the Defendant No.10 and who would be eligible for financial assistance under the scheme and also select the farmers based on their credentials and credit needs.

(iii) To render necessary help to the farmers in furnishing the information and other documents to the Bank.

(iv) To monitor the accounts of individual farmers to the satisfaction of the Bank, and ensure collection and remittance of the amount payable in respect of supply of castor seeds and directly deposits the payments in respect of the receivables to the applicant without any adjustment/set off/lien or deduction for appropriation towards any other dues to the Bank and to hold the receivables in trust for the Bank till the same is paid to the Bank.

(v) To indemnify and keep indemnified the bank against all losses, damages and costs incurred by the Bank as a result of any negligence or breach on the part of 10th Defendant in carrying out any of its obligations under the aforesaid agreement.

(vi) As per Schedule 1, the farmers shall be in the command area of the 10th Defendant who are given with a grower code by the 10th defendant and while giving the grower code as above the 10th defendant shall possess the details of the farmer.

6. It is also stated that as per the Agreement for Loan and Hypothecation of Receivables executed by the Defendant No.1 to 9, they have hypothecated in favour of the applicant the amount receivables in respect of the sale of the agricultural produce. The Defendant No.10 is a confirming party to this agreement and as per clause 10 of the said agreement, the Applicant is authorized to receive the said receivables from the Defendant No.10.

7. It is further stated that as per the tripartite agreement executed by Defendant No.1 to 9 and Defendant No.10 in favour of the Applicant, it has been specified that the farmers have sold the crops cultivated by them to the Defendant No.10 and the Defendant No.10 had issued receipts having received the produce. As per the agreed terms, the Defendant No.10, shall determine and disburse the actual quantum of loans to the farmers through a separate current account “Biotor Industries Limited – Farmers Receivables account” opened/to be opened and operated by the Defendant No.10 and payment shall be made through RTGS. It is further specified in the agreement that the Applicant shall transfer the loan

amount to the account of the Defendant No.1 to 9 (VLAs) as per the details furnished by Defendant No.10. Accordingly, the Defendant No.10 opened account in the name and style of “Biotor Industries Limited – Farmers Receivable account” with the Applicant and Applicant credited the entire loan amount of Rs.50 crores to the said account and thereafter as directed by the Defendant No.10, the amount were transferred to the account to Defendant No.1 to 9 through RTGS as specified in above para 4 of the final order.

8. It is further stated as security for having accepted the loan amount, the Defendant No.10 executed Demand Promissory Note dated 01.09.2009 along with Security Delivery Letters.

9. However, the Defendants committed defaults in repayment of the dues of the Applicant thus, the account was turned into the NPA on 31.03.2010.

10. It is further stated that Defendant No.10 availed credit facilities from other financial institutions. Accordingly, a reference was made for Corporate Debt Restructuring (CDR) which was not materialized. Though the Defendant No.10 has approached High Court of Mumbai, the core group of CDR has rejected the proposal for restructuring due to various reasons. The reference made to the Board of Industrial Finance and Reconstruction (BIFR) also stands rejected.

11. It is further stated that the Defendant No.10 on receipt of the funds has issued 8 cheques in favour of the Applicant and when the cheques were presented for payment, the same were not honoured and hence, the Applicant initiated proceedings under the NI Act against the Defendant No.10 to 13. The said proceedings were also pending. Defendant No.10 to 13 had filed criminal revision for quashing the complaint and observed that Defendants cannot claim the protection applicable to the interest of the guarantor because as per the agreement the Defendants were not only a middlemen but beneficiary of the loan. Thus, the same was dismissed by the session’s court.

12. It is further stated that all the efforts for getting the liabilities turned to be futile and hence, the Applicant issued recall notice dated 03.10.2011 to the Defendants in terms of the Management Agency Agreement/Tripartite Agreement on 03.10.2011 through its Counsel. The Defendant No.10 to 13 have jointly replied the said notice raising untenable contentions and denied any transactions with the Applicant, severally allegations were raised of commission of fraud and opening of fictious accounts though Defendant No.10 was legally bound to provide the details of the farmers. Thus, the Applicant has let with no other option except to approach this Tribunal. Hence, the present OA.

13. Notices were issued to the Defendants. Despite service, none appeared for the Defendant No.1 to 9 nor filed the WS thus, they were proceeded ex-parte vide order dated 16/06/2023.

14. Record reveals that during the pendency of the OA, the Defendant No.10 Company was under liquidation in pursuance of order dated 01.01.2018 passed by the Ld. NCLT in Case No.1514/IBC/NCLT/MB/MAH/2017, and Ld. NCLT appointed Mr. Sanjay Kumar Agarwal as a Liquidator in respect of the

Company (in Liqn.). Despite service, none appeared for the liquidator i.e. Defendant No.10 nor filed any status report.

15. Record further reveals that during the pendency of the OA, the IRP proceeding has been initiated against the Defendant No.11 and Ld. NCLT, vide order dated 06.03.2023 in CP No. (IB/960(MB) 2021, appointed Mr. Ashok Kumar Golechha as Interim Resolution Professional to conduct the Insolvency Resolution Process of the Defendant No.11, thus, Mr. Ashok Kumar Golechha is impleaded as a Defendant No.11 in place of Sh. Rajesh M Kapadia (erstwhile Defendant No.11). Despite opportunities, no status report has been filed by the Defendant No.11.

16. It is further reveals from the record that Defendant No.12 & 13 were expired and the Applicant failed to trace out the legal heirs and representatives of the deceased Defendant No.12 & 13 thus, this Tribunal vide order dated 15.11.2022 in Interim Application No.1381/2022, deleted the name of these Defendants from the present matter.

17. The Applicant Bank has produced all the Original Loan documents and other relevant documents along with their Claim Affidavit filed on 05.03.2014 through Ajayan V. V., Chief Manager of the Applicant Bank.

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

19. The witness of the Applicant Bank has fully corroborated the averments made in the OA/TA, even otherwise the whole case of the Applicant Bank is based on documents and the witness has duly proved all these documents as against the Defendant No.1 to 11. In my view there is no question of disbelieving the evidence led by the Applicant Bank and the Applicant Bank has proved its case beyond reasonable doubt. The liability of the Defendant No.1 to 9 is jointly and severally for their respective dues with the Defendant No.10 &

11.

20. In the light of above discussions, the Original Application filed by the Applicant Bank deserves to be allowed against the Defendant No.1 to 10 & 11.

O R D E R

(i) I allow the present O.A. and direct the Defendant No. 1 to 10 & 11, to pay to the Applicant, within a period of 60 days, their respective sums as mentioned herein under: a. Rs.9,69,26,838.80 (Rupees Nine Crore Sixty Nine Lakh Twenty Six Thousand Eight Hundred Thirty Eight and Paise Eighty only) by the Defendant No.1, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization. b. Rs.6,92,33,456.29 (Rupees Six Crore Ninety Two Lakh Thirty Three Thousand Four Hundred Fifty Six and Paise Twenty Nine Only) by the Defendant No.2, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization. c. Rs.6,92,33,456.29 (Rupees Six Crore Ninety Two Lakh Thirty Three Thousand Four Hundred Fifty Six and Paise

Twenty Nine Only) by the Defendant No.3, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization. d. Rs.9,70,58,075.36 (Rupees Nine Crore Seventy Lakh Fifty Eight Thousand Seventy Five and Paise Thirty Six Only) by the Defendant No.4, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization. e. Rs.6,93,27,195/- (Rupees Six Crore Ninety Three Lakh Twenty Seven Thousand One Hundred Ninety Five Only) by the Defendant No.5, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization. f. Rs.6,93,50,631.78 (Rupees Six Crore Ninety Three Lakh Fifty Thousand Six Hundred Thirty One and Paise Seventy Eight Only) by the Defendant No.6, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization. g. Rs.8,31,92,636/- (Rupees Eight Crore Thirty One Lakh Ninety Two Thousand Six Hundred Thirty Six Only) by the Defendant No.7, 10 & 11, with further interest at the rate of 16.50 % per annum monthly rest from 18/01/2012 till realization. h. Rs.6,93,27,196.68 (Rupees Six Crore Ninety Three Lakh Twenty Seven Thousand One Hundred Ninety Six and Paise Sixty Eight Only) by the Defendant No.8, 10 & 11, with further interest at the rate of 16.50 % per annum monthly rest from 18/01/2012 till realization. i. Rs.6,39,16,874.72 (Rupees Six Crore Thirty Nine Lakh Sixteen Thousand Eight Hundred Seventy Four and Paise Seventy Two Only) by the Defendant No.9, 10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization. j. Rs.68,06,97,627.95 (Rupees Sixty Eight Crore Six Lakh Ninety Seven Thousand Six Hundred Twenty Seven and paise Ninety Five Only) by Defendant No.10 & 11, with further interest at the rate of 16.50% per annum monthly rest from 18/01/2012 till realization.

(Aggregating to sum of Rs.136,82,63,988.87 (Rupees One Hundred Thirty Six Crore Eighty Two Lakh Sixty Three Thousand Nine Hundred Eighty Eight and paise Eighty Seven only), alongwith interest as mentioned above).

(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 the personal moveable and immoveable assets of the Defendant No. 1 to 9.

(iii) Defendant No. 1 to 9 are hereby directed not to deal with their properties till further direction of Ld. Recovery Officer.

(iv) The Liquidator i.e. Defendant No.10 is hereby directed to file their status report before the Ld. Recovery Officer of this Tribunal.

(v) The Interim Resolution Professional i.e. Defendant No.11 is also hereby directed to file status report before the Ld. Recovery Officer of this Tribunal.

(vi) Defendant No. 1 to 10 & 11 shall also pay the cost and expenses of the OA.

(vii) 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) Date : 09.10.2023

Presiding Officer, DRT-1, Mumbai.

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