Esther Malini Victor vs Oriental Bank Of Commerce & Ors

(Arising out of Order dated 19th July, 2019 passed by the Adjudicating Authority (National Company Law Tribunal), Special Bench, Chennai in IBA/138/2019)

IN THE MATTER OF:

Dr. Esther Malini Victor ...Appellant

Vs.

Oriental Bank of Commerce & Ors. ...Respondents

Present: For Appellant: - Mr. Arun Kathpalia, Senior Advocate with Mr. Mahesh Agarwal, Mr. Rishi Agarwal, Mr. Himanshu Satija, Ms. Shruti Arora, Ms. Aashna and Mr. Arshit Anand, Advocates.

For Respondents:- Mr. Ankit Raj, Advocate.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal has been preferred by Director of 'M/s. L&T Halol

Shamlaji Tollway Limited'- ('Corporate Debtor') against the order dated

19th July, 2019 passed by the Adjudicating Authority (National Company

Law Tribunal), Chennai Bench, admitting the application under Section

7 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short)

preferred by 'M/s. Oriental Bank of Commerce'- ('Financial Creditor'). 2

2. The main plea taken by the Appellant is that there was no default

on the part of the 'Corporate Debtor' and therefore, the application under

Section 7 was not maintainable.

3. Learned counsel appearing on behalf of the Appellant submitted

that a 'Master Restructuring Agreement' was reached on 14th February,

2017 between 'M/s. L&T Halol Shamlaji Tollway Limited'- ('Corporate

Debtor') and all the lenders, namely-- 'Allahabad Bank' and 'IDBI

Trusteeship Services Limited', 'Oriental Bank of Commerce' etc., for

restructuring terms of payment of loan. The 'Allahabad Bank' is the

"Lenders' Agent" of financial institutions/ Banks including, 'Oriental

Bank of Commerce'-('Financial Creditor'). 'IDBI Trusteeship Services

Limited' is a company acting in its capacity as 'security trustee' for the

lenders, including 'Oriental Bank of Commerce'.

4. It was submitted that the Government of Gujarat had authorised

the 'Gujarat State Road Development Corporation' to implement the work

of augmenting the existing road including newly proposed 'Godhra by-

pass' on the Halol-Godhra-Shamlaji State Highway No.5 for particular

section.

5. The work was allotted to the 'Corporate Debtor' and pursuant to

the 'Concession Agreement', the 'Gujarat State Road Development

Corporation' has granted a concession by way of an exclusive right,

license and authority during the subsistence of the 'Concession

Company Appeal (AT) (Insolvency) No. 822 of 2019 3

Agreement' to 'construct', 'operate' and 'maintain' the Project subject to

and in accordance with the terms and conditions set forth in the

'Concession Agreement'.

6. Further case of the Appellant is that for the purpose of the aforesaid

project, 'L&T Halol- Shamlaji Tollway Private Limited' (as Borrower)

reached 'Common Loan Agreement' with 'Allahabad Bank' (as 'Lenders

Agent') and 'IDBI Trusteeship Services Limited' (as 'Security Trustee') on

28th August, 2009.

7. Pursuant to the said 'Common Loan Agreement', the amount was

disbursed in different phases which was subsequently amended vide

'Master Restructuring Agreement' reached on 14th February, 2017

between 'M/s. L&T Halol Shamlaji Tollway Limited'- ('Corporate Debtor')

and the 'Allahabad Bank' (as "Lenders' Agent") and 'IDBI Trusteeship

Services Limited' (as "Security Trustee").

8. It was submitted that in terms of the said agreement, no default

has been committed by the 'Corporate Debtor' as in terms of 'Master

Restructuring Agreement', the amount is repayable on subsequent dates.

9. The aforesaid plea was also taken by the 'Corporate Debtor' before

the Adjudicating Authority which has noticed the 'Terms and Conditions'

of both the 'Common Loan Agreement' (dated 28th August, 2009), as

Company Appeal (AT) (Insolvency) No. 822 of 2019 4

amended vide 'Master Restructuring Agreement' (dated 14th February,

2017).

10. Article VII of the 'Common Loan Agreement' suggests 'Events of

Default and Remedies'. In addition to the events of default set out in

Article VII of the 'Common Loan Agreement', certain additional events

were constituted as 'Event(s) of Default' by 'Master Restructuring

Agreement', which reads as follows:

"7.1 In addition to the events of default set out in

Article VII of the Common Loan Agreement, the

following additional events shall constitute Event(s) of

Default on the occurrence of which, the Security

Trustee/ Lenders' Agent/ Lenders shall be entitled to

exercise any and all rights hereunder as contained in

this Agreement, in the manner contained in Clause 8

(Consequences of Event of Default) below.

(a) Payment Default

The Borrower does not pay any amount(s)

constituting the outstanding amounts or any

portion thereof in relation to the Part B Debt on the

respective Due Date for payment of such

amount(s).

(b) Breach or default of the Facility Documents

Company Appeal (AT) (Insolvency) No. 822 of 2019 5

The Borrower and/ or the Promoter commit(s) a

breach of or is/ are in default of any covenant,

condition, representation, warranty, obligation or

provision contained in any of the Facility

Documents, which is not capable of being

remedied or where such breach in the opinion of

the Lenders, is capable of being remedied, the

same is not remedied within a period of 90 (Ninety)

calendar days from the date of a notice being

received from the Lenders in this regard.

(c) Concessions

In the event that the concessions sought in terms

of the letter dated November 8, 2016 addressed

by the Lenders' Agent to the GSRDC are not

provided within 90 (Ninety) calendar days of the

Effective Date, in a form and manner acceptable to

the Lenders."

11. 'Consequences of Event of Default' has also been stipulated in

clause 8.1 of the 'Master Restructuring Agreement' as quoted below:

"8. CONSEQUENCES OF EVENT OF DEFAULT

Company Appeal (AT) (Insolvency) No. 822 of 2019 6

8.1 Upon occurrence of any Event of Default,

(such event being hereinafter referred to as

"Enforcement Event"), the Lenders' Agent or

Security Trustee (acting on the instructions of any of

the Majority Lenders) shall be entitled to exercise all

or any of the powers mentioned below:

(a) the Lenders shall have a right to reverse any

waivers or concessions that has been granted as a

part of this Agreement and upon such reversal, revert

back to the provisions of the Existing Facility

Documents;

(b) accelerate the Facility and declare the

obligations of the Borrower in relation to the Facility,

immediately due and payable;

(c) enforce the Security Interests which have

been created to secure the obligations of the Borrower

in relation to the Facility in the manner stipulated

under the Facility Documents;

(d) stipulate any further terms and conditions as

the Lenders deem fit with respect to Facility

Documents;

(e) upon the occurrence of an Enforcement Event,

the Majority Lenders (acting through any of the

Company Appeal (AT) (Insolvency) No. 822 of 2019 7

Lenders or otherwise) shall have a right to appoint a

nominee/ whole time director(s) on the Board of

Directors of the Borrower and any costs incurred by

the Lenders/ Lenders' Agent/ Security Trustee in

relation to such appointment shall be borne by the

Borrower and the Borrower shall do all acts, deeds

and things necessary in this regard, including but not

limited to making necessary alterations to its

memorandum of association/ articles of association

as may be required; and

(f) exercise any other rights that the Lenders

may have under Applicable Law, any other law for

the time being in force, the Facility Documents and/or

the Project Documents."

12. The other facts brought to the notice of the Adjudicating Authority

has been referred to in the impugned order are as follows:

"3. Besides this, lead Bank of Consortium,

Allahabad Bank on 08.11.2016 wrote a letter to the

Managing Director of Gujarat State Road

Development Corporation Limited (GSRDCL) stating

that the revival package will be based on adoption/

implementation of measures proposed by Banks

Company Appeal (AT) (Insolvency) No. 822 of 2019 8

and GSRDCL, which are- conversion of debt to the

tune of Rs.410 crores into equity and GSRDCL to

take share of Rs.210 Crores out of the proposed

equity of Rs.410 crores by 31.12.2017; reduction of

interest to 10% and extension of repayment based

on proposed cash flow; any measure like Entry

restriction or full toll on SH-59 or Monthly annuity

equivalent to Rs.8,00,000 per day with annual

growth of 5% annually; deferment of Revenue

Share and extension of agreement by 7 years.

4. The Financial Creditor counsel has further

stated that since the Corporate Debtor had taken

monies from various Scheduled Banks including

this Applicant for laying road, as this Corporate

Debtor failed to service the loan, GSRDCL was

asked to take share of Rs.210 Crores equity by

31.12.2017 out of proposed conversion of debt of

Rs.410Crores into equity. On having this Corporate

Debtor given an impression to the Banks stating

that GSRDCL would take share of Rs.210 cores of

equity out of proposed equity of Rs.410 crores, the

lenders on 14.02.2017 agreed in the Master

Restructuring Agreement for clause 7.1 (Event of

Company Appeal (AT) (Insolvency) No. 822 of 2019 9

Default) and 8 (Consequences of Event of Default)

mentioning that in the event concessions sought in

terms of the letter dated 08.11.2016, the Lenders'

Agent (Allahabad Bank) addressed to the GSRDCL

are not provided within 90 calendar days from the

Effective Date (i.e. Strategic Debt Restructuring

Agreement dated 14.02.2014) in a format and

manner acceptable to the lenders, the lenders can

proceed against the Corporate Debtor basing on

the original documents executed between the

parties. In Clause 8 of the consequences of events

of default, it has been stated that the lenders have

a right to reverse any waivers or offers or

concessions that has been granted as part of this

Agreement and upon such reversal, revert back to

the provisions of the Existing Facility Document i.e.

the document initially executed by the Corporate

Debtor in favour of the Creditor as well as other

banks. The Financial Creditor counsel has stated

that though this Corporate Debtor servicing part of

the debt, as GSRDCL has not taken equity share

of Rs.210 crores out of Rs.410 crores debt

converted into equity by this Restructuring

Company Appeal (AT) (Insolvency) No. 822 of 2019 10

Agreement within 90 days from the effective date,

this Financial Creditor has every right to reverse

the waivers and concessions that were provided

under Master Re-structuring Agreement dated

14.02.2017 and to proceed against this Corporate

Debtor basing on the original debt obligations

declaring Part A debt and Part B as due and

payable."

13. It was brought to the notice of the Adjudicating Authority that the

'Financial Creditor' in the Recall Notice given on 12th September, 2018

intimated the 'Corporate Debtor' that it failed to comply with the

concession mentioned in the 'Master Restructuring Agreement' dated 14th

February, 2017. The Bank had issued Recall Notice demanding

repayment of Part-B debt of Rs.78,27,62,198/- within specified date, but

the 'Corporate Debtor' failed to repay the loan as demanded by the

'Financial Creditor'.

14. From the facts as referred and noticed above, we find that the

'Corporate Debtor' in terms of Clause 7.1 of 'Event(s) of Default' of 'Master

Restructuring Agreement' failed to ensure that the 'Gujarat State Road

Development Corporation Limited' has purchased equity share of Rs.210

Crores out of Rs.410 Crores debt converted into equity within 90 days in

terms of 'Restructuring Agreement' thereby defaulted in terms of the

Company Appeal (AT) (Insolvency) No. 822 of 2019 11

Agreement. We find debt and default is proved and the Adjudicating

Authority did not commit error in admitting Section 7 application under

'I&B Code'.

15. We find no merit in this appeal. It is accordingly dismissed. No cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice A.I.S. Cheema) Member(Judicial)

(Kanthi Narahari) Member(Technical) NEW DELHI 28th August, 2019

AR

Company Appeal (AT) (Insolvency) No. 822 of 2019