PUNJAB NATIONAL BANK vs JAL power Corporation Ltd on 5 December 2024

: - FINAL ORDER - :

This is an application filed under Section 19 of the RDB Act, 1993 for recovery of a sum of Rs.377,70,70,988/- along with future interest and rests as mentioned below against the Defendants 1 to 3 jointly and severally with costs. The OA was filed initially before the DRT-II, Bangalore in the year 2018. The Defendants 4 & 5 have appeared through their counsel on 25.04.2019 and fresh summons were ordered to Defendants 1to3 and 6. Later it is recorded that these defendants were served through paper publication in Andhra Prabha, Pratidin Oriya and Indian Express as noted in the order sheet dated 13.10.2020.

However, the matter is transferred to this Tribunal as per the notification dated 04.10.2022 and this Tribunal directed the Applicant Bank to comply the Principles of Natural Justice by intimating the date of hearing for which steps were ordered. Upon compliance by the Applicant Bank, it is noted by this Tribunal in the order sheet dated 25.03.2023 that the summons issued to D1 is returned and the summons on D2 returned with a note that ‚left without instruction at both the address‛ and as regards D3 ‚address incomplete‛. The summons on Defendants No.4 & 5 served with a note that intimation delivered and D6 had left the address. In view of the publication having been carried out as ordered by the DRT-II, Bangalore, this Tribunal had placed the Defendants exparte on 23.05.2023 holding that no useful purpose will be served again to order the publication and the Applicant Bank having taken steps at the last known address, for which the receipts are filed.

Brief Facts of the Case‛-

1.0 It is averred that the Defendant No.1 is the Registered Company and the Defendants No.2 & 3 herein are the Directors of the Company who are also the personal Guarantors to the loans availed by the Defendant No.1 – Company. That the Defendant No.4 herein M/s. Power Finance Corporation, is a Government of India Company is the “Lenders’ Agent” which will represent the Lenders in the administration of the Rupee Term Loan facility, through whom the Defendant No.1 Company may deal with the Lenders in matters arising out of or relating to the Rupee Term Loan Facility and financing documents, subject to certain limitations as to the authority of the Lenders Agent and the Lenders Agent undertaking to carry out certain duties and to discharge certain obligations, as are considered necessary and authorized by the Lenders.

1.1 That the Defendant No.5, which is the Confirming Party is the nodal agency of the Government of Sikkim for development of hydel power projects in the State of

Sikkim. The Confirming Party, agreeing to become a confirming party acknowledged that it would unequivocally cause the Defendant No.1 Company to comply with its obligations. The Defendant No.6 herein, M/s. Coastal Projects limited is a company incorporated under the Companies Act 1956, which has executed an undertaking, among other things, to meet cost overruns in the project, non-disposal of share holding undertaking and other undertakings and also pledged shares of the 1st Defendant Company with the Applicant Bank.

2.0 That the 1st Defendant – Company approached the Applicant Bank and the Defendant No.4 for grant of financial assistance i.e. a Common Rupee Term Loan of Rs.581,47,00,000/- (Rupees Five Hundred and Eighty One Crore and Forty Seven Lakhs only) for implementing 3 x 40 MW Rengit stage IV Hydro electric project on River Rangit in Sikkim. In response to the said request of the Defendant No.1 – Company, the Applicant – Bank and the Defendant No.4, as a Consortium, agreed to grant the said loan of Rs.581,47,00,000/- (Rupees Five Hundred and Eighty One Crore and Forty Seven Lakhs only) on the terms and conditions agreed upon, accordingly, the 4th Defendant, who is the main Lender sanctioned a sum of Rs.387,65,00,000/- (Rupees Three Hundred and Eighty Seven Crores and Sixty Five Lakhs only) and the Applicant-Bank sanctioned the balance loan of Rs.193,82,00,000/- (Rupees One Hundred Ninety Three Crores Eighty Two Lakhs Only), thus totalling the total loan to Rs.581,47,00,000/- to the Defendant No.1 – Company, against execution of common loan documents in favour of the Lenders for the entire project.

2.1 That the Applicant – Bank sanctioned on 25.01.2010, a part of the finance sought for by the Defendant No.1 – Company amounting to Rs.193,82,00,000/- (Rupees One Hundred and ninety three crores and eighty two lakhs only) in favour of the 1st Defendant – Company. The loan was agreed to be repaid in 60 equal quarterly instalments commencing from January 2014 and ending in October 2028

and the rate of interest at the time of availing the loan is at 12% p.a. on monthly rests as per the communication letter dated 25.01.2010.

2.2 The Defendant No.1 – Company passed a resolution in the meeting of the Board of Directors held on 09/03/2010 and accordingly the Project Management Committee was constituted.

2.3 It is pleaded that the Defendant No.1 - Company executed a Lenders’ Agent Appointment Agreement dated 25/03/2010, between it, the Defendant No.4 in its capacity as Lender, Lenders Agent & Security Agent and the Applicant Bank in respect of the above said Common Rupee loan at the request of the Defendant No.1 Company. The Lenders agreed to appoint the Defendant No.4 as the ‘Lenders Agent’ which will represent the Lenders in the administration of the Rupee Term Loan Facility and through whom the Borrower i.e. the Defendant No.1 – Company may deal with the Lenders in matters arising out of or relating to the Rupee Term Loan Facility and the Financing Documents, subject to certain limitations as to the authority of the Lenders Agent and the Lenders Agent undertaking to carry out certain duties and to discharge certain obligations as considered necessary and authorized by the Lenders.

2.4 It is further pleaded that the Inter Creditor Agreement dated 25/03/2010 has been executed between the Defendant No.4 and the Applicant Bank in respect of Common Rupee Term Loan. In terms of the said Agreement, the Lenders have at the request of the Defendant No.1 - Company, agreed to appoint the Defendant No.4, as the Agent of the Lenders inter-alia for the purpose of taking actions, exercising powers and discretions and entering into agreements, on behalf of the Lenders and that since any modifications or amendments to the Common Rupee Term Loan Agreement and other documents will have a direct effect on the interests of the other Lenders, the Lenders desired that there should be a coordinated approach and both the Lenders shall use all efforts to adopt a singular stand or course of action. Similarly in order to provide for the orderly administration of the project, the Defendant No.1 has executed a confirmation letter dated 25/03/2010 to the Inter Creditor Agreement.

2.5 That the 1st Defendant – Company executed a Common Rupee Term Loan Agreement dated 25/03/2010 between it and the Defendant No.4 (in its capacity as the Lender, Security Agent and Lenders’ Agent) and the Applicant Bank (as Lender), which contained the details of the Terms of Rupee term loan facility of Rs.587,47,00,000/- security package, pre-commitment and pre-disbursement conditions, conditions applicable during currency of the agreement etc., and Security interest and with a view to co-ordinate the enforcement of the respective rights, power and duties of each of the Lenders accruing from the Transaction Documents, they have entered into this Agreement. In continuity, the 1st Defendant – Company has also executed a confirmation deed dated 25/03/2010 to the Inter Creditor Agreement.

Name of Lenders Rupee Term Loan Facility Rupees Term Loan Facility (Rs). Letter of Credit as a sub- limit of Rupee Term Loan Facility PFC 3,87,65,00,000 Nil PNB 1,93,82,00,000 1,80,00,00,000

Rs.5,81,47,00,000/- (Rupees Five Hundred and Eighty One Crores and Forty – Seven Lakhs only)

That in terms of the agreement, the obligations of the Lenders are several and accordingly none of the Lenders shall be responsible for the obligations of the other Lender. Further the aggregate of the Rupee Term Loan Facility extended by such of the Lenders to the Borrower shall not exceed the amount set out under the Rupee Term Loan facility against their names. The sub-limit of the letter of Credit shall be subject to all terms and conditions applicable to Rupee Term Loan facility along with

such terms and condition as agreed to by the Letter of credit, as the case may be, regarding the period, processing charges, applicable commission and other conditions, if any, at the time of availing such letter of credit sub-limit as part of Rupee Term Loan facility.

2.6 It is further submitted that, the Defendant No.1 – Company has also executed a Trust and Retention Account Agreement dated 25/03/2010 between itself, the Defendant No.4 and the Applicant Bank, duly signed by all the parties to the Agreement.

2.7 That the Defendant No.1-Company executed a Deed of Hypothecation dated 25/03/2010, between itself and the Defendant No.4 herein, under Rupee Term Loan Facility or security documents executed by the Borrower which shall be secured, inter-alia, by the Security interest stipulated, such as all the movables including movable plant & machinery, machinery spares, tools and accessories, present and future, on the Borrower’s stocks of raw materials, semi-finished and finished goods & consumable goods and all intangible assets including but not limited to the goodwill, trademark patent, uncalled capital and undertaking of Borrower, and all books debts, operating cash flows, treasury income, revenues/receivables of Borrower of whatsoever nature and wheresoever’s arising and also all the right, interest, benefits, claims and demands, whatsoever, of the Borrower in the project documents, any letter of credit, guarantee or performance bound that may be provided by any party to any project documents in favour of the Borrower, all as amended, varied or supplemented, from time to time, and all the amounts lying to the credit of any of the Borrower’s Bank accounts including without limitation, the Trust *Retention Account, Debt Service Reserve Account and other accounts, reserves to be established by the Borrower in consultation with the Security Agent.

2.8 Further, the Defendant No.6 herein had executed a Deed of Pledge Agreement dated 25/03/2010, between itself as Pledgor, the Defendant No.4 herein as Security Agent and the 1st Defendant Company as the Borrower, in consideration of mutual covenants and other goods and valuable consideration, the adequacy of which is acknowledged by the parties, and each party agreed to the same. The 1st Defendant–Company had also executed Share Subscription, Retention and undertaking Agreement dated 25/03/2010, between itself, the Defendant No.6 and the Defendant No.4 herein for the Common Rupee Term Loan Agreement along with Articles set out in the Agreement.

2.9 That the Defendant No.1 Company has executed a Security Agent Appointment Agreement dated 25/03/2010 between itself as Borrower, the Defendant No.4 herein as Lender, Lender’s Agent & Security Agent and the Applicant Bank as Lender for the Rupee Term Loan Facility. The said Agreement contains the details regarding the appointment of Security agent, duties of Security Agent, authority of Security Agent, fees & expenses etc as mentioned in the Articles of the said Agreement.

3.0 That the Defendant No.2 herein, who is one of the Directors of the Defendant No.1 Company is also a personal Guarantor to the loans availed from the Applicant Bank, by the Defendant No.1 Company, by way of Term loan limit of Rs.193,82,00,000/- (Rupees one hundred and ninety three crores and eighty two lakhs only) with a sub-limit of letter of credit of Rs.180,00,00,000/- (Rupees one hundred and eighty crores only). has executed an Agreement of Guarantee dated 27/03/2010 in favour of the Applicant-Bank for the said common Rupee Term Loan agreement availed by the 1st Defendant Company.

3.1 The Defendant No.1 has executed a Indenture of Mortgage Deed dated 15/04/2010, between itself as Borrower and the Defendant No.5 herein, as confirming party in favour of Defendant No.4 herein as Security Agent or the Mortgagee for the Common Rupee Term Loan facility aggregating a principal amount of Rs.581,47,00,000/- availed from the Consortium, by the 1st Defendant Company by mortgaging & creating charge on all the Borrower’s immovable properties including project site (excluding forest land) and tangible assets and properties, both present and future and a mortgage and charge on the Borrower’s movable properties and assets, whatsoever of the Borrower in the project documents duly acknowledged and consented to by the relevant Counter parties to such project documents, all as amended, varied or supplemented, from time to time, and all the rights, titles, interests, benefits, claims and demands, whatsoever, of the Borrowers in the present, approvals and clearances and uncalled capital of the Borrowers and all the right, title, interest, benefits claims and demands, whatsoever of the Borrowers in any letter of credit, guarantee, performance bond provided by any party to the project documents, etc. as detailed and described in the indenture. The Form No.8 evidencing the charges created is also duly executed.

4.0 On the request of the Defendant No.1 Company, regarding credit facilities, the Applicant-Bank vide its approval letter dated 06/09/2014 issued to the 1st Defendant- Company, duly accepted by the 1st Defendant-Company and the Guarantors, the Applicant-Bank Authorities, accorded approval of cost and time overrun in the project and extension of COD & repayment schedule, reviewed the existing term loan with the then outstanding of Rs.189.85 crores (fully disbursed) against sanctioned limit of Rs.193.82 crores (installment of July 14 proposed for deferment) by approval of pricing as under,

Facility Existing Proposed Rate of Interest TL BR + TP+ 4.25% - 15.00% p.a BR + TP+ 4.00% -

Processing fee NFB Nil Nil Comm. On NFB LC As per card rates Existing to continue Review charges TL 50% of applicable charges Existing to continue Other charges - As per card rates As per card rates

And also by approval of acceptance of M/s. Generation Power International Incorporation, as the new equity promoter for the proposed cost overrun and however request for treating recovery of installment of January 2014 and April 14 as future interest was not approved and detailed terms & conditions as per Appendix-I and the additional terms and conditions with the approval letter.

4.1 That the Board of Directors of the 1st Defendant–Company in its meeting held on 12/09/2014 passed the resolution, that upon the request of the 1st Defendant- Company, the Applicant-Bank approved the change in COD and repayment as proposed, since there was a delay in the project and there was cost overrun in the project as appraised by Power Finance Corporation Limited and so approached PNB, the Applicant-Bank, a member of PFC Consortium providing Term loan to the Company, to permit as under:

Original (as per CLA) Proposed Project COD June 30, 2013 June 30, 2016 Start of Principal Payments January 2014 October 2017

4.2 In view of the approval letter dated 06/09/2014 by the Applicant-Bank for cost and time overrun in the Project and extension in COD and repayment schedule, the 1st Defendant-Company executed supplementary term loan agreement dated 29/09/2014 in favour of the Applicant-Bank that due to change in the implementation of the Project with increase in cost of Project and Means of Finance, there is change in COD and change in repayment schedule of the existing term loan of Rs.193.82 crores, as against agreed terms as per Common Loan Agreement dated 25/03/2010 and at the request of the 1st Defendant-Company, the Lender approved, sanctioned the loan vide Amended Sanction Letter dated 06/09/2014. Further the 1st Defendant-Company has agreed to accept and undertake compliance of above said terms and conditions contained in the Sanction Letters issued by the Lender/s, outside the scope of the consortium arrangement. Pursuant to it the 1st Defendant- Company and the Lender have agreed to enter into a Supplementary Term Loan Agreement with terms and conditions as given therein. The 1st Defendant–Company further agreed that the terms and conditions of the said Agreement shall be in addition to the Common Rupee Term Loan Agreement dated 25/03/2010 and will over-ride the provisions of the Common Rupee Term Loan Agreement to the extent mentioned therein, while all the terms and conditions of Common Rupee Term Loan Agreement dated 25/03/2010 shall remain unchanged and shall be binding on both the 1st Defendant-Company and the Lender/s. The 1st Defendant Company confirmed that all other terms and conditions as already agreed to and mentioned in the loaning and security documents executed on 25/03/2010, in respect of Term loan above referred shall continue and remain in force as per the supplementary term loan agreement dated 29.09.2014, the other stipulations remaining unchanged.

4.3 The 1st Defendant-Company and the 6th Defendant herein executed letter of undertaking dated 29/09/2014 in favour of the Applicant-Bank in terms of the Common Loan Agreement dated 25/03/2010 of Term loan of Rs.193.82 Crores. by jointly undertaking to the Applicant-Bank and to the Applicant’s successor and assigns as mentioned in the undertaking letter by them.

5.0 That the Defendant No.2 & 3 herein have also executed an Agreement of Guarantee dated 29/09/2014 in favour of the Applicant-Bank, relating to the grant of the Term Loan of Rs.193.82, thereby making themselves liable jointly and severally to repay the dues of the 1st Defendant-Company.

6.0 That the 2nd loan viz: Additional Term Loan of Rs.94.00 crores to fund IDC was sanctioned on 18/03/2015 by the Applicant-Bank to the 1st Defendant-Company. The said loan of Rs.94.00 crores being pro-rata share of IDC part of cost overrun (out of total IDC of Rs.280.90 crores) and also review of existing Term Loan with present outstanding of Rs.204.58 crores in favour of 1st Defendant Company, was based on the following stipulations and detailed terms and conditions of sanction annexed and other issues and also additional stipulations as mentioned in the Sanction letter.

Facility Existing Proposed

Rate of Interest Existing TL BR + TP+ 4.25% - 15.00% p.a BR + TP+ 4.00% - 14.75% p.a New TL NA BR+TP+4.00% = 14.75% p.a Processing fee NFB Nil Nil Upfront Fee New TL NA Nil Comm. On LC As per card rates Existing shall continue NFB

Review Charges TL 50% of applicable charges Nil Other Charges - As per card rates As per card rates

The same is contained in the sanction communication dated 18.03.2015.

6.1 That the Board of Director of the Defendant No.1-Company in its meeting held on 25/03/2015 passed a resolution for additional Term loan of Rs.94.00 Crores from the Applicant-Bank and execution of the loan document in favour of the Applicant-Bank for the said Project.

6.2 Further, the Defendant No.1-Company executed loan agreement dated 26/03/2015 in favour of the Applicant-Bank in respect of the additional term loan of Rs.94.00 Crores for the purpose of implementing the project.

6.3 That the Defendant No.1-Company has also executed a Deed of Hypothecation dated 26/03/2015 in favour of the Applicant-Bank. Further the 1st Defendant-Company also executed another deed of Hypothecation dated 26/03/2015 in favour of the Applicant-Bank, by undertaking and confirming that so long as any monies are outstanding/due/payable to the Applicant-Bank, it shall pay to the Bank commission at the rate as agreed to vide Sanction letter and subsequent modification, it shall at all times during the continuance of the security maintain the said goods/debits/assets of sufficient quantity and value, that it shall furnish to the

Bank, whenever required full and correct particulars/statements of all the said goods i.e. quantity, description, market value thereof, place where stored, it shall furnish to the Bank whenever required full and correct particulars/statements of all the said debts and shall allow the Bank or its agents to take inspection of all the books of accounts and will produce such evidence as the Bank may requires as to the value thereof etc. and several other such conditions.

7.0 That the Defendant No.1 Company has executed a Deed of Assignment dated 26/03/2015 in favour of the Applicant Bank, which facts can be gathered from the said deed of assignment and also executed a trust and retention account agreement.

8.0 That the Defendant No.1 Company along with Defendant No.6 herein have also executed Undertaking letter dated 26/03/2015. In this connection reiterating the earlier commitments apart from other obligations. The same is duly signed by Defendants 1 & 9. (There is no 9th Defendant – could be a typographical error in the pleadings – Page 32 of the TA). Certain more documents are executed duly signed by Defendants 1 to 4 concerning all unsecured loans.

9.0 The Defendant No.2 in his capacity as a Personnel guarantor has executed Guarantee Agreement dated 26/03/2015. Likewise the Defendant No.3 herein has also as Personnel Guarantor executed a Guarantee Agreement dated 26/03/2015. The same is evidenced by Form No.CHG 1.

10.0 Further the 1st Defendant-Company held a consortium/Lenders meeting on 29/09/2015 at PFC, New Delhi which was attended by all the parties. In the said meeting, the 1st Defendant-Company informed regarding the status of the project that the project is expected to face delay in commissioning and second cost overrun before COD. As per the Borrower, project is likely to achieve COD by June 2018 instead of June 2016 as was envisaged earlier, subject to the condition that the project work must start in October 2015 without any further delay. The Borrower informed that due to delay in COD of the Project, cost is expected to increase to Rs.1697 crores from the approved cost of Rs.1455 crore. Further the 1st Defendant- Company also requested to fund the revised project cost of Rs.1697 crore with D:E of 80:20 instead of existing overall D:E of 72.66:27.33 with that the levellized tariff shall remain more or less the same as at existing level. Further, increase in the D:E shall reduce the weightage of equity in project cost and shall cut cost of capital (i.e. return on ROE) thereby, reducing impact on tariff. Borrower also informed that project progress has come to standstill since October 2013 due to delay in infusion of equity by the Promoters. Further, geological surprises faced by the project in HRT, aggravated increase in cost & time overrun. The rock condition is expected to be better in the balance HRT of 2.7 km for excavation, thereby reducing the risk of geological surprises. The Borrower further informed that the Dam is on a critical path and needs to start from October 2015 to avoid further delay and expected to be completed by June 2018, before the start of monsoon season. Further the Lenders decided on the following action plan:- (a) Borrower to provide all the necessary documents/information pertaining to the impact of promoter into SDR on ‘JPCL’ to PFC, (b) Borrower to provide confirmation from Govt. of Sikkim (GOS) for equity participation by 15th November 2015,

(c) Incase GOS refuse to invest; borrower shall make fall back arrangement by identifying new investor and provide confirmation by 15th December 2015 and (d) JPCL shall provide the comfort letter from GOS to provide lenders the rights to use the forest land.

11.0 The 1st Defendant Company were irregular in repayment of loans granted by the Applicant-Bank on one pre-text or the other and was also in violation of the various terms and conditions of the loan agreement, and thus committed default and inspite of continued follow-up, demands, the Defendants failed and neglected to repay the dues.

11.1 That in view of the continued default by the Defendant No.1-Company, the loan account of the Defendants was classified as Non-Performing Asset (‘NPA’) on 19-04-2018 in accordance with the guidelines issued by the RBI. It issued a Demand Notice dated 24/05/2018 under Section 13(2) of the SARFAESI Act, requesting the Defendant No.1-Company, to clear the dues. However, the 1st Defendant-Company has admitted its dues, from time to time, through Balance Confirmation Letters dated 16/01/2013, 30/05/2013, 01/07/2015 and 04/02/2017. The debt has also been acknowledged by the 1st Defendant-Company and the Guarantors i.e. the Defendants Nos. 2 and 3 vide Balance of Confirmation letter dated 29/09/2014.

12.0 The Applicant-Bank affirms by producing the statement of account duly certified as per Bankers Books Evidence Act. The Applicants submits that the 1st Defendant Company is liable to pay the following sums on two accounts as under:-

I. Loan Account No.2273001C00001214

Common Rupee Term Loan:-

Amount O/S as on 01/10/2015 Rs.193,82,00,000/- Interest at contractual rate from 31/10/2015 to 16/07/2018 at rate of 14.75% p.a. (plus penal interest) with monthly rests Rs.99,27,89,755/- Less recovery made from date of NPA to till date NIL Costs and expenses Rs.53,16,777/- Total Memoranda Dues Rs.304,45,18,969/-

II. Loan Account No.2273001C00001986

Addl. Term Loan:-

Amount O/S as on 01/10/2015 Rs.46,71,71,370/- Interest at contractual rate from 31/10/2015 to 16/07/2018 at rate of 14.75% p.a. (plus penal interest) with monthly rests Rs.23,92,95,847/- Less recovery made from date of NPA to till date NIL Costs and expenses NIL Total Memoranda Dues Rs.73,25,52,018 /-

TOTAL DUES FROM THE ABOVE TWO LOAN ACCOUNTS

….

Rs.377,70,70,988/-

(Rupees Three Hundred Seventy Seven Crores Seventy Lakhs Seventy Thousand Nine Hundred and Eighty Eight Only)

That the Applicant-Bank also produces certified copies of the Account extract maintained by the Applicant-Bank in the ordinary and usual course of business which reflects transaction in the Loan Accounts.

12.1 It is pleaded that for the credit facility extended to the Defendants, the rate of interest as specified in the loan documents is recorded as due and payable from time to time, and in the case of default of the Defendants, the Applicant-Bank shall be entitled to charge the overdue interest, as applicable to such transactions.

12.2 The Applicant-Bank submits that the interest is not debited to the loan facility account of the Defendants when the account became NPA on 17.07.2016, as per the norms of the accounting procedure. The Defendants are under liability to pay the un-debited interest. Such interest is claimed separately as per calculation of memo annexed to the Application. Penal interest has not been capitalized.

12.3 It is averred that since the 4th Defendant i.e. Power Finance Corporation is having pari-passu rights in the secured assets, they are being made a necessary/formal party. Further, the 5th Defendant i.e. the Sikkim Power Development Corporation is a Confirming Party to the loan and mortgage transactions, and the enforcement actions of the Applicant-Bank will be binding on the 5th Defendant, hence the 5th Defendant is a necessary party. The 6th Defendant Coastal Projects Ltd is the holding company of the 1st Defendant, which has pledged the shares held by it as security for the financial facilities availed by the 1st Defendant-Company, and has also executed various Undertakings, for which it will be liable for recovery of dues and hence the 6th Defendant has been made a necessary Party in the present Application to recover the dues of the Applicant-Bank.

13.0 As already noted the Defendants remained exparte before this Tribunal after the transfer of the case. However, it is seen from the record that the Defendant No.5 has filed the written statement before the DRT-II, Bangalore and thereafter remained unrepresented.

Gist of the Written Statement of D5:-

14.0 It is contended by Defendant No.5 that it is only a share holder of Defendant No.5 and it has no nominee director with Defendant No.1 Company. The Defendant No.5 has not executed any security or security to the loan facility. There is no such undertaking. This Defendant does not have any privity of contract directly or indirectly and thus the TA is liable to be dismissed as against this Defendant. Defendant No.5 is only a share holder; it has not pledged any of its equity share holding with the Applicant bank and the liability if at all is limited to the extent of the amounts subscribed.

14.1 It is also found that the Defendant No.5 observed that the progress of the work was not satisfactory and D1 imputes the reason to the adverse geology and financial constraints. The Government of Sikkim infused equity in two tranches of Rs.25 Crores with the Defendant No.1. Government of Sikkim made several request to Defendant No.1 for commercially viable action plan to revive the project and a meeting was also convened in New Delhi on 19.12.2015 and 13.01.2016. It was open to allow the new investor for the revival of the project. However the Defendant No.1 failed to provide way forward solutions. There was another meeting held on 20.04.2017and the Government expressed that it cannot provide budgetary support. The project cost increased multi fold and the delay in completion by the Defendant No.1 for which Defendant No.1 itself is solely responsible. The averments made in the OA at different paragraphs are denied for want of knowledge. This WS is signed by the Secretary – Energy Department of Government of Sikkim.

15.0 In order to prove their case, the Applicant Bank had examined its Senior Manager by name Mr.Narender Pratap Singh as AW1 and had relied on Exh. A1 to A47.

16.0 Heard the Ld. Counsel for the Applicant. He had also filed the written arguments. The same is perused. In the written arguments the facts pleaded are reiterated. Subsequent developments are also brought to the knowledge of this Tribunal in the written arguments. It is submitted that the original documents are deposited with Defendant No.4, which is the Security Trustee to the transaction.

Subsequent Developments reported in the written arguments:- 17.0 Pending the above OA, Corporate Insolvency Resolution Process (CIRP) was initiated against the first Defendant before NCLT, Hyderabad Bench under the Provisions of Section 7 of IBC and vide Order dated 09.04.2019, the first defendant company was put into CIRP. Pursuant to Expression of Interest (EOI), National Hydro Electric Power Corporation (NHPC) had submitted a resolution plan and the same was approved unanimously by the COC and vide Order dated 24.12.2019, the Hon'ble Bench approved the resolution plan. The resolution Applicant had remitted a sum of Rs.165 Crores in the TRA Account maintained with the Applicant Bank on 31.03.2021.

17.1 The Applicant Bank had received a sum of Rs.54.84 Crores after deducting CIRP expenses and interest. Hence the first Defendant Company was sold as an on going concern to the Successful Resolution Applicant (SRA). National Hydro Electric Power Corporation (NHPC) and the Applicant Bank had given a letter on 31.03.2021 to Power Finance Corporation Ltd. to release the securities lying in the name of the first Defendant and accordingly, the original documents pertaining to the first Defendant company released by the Security Trustee. As per the resolution plan, the

financial creditors shall continue to enforce its liability against the guarantors and hence the OA has been continued as against the Defendants 2,3 & 6 for the OA claim amount.

17.2 After releasing the documents to the Successful Resolution Applicant, the remaining original documents are filed along with this Proof Affidavit, which were returned after comparing. The released documents are filed as attested documents. There is no claim against the first Defendant Company since the Applicant has received its share from the Successful Resolution Applicant. The Applicant Bank is entitled to claim the OA claim amount along with interest against the Defendants 2,3 & 6 after deducting a sum of Rs.54.84 Crores which was received as and towards the resolution plan amount from the first Defendant Company.

18.0 In the written arguments seeking relief against Defendants 2, 3 & 6 to be viewed from the reliefs urged. The reliefs are urged only against the Defendants 1 to 3 herein. There is declaration sought against Defendants 5 & 6 to the extent that they will be responsible under the undertakings given to the bank to the extent of dues owed by the 1st Defendant Company.

Points for Determination:-

19.0 In the light of the pleadings available and the evidence adduced and after considering the written arguments filed by the Applicant Bank, the following points arise for determination.

(a) Whether the Defendants 1 to 3 are liable to pay the amount to the Applicant Bank as prayed for in the TA.

(b) Whether the Applicant is eligible for the prayer of declaration that Defendants 5 & 6 will be responsible for the undertakings signed by them for the loan to the extent of dues owed by the Defendant No.1 Company as pleaded in Para-f of the reliefs sought.

(c) What relief?

Answers to Point (a):-

20.0 The averments in the TA as appearing against Defendants 1 to 3 goes unrebutted since these Defendants remained absent before the DRT-II Bangalore and this Tribunal placed these Defendants exparte vide order dated 23.05.2023. The allegations that the 1st Defendant Company approached the Applicant Bank and that the Applicant Bank sanctioned initial loan of Rs.193,82,00,000 Crores vide sanction letter dated 25.01.2010 at Exh.A2 and the corresponding the common Rupee Term Loan Agreement dated 25.03.2010 at Exh.A7, the deed of hypothecation at Exh.A9 and the letter of undertaking at Exh.A13 shows that there has been a transaction of the loan for funding the project of Defendant No.1 Company are corroborated by documentary evidence.

20.1 Defendant No.2 Mr.S.Surendra had executed the guarantee agreement with the Applicant Bank for repayment of Rs.193,82,00,000/- agreeing to pay jointly and severally the sanctioned sum vide the deed dated 27.03.2010. The same is not disputed by the Defendant No.2.

20.2 The Agreement of Guarantee dated 29.09.2014 at Exh.A20 shows that Defendant No.2 Mr.S.Surendra and Defendant No.3 Mr.G.Harihara Rao had jointly executed the personal guarantee deed acknowledging the review of the term loan of Rs.193.82 Crores along with the interest rate and the repayment schedules. They had agreed jointly and severally to pay the bank the term loan and the renewing and reviewing it from time to time. The same is continuing guarantee and they have indemnified the Applicant Bank. This document is not disputed by the Defendants 2 & 3.

20.3 The grant of second loan as per Annexure A21 and the sanction thereof is also not disputed. The same is sanctioned to Defendant No.1 Company, which had executed an undertaking letter along with the undertakings of Defendants 2, 3 & 4 at Exhs. A27 to A34. Defendant No.2 & 3 stood as personal guarantors vide guarantee deed at Exh.A35 executed by Defendant No.2 for the loan transaction of Defendant No.1 Company, which binds the Defendant No.2. Likewise the document at Exh. A36 executed by the Defendant No.3 as personal guarantor to the loan transaction of Defendant No.1 Company is also not disputed.

20.4 As far as the liability of Defendant No.1 Company is concerned, the documents at Exh. A38 which is minutes of meeting of Joint Lender’s Forum shows that they have participated in the said meeting where the discussions with regard to the mounting debt and the non-starting of the power project is fully discussed. However, the balance confirmation letter issued with regard to Account Number ending with 1214 Exhibits that a sum of Rs.96,61,66,965/- along with interest and the present monthly rests is acknowledged by Defendant No.1 Company. The said document is at Exh.A40. Regarding the same account there one more balance confirmation at Exh. A41 dated 30.05.2013 acknowledging the debt at Rs.162,52,72,019/- and further acknowledging the monthly rests. Regarding both the accounts, the balance confirmation letter executed by the Defendant No.1 Company dated Nil, but accompanied by stamp paper dated 01.07.2015 shows that the balance at Rs.249,20,87,994.04p proves the claim of the Bank.

20.5 Further the latest balance confirmation dated nil but accompanies by Stamp paper dated 04.02.2017 pertaining to both the accounts shows a sum of Rs.240,53,71,370.04p further corroborates.

20.6 As on the date of filing of the suit, the total dues pleaded at Para 5.33 of the OA is not disputed. This is as on 16.07.2018. Having perused the documentary evidence discussed above, which are at Exh.A42, the claim made by the Applicant Bank goes unrebutted and the statement of accounts duly certified at Exh. A45, A46 & A47 accompanied by the certificate issued under Banker’s Book Evidence Act are not disputed by the Defendants 1 to 3. Hence the liability of Defendants 1 to 3 to the OA claim is proved on record. Hence the point for consideration at Point (a) is answered in favour of the Applicant Bank.

Answers to Point (b):-

21.0 The Applicant claims the relief of declaration against Defendants 5 & 6 and the relevant prayer made is: ‚For declaration that the 5th and the 6th Defendants will be responsible for the undertakings signed by them in favour of the Applicant Bank for the above loans to the extent of dues owed by the 1st Defendant Company.‛

21.1 This Tribunal has no powers to grant the declarations. However, in the written arguments, the Ld. Counsel prays for reliefs against Defendants 2, 3 & 6.

21.2 There is no prayer by the Applicant Bank seeking money decree against Defendants 5 & 6. However considering the nature of prayer, the Defendants 5 & 6 are sought to be made responsible in view of the undertakings given by Defendant No.5 & 6.

21.3 In this aspect, the WS filed by Defendant No.5 which is a Government of Sikkim Undertaking had taken up a stand that the Defendant No.5 is only a share holder in the Defendant No.1 Company and it has neither a nominated Director on Board nor tendered any security or guarantee in favour of the Applicant Bank. The pleadings are also persued. In para 5.4 of the TA, the Defendant No.5 is described as a confirming party in so far as the allegations of Defendant No.5 having acknowledged that it would unequivocally cause the Defendant No.1 Company to comply with the obligations. Therefore, the liability of Defendant No.5 does not arise and the WS filed by Defendant No.5 is to be viewed from the facts that no fiscal liability is fixed under the confirming agency. The pleadings also do not show having produced such document executed by the Defendant No.5 to take over the liability of the Defendant No.1 Company, which was dealt under CIRP concerning the loan facility. Therefore no relief can be granted against Defendant No.5 who had pledged its shares in the Defendant No.1 Company, which is admittedly taken over by another entity as admitted in the written arguments also. The Defendant No.1 Company was taken over by National Hydro Electric Power Corporation and it is seen from the written arguments that the 1st Defendant Company was sold as an ongoing concern to NHPC, with whom the Applicant Bank had requested to release the securities. This aspect is covered under the Corporate Insolvency Resolution Process (CIRP). Suffice to say that no such declaration can be issued and the prayer cannot be allowed.

21.4 As far as Defendant No.6 is concerned, the allegation is that it had executed a pledge agreement dated 25.03.2010 between it and Defendant No.4. Excepting this pledge agreement concerning the shares of Defendant No.1 Company, there is no allegation that Defendant No.4 had stood as a corporate guarantee to the loan transaction of the Applicant. The shares of D1, which went under CIRP Proceedings cannot be whispered up again. In view of the above, no declaration can be issued by this Tribunal as against Defendant No.6.

Answers to Point (c):-

22.0 In view of the developments that have taken place with regard to Corporate Insolvecy of Defendant No.1 Company and the Applicant having realized a sum of Rs.54.84 Crores, the Applicant Bank rightly is not pressing the relief against the Defendant No.1 Company.

22.1 The liability of Defendants 2 & 3 as personal guarantors having been proved, the Recovery Certificate shall ensue against them.

22.2 The declarations as against Defendant No.5 & 6 as pleaded in the OA are declined. Consequently the following Order.

: - O R D E R - :

23.0 The TA stands partly allowed with costs.

(a) The relief against Defendant No.1 Company is given up.

(b) The Defendants No.2 & 3 are hereby directed to pay jointly and severally a total sum of Rs.377,70,70,988/- (Rupees Three Hundred Seventy Seven Crores Seventy Lakhs seventy thousand Nine Hundred Eighty Eight Only) less Rs.54.84 Crores realized during CIRP Proceedings on 31.03.2021 to the Applicant Bank along with future simple interest @ 18% p.a. from the date of Application till its realization.

(c) In case of any payments made by the Defendants 2 & 3 during the pendency of the TA, the same may be adjusted.

(d) Issue Recovery Certificate accordingly.

(e) The Applicant Bank is directed to file cost memo with two weeks from the date of receipt of this Order.

24.0 Communicate a copy of the order to the parties concerned in terms of Rule 16 read with Rule 2(c) of DRT (Procedure) Rules, 1993. Sd/- (A.S.JAYACHANDRA) PRESIDING OFFICER DRT-I, CHENNAI

(Dictated to PS in the System, corrected, signed and pronounced by me on this 5th Day of December,