Intec Capital Limited vs Manish Kumar Bhagat Resolution ...

[Arising out of order dated 10.03.2021 in I.A. No. 246 of 2020 in C.P. (IB) No. 441/NCLT/AHM/2019 passed by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench, Ahmedabad Court 2)]

IN THE MATTER OF:

INTEC CAPITAL LIMITED CIN: L74899DL1994PLC057410 708, Manjusha Building, 57, Nehru Place, New Delhi-110019 IBC@inteccapital.com ...... Appellant. (Financial Creditor) Versus

MANISH KUMAR BHAGAT Resolution Professional M/s Perfect Boring Private Limited 103-104, Panchdeep Complex, Helmet House Lane, Mithakali Six Road, Navrangpura, Ahmadabad-380009 Mbhagat2003@gmail.com ....... Respondent. (Corporate Debtor) Present: For Appellant: Mr. K. Datta, Sr. Advocate along with Ms. Mehak Khurana, Mr. Ninod Chaurasia and Mr. Aabhas Singh, Advocates. For Respondent:- Ms. Honey Satpal, Advocate for R-1. 2

Ms. Veneet Trehan, Advocate for Intervenor.

JUDGMENT

(23rd September, 2022)

Justice Anant Bijay Singh;

The present Appeal has been filed by the Appellant under Section 61(1) of

the Insolvency and Bankruptcy Code, 2016 (for short IBC) being aggrieved and

dissatisfied by the order dated 10.03.2021 passed by the Adjudicating Authority

(National Company Law Tribunal, Ahmedabad Bench, Ahmedabad Court 2) in

I.A. No. 246 of 2020 in C.P. (IB) No. 441/NCLT/AHM/2019, whereby and

whereunder the Appellant filed the application under Section 60(5)(c) of the IBC

with a following prayer:

a) To direct the Resolution Professional to restore the claim of the applicant as it was lodged in accordance with the arbitration award.

b) To direct the RP to provide details, documents and information sought by the applicant in stipulated time period.

By which the Adjudicating Authority dismissed the Application filed by the

Appellant.

2. The facts giving rise to this Appeal are as follows:

i) The Respondent- Corporate Debtor had availed loan facilities from the

Appellant. The Appellant had sanctioned three loans by issuing three sanction

letters on 22.05.2012 to which Corporate Debtor assented by counter signing

the same and subsequent to which loan agreement were executed.

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ii) Further case is that terms of Sanction Letters were mutually agreed terms

and one of the terms of sanction 'Clause 11' was specifically dealing with

collateral security retained by Appellant. As per the terms agreed, interest on

said collateral security is not payable at the end of tenure if the loan account if

foreclosed, terminated or borrower defaults, the clause 11 is hereunder:

"11. Additional Collateral Security:

Cash collateral Securities 33.75% of the loan amount i.e. INR 1,01,25,000/- amount of SD. The Collateral money bears interest of 7.00% P.A. and will be payable at the end of the tenure of terms loan facility and after all dues including instalments and other charges, if any, are fully repaid to and subject to tax deduction at source as per I.T. Act, 1961 and rules there under."

iii) The Corporate Debtor had defaulted in repayment of financial assistance

sanctioned, thus Arbitration / Loan Recall Notices were issued on 23rd May,

2015 for default committed by corporate debtor towards his Loan account no.

LNAHM00612-130001371, LNAHM01112-130001372 and LNAHM01112-

130001373. Simultaneously Arbitration was also initiated as per the mandatory

arbitration 'Clause 32' of the loan Agreements, the relevant clause is hereunder:

"32. ARBITRATION

32. 1 Any conflict, difference, controversies, or disputes arising between the parties shall be resolved amicably at the first instance. Unresolved disputes, if any, shall be submitted/referred to the arbitration of the Sole Arbitrator. The Sole Arbitrator shall be either the Director or Head-Commercial Business of INTEC Capital Limited or any other person nominated by him/them. The Arbitration shall be conducted in

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accordance with the provisions of Arbitration and Conciliation Act, 1996, Rules thereunder any amendments thereto and the language of the Arbitration shall be English. The decision/award of the Arbitrator shall be final/conclusive and binding on the parties. The seat of Arbitration shall be Delhi."

iv) The Appellant also issued a Section 13(2) notice under SARFAESI Act,

2002 on 15.02.2019 seeking recovery of Rs. 3,50,46,561/-

v) Further case is that the Ld. Arbitrator passed an award dated 04.04.2016

(Annexure 10 at page 304 to 336, Vol.- II of the Appeal) in favour of the Appellant

in all three cases. The Corporate Debtor received ample opportunities to make

his representation before the Ld. Arbitrator but it chooses not to participate for

reasons best known to them as recorded by Arbitrator in Paragraphs 5, 6 & 7 of

the Award, which is hereunder:

"5. On 27.07.2015 my office received a letter dated 21.07.2015 from Respondent party no. 1 & 2 requesting that the arbitration proceedings be held in the end of September, 2015. The request was made on the basis that the party was unable to attend the hearing on 25.07.2015 and also till 15.09.2015 because he was going abroad. In view of the request of the Respondent parties, on the next date being 08.08.2015, the matter was not proceeded ex-parte. Respondent parties were granted the opportunity to authorize a representative to attend the proceedings before this Tribunal.

6. Thereafter, on 22.08.2015 Claimant party filed statement of Claim. Thereafter proof of service was also filed on 11.09.2015. By order dated 11.09.2015 Respondent parties were again notified that in view of the request of the Respondent party

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matter was not proceeded ex-parte despite the earlier order dated 25.07.2015. However, at the request of the Respondent party since sufficient time was allowed to them, on the next date being 24.10.2015 Respondent parties were directed to attend the arbitration proceedings failing which the matter was to be proceeded ex-parte.

7. As despite repeated service and despite sufficient time being allowed to the Respondent parties, when the Respondent parties again failed to appear on 24.10.2015 the matter was proceeded ex-parte."

vi) Further case is that the erstwhile Board of the Corporate Debtor also

challenged the award in Ahmadabad, under Section 34 of the Arbitration and

Conciliation Act. The same came to be dismissed due to want of jurisdiction. The

Corporate debtor again went on to challenge the awards before the District Court,

Delhi which was also dismissed on the ground of want of prosecution. Thereafter,

the award dated 04.04.2016 has attained finality on 1st November, 2019.

vii) Thereafter, the Appellant filed C.P. (IB) No. 148 of 2019 under Section 9 of

the IBC. However, during its pendency, an application of another creditor M/s

Devsaria Iron and Steel Co. Pvt. Ltd. was allowed on 30.09.2019 and Corporate

Debtor was admitted to Corporate Insolvency Resolution Process (For short CIRP)

and Resolution Professional was appointed. In the light of the above, the

Appellant withdrew its petition under Section 9 of the IBC vide order dated

26.11.2019. Further, the Appellant filed its claim on 15.10.2019 as total of Rs.

4,51,96,588.08/- with the Respondent- Resolution Professional. The said claim

was admitted provisionally by the Respondent. There was no issue raised by the

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erstwhile board of management also on the claim of the Appellant. However, on

12.12.2019 in the 2nd CoC meeting, the claim of the Appellant was reduced from

Rs. 4,51,96,588.08/- to Rs. 94 lacs without any basis.

viii) The Appellant was shocked by such reduction and therefore a series of e-

mail communications ensued between the Appellant and the Resolution

Professional, in order to explain to him the calculation done by Appellant in

respect of claim. However, without appreciating the explanation provided by the

Appellant to substantiate its claim, the Resolution Professional again made a

drastic reduction in the claim of the Appellant to the tune of Rs. 69 lacs only.

Vide its email dated 03.02.2020, the RP provided completely erroneous

calculation, based on selective reading of the arbitral award, sanction letter and

the RBI email which adversely reduced the voting share of Appellant from

approximately 19.56% to only 3.63%.

ix) Thereafter, the Appellant filed an Application under Section 60(5) of the

IBC before the NCLT against the decision of the Resolution Professional of

reducing the claim of the Appellant and after hearing the parties the Tribunal

dismissed the said Application. Hence this Appeal.

3. The Ld. Sr. Counsel for the Appellant during the course of argument and

in his memo of Appeal along with written submissions submitted that the claim

initially on the basis of loan documents and sanction letters, however, when the

arbitral awards attained its finality when the appeal against the arbitral awards

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preferred by Corporate Debtor was dismissed on 01.11.2019. The claim

calculations based on arbitral awards were shared with Resolution Professional.

4. It is further submitted that the Adjudicating Authority has failed to

consider the judgment passed by the Hon'ble Supreme Court in the matter of

'Dena Bank Vs. C. Shivkumar Reddy & Anr., Civil Appeal No. 1650 of 2020 dated

04.08.2021' held that a final judgment and/or decree of any Court or Tribunal

or any Arbitral Award for payment of money, if not satisfied, would fall within

the ambit of a 'financial debt', enabling the creditor to initiate proceedings under

Section 7 of the IBC.

5. It is further submitted that the Resolution Professional wrongly

adjudicated upon and reduce the claim of the Appellant from Rs.

4,51,96,588.08/- to Rs. 69,38,050.38/- causing thereby huge prejudice as well

as reduction in CoC voting power of the Appellant from 19.56% to 4.80% which

is in total disregard to amount of the financial debt of Rs. 5,84,43,439/- in terms

of the Audited balance sheet of the Corporate Debtor, inter alia, for the year

ended 31st March, 2017, duly acknowledging the amount payable by the

Corporate Debtor in terms of he admitted sanction letters and loan agreements

as also arbitral awards and amount as shown in execution application filed

before the Hon'ble City Civil & Sessions Court at Ahmadabad on 02.08.2016.

6. It is further submitted that the Resolution Professional has re-evaluated

and effectively adjudicated upon the claims, albeit wrongly, with following

submissions:

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• The Ld. Arbitrator has not granted the Collateral /security benefit to the

Corporate Debtor. Thus, outstanding as per awards is Rs. 5,84,43,439/-

but Resolution Professional while calculating as per awards is himself

giving benefit of collateral security to the Corporate Debtor as evident from

calculation given by Resolution Professional.

• The Sanction Letter (Clause 11) it is clearly mentioned that no interest

will be payable on collateral in case of premature termination yet

Resolution Professional has given benefit to Corporate Debtor without

considering the fact that Ld. Arbitrator completely ignored the same.

• The Sanction Letter and Loan Agreement clearly states the penal interest

to be 3% per month which amounts to 36% per annum yet the Resolution

Professional calculated the claim by taking 18% per annum while

admitting the claim irrespective the method of calculation.

7. It is further submitted that Resolution Professional be directed to admit

claim as per mutually agreed terms of sanction or as per Arbitral Awards which

comes out to be Rs. 5,84,43,439/-. Based on these submissions the impugned

order is set aside and the Appeal be allowed.

8. The Ld. Counsel for the Respondent during the course of argument and in

his reply affidavit along with written submissions submitted that the Company

Petition was filed under Section 9 of the IBC and the same was admitted by the

Adjudicating Authority vide order dated 30.09.2019 and further public

announcement has been made by the respondent RP on 07.10.2019 for

submission of claims before 18.10.2019. Pursuant to that, the Appellant on

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15.10.2019 lodged his claim under Form-C as financial creditor for the amount

of 4,51,96,588.08/- and the same was provisionally admitted and a report was

submitted for constitution of CoC in which it was clearly mentioned that in the

absence of the financial statement for the year 2018-19 the claims are

provisionally admitted which are subject to change.

9. It is further submitted that after the 1st CoC meeting it was observed that

the arbitration award dated 04.04.2016 passed by the Ld. Sole Arbitrator

provided interest at the rate of 18% per annum to payable to the Appellant as

opposed to 36% as mentioned in sanction letter of the Appellant, the same is

attached in the appellant Appeal memo as Annexure 10. Accordingly, the claim

of Appellant was verified and notified on 06.12.2019 through mail by the

Resolution Professional (page 6 of the Reply). The 2nd CoC meeting dated

12.12.2019 the CoC was informed of the reconstituted shares. Pursuant to

above, a mail was received from Mr. Vasant Modi, member of suspended Board

of Director requesting the Respondent to inquire the Appellant whether it has

deposited the interest of Rs. 56.26 lakhs in account of Corporate Debtor at the

time of NPA and then final the claim of Intec Capital Ltd. to which reply was also

made on 30.01.2020 (Annexure C of the reply).

FINDINGS

10. We observe that subsequent to the RBI complaint an email was written to

the Appellant on 04.01.2020 (Annexure D of the reply) that the interest on Rs.

2,70,00,000/- @ 7% is not credited in Corporate Debtor account. However, it is

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considered that the interest credit in the loan account on Security Deposit @ 7%

whereby the Respondent called for explanation from the Appellant. In response

to the mail, the Appellant sent mail dated 07.01.2020 alleging that RBI mail is

wrongly interpreted and erred in calculating Appellant's claim and asked to have

meeting to discuss and understand each and every figure of appellant's claim

after that the meeting was scheduled on 15.01.2020 to discuss and finalise the

appellant's claim after this a mail has been sent on 03.02.2020 (Annexure E of

the reply) in which it is informed that the claim of Rs. 4,51,96,588.08/- is

received against Perfect Boring Pvt. Ltd., admitting the appellant claim of Rs.

69,38,050.38/- as per calculation.

11. We observe that in the 4th CoC meeting held on 17.02.2020, the

Respondent informed the CoC about revised claim of the Appellant i.e. Rs.

69,38,050/-. However, objection has been raised by the Appellant on the

reduction of the claim and asked to consider some points at page no. 11 and 12

of the reply for accepting the claim and further in response to it the Respondent

informed that the arbitration award considered at 18% interest instead of 36%

and further the interest amount of security deposit was never credited in

Corporate Debtor bank account and also the TDS Certificate (26 AS) of Perfect

Boring Pvt. Ltd. for the Financial year 2012-13, 2013-14, 2014-15 are evident.

The interest on security deposit has been deducted by 'Intec Capital Ltd.' but

interest was not credited to 'Perfect Boring Pvt. Ltd.', therefore, the claim of the

Appellant has been verified and admitted based on the information and

Company Appeal (AT) (Insolvency) No. 307 of 2021 11

documents available. The claim was verified based on the arbitration award and

revised accordingly.

12. We observe that the Respondent admitted the claim based on calculation

of the Appellant wherein the Appellant itself has given treatment to the security

deposit by deducting it from the outstanding amount, the interest rate as per the

arbitration award dated 04.04.2016 was @ 18% which is also not disputed by

the Appellant and further treatment also has been given to the information

provided by the RBI on 19.12.2019 with respect to the interest on the security

deposit, which again has been admitted by the Appellant before the RBI. The

Resolution Professional has therefore not adjudicated but only has collated the

information provided by the Appellant, Corporate Debtor and the RBI. Hence, we

are of the view that there is no merit in the Appeal, the instant Appeal deserves

to be dismissed.

13. We are of the view that the Adjudicating Authority has considered the

submissions made by the Appellant and have held that the Hon'ble Supreme

Court in the case of "Essar Steel India Limited" relied by the Resolution

Professional, wherein it is observed that it is the responsibility of the Resolution

Professional to collect, collate and finally admit claims of all creditors, the role of

the Resolution Professional is not adjudicatory but administrative. Further in

paragraph 19 of the impugned order, the Adjudicating Authority have come to

the conclusion that the Resolution Professional has already collated the genuine

claim of the Appellant based on the documents filed by the Appellant.

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• Perusal of the order dated 30.04.2021 passed by this Appellate Tribunal

it appears that the Ld. Counsel for the Appellant informed that on

16.03.2022 Resolution Plan which was submitted and approved by CoC

has further been approved by Adjudicating Authority, it was ordered that

any outcome of the Resolution Plan/implementation of the Resolution

Plan will be subject to result of this Appeal.

• Taking all the facts aforenoted above, we find that no reason to disagree

with the finding given by the Adjudicating Authority, therefore, the

Adjudicating Authority has rightly passed the impugned order. The

Impugned order dated 10.03.2021 passed by the Adjudicating Authority

(National Company Law Tribunal, Ahmedabad Bench, Ahmedabad Court

2) in I.A. No. 246 of 2020 in C.P. (IB) No. 441/NCLT/AHM/2019 is hereby

affirmed. The Appeal is hereby dismissed.

14. Registry to upload the Judgment on the website of this Appellate Tribunal

and send the copy of this Judgment to the Adjudicating Authority (National

Company Law Tribunal, Ahmedabad Bench, Ahmedabad Court 2), forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

New Delhi 23rd September, 2022 R. Nath.

Company Appeal (AT) (Insolvency) No. 307 of 2021