STATE BANK OF INDIA vs M/s Bilpower Ltd on 31 December 2020

J U D G M E N T

This is an application under sub-section (1) of section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short “the 1993 Act”) for the recovery of the dues in the sum of Rs.2,07,81,42,333/- together with future interest thereon from the date of filing of Original Application till repayment/realization and also for enforcement of the securities.

Defendant no.1 is the borrower and mortgagor, defendant nos.2 & 3 are the personal guarantors and defendant no.4 is the corporate guarantor.

On 19th May 2005, defendant no.1 passed a resolution to avail financial assistance from the applicant. Therefore, on 7th June 2005, defendant no.1 approached the applicant seeking financial assistance. On 13th September 2005, the applicant sanctioned to the defendant no.1 cash credit facility in the sum of Rs.20 crores and letter of credit limit in the sum of Rs.13 crores, aggregate in all to a sum of Rs.33 crores.

On 14th October 2005, the defendant no.1 signed and executed the loan and security documents. In order to secure the aggregate credit facility in the sum of Rs.33 crores, the defendant nos.2 & 3 signed and executed the deed of guarantee on 14th October 2005.

On 31st July 2006, the defendant no.1 passed a resolution in favour of the defendant no.3 to execute mortgage documents and to secure the credit facilities referred to above. On 21st August 2006, the defendant no.1 created mortgage by deposit of the title deeds. The applicant recorded mortgage by deposit of title deeds in the memorandum of entry. On 7th October 2006, the defendant no.1 confirmed the creation of equitable mortgage.

On 22nd July 2006, the applicant issued sanction letter enhancing the limits granted earlier. The sanction letter was issued based on the representation made by the defendant no.1 in this regard.

The applicant enhanced the cash credit facility from Rs.20 crores to Rs.35 crores and letter of credit limit from Rs.13 crores to Rs.20 crores. Thus, the aggregate facility was enhanced from Rs.33 crores to Rs.55 crores. It is also pertinent to note that IndusInd Bank also sanctioned the cash credit facility in the sum of Rs.13 crores

and the letter of credit limit in the sum of Rs.6 crores, aggregating to Rs.19 crores.

On 10th October 2006, the defendant no.1 passed a resolution authorizing the defendant nos.2 & 3 to sign and execute the loan and security documents. Accordingly, on 6th November 2006, the defendant no.1 signed and executed working capital consortium agreement for Rs.74 crores. The defendant nos.2 & 3 signed and executed the deed of guarantee on 6th November 2006 to secure the aggregate facility of Rs.74 crores. On 6th November 2006, the applicant and IndusInd Bank signed and executed inter se agreement. On 6th November 2006, the defendant no.1 extended the equitable mortgage to secure the credit facility in the sum of Rs.74 crores.

On 21st March 2007, the defendant no.1 approached the applicant for further enhancement. The applicant conceded the request made by defendant no.1 and by letter dated 3rd July 2007 sanctioned the enhancement of the cash credit limit from Rs.35 crores to Rs.62 crores, letter of credit limit from Rs.20 crores to Rs.33 crores and granted bank guarantee in the sum of Rs.11 crores, aggregate in all to a sum of Rs.106 crores. IndusInd Bank also enhanced the cash credit facility from Rs.13

crores to Rs.23 crores and letter of credit limit from Rs.6 crores to Rs.16 crores, aggregating in all to a sum of Rs.39 crores.

On 26th July 2007, the defendant no.1 passed a resolution authorizing the defendant nos.2 & 3 to sign and execute the loan and security documents. On 28th August 2007, the defendant no.1 signed and executed first supplemental to working capital consortium agreement and supplemental deed of hypothecation. In order to secure the aggregate credit facility, the defendant nos.2 & 3 signed and executed the deed of continuing guarantee on 28th August 2007. The applicant and IndusInd Bank signed and executed the inter se agreement on 28th August 2007.

The aforesaid credit facilities are secured by the equitable mortgage of Plot Nos.D-10 & D-11 bearing Khasra No.117 situate at Village Raipur, Pargana Bhagwanpur, Tehsil Roorkee, District Hardwar, Uttaranchal and Plot Nos.440/441, admeasuring sq. mts. Each, GIDC Industrial Estate, Por Ramangamdi, District Baroda. On 10th July 2007, the defendant no.1 deposited the title deeds to secure the credit facilities in the sum of Rs.145 crores. The applicant recorded the creation of mortgage in memorandum of entry.

On 28th November 2007, the defendant no.1 registered the extension of charge/mortgage to secure the credit facilities in the sum of Rs.145 crores. The applicant also recorded the creation of mortgage in memorandum of entry on 28th November 2007.

On 25th June 2008, the defendant no.1 approached the applicant seeking further enhancement in the credit facilities. Pursuant to the loan application made by defendant no.1 on 14th October 2008, the applicant sanctioned enhancement of the credit facilities namely cash credit facility from Rs.62 crores to Rs.80 crores, letter of credit limit from Rs.33 crores to Rs.58 crores and bank guarantee from Rs.11 crores to Rs.16 crores, aggregating in all to in the sum of Rs.154 crores.

On 31st October 2008, the defendant no.1 passed resolution authorizing the defendant nos.2 & 3 to execute the loan and security documents. Accordingly, on 4th November 2008, the defendant no.1 signed and executed the loan and security documents for the aggregate amount of Rs.154 crores. The defendant no.1 signed and executed agreement of hypothecation, undertaking by it and the defendant nos.2 & 3. In order to secure the aggregate credit facility in the sum of Rs.154

crores, the defendant nos.2 & 3 signed and executed the security documents on 4th November 2008. In order to further secure the credit facility in the sum of Rs.154 crores, the defendant no.1 extended the mortgage created earlier for the aggregate amount of Rs.154 crores.

The defendant no.1 once again approached the applicant seeking further financial assistance by way of enhancement on 17th November 2009. The applicant sanctioned the enhancement of the cash credit facility from Rs.80 crores to Rs.110 crores, letter of credit limit from Rs.58 crores to Rs.75 crores, bank guarantee from Rs.16 crores to Rs.20 crores and forward cover of Rs.5 crores. On 24th December 2009, the defendant no.1 passed resolution authorizing the defendant no.3 to sign and execute the loan and security documents. On 26th December 2009, defendant no.1 signed and executed the loan and security documents for the aggregate credit facility in the sum of Rs.250 crores. The defendant signed and executed supplementary deed of hypothecation also. In order to secure the aggregate credit facility in the sum of Rs.250 crores, on 26th December 2009, the defendant nos.2 & 3 signed and executed deed of guarantee.

In order to further secure credit facility, the defendant no.1 extended the creation of mortgage by deposit of title deeds on 15th February 2011 which was recorded by the applicant in the memorandum of entry.

Thereafter, the existing limit was reduced/bifurcated by the applicant as set out in paragraph no.43 of the Original Application. The existing limit was reduced from Rs.243.68 crores to Rs.174 crores.

On 31st March 2011, the defendant nos.1 to 3 signed and executed the balance confirmation letter. The defendant no.1 did not adhere to the terms of sanction and the contract in repaying the loan and payment of interest. The default committed by the defendant no.1 was long and persistent. Therefore, the applicant classified the account of defendant no.1 as non-performing asset on 18th April 2012. On that day, the defendant nos.1 to 3 signed and executed the balance and security confirmation letter.

The account of defendant no.1 was classified as non-performing asset as stated above. The defendant no.1 therefore, approached the applicant on 7th June 2012 for regularizing cash credit facility and for restructuring of the loan. On 16th October 2012, the applicant conceded the request of the defendant no.1 by reducing

the existing credit facilities as set out in paragraph no.48 of the Original Application.

On 14th November 2012, the defendant no.1 passed a resolution authorizing the defendant no.3 to sign and execute the loan and security documents.

On 14th November 2012, the defendant no.4 passed a resolution to offer the corporate guarantee. On 25th March 2013, the defendant no.1 signed and executed the loan and security documents for the aggregate sum of Rs.183.78 crores. On 25th March 2013, the defendant nos.1 to 3 executed supplementary agreement of loan and supplementary agreement of hypothecation of goods and assets. In order to secure the aggregate credit facility for a sum of Rs.182.78 crores, defendant nos.2 & 3 signed and executed the supplementary deed of guarantee. On 25th March 2013, the defendant no.4 signed and executed the deed of corporate guarantee.

The aggregate facilities are secured by hypothecation of stocks, plant and machinery, equipments, movables and book debts and pledge of equity shares and further charge on the mortgaged property.

The defendant no.1 once again committed default and therefore, the applicant was constrained to issue notice through its advocate

on 17th January 2014 calling upon the defendant nos.1 to 4 to liquidate the entire outstanding. As on 16th January 2014, there was owing, due and payable by the defendant nos.1 to 4 to the applicants the aggregate amount as set out in paragraph nos.61 to 63 under various facilities granted to the defendant no.1. The applicant has prayed for interest @11.25% per annum with monthly rests along with penal interest @2% accrued thereon.

The defendant nos.1 to 4 have failed and neglected to pay the outstanding amount in the sum of Rs.2,07,81,42,333/-. Since defendant nos.1 to 4 have failed and neglected to pay, the applicant was left with no other alternate but to file the present Original Application which is presented on 31st January 2014.

The defendant nos.1 to 4 were duly served with the summons. Defendant no.1 filed the written statement (exhibit no.13). The defendant nos.2 to 4 did file the written statement and therefore, they were set ex-parte on 10th April 2019. The written statement filed by the defendant no.1 is without valid authority. Mr. Ranjnish Kumar Pandey has been authorized to sign and verify the written statement by resolution dated 14th August 2014.

The applicant has filed evidence affidavit

(exhibit no.14), list of documents (exhibit nos.15 to 78).

The defendant no.1 has filed affidavit of defence (exhibit no.79) and affidavit-in-reply (exhibit no.95).

In the course of arguments, Mr Koli submitted that the applicant is not pressing for the relief vis-à-vis penal interest @2% and therefore, the question of granting the relief in this regard does not arise.

Mr Pandit, for the defendant no.1, submitted that Interlocutory Application No.2575 of 2014 was taken placing certain subsequent events on record about the sale of the office premises. In Interlocutory Application No.2575 of 2014, it is stated that the GIDC Baroda property is in possession of the bank. The office premises no.201 to 204 at Malad was sold by the Applicant Bank, property at Roorkee, Hardwar is in possession of the Applicant Bank. Flat No.1703 is mortgaged with City Bank on 29th April 2012 which is not the security of the applicant. On 4th February 2014, the applicant issued statutory demand notice under the SARFAESI Act for Rs.215.82 crores. Symbolic possession of the flat no.440/441, GIDC, Baroda was taken on 8th July 2014. On 14th August 2014, the order under Section 14 was passed

based on which the notice dated 16th September 2014 was issued by Assistant Registrar, Bandra Centre of Courts to take the physical possession.

I have perused the written statement carefully and the resolution placed on record by defendant no.1. Mr Rajnish Kumar Pandey was authorized by the resolution dated 14th August 2014 which is a blanket resolution. The law laid down by the Hon’ble Bombay High Court in the case M/s. Hari Shree Enterprises Vs. M/s. Vikas Housing Ltd. And others reported in 2009 (4) ALL MR 247 is very clear. I respectfully agree with the law laid down that the board of director requires application of mind in passing the resolution. To file or defend the suit is not the business of defendant no.1. There is no reference to the memorandum of association or articles of association in this regard.

The defendant no.1 has not made any specific pleading to show that the original application is not maintainable. It is not sufficient for the defendant no.1 in his written statement to deny generally the grounds alleged by the applicant, but ought to have dealt with specifically with each allegations of facts which it did not admit the truth. The defendant no.1 has denied the allegation evasively without answering the point

of substance.

Mr Koli submitted that pendent lite future interest @11.25% per annum from the date of the presentation of the Original Application till payment/realization be granted. The submission made by Mr Koli is fair and reasonable. I therefore grant penal interest @11.25% per annum from the date of filing of the Original Application that is 31st January till payment/realization.

The applicant has pleaded and established the creation of the security by way of hypothecation. In my view, the applicant is entitled for the relief in this regard.

The applicant has pleaded, established and proved the creation of mortgage as set out in the Original Application. Under Section 60 of the Transfer of Property Act, the defendant no.1 is entitled for redemption of the mortgage. In my view, interest of justice will be met if defendant no.1 redeems the mortgage within the timeline as prescribed under the law.

Upon careful scrutiny and the examination of the original application, analyzing the evidence and giving due weightage to the documentary evidence adduced by the applicant, I am of the view that there is no reason to disbelieve the claim made by the applicant bank.

In view of the observations made hereinabove, the original application filed by the applicant deserves to be granted.

Hence, I pass the following order:

ORDER

A) Original Application is allowed with costs. B) Defendant nos.1 to 4 are ordered and directed to pay to the applicant either jointly or severally the aggregate sum of Rs.207,81,42,333/- (Rs. Two Hundred Seven Crores Eighty One Lakhs Forty Two Thousand Three Hundred Thirty Three only) with pendent lit and future interest @11.25% per annum with monthly rests from the date of filing of the Original Application that is 31st January 2014 till payment/realisation. C) The aforesaid adjudicated amount is secured by the valid and subsisting mortgage of the immovable property that is Plot Nos.446/447, admeasuring 1080 sq. mts. Each, GIDC Industrial Estate, Por Ramangamdi, District Baroda, Office premises nos.201-204, admeasuring 3073 sq. mtrs. (built-up), 2nd floor, Vikas Chambers, Link Road, Malad (W) Mumbai 400 064, Plot Nos.D-10 & D-11 bearing

Khasra No.117 situate at Village Raipur, Pargana Bhagwanpur, Tehsil Roorkee, District Hardwar, Uttaranchal and Plot Nos.440/441, admeasuring 1080 sq. mts. Each, GIDC Industrial Estate, Por Ramangamdi, District Baroda. D) The aforesaid adjudicated amount is secured by the valid and subsisting mortgage of the hypothecated property that is stocks, plant and machinery, equipments, movables and book debts and pledge of equity shares of defendant no.1 company. E) Issue Recovery Certificate. F) The Registrar is directed to forward the copy of the order to the applicant and defendants.

Sd/- (Deepak M. Thakkar) Presiding Officer, DRT-2, Mumbai

Dhawale