Asset Reconstruction Company (India) Limited vs M/s.Nestler limited on 30 December 2022

J U D G M E N T

1. The Original Application has been filed by the Applicant before the Ld. DRT-II, Mumbai on 12.03.2008, which stands transferred to this Tribunal on 18.01.2017 as per Govt. Notification dated 26.09.2016 and registered as TOA No.1644/2016. The OA has been filed for recovery of Rs.58,18,83,215/- (Rupees Fifty Eight Crores Eighteen Lakhs Eighty Three Thousand Two Hundred Fifteen only) from the Defendant No.1 to 5, together with future interest @15% p.a. quarterly rests from 01.01.2008 till its realization.

2. Facts as succinctly set out in the OA are that the original lender i.e. ICICI Bank assigned all its rights, title and interest in respect of the debts of the Defendants in favour of the Applicant by way of Assignment Agreement dated 30.06.2004. Further, the Karnataka Bank also assigned all its rights, title and interest in respect of the debts of Defendants in favour of the Applicant by way of Assignment Agreement dated 31.12.2004.

3. It is stated that the ICICI Bank and Karnataka Bank had granted financial assistance to Defendant No.1 Company. The Defendant No.1 is the principal borrower and carrying on business of manufacture of boilers and fabrication of effluent and water treatment plants. The Defendant No.2 to 4 are the Directors of the Defendant No.1 Company and also the guarantors. The Defendant No.5 is a public limited company who are the corporate guarantors and Defendant No.6 to 8 are sued in the capacity of pledger.

4. It is further stated that in or about April, 1997, the Defendant No.1 requested the Karnataka Bank Limited to grant various facility which was granted by the Karnataka Bank Limited against charge on fixed assets of the company and hypothecation of plant and machinery, book debts, personal guarantee of the Directors of the Defendant Company and other moveable assets of the Company. TERM LOAN-I

5. It is stated that the Term Loan-I agreement dated 02.09.1999 entered into between the Defendant No.1 together with Defendant No.2 & 3 and Karnataka Bank Limited. Hypothecation Agreement dated 02.09.1999 entered into between the Defendant No.1 and Karnataka Bank Limited; Guarantee Letter dated 02.09.1999 executed by Defendant No.2 & 3. Further, the Defendant No.1 to 3 duly acknowledged the debt by their Acknowledgment of Debt dated 19.07.2002 and 17.02.2003. TERM LOAN-II

6. It is stated that the Term Loan-I agreement dated 02.09.1999 entered into between the Defendant No.1 together with Defendant No.2 & 3 and Karnataka Bank Limited. Guarantee Letter dated 02.09.1999 executed by Defendant No.2 & 3. Further, the Acknowledgment of Debt dated 19.07.2002 acknowledged by the Defendant No.1 to 3 for a sum of Rs.300 lakhs in favour of the Karnataka Bank Limited. The Defendant No.1 to 3 further

acknowledged the debt of Rs.300 lakhs vide Acknowledgment of Debt dated 17.02.2003. OVERDRAFT FACILITY

7. It is stated that the Hypothecation Agreement dated 19.04.1997 entered into between the Defendant No.1 and Karnataka Bank Limited; Hypothecation Agreement of Goods and Book Debts dated 06.03.1999 entered into between the Defendant No.1 and Karnataka Bank Limited. Hypothecation Agreement dated 28.06.1999 entered into between the Defendant No.1 and Karnataka Bank Limited.

8. It is further stated that in or about July, 2000, the Defendant No.1 approached the Karnataka Bank Limited for renewal/extension of overdraft facility from Rs.550 lakhs to Rs.900 lakhs which was sanctioned by the Karnataka Bank Limited vide its sanction letter dated 18.07.2000. The Defendant No.1 executed the various loaning and security documents on 20.07.2000 which includes Demand Promissory Note; Hypothecation Agreement; Hypothecation of Goods and Book Debts; Respective Personal Guarantee executed by Defendant No.2 and 3. Further, the Defendant No.1 to 3 acknowledged the Debt of Rs.900 lakhs on 17.02.2003.

9. It is further stated that at the request of the Defendant No.1, the Karnataka Bank vide its sanction letter dated 27.11.2001 sanctioned Adhoc Overdraft Facility of Rs.200 lakhs to the Defendant No.1.

The Defendant No.1 executed the various documents on 27.11.2001 which includes Hypothecation Agreement; Demand Promissory Note and Personal Guarantee executed by Defendant No.2 and 3. LETTER OF CREDIT

10. The Applicant stated that at the request of the Defendant No.1, the Applicant granted Letter of Credit Facility to the Defendant No.1 and in pursuant thereof, the Defendant No.1 executed the various documents which includes Hypothecation Agreement dated 19.04.1997; Hypothecation Agreement of Goods and Book Debts.

11. In or about July, 200, the Defendant No.1 approached the Karnataka Bank Limited for renewal/extension of Letter of Credit Facility from Rs.50 lakhs to Rs.200 lakhs which was sanctioned by the Karnataka Bank vide its sanction letter dated 18.07.2000. In pursuant thereof, the Defendant No.1 executed the various documents on 20.07.2000 which includes Hypothecation Agreement; Undertaking; Trust Receipt;

Hypothecation Agreement of Goods and Book Debts; Respective Personal Guarantee executed by Defendant No.2 & 3. Further, the Defendant No.1 to 3 acknowledged the amount of Rs.200 lakhs vide their Acknowledgment of Debt dated 17.02.2003. BANK GUARANTEE

12. It is further stated that at the request of the Defendant No.1, the Karnataka Bank Ltd. sanctioned Bank Guarantee Facility in favour

of the Defendant No.1. The Defendant No.1 executed Hypothecation Agreement dated 19.04.1997 and Hypothecation Agreement of Goods and Book Debts dated 06.03.1999.

13. At the request of the Defendant No.1 for renewal/extension of Bank Guarantee, the Karnataka Bank Limited sanctioned Bank Guarantee Facility of Rs.150 vide its sanction letter dated 18.07.2000. The Defendant No.1 executed the various loaning and security documents on 20.07.2000 which includes Hypothecation Agreement; Undertaking; Hypothecation of Goods and Book Debts; Respective Personal Guarantee executed by Defendant No.2 & 3. Further, the Defendant No.1 to 3 acknowledged Rs.150 lakhs vide their acknowledgment of debt dated 17.02.2003. RUPEE LOAN FACILITY GRANTED BY ICICI LIMITED

14. At the request of the Defendant No.1, the ICICI Limited granted Rupee Loan Facility to the Defendant No.1. In consideration of sanction the said loan, the Defendant No.1 executed the various loaning and security documents on 02.02.2000 which includes Rupee Loan Facility Agreement; Deed of Hypothecation Agreement; Respective Personal Guarantee executed by Defendant No.2 to 4; Deed of Corporate Guarantee executed by Defendant No.5; Undertaking executed by Defendant No.1; Undertaking executed by Defendant No.2 to 4 agreeing not to accept any commission/remuneration or compensation from the Defendant No.1; Undertaking executed by Defendant No.2 to 4

inter alia agreeing jointly and severally not to demand or withdraw and not to repay the unsecured loan till the money due under Rupee Loan Facility; Deed of Poll executed between ICICI Limited and Jaydeep Investments, Bombay Asbestos Cement Products Private Limited and Veegee Holding and Finance Private Limited inter alia pledging the Share Certificate held by the Pledgers in the Defendant No.1 Company; Certificate u/s 281(i)(ii) of the IT Act dated 07.02.2000 from the office of the Joint Commissioner of Income Tax thereby granting permission to obtain sanctioned Term Loan of Rs.1100 lakhs; Letter from Statutory Auditors of the Defendant No.1 D.N. Shukla & Company; Respective Power of Attorney of Defendant No.6 to 8; Letter dated 08.02.2000 from Chartered Accountants M/s Nitish Nigam & Company; Memorandum of Entry (Constructive Delivery) dated 03.02.2001; Note of Amendment dated 12.03.2001 entered into between Defendant No.1 and ICICI Limited; Respective Letters dated 27.09.2007; Letter dated 28.09.2007 addressed by Defendant No.1 to ICICI Limited confirming that the pledge created in favour of ICICI Limited are valid and have been duly recorded in the books of company.

15. It is further stated that to secure the due repayment of the loans granted by the Karnataka Bank Limited and ICICI Limited, the Defendant No.1 created mortgage properties i.e. (Exhibit C to Exhibit K of the OA) by executing the various documents which includes Memorandum of Deposit of Title Deeds dated 27.08.1999;

Memorandum of Entry (Constructive Delivery) dated 03.02.2001; Letter dated 18.02.2002 by the Karnataka Bank Limited addressed to the Chief Manager of the ICICI Limited interalia agreeing that the pari-passu charge has been create on Silvassa Property off Defendant No.1 in favour of the ICICI Limited. The Defendant No.1 Company has executed Deed of Charge in favour of the Karnataka Bank on 01.10.1997 of the immovable properties in respect of the various financial facilities of Rs.450 lakhs to the Defendant No.1.

16. It is further stated that after assignment, a restructuring proposal of the Defendant No.1 was considered by the Applicant and the same came to be approved by the Applicant subject to terms and conditions more particularly set out in the letter dated 17.01.2006. The Defendant No.1 signified its acceptance of the terms and conditions by having the duplicate signed by a duly authorized director. Subsequently, the Defendant No.1 Company committed defaults in complying with the terms and conditions which came to be revoked. However, it is pertinent to note that in the said restructuring proposal accepted by the Defendant No.1 as the Borrower has admitted that the Borrower owes the Applicant an aggregate sum of Rs.41,83,36,536/- as on 30.11.2005 towards the financial assistances as per the books of accounts of the Applicant together with interest at the documented rate. Hence, the present OA has been filed.

17. Notices were issued to the Defendants. Defendant No.1 to 4 put their appearance through counsel and filed their respective written statement. Despite service, none appeared for the Defendant No.5 to 8 thus, they were proceeded ex-parte vide order dated 25.02.2010.

18. Record reveals that none appeared for the Defendant No.1 since 22.11.2018 and Defendant No.2 to 4 since 18.01.2017.

19. In the written statements filed by the Defendant No.1 and Defendant No.2 to 4, they have raised the similar objections which are as under:

(i) The Applicant has not approached this Tribunal with clean hands and has suppressed the various material facts before this Tribunal;

(ii) The present OA is barred by limitation;

(iii) The Applicant has not produced the true and correct statement of accounts with particulars of expenses viz. principal amount, interest accrued and due, interest in dispute, penal interest, and expenses with their full particulars should be stated to determine the alleged debts;

(iv) The Officer of the Banks obtained signatures on the blank documents;

(v) The Applicant has nowhere state that as and when the Guarantee was invoked;

20. The Applicant has filed the Affidavit in rejoinder to the Affidavit in Reply of the Defendant No.1 and denied each and every allegations made by the Defendant No.1 and reiterated the averments made in the OA.

21. The Applicant has produced all the Original Loan documents and other relevant documents along with their Claim Affidavit and Additional Claim Affidavit filed through Sh. Aalok Dave, Assistant Vice President.

22. The Defendant No.1 and Defendant No.2 to 4 filed their respective CAOD through Mr. Suresh G. Motwani, Authorized Signatory of the Defendant No.1, however, no documentary evidence has been filed by Defendant No.1 to 4;

23. The Defendant No.2 to 4 filed their CAOD through Suresh G. Motwani however, no documents has been placed on record by the Defendant No.2 to 4 to prove the averments made in the WS.

24. I have heard the Ld. Counsel for the Applicant and perused the record. Despite opportunities, none appeared on behalf of the Defendant No.1 to 4 to argue the matter.

25. Though the Defendant No.1 to 4 have already filed their written statements and CAOD therefore, I would like to decide the issue raised by the Defendant No.1 and Defendant No.2 to 4 in their respective written statements.

(i) The first objection raised by the Defendant No.1 to 4 is that the Applicant has not approached this Tribunal with clean hands and has suppressed the various material facts before this Tribunal.

The Defendant No.1 to 4 have 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.1 to 4 is devoid of force hence, rejected.

(ii) The next objection raised by the Defendant No.1 to 4 is that the present OA is barred by limitation.

According to the Applicant, the Defendant No.1 has filed reference before the BIFR on or about 2003 being reference No.125/2003 which was rejected vide order dated 03.11.2003 and the Defendant Company challenged the same before AAIFR. The AAIFR vide order dated 15.06.2007, remanded back the matter to BIFR and BIFR vide order dated 15.11.2007 recorded abatement of the reference in view of the measures taken by the Applicant under Section 13(4) of the SARFAESI Act,, 2002 and therefore, such period will have to be excluded for the purpose of the Limitation.

Record reveals that the Defendants availed the various facilities from the ICICI Bank and Karnataka Bank from time to time and executed the loaning and security documents in 1997, 1999, 2000, and lastly in in the year 2001. The Defendant No.1, 2 &

3 admitted their liability in respect of the facilities availed by the Defendant No.1 on 19.07.2002 and 17.02.2003 (Exb.52). Further, the Defendant No.1 in their Balance Sheet admitted its liability as on 31.03. 2007. The Defendant No.1 filed a reference before BIFR in the year 2003. BIFR vide order dated 15.11.2007 recorded abatement of the reference thus, I find merit in the contention of the Applicant that the period consume before the BIFR would be excluded while computing the period of limitation. The present OA has been filed by the Applicant bank on 12.03.2008. Therefore, I do not find any merit in the objection raised by the defendant No.1 to 4 thus, same is hereby rejected.

(iii) The next objection raised by the Defendant No.1 to 4 is that the Applicant has not produced the true and correct statement of accounts with particulars of expenses viz. principal amount, interest accrued and due, interest in dispute, penal interest, and expenses with their full particulars should be stated to determine the alleged debts.

Record reveals that the Applicant Bank has filed the Statement of Account (“Exb.105) alongwith Certificate under the Information Technology Act, 2002. Further, the Applicant during the pendency of the OA produced the detailed Statement of Accounts of the ICICI Bank Ltd. and Karnataka Bank (Exb.166 &

167) whereas the Defendant No.1 to 4 in their Written Statement as well as CAOD, failed to point out any single entry, which is incorrect. No documentary evidence has been filed on behalf of these

Defendants. Therefore, the objection raised by the Defendant No.1 to 4 is hereby rejected.

(iv) The next objection raised by the Defendant No.1 to 4 is that the Officer of the Banks obtained signatures on the blank documents.

The said contention of the above Defendants has no force. Once the signature on a document is admitted, it stands proved. Except bald statements in their written statement, the Defendant No.1 to 4 have failed to produce any cogent and independent evidence on record to show that the documents were blank when the same were signed by these Defendants. No documentary evidence has been placed on record to show that during the period the Defendants was availing the credit facilities any such protest was lodged with the high officials of the banks or any other government agency to this effect. This place is otherwise also a sham plea as has been held by the Hon’ble Delhi High Court in a case titled Indian Bank Vs. M/s Cheese Wafers (India) Pvt. Ltd. reported in 76 (1998) DLT 892. In fact, the whole case of the Applicant is a documented one and the above Defendants have not denied their signatures on the documents executed by them. In my view, these Defendants signed the documents after going through their contents. Thus, the objection raised by the Defendant No.1 to 4 is also hereby rejected.

(v) The next objection raised by the Defendant No.1 to 4 is that the Applicant has nowhere state that as and when the Guarantee was invoked.

Record reveals that the Applicant has produced all the Original Guarantee Agreements executed by the Defendant No.2 to 5, wherein the Guarantors agreed for repayment of all the dues as agreed by them in their respective guarantee agreements, in case of defaults committed by the Defendant No.1. No specific clause is mentioned in the Guarantee Agreements for invocation of Guarantees. Since the Defendant No.1 committed defaults in making the payment of the outstanding dues, therefore, the Defendant No.2 to 5 being the Guarantors are jointly and severally liable to pay the dues of the Applicant. Thus, the objection raised by the Defendant No.1 to 4 is hereby rejected.

26. During the pendency of the present OA, the Applicant informed that the immovable and moveable properties of the Defendant No.1 situated at Silvasa described in ‘Exhibit ‘C’ sold to M/s Nibha Capital Services Private Limited for Rs.3,21,00,000/- in combine lot. The sale was confirmed in its favour and possession of the secured assets has already been given to M/s Nibha Capital Services Private Limited. It is further informed that an amount of Rs.33,42,942/- was adjusted by the Applicant herein towards reimbursement of the expenses and after deducing the same an amount of Rs.2,87,59,058/- has been appropriated by the Applicants towards its dues. He further stated that an amount of

Rs.2 crores was treated as sale proceeds of immovable property and Rs.1.21 crores was treated as sale proceeds of movable properties.

27. 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 Defendant No.1 to 5. 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 the Defendant No.1 to 5. No monetary relief is prayed against the Defendant No.6 to 8.

28. In the light of above discussions, the present Original Application deserves to be allowed against the Defendant No.1 to 5.

O R D E R

(i) The present OA is hereby allowed and Defendant No.1 to 5 are hereby directed to pay to the Applicant, within a period of 60 days, sum of Rs.58,18,83,215/- (Rupees Fifty Eight Crores Eighteen Lakhs Eighty Three Thousand Two Hundred Fifteen only) together with future interest @15% p.a. quarterly rests from 01.01.2008 till its realization (after adjusting the amount of Rs.2,87,59,058/-, which recovered by the Applicant during the pendency of the present OA from the sale of the mortgaged properties).

(ii) Failing which the aforesaid amount shall be recovered from the sale of hypothecated assets as well as other personal moveable and immoveable assets of the Defendant No.1 to 5.

(iii) Defendant no. 1 to 5 are hereby directed not to deal with their properties till the further direction of the Ld. Recovery Officer of this Tribunal.

(iv) The Defendant No.1 to 5 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: 30.12.2022

Presiding Officer,

DRT-1, Mumbai