BANK OF BARODA vs M/s TECHPRO Systems Ltd. on 31 March 2022

FINAL ORDER

1. This application is filed by the applicant bank under Section 19(1) of Recovery of Debts and Bankruptcy Act, 1993 against the defendants1 to 5 for recovery of a sum of an aggregate sum of Rs.2,00,23,43,934.80p with further interest @ 12.5% per annum with monthly rests plus 2% penal interest from the date of filing of this OA till the date of realization in full along with costs of this application and for sale of schedule properties.

2. The subject matter of the case is the “Cash Credit Limit” availed by defendants 1 to 5 from the erstwhile applicant.

3. It is the case of the applicant that the 1st defendant is a Private Limited Company represented by defendants 2 and 3 as its Chairman & Managing Director and Vice Chairman & Managing Director respectively, who are the promoters and main shareholders of the company and the other family members are the Directors of the Company for the facilitation of the management of the operations of the company.

4. It is also the case of the applicant that the 1st defendant approached the applicant for grant of credit facilities for the purpose of development of business and considering the said request the applicant sanctioned Cash Credit facility of Rs.100 crores vide its sanction letter dated 27.12.2012 subject to terms and conditions which were accepted by the 1st defendant. It is stated that initially one

Mr. Aditya Gabrani offered to be the guarantor for the facilities to be availed by the 1st defendant, but later by letter dated 28.12.2012 he sought to waive his Guarantee and substitute the 4th defendant herein in his place as the guarantor and the said arrangement was also accepted by the bank in and by an inter- office memo dated 01.02.2013.

5. It is the further case of the applicant that the 1st defendant had also availed credit facilities from the 6th defendant for their business development and in order to secure the said facilities the 1st defendant deposited the original documents pertaining to the properties more fully described in the schedule to the OA with an intention to create mortgage and by letter dated 28.12.2012, the 1st defendant undertook to extend / create charge over the said mortgaged properties on pari passu basis.

6. It is contended by the applicant that the 1st defendant as the borrower and the defendants 2 to 4 as guarantors executed various loan and security document on 31.12.2012 viz., Demand Promissory Note for Rs.50 crores (cash credit hypothecation) executed by the 1st defendant, Letter confirming the execution and delivery of Demand Promissory for Rs.50 crores (ILC/IFC) executed by the 1st defendant, Letter of guarantee executed by defendants 2, 3 and 4 through their power agent the 3rd defendant herein, counter indemnity executed by 1st defendant, power of attorney of the 4th defendant executed in favour of the 3rd defendant and Agreement for Demand Cash Credit against hypothecation of stocks and book debts executed by the 1st defendant in favour of the applicant bank.

7. It is also contended that in order to secure the aforesaid credit facilities defendants 1 to 4 created charge by way of hypothecation over the immovable fixed assets on paripassu with other banks and primary security and further as collateral security, the charge over the properties which are more fully described in the schedule was extended on pari passu basis with other banks.

8. It is further contended that the 1st defendant for their business purpose had availed various facilities from different lenders under the Multiple Banking Agreement. It is contended that as the 1st defendant’s business developed day by day and for meeting their working capital needs at various discussions spread all over India in addition to / in replacement of existing facilities and also for replacement of certain other facilities and for the betterment of the credit facilities, the first defendant company resolved to shift the multiple banking arrangement to Consortium Agreement and thus the total facilities availed by the 1st defendant from all the Consortium Bankers was arrived Rs.5,222.50 crores

9. It is contended that the 1st defendant passed the required Board Resolution dated 20.04.2013 to borrow from the Consortium Banks, accepting to the terms and conditions of the sanction letters and to execute all required loan documents in respect of the aforesaid facilities with the 6th defendant as the Lead Banker.

10. It is stated that the 5th defendant voluntarily offered to furnish Corporate Guarantee for securing the Consortium Working Capital Facilities aggregating to a sum of Rs.5,222.50 crores availed by the 1st defendant. It is also stated that the 5th defendant passed the required Board Resolution dated 25.04.2014 to offer the Corporate Guarantee to secure the aforesaid facilities, accepting the terms and conditions of the Consortium Bankers.

11. It is the case of the applicant that in consideration of availing the said total facility of Rs.5,222.50 crores and to secure the consortium facilities, the 1st defendant as the borrower, defendants 2 to 4 as guarantor, 5th defendant as the Corporate Guarantor and the applicant bank along with defendants 6 to 14 as the consortium lenders, had executed various documents on 26.04.2013 viz., Working Capital Consortium Agreement entered into between the applicant and defendants 1 to 3 and 5, Joint deed of hypothecation entered into between the applicant bank and defendants 1 to 3 and 5, Inter se agreement entered into between the applicant bank and defendants 6 to 14, deed of guarantee executed by defendants 2 to 4 in favour of the Lead Bank, deed of guarantee executed by the 4th defendant in favour of the Lead Bank, deed of guarantee executed by the 5th defendant in favour of the lead bank, Letter of Authority authorizing the Lead Bank to make the first disbursement on behalf of other Consortium member banks and Letter of Authority to Lead Bank executed by the defendants 7 to 14 in favour of the 5th defendant.

12. It is also the case of the applicant that the aforesaid consortium facilities were sanctioned against the primary security of hypothecation of stocks, raw materials, finished / semi-finished goods and book debts on pari passu with defendants 6 to

14. It is stated that the collateral security of the mortgaged properties which are more fully described in the schedule to the OA were also extended to the consortium on pari passu basis. It is also stated that to confirm the same the defendants 2 to 4 executed memorandum of entry dated 26.4.2013 in favour of the 6th defendant, who is the lead banker of the consortium.

13. It is contended by the applicant that the 1st defendant approached the applicant seeking for inter-changeability for non-fund based limits to Fund based Working Capital Limits, to the full extent of NFB limit, with the overall exposure approved vide sanction letter dated 24.12.2012 and considering the said request the 1st defendant the applicant vide sanction letter dated 25.03.2014 approved the inter- changeability. It is stated that the 1st defendant passed a Board Resolution dated 25.3.2014 to avail the aforesaid facilities from the applicant bank, accepting the terms and conditions of the said sanction letter and to execute all required loan documents in respect of the aforesaid facilities.

14. It is also contended that in order to secure the said renewal / inter-changeability, the 1st defendant had executed various loan documents in favour of applicant bank on 27.3.2014 viz., Supplementary Agreement executed by the 1st defendant, Agreement of Demand Cash Credit against hypothecation of stocks and book debts executed by 1st defendant, Take delivery letter (Cash Credit Hypothecation) executed by 1st defendant and Letter of guarantee executed by defendants 2 to 4 in favour of the applicant bank.

15. It is the case of the applicant that the defendants 1 to 5 having availed the credit facilities defaulted in repayments and failed to regularize the loan account despite. It is also stated that as the defendants 1 to 5 did not come forward to clear the outstanding dues despite repeated demands and therefore the

applicant was constrained to classify the loan account as NPA on 01.11.2013. It is stated that after repeated reminders and follow ups the 1st defendant did not come forward to repay the outstanding dues, hence each of the consortium banks had proceeded further in their recovery process and finally after several efforts the applicant obtained acknowledgement of liabilities on 27.3.2014 and 16.03.2015. It is also stated that despite the same the 1st defendant did not take any effective steps to clear the outstanding dues.

16. It is the case of the applicant that the 1st defendant company filed an application before BIFR on 22.03.2015 to declare themselves as a sick industry and due to dissolution of BIFR the application was disallowed on 1.12.2016. It is stated that at the instance of the 14th defendant a Company Application was filed before the NCLT against the 1st defendant for initiation of Corporate Insolvency Resolution Process. Which was admitted vide order dated 7.8.2017 and moratorium under Section 14 of the IBC was declared and Interim Resolution Professional was appointed, and the applicant bank had also filed their claim before the IRP. At the expiry of the moratorium the 1st defendant company came up with the Resolution Plan and filed an application before the NCLT for approval and the said application is pending.

17. It is stated that for the effective follow up of the recovery process, the said loan account was transferred to and maintained by the Assets Recovery Management Branch of the applicant and the amount outstanding in the account of the 1st defendant, due and repayable by defendants 1 to 5 to the applicant bank is Rs.2,00,23,43,934.80p.

18. It is the case of the applicant that the efforts of the applicant bank to make the defendants 1 to 5 to settle the loan did not yield any result, and hence the applicant approached this Tribunal seeking issuance of a Recovery Certificate allowing recovery of the amount due in the account.

19. Summons were taken out to the defendants were served.As there was no representation on behalf of the defendants on 12.03.2019, they were set ex-parte on that day. Applicant Bank filed Proof Affidavit along with 33 documents, which were marked as Ex. A-1 to A-33on 01.11.2021. The Ld. Counsel for Applicant Bank made his submissions on 04.03.2022 and thereafter the matter stood till this date for passing final orders.

20. The following issues arise for consideration in the matter: - (a) Whether the applicant had succeeded in proving the liability of the defendants 1 to 5?

(b) What order as to cost of the proceedings need be passed?

These issues are considered together.

21. Heard the Ld. Counsel for the applicant, perused the OA averments and the record placed before the Tribunal.

22. The evidence of the applicant is led by AW1 who produced the documents Exhibit A-1 to A-33 along with the proof affidavit. Exhibit A-1 is the Power of Attorney issued by the applicant in favour of its Authorised Signatory. Exhibit A-2

is the Sanction letter dated 27.12.2012 issued by the applicant. Exhibit A-3 is the letter dated 28.12.2012 sent by the 1st defendant to waive the guarantee on the substitution of guarantee of 4th defendant. Exhibit A-4 is the letter dated 28.12.2012 sent by the 1st defendant undertaking to extend credit charge over mortgaged properties, on pari-passu basis. Exhibit A-5 is the Demand Promissory Note executed by defendants 1 to 4 dated 31.12.2012. Exhibit A-6 is the letter dated 31.12.2012 confirming the execution and delivery of demand promissory note for Rs.50 crores executed by the 1st defendant (Cash Credit Hypothecation). Exhibit A-7 is the letter dated 31.12.2012 confirming the execution and delivery of demand promissory note for Rs.50 crores executed by the 1st defendant (ILC/FLC). Exhibit A-8 is the letter of guarantee dated 31.12.2012 executed by the defendants 2, 3 and 4 through their power agent 3rd defendant in favour of applicant. Exhibit A-9 is the indemnity dated 31.12.2012 executed by the 1st defendant in favour of applicant bank. Exhibit A-10 is the Power of Attorney dated 4.1.2013 executed by the 4th defendant in favour of 3rd defendant. Exhibit A-11 is the Agreement for demand Cash Credit against hypothecation of stocks and book debts executed by the 1st defendant. Exhibit A-12 is the Copy of the Board Resolution dated 20.04.2013 passed by the 1st defendant. Exhibit A-13 is the Board Resolution dated 25.04.2013 passed by the 5th defendant. Exhibit A-14 is the Working Capital Consortium Agreement entered into between the applicant bank and the defendants 1 to 3 and 5 dated 26.4.2013. Exhibit A-15 is the copy of the joint deed of hypothecation dated 26.4.2013 entered into between the applicant bank and defendants 1 to 3 and 5.

Exhibit A-16 is the copy of the inter-se agreement dated 26.4.2013 entered into between the applicant bank and the defendants 6 to 14. Exhibit A-17 is the deed of guarantee dated 26.4.2013 executed by defendants 2 to 4 in favour of the lead bank. Exhibit A-18 is the deed of guarantee dated 26.4.2013 executed by the 4th defendant in favour of the lead bank. Exhibit A-19 is the deed of guarantee dated 26.4.2013 executed by the 5th defendant in favour of the lead bank. Exhibit A-20 is the letter of authority dated 26.4.2013 authorising the lead bank to make the first disbursement on behalf of other consortium member bank. Exhibit A-21 is the letter of authority to the lead bank executed by the defendants 7 to 14 in favour of 5th defendant. Exhibit A-22 is the Memorandum of entry dated 26.4.2013 executed by the defendants 2 to 4 in favour of 6th defendant. Exhibit A- 23 is the memorandum of entry dated 26.4.2013 executed by defendants 2 to 4 in favour of the 6th defendant. Exhibit A-24 is the Memorandum of entry dated 26.4.2013 executed by defendants 2 to 4 in favour of 6th defendant, the lead bank of the consortium. Exhibit A-25 is the sanction letter dated 25.3.2014 issued by the applicant bank approving the inter-changeability. Exhibit A-26 is the Board Resolution dated 25.3.2014 passed by the 1st defendant. Exhibit A-27 is the Supplementary Agreement dated 27.3.2014 executed by the 1st defendant in favour of applicant bank. Exhibit A-28 is the agreements for the demand cash credit against hypothecation of stocks and book debts executed by the 1st defendant on 27.3.2014. Exhibit A-29 is the take delivery letter (cash credit hypothecation ) dated 27.3.2014 executed by the 1st defendant. Exhibit A-30 is the letter of guarantee executed by the defendants in favour of applicant. Exhibit

A-31 is the acknowledgement of liability dated 27.3.2014 executed by the 1stdefendant. Exhibit A-32 is the acknowledgement of liability dated 16.3.2015 executed by the 1st defendant. Exhibit A-33 is the Statement of Accounts in respect of the loan account of the 1st defendant along with certificates under Bankers’ Book Evidence Act.

23. Exhibit A-1 evidences that the Authorised Signatory has been empowered to institute and defend the claim on behalf of the applicant bank. Exhibit A-2 evidences that at the request of the 1st defendant the applicant sanctioned Rs.100 crores to the 1st defendant vide its sanction letter dated 27.12.2012. Exhibit A-3 evidences that the 4th defendant was substituted as guarantor in place of Mr. Aditya Gabrani and the same was also accepted by the applicant. Exhibit A-4 evidences that the 1st defendant by letter dated 28.12.2012 agreed to extend the credit charge over mortgaged properties on pari passu basis to the applicant. Exhibit A-5 to A-7 evidences that the 1st defendant executed two demand promissory notes for an amount aggregating to Rs.100 crores in favour of the applicant on 31.12.2013. Exhibit A-8 evidences that the defendants 2, 3 and 4 through their power agent 3rd defendant executed letter of guarantee in favour of the applicant. Exhibit A-9 evidences that the 1st defendant executed counter indemnity on 31.12.2012 in favour of the applicant. Exhibit A-10 evidences that the 4th defendant had executed power of attorney dated 4.1.2013 in favour of the 3rd defendant. Exhibit A-11 evidences that the 1st defendant on 31.12.2012 executed agreement of demand cash credit against hypothecation of stocks and book debts to secure the credit facilities. Exhibit A-12 and A-13

evidences that the 1st and 5th defendants had passed Board Resolution on 20.04.2013 and 25.04.2013 respectively resolving that the 1st defendant shall shift loan facilities availed to consortium of bankers and for the 5th defendant to executed corporate guarantee respectively. Exhibit A-14 evidences that the an Working Capital Consortium agreement has been entered into between the applicant bank and defendants 1 to 3 and 5 on 26.4.2013. Exhibit A-15 to A-21 evidences that the agreement was entered into between the applicant bank and the defendants 1 to 3 and 5 on 26.4.2013 and inter-se agreement between applicant and defendants 6 to 14 on 26.4.2013. It further evidences that the defendants 2 to 4 and 5 executed deed of guarantee in favour of the lead bank, the 6th defendant. It also evidences that a letter of authority has been executed by defendants 7 to 14 in favour of the 6th defendant the lead bank of the consortium. Exhibit A-22 and A-24 evidences that the defendants 2 to 4 on 26.4.2013 executed memorandum of entry in favour of 6th defendant. Exhibit A- 25 is the sanction letter issued by the applicant dated 25.03.2014 approving the inter-changeability request of the 1st defendant. Exhibit A-26 evidences that by the Board Resolution dated 25.03.2014 the 1st defendant was authorized to execute documents securing the revised credit facilities. Exhibit A-27 to A-30 evidences that the 1st defendant executed loan and security documents in favour of the applicant in respect of the revised credit facilities. Exhibit A-31 and A-32 evidences that the 1st defendant had executed acknowledgement of liability on 27.3.2014 and 16.3.2015 in favour of the applicant. Exhibit A-33, the statement of accounts in respect of loan accounts produced and certified under the

Banker’s Book Evidence Act, clearly indicates that the amount claimed by the applicant is due from the defendants. It is clear from the statement of accounts that penal interest is not capitalized.

24. The proof affidavit of the applicant bank remained unchallenged and unrebutted. Therefore, on careful consideration of proof affidavit along with Exhibits filed on behalf of the applicant bank, besides the material placed before the Tribunal, the Tribunal is satisfied that the applicant bank has successfully proved the OA claim against the defendants 1 to 5 and the applicant is having a pari-passu charge over the schedule properties along with defendants 6 to 14. Point is answered accordingly.

25. In view of the afore mentioned discussions, the only conclusion this Tribunal can draw is that the applicant had clearly proved the disbursement of the loan, which the applicant is entitled to realize. Hence, OA is disposed off in the following manner: - (a) OA No.28 of 2019 stands allowed.

(b) Applicant is permitted to realize a sum of a sum of Rs.200,23,43,934.80p together with further interest at 12.50% p.a. with monthly rests from the date of filing of the OA till date of realization from the defendants 1 to 5 jointly and severally, after deducting all the amounts received by them during the pendency of OA and also by selling the schedule properties and other assets of the defendants.

(c) It is made clear that the applicant shall have pari-passu charge over the schedule properties along with defendants 6 to 14.

(d) If the sale proceeds are not found sufficient to cover the amount due and payable to the Applicant Bank, the defendants 2 to 4 are personally liable for all such amounts due under the Loan Accounts.

(e) Applicant is permitted to realize cost of the proceedings and shall file cost memo within 7 days from the date of the order.

(f) The Recovery Certificate shall be drawn up and issued to the Recovery Officer in terms of this final order.

26. Communicate a copy of the order to the parties concerned in terms of Section 19(21)(i) of the RDB Act, read with Rule 16 of DRT (Procedure) Rules, 1993. (Dictated to PS, transcribed by him, corrected, signed and pronounced by me in Open Court, on this the 31st day of March, 2022)

Sd/- (T. RAJESH) PRESIDING OFFICER DRT-II, CHENNAI