Canara Bank vs Gtl Infrastructure Limited

Comp. App. (AT) (Ins) No. 68 of 2023 & I.A. No. 271, 272, 470, 2601 of 2023

(Arising out of the Order dated 18.11.2022 passed by the National Company Law Tribunal, Mumbai Bench-II in CP (IB) No. 4541/ (MB)/ 2019)

IN THE MATTER OF:

Canara Bank Having its registered office at: 112, JC Road Banglore, Branch : 1st Floor, A Wing, Canara Bank Building C-14, 'G' Block, Bandra Kulra Complex, Bandra (East), Mumbai. Maharashtra - 400051. Email: cb5310@canarabank.com ...Appellant

Versus

GTL Infrastructure Limited Having Registered Office at: 3rd Floor Global Vision Electronic Sadan No. III MIDC, TTC, Industrial Area, Mahape, Navi Mumbai, Maharashtra- 400710 Email: niteshm@gtlinfra.com ...Respondent

Present

For Appellant: Mr. Abhijeet Sinha, Sr. Adv. with Mr. Madhav Kanoria, Mr. Raunak Dhillon, Ms. Srideepa Bhattacharyya, Ms. Neha Shivhare, Isha Malik, Advocates. Ms. Misha, Ms. Mahima, Mr. Satyajit Bose, Advocates for I.A. No. 470 of 2023.

For Respondent: Mr. Vikram Nankani, Sr. Adv. with Mr. Rohan Raja Dhyaksha, Apoorva Agarwal, Prasad Lotlikar, Ms. Neha Mathen, Mr. Ankit Swami, Advocates. -2- Comp. App. (AT) (Ins.) No. 68 of 2023

JUDGEMENT

(25.10.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present appeal has been filed by Canara Bank who is Appellant

herein under Section 61 of the Insolvency and Bankruptcy Code, 2016 ('Code')

against the Impugned Order dated 18.11.2022 passed by National Company

Law Tribunal Mumbai Bench-II ('Adjudicating Authority') in CP (IB) No.-

4541/(MB)/2019, whereby the Adjudicating Authority has dismissed the

application filed by the appellant under Section 7 of the Code.

GTL Infrastructure Limited, the Corporate Debtor against whom Section

7 application was filed by the Appellant, is the Respondent ('Respondent').

2. Heard the Counsel for the Parties and perused the records made available

including the cited judgements. We have also updated the figures based on

Written Submission of the Parties based on liberty granted by this Appellate

Tribunal on 24.09.2024 while reserving order for judgment.

3. The Appellant submitted that he is the Financial Creditor who lent money

to the Corporate Debtor. The Appellant further submitted that there was a

consortium of banks who gave different financial facilities to the Corporate

Debtor.

4. Giving the background of the case, the Appellant submitted that the

Corporate Debtor was set up somewhere around 2006 for providing -3- Comp. App. (AT) (Ins.) No. 68 of 2023

approximately 23,700 passive telecom towers comprising 3,218 rooftop sites

and 20,487 ground bases sites as Phase-I at various locations across India and

for this purpose executed several finance and security documents ('Phase-I

financing documents). The Appellant stated that for expansion of business by

the Respondent in Phase-II, the Respondent approached the group of 16 other

lenders (in short 'GTL Consortium Lenders') and the consortium sanctioned

Rupee Term Loan ('RTL') of Rs. 2,829 Crores in addition to foreign currency

loan.

5. The Appellant submitted that he also sanctioned RTL of Rs. 200/- Crores

to the Respondent and for this purpose; the Respondent, consortium to lenders,

lenders agent and security trustee, entered into a common loan agreement dated

12.07.2008 and certain other agreement (Phase - II Financing Agreement).

6. One entity named Chennai Network Infrastructure Limited ('CNIL') also

approached the Appellant and 10 other consortium lenders ('CNIL Consortium

Lenders/JLF') for RTL of Rs. 5,000 Crores for acquisition of 17,500 passive

telecom towers. The Appellant sanctioned of RTL of Rs. 650 Crores and entered

into a Facility Agreement dated 23.03.2010 along with various connected

agreements ('CNIL Financing Documents').

7. The Appellant further elaborated that during March, 2010, the

Respondent approached five other lenders for additional loans of Rs. 700 Crores

and lenders sanctioned the same and became members of the GIL Consortium -4- Comp. App. (AT) (Ins.) No. 68 of 2023

Lenders and subsequent to this, the Respondent and the lenders entered into

amended and Restated Phase-II Common Loan Agreement dated 08.03.2010

and various other connected agreements ('Phase-II Amended and Restated

Financing Documents').

8. The Appellant submitted that since the Respondent and CNIL were not

able to meet their financial obligations on due dates and approached the

Corporate Debt Restructuring Cell ('CDR Cell') for restructuring of their

respective loans and CDR package was approved by the CDR Empowered

Group ('CDR EG') and letters of approval of restructuring package was issued

to the Corporate debtor and CNIL on 23.12.2011 and accordingly, out of total

outstanding debts of the Appellant, Rs. 93.05 Crores and Rs. 637.68/- Crores

were restructured as per the CDR Package of the Respondent and CNIL

respectively.

9. The Appellant alleged that despite such reliefs given to the Respondent

and CNIL, through CDR Packages, the accounts of the Respondent and CNIL

continued to remain unsatisfactory and due to default in payment of interest and

principal, the account of the Respondent slipped into Non-Performing Asset

('NPA') w.e.f. 17.06.2016 in terms of RBI Prudential Norms on Income

Recognition, Asset Classification and Provisioning pertaining to Advances

('IRAC Norms').

-5-

Comp. App. (AT) (Ins.) No. 68 of 2023

10. The Appellant submitted that on 20.09.2016, the Appellant and other

Consortium Lenders met and noted inability of the Respondent and CNIL to

service the principal repayments of the lenders and decided to classify their

accounts as ASM-II, however also decided to further help the Respondent and

CNIL through Strategic Debt Restructuring (SDR) in accordance the RBI

Master Direction- 'Review of I · Prudential Guidelines - Revitalising Stressed

Assets in the I ' Economy' dated 25.02.2016. The Appellant stated that lenders

agreed for participation in equity under SDR, merger of CNIL with Respondent

and induction of New Investor post-merger. The Appellant communicated the

sanction of SDR vide his letter dated 31.03.2017.

11. The Appellant submitted that in terms of this SDR, the CNIL was merged

with the Respondent w.e.f. Appointed Date i.e., 01.04.2016, which was

approved by the NCLT, Chennai and as per this merger, the assets and liabilities

of CNIL were merged into the Respondent and the Respondent became liable

for the payments of the loans and financing facilities in terms of both the

Respondent and CNIL, which were earlier availed by the Appellant from the

Consortium Lenders under the GIL Finance Documents/GIL Restructuring

Documents.

12. The Appellant stated that the Respondent could not meet requirements of

the SDR restructuring package and the Corporate Debtor was classified as NPA

with retrospective effect from 01.07.2011 based on advise of statutory auditor -6- Comp. App. (AT) (Ins.) No. 68 of 2023

i.e., from the CDR Reference Date, since the CDR had failed consequent to

which, the terms and conditions w.r.t. pricing and repayment schedule as per the

pre-CDR Period had been restored.

13. The Appellant submitted that in 2018, some of the Consortium Lenders

assigned their rights, title and interest w.r.t. the Corporate Debtor in favour of

Edelweiss Asset Reconstruction Company Limited ("EARC") and therefore,

EARC acquired 79.34% (by value) of the debt of the Respondent.

14. The Appellant submitted that vide notice dated 27.06.2018, the Appellant

called upon the Respondent to pay the overdues amount of Rs. 264.46 Crores

along with the interest due from 01.06.2018, which was followed by another

letter dated 13.07.2018.

15. It is the case of the Appellant that the Appellant decided for initiation of

the CIRP against the Respondent and recalled the entire financial assistance

granted to the Respondent vide the Recall Notice dated 23.08.2018 demanding

the outstanding payment of Rs. 540.35/- Crores. The Respondent acknowledged

and admitted the liability in its annual financial report for the year 2017-2018.

16. The Appellant submitted that he wrote letters on 03.08.2018 and

04.08.2018 to other members of consortium lenders raising concern over

mechanism being adopted for sale of Respondent's debt to EARC and the

Appellant himself opined that seeking resolution of the Corporate Debtor under

the Code is the best option.

-7-

Comp. App. (AT) (Ins.) No. 68 of 2023

17. In this background, on the failure of the Respondent to repay the amount,

the Appellant filed an application under Section 7 of the Code vide C.P. No.

3604 of 2018 before the Adjudicating Authority, which was dismissed by the

Adjudicating Authority on 26.11.2019 taking into account the judgment of the

Hon'ble Supreme Court of India dated 02.04.2019 in matter of Dharani Sugar

and Chemical Ltd v. Union of India and Ors. [(2019) 5 SCC 480], wherein the

Hon'ble Supreme Court of India held the Revised Framework Circular as ultra

vires under Section 35 AA of the RBI Regulation Act, 1949.

18. The Appellant filed another Section 7 application on 05.12.2019 before

the Adjudicating Authority bearing CP (IB) No. 4541/2019 for outstanding

amount of Rs. 646,38,062,711- as on 30.11.2019.

19. The Appellant stated that in the meanwhile, Respondent approached the

Hon'ble Bombay High Court vide its Writ Petition No. 1893 of 2019 seeking a

writ of mandamus against the Appellant and four others lenders to assign their

respective debts owed by the Respondent/ Corporate Debtor in favour of EARC

as the Appellant and few other lenders were not assigning their debts to EARC.

This writ petition of the Respondent was dismissed by the Hon'ble Bombay

High Court on 03.02.2020.

The Appellant submitted that the Respondent challenged the same before

the Hon'ble Supreme Court of India vide Special Leave Petition No. 5256/2020

which was also dismissed by the Hon'ble Supreme Court of India on 06.12.2021 -8- Comp. App. (AT) (Ins.) No. 68 of 2023

mentioning that each bank/ financial institution must make its own assessment

of the value offered by the borrowers for the financial assets and decide whether

to accept or reject the offer.

20. The Appellant submitted that his Section 7 application was finally

rejected by the Adjudicating Authority on 18.11.2022 and aggrieved by the

same the present appeal has been filed.

21. The Appellant brought out that during meeting held on 20.09.2016

between the Appellant and Consortium Lenders, the Respondent informed that

they are agreeable to SDR and following is the relevant portion :-

"'The JLF lenders reviewed the performance of the companies and they were of the opinion that they have not been able to achieve the projections envisaged at the time of CDR on all viability parameters (or reasons mentioned above. The companies have also voiced its inability to service the principal repayments o(the lenders. In view of the failure to achieve viability milestones and since the account is in SMA 2 category, the company has requested the Lenders to find a solution through Corrective Action Plan. The company has also informed that they are agreeable for Strategic Debt Restructuring Scheme as per RBI Guidelines ("SDR')'.

(Emphasis Supplied) -9- Comp. App. (AT) (Ins.) No. 68 of 2023

22. The Appellant reiterated that the Respondent miserably failed to meet its

obligation and consequently both the CDR and SDR packages failed and

therefore the Appellant declared the Corporate Debtor as NPA w.e.f.

01.07.2011.

23. It is the case of the Appellant that there is a clear case of debt and default

and acknowledgement by the Corporate Debtor and therefore the Adjudicating

Authority erred in denying the application of the Appellant filed under Section 7

of the Code. It is the case of the Appellant that as per the insolvency scheme,

the Adjudicating Authority role is limited in determining debt and default of

more than stipulated threshold limit, thereafter, the Adjudicating Authority is

expected to order for CIRP against the Corporate Debtor.

24. The Appellant brought out that there have been clear acknowledgements

of existence of debt and defaults by the Respondent as evident from various

statement of accounts of the Respondent from 01.11.2008 to 30.11.2019 and

similarly the statement of CNIL (Letter merged with Respondent) from

26.03.2010 to 30.11.2019 and all such statement have been filed and attached to

the present appeal. The Appellant reiterated that the Respondent's debt and

default are confirmed as can be seen from execution of security documents and

balance outstanding evident by several acknowledgments including letter of

Respondent dated 02.07.2016. Further the debt is also recorded in the Report of

Information Utility (NeSL) dated 05.12.2019 and the Record of default under -10- Comp. App. (AT) (Ins.) No. 68 of 2023

the report of the Central Repository of Information on Large Credits ("CRILC")

dated 04.12.2019.

25. The Appellant stated that the Respondent and CNIL have created several

charges on their properties in favour of the lenders for various facility

management and the same are undisputed facts.

26. The Appellant emphasized that according to their commercial wisdom, it

would be realistic to seek resolution of the Corporate Debtor under the Code and

the same was communicated to Union Bank of India (Leader of Consortium)

vide letter dated 03.08.2018 not to assign Appellant's debts in favour of EARC.

The Appellant sated that he issued notice dated 23.08.2018 to the Respondent

recalling the entire financial assistance granted to the Respondent and demanded

payment of Rs. 540.35 Crores (Approx.).

27. The Appellant assailed the conduct of the Respondent for taking several

frivolous grounds including that the application of the Appellant under section 7

of the Code has been rejected earlier and by doctrine of res-judicata the same

could not have been filed. The Appellant reiterated that his earlier section 7

application was dismissed in view of decision on RBI Circular dated 12.02.2018

titled as 'Resolution of Stressed Assets- Revised Framework' which was held as

ultra vires under Section 35 AA of Banking Regulations Act, 1949 and this had

nothing to do with the Appellant's right to file Section 7 application. The

Appellant filed Section 7 application under the Code for outstanding amount of -11- Comp. App. (AT) (Ins.) No. 68 of 2023

Rs. 6,46,38,06,271/- as on 30.11.2019 before the Adjudicating Authority which

was dismissed vide Impugned Order dated 18.11.2022.

28. The Appellant pleaded that the Adjudicating Authority has erred in

following the ratio of Vidarbha Industries Power Ltd. vs. Axis Bank Ltd.

[(2022) 8 SCC 841] in rejecting his application under his Section 7. The

Appellant gave details of the facts based on Vidarbha Industries (Supra) vis-à-

vis present case and stated that Vidarbha Industries (Supra) could not have

been applicable here on viability and feasibility of the Corporate Debtor, which

is entirely different. The Appellant further stated that Vidarbha Industries

(Supra) was on its own facts and did not overrule the Innoventive Industries

Ltd. v. ICICI Bank and Anr, (2018) 1 SCC 407] which is still a good law

regarding admission of Section 7 application once the criteria of debt and

default is met, which is undisputed fact here.

29. The Appellant further assailed the Impugned Order passed by the

Adjudicating Authority completely ignoring the various acknowledgments of

defaults by the Corporate Debtor in its financial statement, books of accounts,

affidavit in reply and Written Submissions filed before the Adjudicating

Authority, where the Corporate Debtor clearly admitted the debt and default but

stated that he is under financial stress consequent to initiation of CDR and SDR.

30. The Appellant pointed out that the Innoventive Industries Ltd. (Supra)

is a landmark judgment on debt and default and has been followed in most of -12- Comp. App. (AT) (Ins.) No. 68 of 2023

the cases and the Hon'ble Supreme Court of India has again reiterated in the

matter of ES Krishnamurthy v. M/s Bharath Hi Tech Builders [(2022) 3 SCC

161], that debt and default are only pre-requisites as in Appellant's application

in this case under Section 7 of the Code

31. The Appellant further cited a judgment of this Appellate Tribunal titled as

Rajesh Kedia v. Phoenix ARC Private Limited, Company Appeal (AT)

(Insolvency) No. 996 of 2021 and judgment passed by Hon'ble Supreme Court

of India in the matter of Arun Kumar Jagatramka v. Jindal Steel & Power Ltd,

Civil Appeal No. 9664 of 2019 in support of his arguments.

32. The Appellant submitted that the reliance on the Vidarbha Industries

(Supra) by the Adjudicating Authority is patently illegal in light of the order

passed by the Hon'ble Supreme Court of India in Axis Bank Limited v.

Vidarbha Industries Power Limited Review Petition [(Civil) No. 1043 of 2022

in Civil Appeal No. 4633 of 2021 ("Vidarbha Review Order")], where the

same judges of the Hon'ble Supreme Court of India who gave the original

judgment of Vidarbha Industries (Supra), clearly stipulated that

'it is well settled that judgments and observations in judgments are not to be read as provisions of statute. Judicial utterances and/or pronouncements are in the setting of the facts of a particular case'.

(Emphasis Supplied) -13- Comp. App. (AT) (Ins.) No. 68 of 2023

33. The Appellant reiterated that in the present appeal, conduct of the

Respondent has been grossly unfair and questionable and has been defaulting its

payment since 2011 despite of the best possible assistance provided by the

lenders including the Appellant through various mechanism including the CDR

and SDR.

34. The Appellant submitted that the Corporate Debtor is loss making entity

and can be seen from its Financial Statement for the year 2017-18 and is having

negative networth and not in a position at all is making the payments. The

Appellant emphasized that there is no chance of revival of the Respondent and

under these circumstances only option left is seeking resolution of the Corporate

Debtor where new management can infuse funds and bring desired changes

which ultimately would be beneficial to all stakeholder including the Corporate

Debtor itself, the lenders including the Appellant and other stakeholders.

35. The Appellant castigated Impugned Order which despite noting few facts

of the Appellant under submissions, has relied solely on the judgment of

Vidarbha Industries (Supra) and gave the ruling in one single para 11 of the

Impugned Order dated 18.11.2022 which show clearly non application of mind

by the Adjudicating Authority. The Appellant stated that the Adjudicating

Authority has not give any rational in denying the Appellant's right to initiate

the CIRP against the Corporate Debtor except mentioning judgment of

Vidarbha Industries (Supra).

-14-

Comp. App. (AT) (Ins.) No. 68 of 2023

36. The Appellant further castigated the Impugned Order stating that figures

were used in the Impugned Order out of context like the repayment of Rs.

16,915 Crores from 2011 to 2018 by the Respondent to the Lenders, monthly

revenue of Rs. 120 Crore, alleged future claims in favour of the Respondent

without analyzing relevance and context of such facts. The Appellant stated that

these facts and figures are out of context and wrongly depicted for instance the

gross monthly revenue as claimed by the Respondent does not take into

consideration cost of financing etc. The Appellant stated that the Adjudicating

Authority failed to appreciate that the alleged payment of Rs. 16,915 Crores

(new updated figure is Rs. 17,394 Crores) is as a result of conversion of loan

to equity through CDR/SDR.

37. Concluding his remarks, the Appellant strongly urged this Appellate

tribunal to dismiss the Impugned Order to protect huge money involved of the

lenders and to protect financial interest of the public at large.

38. Per contra, the Respondent denied all the averments made by the

Appellant treating these as misleading and malicious.

39. The Respondent submitted that the Adjudicating Authority has examined

the various issues and pleadings and has gone into details of the records and

facts before passing the Impugned Order which is legal and correct in given

circumstances.

-15-

Comp. App. (AT) (Ins.) No. 68 of 2023

40. The Respondent submitted that the Corporate Debtor is successfully

running its operations and is viable going concern and has been generating

sufficient revenue. The Respondent submitted that in March, 2023 it was

generating almost monthly revenue of Rs. 120 Crores and as such in spirit of the

Code, the Corporate Debtor should be allowed to continue as a going concern in

interest of all stakeholders including the lenders and for economic welfare of

public at large.

41. The Respondent gave the background of the business of the Corporate

Debtor and subsequent events leading to merger of CNIL with the Corporate

Debtor and stated that the Corporate Debtor has been providing huge

infrastructure network required for telecom business and has been pioneer in

this sector. The Respondent stated that due to external circumstance, beyond its

control, the Respondent has been facing financial distress and there has been

occasion of not paying to the lenders, however, the Respondent has been

making all the endeavors in meeting its obligations and fulfilling its

commitments towards lenders. The Respondent assailed the conduct of the

Appellant who is bent upon to send the Respondent on the path of insolvency

and later liquidation.

42. The Respondent submitted that the Corporate Debtor is capable of

survival and its genuine intentions regarding meeting its obligations can be

gauged by the fact that the Corporate Debtor has paid Rs. 17,394 Crores during -16- Comp. App. (AT) (Ins.) No. 68 of 2023

the period 2011 to 24.09.2024 (updated figures based on Written Submission) to

lenders which clearly demonstrate that the intention of the Respondent has

always good and fair.

43. The Respondent brought out that the ratio given by the Hon'ble Supreme

Court of India in the case of Vidarbha Industries (Supra) is clearly applicable

in the present case and the Adjudicating Authority rightly followed the same in

rejecting the application filed by the Appellant under Section 7 of the Code. To

buttress his point, the Respondent stated that the Adjudicating Authority itself

directed Aircel (debtors of the Respondent) to pay Rs. 900 Crores to the

Respondent in another matter, which is also pending appeal before this

Appellate Tribunal. Similarly, the Respondent has also been awarded Rs. 29.16

Crores in arbitration case of Tata Teleservices Limited and Tata Services

Maharashtra. The Respondent submitted that one arbitration case is under

process where the Respondent is likely to recover approx. Rs. 20.38 Crores and

Rs. 351 Crores from BSNL.

44. The Respondent submitted that these figures in totality around Rs. 1271

Crores which is more than the outstanding debt claimed by the Appellant of Rs.

646.38 Crores and as such only on this ground in view of Vidarbha Industries

(Supra) judgment, the appeal is required to be dismissed with cost.

45. The Respondent submitted that intention of the Code is resolution of the

Corporate Debtor and not to send the Corporate Debtor on the path of CIRP -17- Comp. App. (AT) (Ins.) No. 68 of 2023

and/or the liquidation which should be totally avoidable path as CIRP would be

detrimental not only to Respondent but also to the Appellant and also other

creditors along with thousands of other stakeholder and number of customers of

the Corporate Debtor using telecom services across India and large number of

the employees working for such industries.

46. The Respondent also refuted the claims of the Appellant that Vidarbha

Industries (Supra) is not a substantial law and is limited to its own fact and

rather Innoventive Industries Ltd. (Supra) is the only good law in deciding

cases of debt and default. The Respondent submitted that this position is not

correct and Vidarbha Industries (Supra) is a correct and latest law which is

pronounced after judgment of Innoventive Industries Ltd. (Supra) .

47. The Respondent submitted that judgment in Innoventive Industries Ltd.

(Supra) rendered at the time when the IBC was in nascent stage and laid down

of law relating to IBC and subsequently large number of litigations have helped

IBC to evolve itself and came to correct path for benefit of all stakeholders

including the borrowers and the lenders along with other stakeholders and in

this background Vidarbha Industries (Supra) is a path breaking judgment

which allows the Corporate Debtor to flourish and continue as going concern

and only the errant and unscrupulous companies are to be sent to the CIRP,

which is not the case with the Respondent.

-18-

Comp. App. (AT) (Ins.) No. 68 of 2023

48. The Respondent submitted that the decision of Vidarbha Industries

(Supra), is squarely applicable to the instant case. The ratio in the aforesaid

judgment clearly provides the Adjudicating Authority discretion to admit

Section 7 application, despite the existence of a financial debt and default. The

Respondent stated that the Hon'ble Supreme Court has clearly held that the

Adjudicating Authority has discretion under Section 7 of the Code and it ought

to exercise this discretion in situations where an entity is not really "in the red"

especially where there is concrete evidence of monies being due to it as a result

of decrees, awards and pending arbitrations along with other relevant factors,

such as steady revenue stream need to be considered. The Respondent

emphasized that the judgment in the case of Vidarbha Industries (Supra) has

stated that the examples are only illustrative and the real intent of the judgment

is that if the company is a going concern with regular revenues and has potential

to revive, it is not advisable to send such company CIRP.

49. The Respondent submitted that there are several other financial

parameters which cannot be over looked in deciding the fate of the Corporate

Debtor and submitted that as part of SDR Rs. 4501.17 Crores of debt was

converted into equity, resulting in lenders holding 63.16% of the share capital.

The market price of the said equity was R 780 Cr. as per closing of BSE and

NSE on July 31, 2022. The said value can be further improved if debt is -19- Comp. App. (AT) (Ins.) No. 68 of 2023

restructured at sustainable level, however, this equity would become NIL in case

the Corporate Debtor is admitted to CIRP.

50. The Respondent submitted that under the various Service Agreements

entered with several Telecom Operators (i.e. customers) by the Respondent, the

said Telecom Operators have a termination clause linked to insolvency of the

Respondent and if CIRP is initiated in this case, the same will not only shake the

confidence of telecom operators in the ability of the Respondent but also likely

lead to the telecom operators terminating the said contracts without having to

pay exit penalty to the Respondent, which in turn would cause further stress to

the Respondent's financial position and significant erosion in the value of the

Respondent. The Respondent stated that the core object of Code is

maximization of value through resolution and in the peculiar facts of the present

case, maximization is possible only outside IBC.

51. The Respondent submitted that the Adjudicating Authority in para 11

gave reasoning of the judgment, as earlier the pleadings were complete and only

for brevity purpose, the Adjudicating Authority has restricted its rationale in

Para 11 and rather has given its clear reasoning in para 11. The Respondent

assailed the conduct of the Appellant for generating unnecessary controversy on

such trivial and hyper technical grounds.

52. The Respondent strongly emphasized that it has been paying to all

creditors since its inceptions and stated that it has paid Rs. 17,394 Crores -20- Comp. App. (AT) (Ins.) No. 68 of 2023

between the year 2011 to 24.09.2024 i.e., (updated figures based on Written

Submission) i.e., paid in kind as debt converted into equity of Rs. 8,892 Crores

(updated till 2022-23) and remaining amount in cash and thus, total repayment

made to lenders (Cash + Conversion) is of Rs. 17,394 Crores from 2011 to

24.09.2024.

53. The Respondent submitted that it is hopeful of getting Rs. 900 Crores

from Aircel which is biggest customer of the Respondent and now since Aircel

has itself come under CIRP and the Respondent had filed a total claim of Rs.

13,393.83 Crores against the Aircel before the Resolution Professional which

has been directed by the Adjudicating Authority vide Order dated 06.12.2019 in

M.A. No. 1450 of 2019 in CP(IB) 298(MB)/2018 and same has been challenged

by the Resolution Professional before this Appellate Tribunal in Company

Appeal (AT) No. 1410 of 2019 and 1503 of 2020.

54. The Respondent stated that he has filed arbitration proceedings to recover

Rs. 351 Crores against BSNL. This arbitration is at the stage of filing of

evidence before the cross-examination of witnesses and the Respondent is

hopeful of being able to recover the dues against BSNL.

55. The Respondent emphasized that the Respondent is engaged in the

business of building, maintaining and providing/leasing passive infrastructure to

telecommunication service providers like Airtel, Reliance Jio, BSNL etc., and

such services are categorized as essential services and are being used by the -21- Comp. App. (AT) (Ins.) No. 68 of 2023

public at large. Any disruption of these services due to a protracted insolvency

process could cause set back for millions of customers across the country.

56. The Respondent mentioned that in the recent past, telecom companies like

Reliance Communications / Aircel which went into CIRP/liquidation could not

be revived and were forced into liquidation whereunder estimated recovery to

lenders and other stakeholders is less than 5%. The Respondent stated that in

view of these facts, it would not be desirable to send Corporate Debtor into

CIRP.

57. The Respondent submitted that the CDR/SDR failed not because of the

Respondent but due to the circumstances beyond control of Respondent

including, increased competition, slow roll out by new licensees, delay in 3G

roll outs, exposure of 2G scam and the Vodafone tax litigation etc. The

Respondent submitted that implementation of CDR and SDR could not be

successful due to such external environmental factors beyond the control of the

Respondent which included cancellation of 2G licensees (total 122) by the

Hon'ble Supreme Court of India in February 2012 and subsequently worsening

performance of telecom operators from 2010 to 2015 requiring telecom

operators to pay a staggering sum of Rs. 2.42 Lakh Crores and cancellation of

expansion by Aircel in 2013-14. The Respondent stated that these events led to

non implementation of SDR and therefore the debt became multifold putting

extreme hardship and unbearable financial distress on the Respondent. -22-

Comp. App. (AT) (Ins.) No. 68 of 2023

58. The Respondent gave the background under which the lenders initiated

the proposal for assignment to its debt to suitable EARC and during the time the

Respondent submitted the Resolution Plan vide letter dated 27.04.2018,

however, the same was not considered by the lenders and finally the majority of

the lenders decided to assign their Debts to EARC valued 79.34% (by value) as

on 01.07.2019.

59. The Respondent stated that the Corporate Debtor has paid around

Rs. 17,400 Crores to the lenders which included principal, interest, conversion

to equity, direct debited and amounts realized by sale of pledged shares

indicating that the Respondent has been making payments of its debts and has

been meeting its commitment towards financial facilities.

60. The Respondent submitted that by treating the SDR Scheme as having

"failed", the Appellant is seeking to disregard the conversion of a specific

portion of debt of the Applicant Bank into equity of the Respondent and

demanded repayment of the debts owed by the Respondent to Appellant prior to

the implementation of the CDR Scheme way back in 2011. The Respondent

submitted that there is no provision in the CDR Notification, or SDR

Notification, the SDR Scheme or the Revised Framework which permits the

Applicant Bank to declare the SDR Scheme or CDR Scheme as having "failed"

and disregard the specific portion of the debt converted into equity even if the -23- Comp. App. (AT) (Ins.) No. 68 of 2023

shares have not been sold prior to the end of the stand-still period under the

SDR Scheme on 19.03.2018.

61. The Respondent submitted that the Appellant has not appreciated that in

the event that the debts of all the lenders are not assigned to the EARC, the

EARC would not be in a position to restructure the entire debts owed by the

Respondent, which would defeat the very purpose of the entire process of sale

of the debt of the Respondent to the EARC due to adamant approach by the

Appellant.

62. The Respondent stated that he is not a willful defaulter and has extended

utmost co-operation and support to the lenders and made every attempt to

achieve resolution of the debts of the Lenders. The Respondent stated that the

appellant was only interested in pursuing its own mala fide objecting of using

IBC as recovery mechanism and not for resolution of the Corporate Debtor and

for sending the Corporate Debtor into CIRP without considering any alternative

remedies available.

63. The Respondent raised the issues that the Appeal was filed on limited

ground of non-applicability of Vidarbha Industries (Supra) ratio by the

Adjudicating Authority in the Impugned Order whereas in the Rejoinder filed by

the Appellant dated 11.04.2023 to the Affidavit in reply and Additional

Affidavit in reply, the Appellant is trying to raise issues of facts directly before

this Appellate Authority. It is the case of the Respondent that the Appellant -24- Comp. App. (AT) (Ins.) No. 68 of 2023

should not be permitted to bring out new facts and grounds in this Rejoinder

which was not raised in the main appeal. The Respondent emphasized that such

new contentions now been raised in the Rejoinder by the Appellant for the first

time would tantamount to expanding the scope of the appeal which is

permissible. The Respondent cited several judgments including Central Bank

of India v. Himmat Steel Judgment dated 14.11.2022 in CA (AT) (Ins.) No.286

of 2022] (paras 15-17), SBI v. India Power Corporation Ltd. Judgment dated

04.10.2023 in CA (AT) (CH) (Ins) No.87 of 2023] (paras 23-24), Sambhaji

Waghoji Asole v. State of Maharashtra & Ors., [(2006) (1) Mh.L.J., Procter

and Gamble India Ltd. v. Endolabs Ltd., 1999 SCC Online Bom 805 and

Hindustan Construction Corp. v. Mazgaon Dock, 1998 SCC Online Bom 32,

in support of his arguments.

64. The Respondent brought out that during the final stage of pleadings

before this Appellate Tribunal when the Respondent raised issue regarding non-

admissibility of Rejoinder submissions of the Appellant, the Senior Learned

Counsel for the Appellant has categorically stated that the Appellant would not

be pressing or relying upon the Rejoinder. The Respondent requested this

Appellate Tribunal to disregard the Rejoinder filed by the Appellant.

65. Concluding his remarks, the Respondent submitted that the Corporate

Debtor is viable company and was serving nation by providing telecom

infrastructure and is a serious player as evident by the fact that the EBITA was -25- Comp. App. (AT) (Ins.) No. 68 of 2023

positive and it has paid more than Rs. 17,000 Crores to its lenders in last several

years. The Respondent reiterated that due to several factors happening in the

economy and particularly in the telecom sector after 2G scam and failure on the

part of the telecom companies, the Respondent came under financial distress

and therefore the CDR and SDR become unsuccessful for no fault of the

Respondent. The Respondent reiterated in view of these clear facts, the Appeal

devoid of any merit should be dismissed with exemplary cost. The Respondent

submitted that alternatively, this Appellate Tribunal may consider to remand the

matter to Adjudicating Authority for fresh consideration after hearing both the

sides. The Respondent stated that he would like to bring out to the notice of the

Adjudicating Authority the financial statements, facts like various arbitrations

award in his favour which the Respondent has claimed w.r.t. to its viability and

sustainability as well as its ability to settle outstanding debts of the Lenders.

Findings

66. Since, we have already noted the facts of the case, during pleadings of the

Appellant and the Respondent, we will not reiterate the same once again.

67. Following issues emerges in the present appeal :-

(i) Whether there was a debt and default which could trigger Section 7

application filed by the Appellant.

-26- Comp. App. (AT) (Ins.) No. 68 of 2023

(ii) (a) Whether, ratio of Vidarbha Industries (Supra) was applicable in

the present case based on which the Adjudicating Authority rejected

the application of the Appellant filed under Section 7 of the Code.

(b) Whether, there was judicious application of mind by the

Adjudicating Authority as evident in the Impugned Order while

rejecting the application of the Appellant under Section 7 of the Code.

(iii) Whether the Adjudicating Authority ignored the acknowledgements of

debt and default by the Respondent in its various statements, books of

accounts, affidavit in reply and Written Submissions filed before the

Adjudicating Authority .

(iv) Whether the Appellant is permitted to raise any disputed issues of

facts before this Appellate Tribunal through Rejoinder dated

11.04.2023 to the Affidavit in Reply and Additional Affidavit in reply

and whether it is an impediment in the present appeal.

(v) Whether, the Appellant was duty bound to agree with majority of the

lenders to assign its debts to EARC.

Since, all these issues are inter-related, inter-connected and inter-dependent,

we shall deal with these issues in conjoint manner in subsequent discussions.

68. Issue No. (i) Whether there was a debt and default which could

trigger Section 7 application filed by the Appellant. -27-

Comp. App. (AT) (Ins.) No. 68 of 2023

➢ We note that the Appellant filed the application under Section 7 of the

Code in CP (IB) No. 4541/(MB)/ 2019 for initiation of CIRP against the

Respondent and in Para IV of Section 7 Application, total amount has

been shown as default Rs. 646,38,06,271/- as on 01.07.2011 and one table

for working of computation of accounts and date of default was attached

in annexures Part IV as Exhibit (C-1).

➢ We further note that there was a consortium of lenders which financed

GTL Infrastructure Ltd. and CNIL. We also observe that CNIL was later

emerged into GTL Infrastructure Ltd. the Respondent herein. The

financial facilities started since July 2008 by lenders, and continued over

the time including sanctioning of financial facilities by the lenders of Rs.

2829 Crores + Rs. 5000 Crores + Rs. 700 Crores to these two entities.

➢ We have already noted that due to financial distress of the Corporate

Debtor the lenders and the Respondent agreed for CDR and the portion

pertaining to the Appellant for this CDR package was Rs. 93.05 Crores +

Rs. 631.08 Crores. We note that the CDR failed and the account of

Respondent became NPA on 17.06.2016.

➢ Later SDR package was sanctioned by the lenders in favour of the

Respondent which also failed since the Respondent defaulted on

19.03.2018 and the account of the Respondent was classified as NPA -28- Comp. App. (AT) (Ins.) No. 68 of 2023

w.e.f. 01.07.2011 based on Statutory Auditors advise i.e., w.r.t.

commencement of CDR invocation year i.e., from 2011.

➢ We also note that the suitable correspondence was made by the lenders

including the Appellant to the Respondent for serving its financial

liability and finally the loan recall notice was also issued by the

Appellant.

➢ The various financial statements were brought to our notice which clearly

demonstrate the acknowledgments of default by the Respondent in its

financial statement including the annual statements for the Financial Year

2017 -2018.

➢ We note that the Impugned Order consist of 11 Paras and the contentions/

pleadings of the Appellant herein were discussed in paras No. 2 and 9 and

the contentions of the pleadings of the Respondent were discussed in Para

3 to 8. In Para 10 of the Impugned Order, ratio of Vidarbha Industries

(Supra) has been elucidate and finally in solitary Para 11, the financial

facts as submitted by the Corporate Debtor have been mentioned and the

Section 7 application has been rejected in view of the Vidarbha

Industries (Supra).

➢ Thus, we do not find any explicit discussions regarding debt and default

and any detailed analysis regarding acknowledgments of defaults by the

Respondent in the Impugned Order. From the various documents -29- Comp. App. (AT) (Ins.) No. 68 of 2023

submitted before us including the various Financial Statements of the

Respondent, we find that there has been clear debt and default and

acknowledgement by the Respondent.

➢ Even during the pleading, the Respondent did not dispute the debts and

the acknowledgments made in its annual Financial Statements. The

Respondent however explained the defaults on several grounds including

the external factors beyond its control which caused financial distress to

the Respondent and also accepted that there have been some irregularities

in done payments.

➢ In our order dated 24.09.2024, liberty was granted to the Appellant and

Respondent to file Written Submissions subsequent to which the

Respondent has filed the Written Submissions vide Diary No. 88202

dated 01.10.2024. From the Written Submission, we note that the

following issues have been raised by the Respondent :-

"Whether the ratio in Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 352 ("Vidarbha Industries") holding that the Adjudicating Authority has the discretion under Section 7, IBC to admit a petition by financial creditor only because there is debt and default has in any manner been affected by the subsequent judgements in the case of M. Suresh Kumar Reddy v. Canara Bank & Ors. and Sunder Nagar Co-operative Housing Societies Union Ltd. v. SBI?

-30- Comp. App. (AT) (Ins.) No. 68 of 2023

B. Having filed the appeal only on the limited ground of non-applicability of Vidarbha Industries, can the Appellant be heard on grounds other than those raised in the memo of appeal?

C. Having failed to file a rejoinder to the Affidavit in Reply and the Additional Affidavit in Reply filed by Respondent before NCLT, can the Appellant be permitted to raise or dispute issues of facts directly before the Appellate Authority without any challenge to the facts before NCLT? D. Can the Rejoinder filed by the Appellant before this Hon'ble Tribunal, without leave, containing a challenge to findings of facts beyond the grounds taken in the memo of appeal as per NCLAT Rules, 2016 be taken on record in view of the decisions of this Hon'ble Tribunal in Central Bank of India v. Himmat Steel and SBI v. India Power Corporation Ltd.?

E. Absent an application to amend the memo of appeal and the grounds therein, in view of the judgements of the Hon'ble Bombay High Court referred to in para 7 herein holding that rejoinder/replication does not constitute "pleadings", substantial parts of the Appellant's Rejoinder dated 11.04.2023 are liable to be struck off as set out in IA No. 2601 of 2023?

F. Whether, in the event, the Rejoinder dated 11.04.2023 is either taken on record and parts thereof not struck off, is the Respondent not entitled to file a reply to the said -31- Comp. App. (AT) (Ins.) No. 68 of 2023

Rejoinder on grounds contained therein which are beyond the ones raised in the memo of appeal?

G. Whether in the alternative, the matter be remanded to the Adjudicating Authority to re-examine the case on merits?

H. Whether in the facts and circumstances of the case, where more than INR 17,394 crores has been recovered by the financial creditors against the principal debt of INR 12,539 crores from 2011 to 24.09.2024, and with cash flow of more than INR 130.48 Crores (inclusive of GST) and INR 110.57 Crores (net of GST) per month credited in the TRA each month out of which disbursements are also made to the Appellant, and other factors including claims/amounts in excess of INR 1271 crores to be recovered from other Telecom Companies, the appeal is liable to be dismissed?"

(Emphasis Supplied) ➢ From above issues and the details given by the Respondent, we do not

find any submissions regarding denial of debt and default. Similarly, we

do not find any denial on the part of the Respondent regarding its

acknowledgements in its financial statements.

➢ In view of above, we hold that there was outstanding debt and there was a

clear default on the part of the Respondent in meeting its obligation which

entitles the Appellant to take suitable remedy as per the Code and

therefore, he correctly filed the Application under Section 7 of the Code. -32-

Comp. App. (AT) (Ins.) No. 68 of 2023

➢ We do not find any meaningful and detailed discussion on this issue in

the Adjudicating Authority decision in the Impugned Order, especially on

issue of default which is against the spirit of the Code. In view of these

discussions, the debt and default is established in favour of the Appellant.

69. Issue No. (ii) (a) Whether, ratio of Vidarbha Industries (Supra)

was applicable in the present case based on which the Adjudicating

Authority rejected the application of the Appellant filed under Section 7 of

the Code.

(b) Whether, there was judicious application of mind by the Adjudicating

Authority as evident in the Impugned Order while rejecting the application

of the Appellant under Section 7 of the Code.

➢ We note that the Impugned Order is entirely based on the ratio of

Vidarbha Industries (Supra) and therefore it would be desirable to look

into the ratio and the relevant facts, Vidarbha Industries (Supra) which

reads as under :-

" 24. Mr Jaideep Gupta, Senior Advocate appearing on behalf of the appellant submitted that the appellant had applied for stay of the proceedings before NCLT, Mumbai in extraordinary circumstances, where the appellant had not been able to pay the dues of the respondent, only because an appeal filed by MERC, being Appeal No. 372 of 2017, against an Order dated 3-11-2016 [Vidarbha Industries -33- Comp. App. (AT) (Ins.) No. 68 of 2023

Power Ltd. v. Maharashtra Electricity Regulatory Commission, 2016 SCC OnLine Aptel 137] passed by APTEL in favour of the appellant, was pending in this Court. Since the aforesaid appeal is pending in this Court, the appellant is unable to realise a sum of Rs 1730 crores, which is due and payable to the appellant, in terms of the order of APTEL.

37. Mr Mehta argued that the application under Section 7 IBC was filed by the respondent financial creditor before NCLT, Mumbai on 15-1-2020. The debt due from the appellant to the respondent financial creditor was approximately Rs 553 crores. The total debt owed by the appellant to the consortium of lenders of which the respondent financial creditor is the lead bank was approximately Rs 2727 crores.

59. There can be no doubt that a corporate debtor who is in the red should be resolved expeditiously, following the timelines in the IBC. No extraneous matter should come in the way. However, the viability and overall financial health of the corporate debtor are not extraneous matters.

60. The adjudicating authority (NCLT) found the dispute of the corporate debtor with the electricity regulator or the recipient of electricity would be extraneous to the matters involved in the petition. Disputes with the electricity regulator or the recipient of electricity may not be of much relevance. The question is whether an award of APTEL in favour of the corporate debtor, can completely be -34- Comp. App. (AT) (Ins.) No. 68 of 2023

disregarded by the adjudicating authority (NCLT), when it is claimed that, in terms of the award, a sum of Rs 1730 crores, that is, an amount far exceeding the claim of the financial creditor, is realisable by the corporate debtor. The answer, in our view, is necessarily in the negative.

75. Significantly, the legislature has in its wisdom used the word "may" in Section 7(5)(a) IBC in respect of an application for CIRP initiated by a financial creditor against a corporate debtor but has used the expression "shall" in the otherwise almost identical provision of Section 9(5) IBC relating to the initiation of CIRP by an operational creditor.

76. The fact that the legislature used "may" in Section 7(5)(a) IBC but a different word, that is, "shall" in the otherwise almost identical provision of Section 9(5)(a) shows that "may" and "shall" in the two provisions are intended to convey a different meaning. It is apparent that the legislature intended Section 9(5)(a) IBC to be mandatory and Section 7(5)(a) IBC to be discretionary. An application of an operational creditor for initiation of CIRP under Section 9(2) IBC is mandatorily required to be admitted if the application is complete in all respects and in compliance of the requisites of the IBC and the rules and regulations thereunder, there is no payment of the unpaid operational debt, if notices for payment or the invoice have been delivered to the corporate debtor by the operational creditor and no notice of dispute has been received by the -35- Comp. App. (AT) (Ins.) No. 68 of 2023

operational creditor. The IBC does not countenance dishonesty or deliberate failure to repay the dues of an operational creditor.

81. The title "Insolvency and Bankruptcy Code" makes it amply clear that the statute deals with and/or tackles insolvency and bankruptcy. It is certainly not the object of the IBC to penalise solvent companies, temporarily defaulting in repayment of its financial debts, by initiation of CIRP. Section 7(5)(a) IBC, therefore, confers discretionary power on the adjudicating authority (NCLT) to admit an application of a financial creditor under Section 7 IBC for initiation of CIRP.

88. The adjudicating authority (NCLT) has to consider the grounds made out by the corporate debtor against admission, on its own merits. For example, when admission is opposed on the ground of existence of an award or a decree in favour of the corporate debtor, and the awarded/decretal amount exceeds the amount of the debt, the adjudicating authority would have to exercise its discretion under Section 7(5)(a) IBC to keep the admission of the application of the financial creditor in abeyance, unless there is good reason not to do so. The adjudicating authority may, for example, admit the application of the financial creditor, notwithstanding any award or decree, if the award/decretal amount is incapable of realisation. The example is only illustrative."

(Emphasis Supplied) -36- Comp. App. (AT) (Ins.) No. 68 of 2023

➢ From above, it is seen that there was a clear award approved by APTEL

in favour of the Vidarbha Industries (Supra) of Rs. 1730 Crores pending

before the Hon'ble Supreme Court of India which was much more than

the amount claimed by the Financial Creditor i.e., Axis Bank of Rs.

553.28 Crores. In view of this scenario, the Hon'ble Supreme Court of

India held that it was discretion of the Adjudicating Authority, since the

word "may" has been used in Section 7 and thus the Adjudicating

Authority should have given a chance to the Corporate Debtor to continue

rather than admitting Section 7 application.

➢ In the present case, the total outstanding of all lenders was thousands of

crores and debt claims of Appellant was itself Rs. 646.38 Crores, whereas

the Respondent is now hopeful of Rs. 1271 Crores to be recovered from

other telecom companies based on Arbitration etc., which are at present at

different stages of being finalised, thus, perception of the Respondent

looks far from finality. It is anybody's guess as to when this money, if at

all, will come to the Respondent's account after all sort of claims, counter

claims and litigations at various legal fora.

➢ We further note that the ratio was further discussed by the Hon'ble

Supreme Court of India in the matter of Axis Bank Limited v. Vidarbha

Industries Power Limited Review Petition [(Civil) No. 1043 of 2022 in -37- Comp. App. (AT) (Ins.) No. 68 of 2023

Civil Appeal No. 4633 of 2021 ("Vidarbha Review Order")] and the

relevant portion reads as under :-

"3. In para 31, extracted hereinabove, to which reference has been made by the learned Solicitor General of India, this Court observed that two courses of action are available to the adjudicating authority in a petition under Section 7. The adjudicating authority must either admit the application under clause (a) sub-section (5) or it must reject the application under clause (b) of sub-section (5). The statute does not provide for the adjudicating authority to undertake any other action, but for the two choices available.

4. The question of whether Section 7 sub-section (5) was mandatory or discretionary was not in issue in any of the judgments cited on behalf of the review applicant. What was in issue in Krishnamurthy case [E.S. Krishnamurthy v. Bharath Hi-Tecch Builders (P) Ltd., (2022) 3 SCC 161 : (2022) 2 SCC (Civ) 129] was whether the adjudicating authority could foist a settlement on unwilling parties. That issue was answered in the negative.

6. The elucidation in para 90 and other paragraphs [of the judgment under review] [Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 352 : (2022) 4 SCC (Civ) 329] were made in the context of the case at hand. It is well settled that judgments and observations in judgments are not to be read as provisions of statute. Judicial -38- Comp. App. (AT) (Ins.) No. 68 of 2023

utterances and/or pronouncements are in the setting of the facts of a particular case.

7. To interpret words and provisions of a statute, it may become necessary for the Judges to embark upon lengthy discussions. The words of Judges interpreting statutes are not to be interpreted as statutes."

(Emphasis Supplied) ➢ We observe that this judgment was delivered by the same Hon'ble Judges

who gave original Vidarbha Industries (Supra) judgment and it has been

made clear that ratio was given in the context of the facts of the case on

hand.

➢ The Hon'ble Supreme Court of India in the matter of Innoventive

Industries Ltd. (Supra) brought out relevant ratio as contained in

following paras :-

"27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. ...

30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable -39- Comp. App. (AT) (Ins.) No. 68 of 2023

at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise."

(Emphasis Supplied) ➢ We note that Innoventive Industries Ltd. (Supra) clearly stipulated that

once debt and default is established, the logical decision of the

Adjudicating Authority ought to admit Section 7 application. ➢ The Respondent also pointed out that the Corporate Debtor has claimed

aggregating Rs. 13,393.83 Crores against Aircel entities and the same has

been noted by the Adjudicating Authority in the Impugned Order dated

18.11.2022 in Para 11 while rejecting the application of the Appellant

based on Vidarbha Industries (Supra).

➢ We note that the Appellant had clarified the position in the written

submissions that the figure of Rs. 13,393.83 Crores as claimed by the

Respondent has already been discussed in the Resolution Plan of Aircel,

which has been approved vide order dated 09.02.2020 in Aircel's CIRP

case and the amount claimed, admitted and provided in the Resolution

Plan give entirely different scenario.

➢ We would like to take into consideration the following table as furnished

by the Appellant in Written Submissions which reads as under :- -40-

Comp. App. (AT) (Ins.) No. 68 of 2023

Entity Amount Amount Amount provided claimed Admitted in the Plan (in Cr.) (in Cr.) (in Cr.) Aircel limited 17,462 3,128 28.50 Dishnet Wireless 16,689 3,925 27.26 Limited Aircel Cellular 2,703 27.85 0.25 Total 37,034 7,080 56.01

➢ Thus, it become clear that the out of total claimed amount of Rs. 37,034

Crores, only Rs. 56.01 Crores has been provided in the Resolution Plan,

which is 0.15% of the amount claimed, in the Resolution Plan of the

Aircel entities and the Appellant is likely to get the same amount

aggregating which is Rs. 20.08 Crores i.e., 0.15% of his claims of Rs,

13393.83 Crores, whereas the Adjudicating Authority has merely

recorded "Corporate Debtor's claims aggregating to Rs. 13,393.83 Crores

against the Aircel entitled", without taking into account the approved

Resolution Plan of Aircel only provided 0.15% of claims. Incidentally, as

noted from pleadings, the Resolution Plan of Aircel entities was approved

much earlier i.e., on 09.02.2020 whereas the present Impugned Order was

passed on 18.11.2022. We note that the approved Resolution Plan of

Aircel is pending in appeal.

➢ We observe that the provided amount in favour of the Corporate Debtor is

very meagre and does not support rational of the Adjudicating Authority

in justifying the viability and sustainability of the Corporate Debtor.

-41- Comp. App. (AT) (Ins.) No. 68 of 2023

➢ We note that the Respondent has pleaded that Rs. 900 Crores has been

directed to be paid to the Respondent as CIRP cost by the Adjudicating

Authority, whereas the Appellant has clearly brought to our notice that

the Adjudicating Authority vide its order dated 27.11.2019 in CP No.

298/IBC/NCLT/MB/MAH/2018 only stated regarding payment of ground

rent and security charges as payable to the Respondent as CIRP cost.

Thus, there is no clear basis of Rs. 900 Crores claimed by the

Respondent. Incidentally, this Appellate Tribunal vide its Order dated

09.12.2019 in Company Appeal (AT) (Ins.) No. 1410 of 2019 has stayed

the said order of the NCLT.

➢ We would also like to record other facts of the present case to examine

whether the ratio of Vidarbha Industries (Supra) is applicable in the

facts of the present case or otherwise. We note that as per Annual Report

of the Respondent for the year 2017-18, the Respondent had incurred

losses of Rs. 1892 Crores, negative networth and total liabilities of

Rs. 7188 Crores. This does not infuse rosy picture regarding viability of

the Respondent.

➢ We note that the Respondent has been emphasizing regarding its viability

and capacity to meet the financial obligations towards lenders. The latest

figures submitted by the Respondent about gross monthly revenue of

Rs. 130.48 Crores (inclusive of GST) and Rs. 110.57 Crores (net of -42- Comp. App. (AT) (Ins.) No. 68 of 2023

GST). The bank balance of the Respondent as on 30.06.2024 was Rs.

497.77 Crores and EBITDA of the Respondent during Financial year

2023-24 of Rs. 198.3 Crores.

➢ However, the Respondent has not brought out the context of these figures

which is fundamental to understand and determine the viability of any

corporate entity. We note that while claiming monthly revenue of

Rs. 110.57 Crores (net of GST) the Respondent has not taken into

consideration the cost of finance and depreciation etc., thus alleged gross

monthly revenue are not true figures.

➢ In this connection, we note that the Corporate Debtor has claimed that it

has paid Rs. 17,394 Crores till 24.09.2024 to lenders. We note that this

payment has got two components i.e., one portion containing of cash

component and second portion of debt converted into equity component

of Rs. 8892 Crores due to SDR approved by the lenders in terms of the

then prevalent RBI Circulars. Thus, the submissions of the Respondent

that it has paid Rs. 17,394 Crores between 2011 to 24.09.2024 is required

to be taken with pinch of salt. The Respondent has not brought as what

was total outstanding as per original loans along with interest which

would have been payable to lenders to understand the depth of payment

i.e., Rs. 17,394 Crores paid to all lenders including converted portion of

debt to equity.

-43-

Comp. App. (AT) (Ins.) No. 68 of 2023

➢ We consciously note that both CDR and SDR failed due to default of the

Respondent in meeting its agreed obligations. As such we feel that the

Adjudicating Authority should have gone into details and should have

analysed all facts and figures before rejecting the application of the

Appellant under Section 7 of the Code and should have taken all figures,

based on numerators as well as denominators, into consideration rather

than quoting Rs. 16915 Crores as paid to all Lenders by the Corporate

Debtor contained in the Impugned Order (updated figure 17,394 Crores

upto 24.09.2024).

➢ The Adjudicating Authority has not even discussed the nature of this

repayment of Rs. 16915 Crores i.e., whether it was paid in cash

component as per loan agreements or major chunk as deemed payable due

to conversion of debt into equity as per CDR/ SDR in terms of RBI

Guidelines, which Lenders/ Bank had to follow without any option. We

note that both the CDR/SDR failed due to default of the Respondent.

This could have been relevant factor to determine viability of the

Corporate Debtor in terms of Vidarbha Industries (Supra).

➢ It would have been desirable for the Adjudicating Authority to go into

details as what was the total outstanding claims all the lenders pre

CDR/SDR as well as post CDR/SDR and what was the total payment

made thereon. This would have given a clear picture in terms of total -44- Comp. App. (AT) (Ins.) No. 68 of 2023

payment made by the Respondent on account of principals, interest and

other ancillary charges like penal interest, if any, happened due to non

payment on part of the Respondent to the Lenders. The Adjudicating

Authority has not gone into any of these details, as such we are not in

position to support the Impugned Order rejecting Section 7 application of

the Appellant only on the ground of Vidarbha Industries (Supra). ➢ Thus, in view of all above detailed analysis herein above, we are of the

view that the Adjudicating Authority has not applied the ratio of

Vidarbha Industries (Supra) correctly in the present case while rejecting

the application of the Appellant, filed under Section 7 of the Code.

70. Issue No. (iii) Whether the Adjudicating Authority ignored the

acknowledgements of debt and default by the Respondent in its various

statements, books of accounts, affidavit in reply and Written Submissions

filed before the Adjudicating Authority .

➢ The following have been brought out during pleadings to our notice

regarding acknowledgements of debts and defaults by the Respondent.

(i) In the statement of account maintained by the Appellant- Canara

Bank in reference to account of GTL Infrastructure Ltd. from

01.11.2008 to 30.11.2019 and statement of account CNIL from

26.03.2010 to 30.11.2019, it is noted that the Appellant clearly

gave evidence of several deposit and withdrawal to establish the -45- Comp. App. (AT) (Ins.) No. 68 of 2023

debt existed and were not paid by the Corporate Debtor and

remained outstanding.

(ii) Similarly in Para 6 of the Impugned Order dated 18.11.2022 the

debt is noted and the relevant portion of the Impugned Order is

reads as under :-

"6. ...The Counsel for the Corporate Debtor has also submitted that the petitioner has claimed an amount of approx. INR 646.38 crores in the present petition. But, as per the Corporate Debtor, the debt of the Petitioner stands at INR 212,50,78,149 (Rupees Two Hundred and Twelve Crores Fifty Lakhs Seventy-Eight Thousand One Hundred and Forty-Nine Only) amounting to 6.56% of the total debt of the Corporate Debtor..."

(Emphasis Supplied)

(iii) As regarding default the same has been reflected in annual report of

the Corporate Debtor for the financial year 2017-2018 where the

admitted default in repayment in rupee term loan has been

reflected.

(iv) We also note that the GTL Infrastructure Limited has further

admitted its default in payment of facilities which led to CDR/SDR

as evident from GTL Infrastructure Limited's affidavit in reply to

Section 7 petition before the Adjudicating Authority which has -46- Comp. App. (AT) (Ins.) No. 68 of 2023

been reproduced as Annexure A-24 in Volume-IV of the present

appeal.

(v) Similarly, we note that the record of default of the account of GTL

Infrastructure Limited classify as "doubtful restructured" and has

been recorded in CRILC report dated 04.12.2019 as made available

to us in Annexure A-12 of Volume - III of the present appeal.

(vi) Furthermore, default has been acknowledged and identified in the

report of information utility, national e-services limited dated

05.12.2019 which has been produced before us in the present

appeal in Annexure A-13.

(vii) We note that in additional affidavit in reply dated 06.04.2020, at

various places, the fact regarding the debt and default has been

indicated. Similarly, the Respondent, in reply filed to the

intervention application of EARC before NCLT, also admitted debt

of Rs. 4066 Crores as due and payable towards lenders including

the Appellant.

➢ Thus, we note that there are several acknowledgements of debt and

default on the part of the Corporate Debtor.

➢ In view of above, we hold that there is a clear debt and default backed

several acknowledgements by the Respondent which entitled the -47- Comp. App. (AT) (Ins.) No. 68 of 2023

Appellant to file application under Section 7 of the Code before the

Adjudicating Authority.

71. Issue No. (iv) Whether the Appellant is permitted to raise any

disputed issues of facts before this Appellate Tribunal through Rejoinder

dated 11.04.2023 to the Affidavit in Reply and Additional Affidavit in reply

and whether it is an impediment in the present appeal.

➢ We have already noted the submissions of the Respondent that the

Appellant cannot be allowed to raise new issues in form of rejoinder. It is

the case of the Appellant that the grounds taken by the present appeal is

restricted to challenge the issues that law laid down by Vidarbha

Industries (Supra) based on which the Adjudicating Authority rejected

his application is per-incuriam and therefore ought to not have been

applied. It is the case of the Respondent that the Appellant has not

challenged any other finding of the Adjudicating Authority. ➢ We note from the submissions of the Appellant that the Adjudicating

Authority vide its order dated 29.09.2022 directed the parties to file

written submissions and the Appellant responded to the objections of the

Respondent's submissions on Vidarbha Industries (Supra) by way of its

written submissions filed before the Adjudicating Authority which is

annexed as Annexure A-27 in the present appeal.

-48-

Comp. App. (AT) (Ins.) No. 68 of 2023

➢ The Appellant pleaded that in the present case, the question as to the

applicability of Vidarbha Industries (Supra) is not a new plea set out by

the Appellant. It has its basis in the pleadings of the Respondent as well

as the Appellant before the Adjudicating Authority. ➢ In this connection, we note that the whole issue is regarding applicability

of Vidarbha Industries (Supra) which was discussed in Para 11 of the

Impugned Order dated 18.11.2022 and the only issue to reject the

application of the Appellant by the Adjudicating Authority despite

acknowledgements of the debt and default on the part of the Respondent

was the ratio contained in Vidarbha Industries (Supra). ➢ As such, the ratio of the Vidarbha Industries (Supra) is required to be

looked into, which is the prime reason for the present appeal. ➢ We have already noted the relevant para of Vidarbha Industries (Supra),

Innoventive Industries Ltd. (Supra), Vidarbha Review Order and

further we have already noted the various financial facts and figures

regarding viability of the Corporate Debtor in our earlier analysis, as such

the contentions raised by the Respondent does not hold good. ➢ We feel that even without considering the Rejoinder filed by the

Appellant, the ratio and applicably of Vidarbha Industries (Supra) is in

the present appeal is required to be taken into consideration along with

various financial facts which are found in the pleadings made before us as -49- Comp. App. (AT) (Ins.) No. 68 of 2023

well as written submissions and which are based on the financial

statements of the Corporate Debtor which are in public domain.

72. Issue (v) Whether, the Appellant was duty bound to agree with

majority of the lenders to assign its debts to EARC.

➢ We have already noted facts relating to assignment of debts by majority

of lenders in favour of EARC which constituted the value 79.34% of the

debt of the Corporate Debtor

➢ We have also noted that the Appellant has not agreed to assign its debt to

EARC along with few other lenders against which the Respondent has

approached the Hon'ble Bombay High Court in WP No. 1893 of 2019

which was dismissed vide order dated 03.02.2020.

➢ At this stage, we would like to take into consideration the relevant portion

of relevant paras of the Judgment of the Hon'ble Bombay High Court

which reads as under:-

""2. These two petitions were heard together and as they involve similar questions and issues, they are disposed of by this common judgment.

4. The relief claimed in the writ petition is that this Court should issue a writ of mandamus or any other appropriate writ, order or direction, directing respondent Nos.1 to 6 to forthwith comply with paragraph 6.4 of the Master Circular -50- Comp. App. (AT) (Ins.) No. 68 of 2023

dated 1st July, 2015 issued by the Reserve Bank of India (RBI).

38. The petitioner further submits that pertinently, despite agreeing to a sale to an ARC, in the aforementioned meetings of the lenders of the petitioner, on 3rd August, 2018 i.e. almost 6 months after agreeing to the sale, respondent No. 1 addressed a letter to the Union Bank of India, opposing the proposed sale to respondent No. 7 and raised totally irrelevant, extraneous and misconceived objections. By the said letter, respondent No. 1 also expressed its intention to initiate proceedings under the IBC against the petitioner....

45. On the above allegations and in the light of the judgment of the Hon'ble Supreme Court delivered in Writ Petition (Civil) No.1156 of 2018 dated 2nd April, 2019, it is urged that the proceedings under the Insolvency and Bankruptcy Code, 2016 (For short, "the IBC") are liable to be dismissed. The further averment in the petition is that respondent Nos.1 to 6 are required to comply with the extant guidelines of the Reserve Bank of India, including the Income Recognition and Asset Classification (IRAC) guidelines. Since 78.93% lenders of the petitioner have assigned their respective debts to respondent No.7, as per the IRAC guidelines, respondent Nos.1 to 6 are bound to assign their respective debts to respondent No.7 as well. The petitioner is impugning the actions/omissions of respondent Nos.1 to 6 on the grounds set out in the petition. -51-

Comp. App. (AT) (Ins.) No. 68 of 2023

In ground B, reliance is placed upon para 6.4 of the IRAC guidelines, which reads as under :-

"6.4 Procedure for sale of Bank's/ FI's financial assets to ARC including valuation and pricing aspects.....

(d) (i) .....

(ii) In the case of consortium/ multiple banking arrangements, if 75% (by value) of the banks/ FIs decide to accept the offer, the remaining banks/ FIs will be obligated to accept the offer" (Emphasis supplied).

46. The averment in the petition is that respondent Nos.1 to 6 are bound by the said guidelines issued by Reserve Bank of India. In the present case, since more than 75%(by value) of the lenders of the petitioner have assigned all their rights, title and interest in the financial facilities granted by them to the petitioner, in favour of respondent No.7, by executing Assignment Agreements, all other lenders of the petitioner are also obliged to accept the offer of respondent No.7 for assignment of their respective rights, title and interest in the financial facilities granted to the petitioner. In view of the IRAC guidelines, respondent Nos.1 to 6 are not entitled to treat themselves as creditors of the petitioner and must mandatorily assign their debts to respondent No.7. Since they have failed to assign their respective debts to respondent No.7, respondent Nos.1 to 6 are in blatant violation of IRAC guidelines. The IRAC guidelines constitute a law. The actions of respondent -52- Comp. App. (AT) (Ins.) No. 68 of 2023

Nos.1 to 6 are not only illegal, but also arbitrary and violative of Article 14 of the Constitution of India. Thereafter in other grounds, particularly, grounds (D) to (Q) of the petition, it is submitted that respondent Nos.1 to 6 be directed by a writ of mandamus or a direction in the nature of mandamus to assign their respective debt owed by the petitioner in favour of respondent No.7 in terms of the IRAC guidelines.

50. We heard both sides extensively on that date.

62. On these pleadings, the petition has been instituted and there is one more petition filed, namely, Writ Petition (L) No.223 of 2020. In that petition, the petitioner is stated to be GTL Limited and it invokes the jurisdiction of this Court under Article 226 of the Constitution of India for claiming the relief/direction against respondent No.7 to that petition (Canara Bank) to forthwith withdraw and cancel the Recall Notice dated 10th July, 2018, copy of which is at Exhibit 'R' to the petition, letter dated 4th June, 2019, copy of which is at Exhibit 'BB', letter dated 27th June, 2019, copy of which is at Exhibit-II and the letter dated 12nd December, 2019, copy of which is at Exhibit 'VV' to the petition.

67. It is on the above materials that we have heard Mr.Kamdar, learned senior counsel appearing on behalf of the petitioner in Writ Petition No.1893 of 2019 and Mr.Navroz Seervai, learned senior counsel appearing on behalf of the petitioner in other petition.

-53-

Comp. App. (AT) (Ins.) No. 68 of 2023

68. Mr.Kamdar invited our attention to the petition and its annexures and submitted that the case of the petitioner is that it is the Canara Bank alone, which is objecting to the agreement and assignment of the debt. The circulars of the Reserve Bank of India have been referred to by Mr.Kamdar and he would argue that these circulars are binding on Canara Bank. It cannot opt out of restructuring of debt and settlement proposal....

74. ....The primary responsibility for making adequate provisions for any diminution in the value of loan assets, investment or other assets is that of the bank managements and its statutory auditors. There has to be a inspecting officer of the Reserve Bank of India whose assessment furnished to the bank will assist it and statutory auditors in taking a decision with regard to making adequate and necessary provisions in terms of prudential guidelines. The prudential norms, the classification of assets would then enable the provisioning. Now, the argument of the learned senior counsel is based on para 6.4 of this circular. This para sets out the procedure for sale of banks/financial institutions' financial assets to Securitisation Company and Reconstruction Company, including valuation and pricing aspects. This paragraph reads as under :-

"6.4 Procedure for sale of banks'/FIs' financial assets to SC/RC, including valuation and pricing aspects -54- Comp. App. (AT) (Ins.) No. 68 of 2023

...(d) (i) Each bank/FI will make its own assessment of the value offered by the SC/RC for the financial asset and decide whether to accept or reject the offer.

(ii) In the case of consortium/multiple banking arrangements, if 75% (by value) of the banks/FIs decide to accept the offer, the remaining banks/FIs will be obligated to accept the offer....

75. Mr. Kamdar would submit by relying upon clause (d)(ii) of this paragraph that the writ be issued. However, he omits from his arguments other clauses of para 6.4. The clauses would reveal that the financial institutions and banks can acquire financial assets. This can be done by taking recourse to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the SARFAESI Act"). This provides for sale of financial assets on 'without recourse' basis. This means the credit risk associated with the financial assets being transferred to the creditors. This is subject to unrealised part of the asset reverting to the seller bank/financial institution. The banks are directed to ensure that the effect of the sale of the financial assets should be such that the asset is taken off the books of the bank/financial institution and after the sale, there should not be any known liability devolving on the bank/financial institution. Thereafter, how the sale is to be conducted in a prudent manner, in accordance with the policy approved by -55- Comp. App. (AT) (Ins.) No. 68 of 2023

the Board and what policy and guidelines the Board should lay down is set out in clause (b) of para 6.4. ...

76. The entire set of guidelines denote that this is an advise, caution and guidance provided on sale of financial assets to Securitisation Company (SC) and Reconstruction Company (RC). ...a procedure has to be followed and in the case of consortium/multiple banking arrangements, if 75% (by value) of the banks/financial institutions decide to accept the offer, the remaining banks/financial institutions will be obligated to accept the offer. However, this is preceded by an assessment of each bank/ financial institution of the value offered by the Securitisation Company/Reconstruction Company for the financial asset and decide whether to accept or reject the offer. Further, there cannot be a transfer to this Securitisation Company/ Reconstruction Company at a contingent price, whereby, in the event of shortfall in the realization by the Securitisation Company/Reconstruction Company, the banks/financial institutions would have to bear a part of the shortfall. Finally, if the auction process is used for sale of non- performing assets to Securitisation Companies/ Reconstruction Companies, that should be more transparent and complying with what is laid down in para 6.4 clause

(d)(iv).

77. Mr.Kamdar, therefore, is not correct in arguing that this circular ought to be followed and must be directed to be followed by respondent Nos.1 to 6, even if that is containing -56- Comp. App. (AT) (Ins.) No. 68 of 2023

a caution, advise and guidance. It is common ground that the petitioner says that these guidelines/norms should be applied and there is no choice not to abide by it. The argument is that since more than 75% (by value) of the lenders of the petitioner have assigned all their rights, title and interest in the financial facilities granted by them to the petitioner in favour of respondent No.7 by executing assignment agreements, by virtue of the IRAC guidelines, all other lenders of the petitioner are obligated to accept the offer of respondent No.7 for assignment of their respective rights, title and interest in the financial facilities granted to the petitioner. To our mind, this understanding of the senior counsel is flawed and erroneous simply because there is an obligation only when the guidance is adhered to and all precautions are taken before the assignment arrangement for sale. Once these are guidelines and they cannot be elevated or placed at the level of a binding rule, regulation and statute, then, we cannot accept the arguments of Mr. Kamdar. Assuming that these are fulfilled, as projected by the petitioner, still the decision to be taken requires balancing and weighing of several factors. There is a risk which has to be taken and ultimately the policy must be applied on case-to-case basis. We cannot direct respondent Nos.1 to 6, who are financial institutions/banks, to agree to the demand of the petitioner. If these are policy matters and dealing with fiscal and financial issues, then, the discretion of the banks/financial institutions cannot be -57- Comp. App. (AT) (Ins.) No. 68 of 2023

taken away by issuing a command or writ contrary to the expressed terms and conditions of the policy. The policy document must be read as a whole and nothing should be read, as is attempted, in isolation or out of context. In these circumstances, we do not think that the petitioner can claim the writ. In fact, in the grounds of this petition, respondent No.1 is targeted and it is stated that its actions are mala fide and arbitrary. It is seeking to recover monies from the petitioner under the original financial documents after a part of the respondent No.1's debt has been converted into equity under the SDR Scheme. Now, we cannot attribute mala fides and arbitrariness so easily and casually in financial matters to a public sector bank. That bank is the custodian of public funds. It holds them in trust for the public. It is not expected to surrender and sacrifice its interests, particularly legal rights merely because the petitioner desires that it should join in total restructuring of the debt of the petitioner or total waiver. We must bear in mind that before us is a debtor who owes thousands of crores to these financial institutions and banks and it is dictating to them to accept the proposal of settlement or restructuring of its debt. The proposal has to be evaluated and considered in the backdrop of its long term implications and consequences. If the bank adopts such a course, then, we cannot direct the bank to act contrary to the same. That would mean calling upon the bank not to act for public good and in public interest.

-58-

Comp. App. (AT) (Ins.) No. 68 of 2023

79. We do not think that the grounds raised in this petition, consistent with which Mr.Kamdar raised the arguments, enable us to issue the writ as prayed for.

80. The grounds in the writ petition project a version of the petitioner based on which a relief in the nature of specific performance of contractual obligations is sought in this writ petition. If we make a reference to grounds (N), (O) and (P), then, it is evident that the petitioner say that it has fulfilled its part of promise or obligation and respondent Nos.1 to 6 have refused to comply with the guidelines despite the same. Now, what the reciprocal or corresponding obligations qua the dues of the lenders are and whether they are contractual or statutory in character would have to be established and proved. If these are contractual obligations, then, whether there is absolute refusal to perform the obligations or discharge the duties or that the duties and obligations allegedly attributed to the lenders have been performed only in part and not in full are matters, which would have to be established and proved by the petitioner either in substantive legal proceedings or in defence to the proceedings instituted against it by respondent No.7. To our mind, it would be highly risky and unsafe to rely on the version of the petitioner and issue the writ of mandamus as prayed.

81. ...The standstill clause available under the SDR expired on 19 th March, 2018. Therefore, by the Reserve Bank of India guidelines, the petitioner's accounts were -59- Comp. App. (AT) (Ins.) No. 68 of 2023

classified as non-performing assets by the statutory auditors with retrospective effect from 1st July, 2011. This is on account of failure or non-compliance with the CDR and SDR packages. The company has failed to meet its repayment obligations towards the Canara Bank and committed breaches and defaults under financial documents. That is why the Canara Bank called upon the petitioner to pay the dues by its reminder dated 27th June, 2018. There is no response to the same. That is how the bank was seeking to recover a sum of Rs.540.35 Crores under the Rupees Facility as on 23rd August, 2018.

84. As a result of the above discussion, Writ Petition No. 1893 of 2019 fails. Rule is discharged. There would be no order as to costs.

89. ... We cannot, by a unilateral version of the petitioner, issue the writ. Ultimately nobody and much less a public sector financial institution/bank can be compelled to accept a settlement or resolution plan of the debtor. The bank has its own limitations, restrictions and desires to abide by the norms which it terms as more prudent. In the circumstances, we do not think that the petitioner's version can be accepted as sacrosanct. The petitioner here also relies upon the minutes of the joint lenders' meeting. If only the Canara Bank is not joining the resolution plan, then, it cannot be compelled to join it by entering into the intercreditor agreement, all the more when it has approached the NCLT. The allegations made against the -60- Comp. App. (AT) (Ins.) No. 68 of 2023

Canara Bank by the petitioner can be substantiated in the appropriate proceedings or while defending the proceedings before the NCLT or other Forums. In the circumstances, we think that it would be highly unsafe to issue the writ as prayed in this petition. The petitioner can pursue its objections before the NCLT so also institute substantive proceedings and seek appropriate declaration and relief to compel the seventh respondent to execute the agreement. We do not think that judgments in fiscal and financial matters involving huge debts can be so easily made in our limited powers. For the same reasons as are assigned while dismissing Writ Petition No. 1893 of 2019, even this writ petition fails. It is dismissed. Rule is discharged. There will be no order as to costs.

(Emphasis Supplied) ➢ From above it becomes clear that the issue regarding assignment was

discussed by the Hon'ble Bombay High Court in great detail as seen

from above paragraphs on merits and the Writ Petition was dismissed

accordingly.

➢ We note that the Hon'ble Bombay High Court have heard both the

GTL Infrastructure Limited and GTL Limited in common order and

one of the main issue was regarding mandatory applicability of

paragraph 6.4 of the RBI Master Circular. The Hon'ble Bombay High

Court categorically held that this is not mandatory and ultimately this -61- Comp. App. (AT) (Ins.) No. 68 of 2023

is discretion vesting in the financial institutions. The Hon'ble Bombay

High Court also held that RBI Guidelines only advise, caution and

provide on sale of financial assets to ARC and cannot be held

mandatory.

➢ The Hon'ble Bombay High Court also rejected the arguments of the

Respondent herein that since more than 75% (by value) of the Lenders

have assigned their rents to ARC the Appellant herein is also duty

bound to do so.

➢ The Hon'ble Bombay High Court held that RBI Circular dated

01.07.2015 are only Guidelines and these cannot be elevated or placed

at the level of binding rule, regulations and statute.

➢ The Hon'ble Bombay High Court categorically stated that they cannot

direct the Appellant herein who is the Financial Institution/ bank to the

demand of the Petitioner as these are policy matter dealing with fiscal

and financial issues and therefore, discretion of banks cannot be taken

away.

➢ The Hon'ble Bombay High Court had also held that they cannot

contribute mala-fide and arbitrariness on the part of the Appellant in

these matters who are custodian of public funds and they are not

expected to sacrifice its interest particularly legal rights merely -62- Comp. App. (AT) (Ins.) No. 68 of 2023

because the Respondent herein desired that the Appellant herein to

joins in total restructuring debt of the Corporate Debtor.

➢ Incidentally, the Hon'ble Bombay High Court noted carefully that

before them is a debtor (Respondent herein) who owes thousands of

crores to these financial institutions and banks and is dictating to them

to accept the prosed settlement or restructuring of debt. In this

connection, the Hon'ble Bombay High Court held that if such

directions is given to the banks (Appellant herein) it would mean

calling upon the banks not to act for public good and in public interest.

➢ Thus, the reasoning and the ratio given by the Hon'ble Bombay High

Court is absolutely explicit and does not leave any ground for any

doubt regarding non mandatory nature of the RBI Guidelines as well

as absolute right of the Appellant to pursue its legal remedies

including initiation of Section 7 application before the Adjudicating

Authority.

➢ We note that this was challenged by the Respondent before the

Hon'ble Supreme Court of India in the matter of GTL Infrastructure

Limited vs. Canara Bank and Ors. [(2021) SCC OnLine SC 3366]

and the following are the relevant paragraphs of the judgment of the

Hon'ble Supreme Court of India which reads as under :- -63-

Comp. App. (AT) (Ins.) No. 68 of 2023

"2. This appeal arises out of Special Leave Petition (C) No. 5256 of 2020 preferred by GTL Infrastructure Limited challenging the judgment and order dated 03.02.2020 passed by the High Court of Judicature at Bombay in Writ Petition No. 1893 of 2019.

3. The aforestated Writ Petition was filed by the appellant praying for following reliefs:

"(a) Issue a Writ of Mandamus or any other appropriate writ, order or direction, directing Respondents Nos. 1 to 6 to forthwith comply with paragraph 6.4 of the Master Circular dated July 1, 2015 issued by the Reserve Bank on Prudential Norms on Income Recognition Assets Classification and Provisioning Pertaining to Advances and execute agreements assigning their respective debts in favour of Respondent No. 7;

(b) pending the hearing and final disposal of the Petition, the Respondent Nos. 1 to 6 be restrained from taking any coercive steps against the Petitioner for recovery of their purported dues under the financial facilities granted by the Respondent Nos. 1 to 6 to the Petitioner including but not limited to filing or prosecuting any proceedings under the IBC and/or Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(c) grant and interim relief in terms of prayer clause (c);

(d) grant costs in favour of the Petitioner;"

11. We have heard Dr. Abhishek Manu Singhvi, learned Senior Advocate in support of the appeal and Mr. Salman Khurshid, learned Senior Advocate in support of the Writ Petition.

12. We have also heard Mr. Harish Salve and Mr. Amit Sibal, learned Senior Advocates for Respondent Nos. 2, 3 and 4 in the Writ Petition; Mr. Neeraj Kishan Kaul, learned Senior Advocate for Edelweiss Asset Reconstruction -64- Comp. App. (AT) (Ins.) No. 68 of 2023

Company Limited and Mr. Abhishek Singh, learned Advocate for Canara Bank.

13. Paragraph No. 6.4 (d)(i) itself makes the position quite clear that each bank/financial institution must make its own assessment of the value offered by the SC/RC for the financial asset and decide whether to accept or reject the offer.

14. The High Court was, therefore, right in holding that there would be no obligation upon the bank/FI in terms of paragraph 6.4 (d)(ii) as was contended on behalf of the appellant. Thus the High Court was absolutely right and justified in rejecting the claim made on behalf of the appellant.

15. We, therefore, see no reason to entertain this appeal, which is accordingly dismissed without any order as to costs.

16. For the same reasons, in our considered view, the writ petition also calls for no interference and is therefore, dismissed."

(Emphasis Supplied)

➢ From above judgment of Hon'ble Supreme Court of India, we note

that the Hon'ble Supreme Court of India has upheld the judgment of

the Hon'ble Bombay High Court that there would be no obligation

upon the bank/ financial institutions to accept settlement and each

bank must make its own assessment of to accept or reject.

➢ The Hon'ble Supreme Court of India clearly held that Para 6.4 of RBI

Master Circular is not mandatory and it gives discretion to every bank

to decide in overall scenario. This is quite contrary to position taken -65- Comp. App. (AT) (Ins.) No. 68 of 2023

by the Respondent before the Adjudicating Authority as well as in the

present appeal before us while arguing that clause 6.4 is mandatory

and once 75% of Lenders (by value) agrees, the other minorities (by

value) debts holders/ banks cannot remain outside. The judgments, as

discussed above, also negates the connotation of the Respondent that

the Appellant could not have initiated on his own Section 7 application

before the Adjudicating Authority.

➢ In view of this settled position by the Hon'ble Bombay High Court as

well as the Hon'ble Supreme Court of India between the same parties

on the same issue, we hold that the Appellant is not duty bound to

agree with majority of the lenders to assign its debts to EARC.

➢ It is clear that it is the commercial wisdom of the lenders is paramount

in deciding to assign its debts or to pursue other remedies including

filing under Section 7 of the Code or otherwise and these can't be any

judicial intervention on this aspect by the Adjudicating Authority or

this Appellate Tribunal.

73. In view of above detailed observations, we are not in position to support

the Impugned Order dated 18.11.2022 passed by the Adjudicating Authority.

74. The Appeal is allowed and the Impugned Order is set aside and the case is

remanded back to the Adjudicating Authority to hear the original petition of the

Appellant a fresh, taking into consideration all the relevant facts. -66-

Comp. App. (AT) (Ins.) No. 68 of 2023

75. Both the parties are directed to be appear before the Adjudicating

Authority on 11.11.2024. The Adjudicating Authority is requested to dispose of

the matter expeditiously within reasonable period say 8 weeks keeping in that

the original petition was filed in CP (IB) No. 4541/(MB)/2019 which is almost

five years old.

76. In fine, the Appeal succeeds and the Impugned Order is set aside. No

cost. IA, if any, are closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

Sim