Maneesh Ramakant Sapte vs Export-Import Bank Of India & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No.1954 of 2024 (Arising out of Order dated 15.10.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench Court III in C.P. No.(IB) 3425/MB/C-III/2019)

IN THE MATTER OF: Maneesh Ramakant Sapte ...Appellant

Versus Export Import Bank of India & Ors. ...Respondents

Present: For Appellant : Mr. Abhinav S. Raghuvanshi, Mr. Milan Singh Negi, Mr. Nikhil Kumar Jha, Ms. Aakriti Gupta, Ms. Shweta, Advocates. For Respondents : Mr. Krishnendu Datta, Sr. Advocate with Ms. Palak Nenwani, Mr. Rohit Gupta, Advocates.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by a Suspended Director of the Corporate Debtor -

Maneesh Ramakant Sapte has been filed challenging order dated

15.10.2024 passed by National Company Law Tribunal, Mumbai Bench,

Court-III admitting Section 7 Application filed by Export-Import Bank of

India and other three Banks under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as the "IBC"). The

Adjudicating Authority by the impugned order has admitted Section 7

Application and initiated the Corporate Insolvency Resolution Process

("CIRP") against the Corporate Debtor ("CD"). Aggrieved by which order

this Appeal has been filed.

Company Appeal (AT) (Ins.) No.1954 of 2024 1

2. Brief facts of the case necessary to be noticed for deciding the Appeal

are:

i. The Financial Creditors - Respondent Nos.1 to 4 with one

Barclays Bank PLC extended Term Loan Facility to the tune

of USD 45 million to M/s Svizera Holdings B.V. (Principal

Borrower), a subsidiary company of the CD. The loan was

extended under a Facility Agreement dated 24.09.2007. The

CD stood as a Guarantor. The Barclays Bank LLC, Hong

Kong L King Branch acting as Agent and the Offshore

Security Trustee of the of the Financial Creditors.

ii. The Principal Borrower - Svizera, Netherlands as well as the

CD failed to repay the amounts due on the respective due

dates, hence, as per the guidelines of RBI the account of

Borrower - Svizera, Netherlands was classified as Non-

Performing Assets ("NPA") by Respondent Banks on different

dates in the year 2011. The Agent Barclays Bank PLC,

Hongkong Branch, as instructed by the Financial Creditors

issued a notice dated 03.02.2012 to the Borrower as well as

Corporate Guarantor. A Demand Notice dated 21.02.2012

was also issued to the Corporate Guarantors of CD with copy

to the Borrower requesting the Corporate Guarantor to pay

outstanding amount of USD 36,316,260.33 due as on

30.01.2012.

Company Appeal (AT) (Ins.) No.1954 of 2024 2

iii. The Respondent Banks filed a suit against Principal Borrower

and the CD (Foreign Suit) before the Queen's' Bench, UK in

accordance with Clause 37.1 of the Facility Agreement. The

CD has also filed a reference under Section 15(1) of the Sick

Industrial Companies (Special Provisions) Act, 1985 ("SICA")

before the BIFR, on which Case No.74 of 2012 was registered.

Barclays Bank filed an Application for intervention before the

BIFR. In the Foreign Suit before the Queen's Bench a Decree

was passed on 08.04.2014 against the Principal Borrower

and the CD of USD 35,355,064.80 (approximately Rs.212.13

crores) along with interest and fees.

iv. After repeal of SICA on 01.12.2016, the Financial Creditors

filed a Company Petition under Section 7 before the

Adjudicating Authority on 30.08.2019 alleging default by the

Principal Borrower and the Corporate Guarantor. On

25.03.2022, NCLT dismissed Section 7 Application as barred

by time, against which Financial Creditors filed Company

Appeal (AT) (Ins.) No.579 of 2022. The Appeal was allowed on

09.05.2023. Aggrieved by the order of this Tribunal dated

09.05.2023, the Appellant filed an Appeal under Section 62

of the Code before the Hon'ble Supreme Court being Civil

Appeal No.4073 of 2023, which was dismissed by the Hon'ble

Supreme Court.

Company Appeal (AT) (Ins.) No.1954 of 2024 3 v. The Financial Creditors in the meanwhile filed an IA for

restoration of Section 7 Application, which was allowed by

the Adjudicating Authority on 05.07.2023, restoring Section

7 Application. The Adjudicating Authority refused to adjourn

Section 7 Application, aggrieved by which an Appeal was filed

on 06.12.2023. This Tribunal passed an order directing the

Adjudicating Authority to admit Section 7 Application, which

order was challenged before the Hon'ble Supreme Court by

the Respondent in Civil Appeal No.8153 of 2023. The Hon'ble

Supreme Court allowed the Appeal filed by the CD and

directed the NCLT to decide the matter afresh.

vi. An IA No.5566 of 2023 was filed by the CD. and by an order

dated 15.10.2024, the Adjudicating Authority heard the

Application along with IA No.5566 of 2023 and by an order

dated 15.10.2024, admitted Section 7 Application, appointing

Mr. Ashish Narayan as an IRP.

vii. Challenging the order dated 15.10.2024, this Appeal has been

filed.

3. When the Appeal came for consideration, learned Counsel for the

Appellant submitted that Appellant is willing to deposit the entire

principal amount as referred in Part-IV of Section 7 Application. This

Tribunal passed an interim order on 18.10.2024 to the following effect:

"18.10.2024: Ld. Counsel for the appellant submits that the appellant is ready to deposit the entire amount referred to in Part- IV of Section 7 application and he has depositing the demand draft

Company Appeal (AT) (Ins.) No.1954 of 2024 4 of Rs.110/- crores (Rupees One Hundred Ten Crores) by tomorrow. He further submits that balance principal amount shall be paid within 15 days.

2. Counsel for the respondent seeks liberty to communicate the appellant the figure as per all the four banks within a week.

3. List this appeal on 29.10.2024.

4. In the meantime, no further steps shall be taken in pursuance of the impugned order dated 15.10.2024 without prejudice to the rights of both the parties.

4. In pursuance of different orders passed by this Tribunal, the

Appellant as on date has deposited total amount of Rs.369.11 crores in

this Tribunal. On the Application filed by the Appellant, the amount

deposited in this Tribunal has been directed to be kept in the interest

bearing fixed deposit. The Appellant submitted a proposal on 06.02.2025

before the Financial Creditors requesting for settlement. The Appellant

had also sent a letter dated 16.10.2024 to the Financial Creditors,

intimating the amount, which according to the Appellant was required to

be paid. The Bank has replied to the final proposal dated 06.02.2025

submitted by the Appellant and as per additional affidavit in reply, which

was filed by the Financial Creditor, it is pleaded that amount as

calculated by the Appellant is not correct. The Appellant also filed an

affidavit in response to the affidavit in reply dated 12.02.2025 where the

Appellant pleaded that interest claimed by the Bank is not acceptable. It

is submitted that Bank may consider filing of Application under Section

12A on the amount of Rs.369.11 crores towards 100% principal and

interest due as on 31.03.2019.

Company Appeal (AT) (Ins.) No.1954 of 2024 5

5. Both the parties were heard by this Tribunal on 17.03.2025 and

judgment was reserved. Both the parties were given liberty to file written

submissions, which have been filed by both the parties.

6. As per the Appellant, the amount deposited of Rs.369.11 crores is

sufficient to take care of the principal amount and the interest. It is

submitted that Bank is charging interest in violation of the RBI

Guidelines. It is submitted that under the Guidelines of the RBI dated

18.08.2023, in respect of NPA accounts, the penal interest should be

charged reasonable and levied by the Lender only on the amount under

default in a non-discriminatory manner and it must be ensured that there

is no capitalization of the penal charges and no further interest computed

on such charges. It is further submitted that the said Guidelines also

stipulates that the Bank should keep in mind that the intent of levying

penal charges is essentially to inculcate sense of credit discipline and

such charges are not meant to be used as a revenue enhancement tool. It

is submitted that copy of Lender Banks Books of Account indicate that

Lenders have charged interest on interest on Notional as well as penal

interest, which is unfair lending practice. It is submitted that USD 10

mn. was already repaid. The Borrower Company was liquidated and USD

7272648 was recovered from the sale of offshore securities. Besides,

principal Borrower paid 3.276 million euros equivalent to approximate

USD 5.32 million. The Appellant and CD - Maneesh Pharmaceuticals

Ltd. Is having manufacturing units in Mumbai and Himachal Pradesh

and engaging in export of life saving Anti TB drugs to more than 60

countries through WHO contracts and employs about 1800 staff/

Company Appeal (AT) (Ins.) No.1954 of 2024 6 workmen across the country. The Company does not have any other

financial obligations or borrowings apart from the present guarantee

obligation and the Company has already deposited monies more than

what is actually due to the Banks herein. It is submitted that the

proceedings under the IBC are not recovery proceedings. The Appellant

has also established that the interest has been calculated in

contravention to the established principles of accounting and against the

RBI Guidelines. The Appellant has already deposited Rs.369.11 crores in

the Registry of this Tribunal, whereas the Banks are still adamant and

pressurising the Appellant to pay the wrongly calculated monies against

their alleged claim and they have not shown their willingness to file

Section 12 Application for withdrawal of Section 7 proceedings. Learned

Counsel for the Appellant has also referred to RBI Circulars and submits

that even after 31.03.2019, the Respondents have charged interest and

additional interest. The Appellant also sought direction to waive off entire

penal interest charged. It was further submitted that Respondents be

directed to make an Application for withdrawal of the CIRP against the CD

and securities be released.

7. Learned Counsel appearing for the Banks - Financial Creditors has

refuted the submissions of the Appellant and submits that the Appellant

has engaged the Financial Creditors in several rounds of proceedings. The

Adjudicating Authority on finding 'debt' and 'default' has rightly passed

an order of admission in Section 7 Application. The offer made by the

Appellant before this Tribunal is merely an eyewash exercise to cause

delay in the CIRP. Time bound resolution of CIRP is the purpose of IBC.

Company Appeal (AT) (Ins.) No.1954 of 2024 7 The debt and default has not even been questioned before this Tribunal

and the submissions made before this Tribunal that Appellant has

deposited the entire outstanding amount, itself proves that debt and

default is an admitted fact, hence, CIRP need to proceed. It is further

submitted that CD on several occasions have acknowledged the debt,

which has been noted by the Adjudicating Authority in the impugned

order. It is submitted that as per the Facility Agreement the Bank was

entitled to charge interest, penal interest and the total amount due as on

insolvency commencement date is Rs.5,19,01,61,595.03 and the

Appellant for the first time has raised the defence of charging penal

interest, despite being well aware that present transaction was a foreign

currency term loan (default interest is contractual) and default interest is

being charged since the stage of invocation of guarantee. It is submitted

that RBI Circulars, which are relied by the Appellant is not applicable,

since these instructions of penal charges are not applicable in case of

rupee/ foreign currency export credit and other foreign currency loans.

The interest is contractual and was always in the knowledge of the CD

since the invocation of guarantee. There has been repeated failure by the

CD to abide by its own terms. The admission order deserves to be uphold

and CIRP be allowed to continue in time bound manner.

8. We have considered the submissions of learned Counsel for the

parties and have perused the records.

9. We have already noticed the series of litigation which took place

between the parties with respect to default committed by Principal

Company Appeal (AT) (Ins.) No.1954 of 2024 8 Borrower and the CD. The Adjudicating Authority in the impugned order

has recorded a categorical finding of existence of 'debt' and 'default'. The

Adjudicating Authority also noted in its order that settlement proposal

submitted by the CD was rejected by the Financial Creditors, which was

noticed in paragraph 61 of the impugned order. It is useful to extract

paragraphs 61 and 62 of the impugned order, which are as follows:

"61. The Petitioners, in their reply to additional affidavit dated 28.11.2023 filed by the Corporate Debtor, had brought on record two letters dated 30.11.2023 and 08.12.2023 whereby the Corporate Debtor made settlement proposals to the Petitioners which were, however, rejected by the Petitioners. The Petitioners argue that the proposals dated 30.11.2023 and 08.12.2023 also amounts to acknowledgement of debt and default and this Tribunal on being satisfied with the same, is bound to admit the instant application. The issue of bar of limitation has already been decided and accepted by the Corporate Debtor that the petition is within limitation.

62. Considering the facts of the present case and looking at them from whichever angle, we have no hesitation to conclude that debt and default has been established. Thus, the second issue is also answered in positive."

10. The proceedings in this Appeal as noticed above also indicate that

there has been acknowledgment and acceptance of debt and default and

the amount deposited before this Tribunal by the Appellant is also

towards the acknowledgment and acceptance of debt and default. There

being admitted debt and default, we do not find any error in the order of

Adjudicating Authority initiating the CIRP.

11. The submission which has been pressed by learned Counsel for the

Appellant that although the Appellant has deposited the amount to

Company Appeal (AT) (Ins.) No.1954 of 2024 9 liquidate 100% debt as was existing on the date when Application under

Section 7 was filed as well as on the date when CIRP commenced, but the

Financial Creditors are not ready to accept the amount to liquidate their

debt, which indicate that Financial Creditors are proceeding with Section

7 Application only as a recovery measures, which is not the object of IBC.

Learned Counsel for the Appellant submitted that levy of penal interest

was also not permissible and the calculation and computation provided

by the Financial Creditors before this Tribunal are not correct. On the

other side, the Bank has supported its calculation and submitted that the

deposit made by the Appellant is not full deposit to liquidate the amount

of outstanding to all four Banks, who are Respondents herein and who

had filed Section 7 Application. It is submitted that the Appellant on

earlier occasion has also prayed to clear the entire outstanding, in which

he had failed. It is submitted that RBI Circulars relied by the Appellant

are not attracted with regard to external commercial borrowings and there

being clear Clause-8.3 in the Facility Agreement, which allows default

interest to be charged on the entire outstanding amount, including

principal, accrued interest etc., the said amount has to be paid by the

Appellant.

12. After having considered the submissions of learned Counsel for the

parties and perusing the records, we fully endorse the view and the

findings of the Adjudicating Authority that Financial Creditors have fully

proved the 'debt' and 'default' on the part of the CD and no error has been

committed by the Adjudicating Authority in directing for admission of

Section 7 Application and for initiation of CIRP against the CD. We, thus,

Company Appeal (AT) (Ins.) No.1954 of 2024 10 uphold the order of Adjudicating Authority directing for admission of

Section 7 Application.

13. We, however, are not unmindful of the fact that the Appellant has

deposited in this Tribunal an amount of Rs.369.11 crores, which

according to the Appellant will fully satisfy the outstanding of the

Financial Creditors along with interest.

14. The dispute between the parties regarding charging of penal interest

and charging of interest on interest or other issues regarding

computations, are not the issues, which need to be examined and decided

in these proceedings.

15. The Hon'ble Supreme Court in GLAS Trust Company LLC vs. BYJU

Raveendran & Ors. in Civil Appeal No.9986 of 2024 decided on

23.10.2024 has laid down the law that for withdrawal of CIRP, the

appropriate course open for the parties to initiate proceedings under

Section 12A with Regulation 30A. Thus, for withdrawal of the

proceedings, appropriate measures have to be taken under Section 12A

and Regulation 30A of the CIRP Regulations before the Adjudicating

Authority. By interim order passed by this Tribunal on 18.10.2024, the

Committee of Creditors ("CoC") could not be constituted by the IRP. We,

thus, are of the view that in the facts of the present case, the CoC needs

to be constituted to find out the claim of the Financial Creditors and to

permit the Financial Creditors and other claimants to file their claims and

the IRP to collate the claims. In event the Appellant is desirous of

submitting a settlement proposal for withdrawal of Section 7 Application,

Company Appeal (AT) (Ins.) No.1954 of 2024 11 it is always open for the Appellant to submit a proposal before the IRP,

who can place the same before the CoC. In event the CoC with 90% vote

share approve the settlement, the IRP can always file an Application for

withdrawal of the proceedings.

16. Any proposal submitted by the Appellant, may also include the

payment of amount of Rs.369.11 crores deposited in this Tribunal for

payment to the Lenders, can be placed by the IRP/ RP before the CoC to

obtain the decision. The Members of the CoC at that stage needs to take

a decision with requisite vote share, as to whether withdrawal of the

proceedings is to be done or not. In the facts of the present case, we are

of the view that the amount deposited in this Tribunal of Rs.369.11 crores

may await the decision of Adjudicating Authority. In event the CoC does

not accept the settlement proposal of the Appellant, we grant liberty to the

Appellant to file an Application for withdrawal of the amount deposited in

this Tribunal.

17. In result of foregoing discussions and conclusions, we dispose of this

Appeal with following directions:

(1) The order passed by Adjudicating Authority dated

15.10.2024 admitting Section 7 Application filed

by the Financial Creditors is upheld.

The interim order passed by this Tribunal on

18.10.2024 is vacated.

The CIRP against the CD will proceed. The IRP

may constitute the CoC in accordance with law.

Company Appeal (AT) (Ins.) No.1954 of 2024 12 (2) The period from 18.10.2024 till the date of this

order, is excluded from the CIRP of the CD.

(3) The Appellant shall be at liberty to submit

proposal before the CoC with copy to the IRP.

After constitution of the CoC, the IRP may place

the settlement proposal before the CoC for

obtaining a decision as contemplated by Section

12A read with Regulation 30A of the CIRP

Regulations. In event the settlement proposal is

accepted, the IRP may file an Application under

Section 12A.

(4) It shall be open for the CoC to consider the

settlement proposal submitted by the Appellant,

which may also include the payment of the

amount deposited in this Tribunal of Rs.369.11

crores to the Lenders. It is for the CoC to take its

commercial decision to accept or not to accept the

settlement proposal. The settlement proposal may

also include other terms and conditions in addition

to payment of amount of Rs.369.11 crores to the

Financial Creditors.

(5) The entire process of submission of settlement

proposal by the Appellant and consideration by the

CoC shall be completed within 60 days from the

Company Appeal (AT) (Ins.) No.1954 of 2024 13 date of this order. After expiry of 60 days, the

IRP/ RP may proceed with the CIRP of the CD in

accordance with law.

(4) In event the settlement proposal is not accepted by

the CoC with 90% of vote shares or 12A

Application is not allowed, the liberty is reserved to

the Appellant to make an application for

withdrawal of the amount along with interest,

deposited in this Tribunal under orders passed by

this Tribunal.

Parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical)

NEW DELHI

24th April, 2025

Ashwani

Company Appeal (AT) (Ins.) No.1954 of 2024 14