IDBI BANK vs Ms Saketh India Ltd And Five Others on 28 February 2019

O R D E R

1. This application is filed by the applicant bank u/s 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter called as ‘the Act’) on 09.12.2016 for recovery of a total sum of sum of Rs.2391,70,71,959/- (Rupees Two Thousand Three Hundred and Ninety One Crores Seventy Lakhs Seventy One Thousand Nine Hundred and Fifty Nine only) as on 01.11.2016 of First Applicant and a sum of Rs.306,77,11,869/- (Rupees Three Hundred and Six Crores Seventy Seven Lakhs Eleven Thousand Eight Hundred and Sixty Nine only) as on 08.12.2016 of Second Applicant as follows:

(i) Rs.2,35,99,54,499/- in respect of Rupee Term loan together with interest at the rate of 20.50% p.a. with monthly rests;

(ii) Rs.11,57,57,450/- in respect of Foreign Currency Loan together with interest at the rate of 20% p.a. with monthly rests;

(iii) Rs.2,64,67,85,448/- in respect of Rupee Term Loan together with interest at the rate of 21.60% p.a. with monthly rests;

(iv) Rs.3,43,47,53,392/- in respect of Rupee Term Loan together with interest at the rate of 20.60% p.a. with monthly rests;

(v) Rs.1,44,09,97,510/- in respect of Foreign Currency Loan of DM81900 & US$557421 facilities together with interest at the rate of 20% p.a. with monthly rests;

(vi) Rs.4,70,91,31,883/- in respect of Rupee Term Loan together with interest at the rate of 21.05% p.a. with monthly rests;

(vii) Rs.1,89,10,83,214/- in respect of Foreign Currency Loan of US$ 813962 together with interest at the rate of 20% p.a. with monthly rests;

(viii) Rs.2,51,76,13,325/- in respect of Rupee Term Loan together with interest at the rate of 20.60% p.a. with monthly rests;

(ix) Rs.1,73,31,93,563/- in respect of Bridge Loan together with interest at the rate of 19.50% p.a. with monthly rests;

(x) Rs.89,806/- in respect of Bridge Loan together with interest at the rate of 21% p.a. with monthly rests;

(xi) Rs.184,91,78,512/- in respect of Rupee Term Loan together with interest at contractual rates as per the Loan agreements;

(xii) Rs.121,85,33,357/- in respect of Rupee Term Loan together with interest at contractual rates as per the Loan agreements; from the date of OA till realization with costs from the defendants 1 to 4. Brief Averments of OA

2. First defendant is a Company incorporated under the provisions of the Companies Act, 1956. Second defendant is the Managing Director of D1 and third defendant is the Chairman of D1. Defendants 2 and 3 offered their personal guarantee. D4 had also given personal guarantee and mortgage. First defendant availed the following credit facilities from the applicant bank on 15.10.1991 to set up an export oriented unit at Nalgonda in the State of Andhra Pradesh for manufacture of granite tiles:

(i) Rupee Term Loans aggregating to Rs.550 lakhs (IDBI’s Share – Rs.256 lakhs) under the Project Finance Participation Scheme (PFPS) in participation with IFCI Limited (IFCI Share Rs.147 lakhs) and ICICI Bank Limited.

(ii) Foreign Currency Loan of DM 125400;

(iii) Rupee Term Loan of Rs.192 lakhs;

(iv) Rupee Term Loan of Rs.307 lakhs

(v) Foreign Currency Loan of US $ 557,421 and DM 81,900;

First defendant also approached the applicants for various credit facilities as detailed below to set up an export oriented unit at Hosur in the State of Tamil Nadu to manufacture granite tiles:

(i) Rupee Term Loans aggregating to Rs.922 lakhs under the Project Finance Scheme (PFS)

(ii) Foreign Currency Loan of US$ 813962

(iii) Rupee Term Loan of Rs.233 lakhs

(iv) Bridge Loan of Rs.200 lakhs against the Rupee Term Loan of Rs.382 lakhs sanctioned by ICICI

(v) Bridge Loan of Rs.200 lakhs against Rupee Term Loan of Rs.200 lakhs sanctioned by ICICI Defendants have executed necessary loan and security documents in favour of applicant bank. First defendant had executed joint Deed of Hypothecation dated 15.10.1991 in favour of the applicants 1 & 2 and ICICI Bank for creating a first charge on the movable properties of the Company, morefully described in Schedule A to the OA, which was also extended to the subsequent credit facilities availed by the defendants from time to time. Defendants 2 to 4 executed Deed of Guarantee on 17.10.1991, 23.10.1991 and 18.09.1991 respectively in favour of applicant bank guaranteeing due repayment of the dues and also extended the personal guarantees to the subsequent credit facilities also. In terms of loan agreement, first defendant had created mortgage by deposit of title deeds of the Schedule B property in favour of the applicant bank on 03.12.1999. After availing the credit facilities, in view of the various defaults committed by the first defendant in repayment of the facilities, the first applicant vide its letter dated 05.06.1996 declared the outstanding amount together with interest as due and payable with contractual rate of interest. Second applicant issued Recall Notice dated 24.01.1996 calling upon the first defendant to discharge the dues.

3. In the meantime, as the net worth of the applicant was eroded, the defendant made a reference to the BIFR and was declared sick in June, 1997. This applicant was appointed as Operating Agency for formulating a scheme for revival of the defendant. After several joint meetings / BIFR hearings / discussions with the promoters and based on the proposal submitted by the defendant, a Draft Rehabilitation Scheme was circulated by BIFR in March, 2001.

However, in view of the objections received thereafter, modified DRS was discussed in a joint meetings of the secured creditors in July 2001 wherein it was agreed that the amount payable to the financial institutions and banks could be in proportion to their respective settlement amounts. Subsequently, in November, 2001, Indian Bank conveyed their agreement to the modifications, subject to the defendant agreeing inter alia for (i) recompense clause, (ii) pledge of shares / assigning of mining lease and (iii) filing of consent terms. The defendant, however was not agreeable to these conditions. Hence BIFR directed the defendant to pursue with Indian Bank for settlement and thereafter submit a fully tied-up proposal to the defendant. However as the defendants did not comply with the conditions, the proposed rehabilitation scheme failed. Since the DRS remained a non-starter, in November, 2003 the applicant withdrew the consent to support the rehabilitation scheme. Thereafter, no directions were received from the BIFR and no hearing was held inspite of repeated follow-up by the first defendant.

4. The applicant issued a notice under Section 13(2) of SARFAESI Act to the defendants demanding payment of sums aggregating to Rs.136,37,72,123/- within a period of 60 days. A Miscellaneous Application was also filed with BIFR under Section 22 of SICA in June 2003 for the purpose of filing a suit in DRT for recovery of its dues. Defendants approached Hon’ble High Court of Madras and obtained interim stay Writ Petition No.20508 of 2003 dated 21.07.2003, which was subsequently modified by the Hon’ble High Court of Madras on 08.11.2004 with a direction that the stay on the proposed action under SARFAESI Act would be valid only till the requisite consent of 75% of secured lenders was obtained as per Section 13(9) of SARFAESI Act. Subsequently, consents for the proposed enforcement action under SARFAESI Act were received from the other secured creditors of the defendants, viz., IFCI, IARC and Indian Bank on 07.07.2006, 10.08.2006 and 08.01.2007 respectively. After obtaining the requisite consent of secured lenders, representing more than three fourth of outstanding dues of the defendant, the Authorised Officer of the first applicant issued a notice to the defendants on 04.04.2007 notifying their intention to take possession of the secured assets of Hosur unit of the defendant on April 12-13, 2007. However, the said notice was again challenged by the defendants before Hon’ble High Court of Madras in W.P.No.13301of 2007, wherein vide order dated 11.04.2007 applicant was restrained from proceeding further with the enforcement action under SARFAESI Act. The said writ petitions came to be dismissed on 14.12.2007 holding that the bank had complied with

Section 13(9) of the SARFAESI Act and more than three fourth of the creditors have agreed for initiation of action under Section 13(4) of SARFAESI Act. Hence the bank initiated the proposal to take possession of the Hosur property under Section 13(4) and in respect of Nalgonda property, with the consent of other lenders had initiated SARFAESI proceedings. Meanwhile the company had given combined offer for settlement of dues to all the lenders in March 2012. At the joint lenders meeting held on 18.09.2012, the first defendant was advised to make upfront payment to consider the proposal. However, the first defendant / promoters did not give any firm commitment for payment of all dues to lenders. The Nalgonda unit was put for sale through public auction during July 2013, wherein Plant and Machinery alone were sold for Rs.80 lakhs and the applicant did not receive any offer for sale of land and building. Subsequently, the land and building were sold in February, 2014 for a sum of Rs.360 lakhs and sale certificate was issued on 24.02.2014. The sale proceeds received were shared among the other secured creditors including defendants 5 and 6.

5. In respect of Schedule B property, applicant had taken symbolic possession on 29.04.2013, which was challenged by the defendants in SA No.149 of 2013 before this Tribunal and the same was dismissed on 30.05.2013. Fifth defendant had also granted credit facilities to the first defendant and has pari passu charge over the secured assets. In respect of other lender, ICICI Bank Limited, the debt has been assigned to Standard Chartered Bank, which was subsequently assigned to the fifth defendant, who is an Asset Reconstruction Company within the meaning of SARFAESI Act. Fifth defendant had given Rupee Term Loan and Foreign Currency Loan to the first defendant related to its Hosur Unit and the first defendant had created first charge on the Schedule A and B properties on pari passu basis. In the circumstances, defendants 5 and 6 have been impleaded in the present application without seeking any relief against them. In view of personal guarantees given by defendants 2 to 4 for the respective facilities availed by first defendant, they are liable to pay the outstanding dues related to those loans jointly and severally along with first defendant. Thus, the defendants 1 to 4 are liable to pay a sum of Rs.2391,70,71,959/- as on 01.11.2016 of First Applicant and a sum of Rs.306,77,11,869/- as on 08.12.2016 of Second Applicant with agreed rate of interest. Hence, the OA.

6. Defendants set ex-parte.

Points for consideration

7.

(i) Whether the applicant bank is entitled for the claim amount in the application from the defendants?

(ii) Whether the applicant bank is entitled to get rate of interest as prayed in the OA during the pendentelite period? Point

8. The applicants filed this application to recover a sum of Rs.2391,70,71,959/- in respect of First Applicant and a sum of Rs.306,77,11,869/- in respect of second applicant from the defendants. To prove its claim, first applicant bank examined its Manager, Mr. Saisanjeev and the documents were marked as Exh.A-1 to A-56 and Second Applicant examined its Assistant General Manager, Mr. R. Govindarajan and the documents were marked as Exh A-57 to A-72.

9. Heard the Ld. counsel for applicant bank and gone through the OA, PA and the documents. The clinching documents Exhs.A-1 to A-72 and the evidence of the Manager of fist Applicant and Assistant General Manager of Second Applicant proved the applicant’s claim of Rs.2391,70,71,959/- and Rs.306,77,11,869/- from the defendants.

10. The applicant prayed for interest at contractual rates. On perusal of documents, it reveals that the defendants were not able to repay the amount as per the terms and conditions agreed by them. In these circumstances, the contractual rate of interest awarded will not meet the ends of justice. Therefore, for the interest of justice, I am inclined to reduce the rate of interest. Points (i) and (ii) are answered accordingly.

11. In the result, the application is allowed as under:- (a) The applicants are entitled to recover a total sum of Rs.2391,70,71,959/- (Rupees Two Thousand Three Hundred and Ninety One Crores Seventy Lakhs Seventy One Thousand Nine Hundred and Fifty Nine only) in respect of First Applicant and a sum of Rs.306,77,11,869/- (Rupees Three Hundred and Six Crores Seventy Seven Lakhs

Eleven Thousand Eight Hundred and Sixty Nine only) in respect of Second Applicant with interest at 12% p.a. (simple) from the date of application till realization with costs jointly and severally from the defendants 1 to 4 and in case of default proceed and recover by sale of the hypothecated and immovable properties described in the Schedule A and B to the OA.

(b) The applicant bank is directed to file costs memo within two weeks of the receipt of this order.

(c) Issue recovery certificate in favour of the applicant bank in terms of this final order.

(d) 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. (Dictated to PS, transcribed by her, corrected, signed and pronounced by me in the Open Court, this the 28th day of February,2019) Sd/- (R. RAVINDRABOSE) PRESIDING OFFICER