Mr. Markand Adhikari vs Central Bank Of India & Anr

[Arising out of orders dated 20.12.2019 in CP (IB) - 4374/I&B/MB/2018 passed by the Ld. Adjudicating Authority (National Company Law Tribunal), Mumbai Bench.]

IN THE MATTER OF:

Mr. Markand Adhikari Share Holder of, Sri Adhikari Brothers Television Network Ltd. Residing at Adhikari Villa, 5th Floor, Hatkesh CHS, Road No. 7 Plot No. 46, JVPD, Ville Parle (West), Mumbai-400056. ..... Appellant.

Versus

1. Central Bank of India Having its corporate office at Chander Mukhi Building, Nariman Point, Mumbai-400021 ...... Respondent No. 1.

2. Sri Adhikari Brothers Television Network Ltd. Having registered address at 6th Floor, Adhikari Chambers, Oberoi Complex, New Link Road, Andheri (W), Mumbai-400053. Through Mr. Vijendra Kumar Jain, Interim Resolution Professional Having his office at 401/402, Sai Trishul, Raviraj Oberoi Complex, Off. New Link Road, Andheri (W)-400053 ....... Respondent No. 2. 2

For Appellant: Mr. Arpit Dwivedi and Mr. Sai J. Deepak, Advocates. For Respondent: Mr. O.P. Gaggar, Advocate for R-1. Ms. Udita Singh, Advocate for R-2/RP.

JUDGMENT

(04th April, 2022)

Justice Anant Bijay Singh;

The Appellant - Mr. Markand Adhikari, Share Holder of, Sri Adhikari

Brothers Television Network Ltd. has preferred this Appeal under Section 61

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

and dissatisfied by the order dated 20.12.2019 in CP (IB) - 4374/I&B/MB/

2018 passed by the Ld. Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench whereby and where under the Application filed

under section 7 of the IBC by Central Bank of India, the Respondent No. 1

herein was admitted and appointed Mr. Vijendra Kumar Jain as Interim

Resolution Professional.

2. From the perusal of the record it appears that the Appeal has been filed

vide Diary No. 17773 on 13.01.2020 and the matter was listed on 17.01.2022,

on that date, the Learned Sr. Counsel for the Appellant submitted that the

Appellant wants to settle the matter with the Central Bank of India, the

Respondent No. 1 herein and the matter was directed to be listed on

06.02.2020. On 06.02.2020, the matter was listed before the three Hon'ble

Members Bench and it was informed that no settlement has been arrived

between the parties, therefore, the Learned Counsel for the Respondent No. 1

was directed to file Reply Affidavit and the matter was directed to be listed on

02.03.2020. On 02.03.2020, the Respondent has filed the Reply Affidavit and

Company Appeal (AT) (Insolvency) No. 80 of 2020 3

the Learned Counsel for the Appellant was directed to file Rejoinder and the

matter was directed to be listed on 19.03.2020. On 19.03.2020, the Appellant

was again given time to file Rejoinder and the matter was directed to be listed

on 09.04.2020. Thereafter, the matter could not be listed in between during

Covid-19 1st Wave. On 22.12.2020, the matter was listed, the Learned Counsel

for the Appellant and Respondent No. 1 were directed to file Written

Submissions and the Learned Counsel for the Respondent No. 2 was also

directed to file status report and the matter was directed to be listed on

19.01.2021. On 19.01.2019, the matter was again directed to be listed on

05.02.2021. On 05.02.2021, the matter was heard and further directed to be

listed on 01.03.2021. On 01.03.2021, the Learned Counsel for the Appellant

submitted that on 22.02.2021 sent an email to the Respondent as they have

inclined to settle the matter outside the Court and the matter was adjourned

to 17.03.2021. On 17.03.2021, the Learned Counsel for the Respondent No.

1 Bank submitted that they have received the email sent by Learned Counsel

for the Appellant, wherein a request has been made by the Counsel for the

Appellant for a personal meeting and the matter was directed to be listed on

12.04.2021. On 12.04.2021, the Learned Counsel for the Respondent No. 1

Bank was submitted that they have received a proposal for settlement but they

are not agreeing with the terms and the matter was directed to be listed for

hearing on 10.05.2021. Thereafter, due to Covid-19 wave the matter was taken

up on 07.06.2021, on that date, in absence of Reply Affidavit to Additional

Affidavit, the matter was directed to be listed on 19.07.2021. On that date, the

Learned Counsel for the Respondent No. 1 in his Reply Affidavit stated that

settlement proposal offering to pay a paltry sum of Rs. 1.95 Crore against total

Company Appeal (AT) (Insolvency) No. 80 of 2020 4

dues of the Respondent Bank amounting to Rs. 32.77 Crores., therefore, the

matter could not be settled and the matter was directed to be listed on

13.08.2021 for Direction. On that date, this Bench observed that on

28.07.2021 meeting was convened by Canara Bank, being the largest lender

and further meeting was held on 06.08.2021 the lenders discussed the

proposal of the Appellant who proposed staggered payment of Rs. 33.06 Crores

without any upfront deposit amount against total outstanding of more than

504 Crores and the matter was again directed to be listed on 15.09.2021. On

that date, there was no possibility of Settlement, the matter was again directed

to be listed for hearing on 10.11.2021. On that date, the matter was heard

and further directed to be listed on 06.01.2022. On that date, the matter was

adjourned to 12.01.2022 and further directed to be listed on 12.01.2022. On

that date, the Judgment was reserved in this matter.

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

i) The Respondent No. 2 Company has availed three term loans facilities

from Respondent No. 1 for an amount of Rs. 10 Crores each aggregating to

Rs. 80 Crores. Accordingly, the Respondent No. 2 executed security

documents for the grant of the loan amount by hypothecating the programme

rights and pledging of its shares.

ii) Further case is that due to economic factors and other reasons beyond

the control of Respondent No. 2 Company, as described in detail hereunder,

the Respondent No. 2 could not service its debt to the Respondent No. 1 Bank.

iii) In confirmation of its bona fides to discharge its repayment obligations,

the Respondent No. 2 Company on various occasions approached the

Company Appeal (AT) (Insolvency) No. 80 of 2020 5

Respondent No. 1 for restructuring/review of the loan amount. However, the

Respondent No. 1 neither rejected nor responded to the Respondent No. 2's

restructuring proposal of the loan amount.

iv) Further case is that the Respondent No. 1 without giving any

intimation/notice to Respondent No. 2, sold the shares pledged by

Respondent No. 2 which resulted in the down fall of the market prices of the

shares of the Respondent No. 2 Company.

v) The Respondent No. 1 illegally declared the account of Respondent No.

2 as Non-Performing Assets ("NPA"). Before the account became NPA, the

Respondent No. 1 sold a large chunk of pledged shares at a price lower than

the actual market price and that also without informing the Respondent No.

2.

vi) The Respondent No. 2 through their various emails from December

2017 till September 2018 requested the Petitioner No. 1 to furnish the details

of the shares sold by Respondent No. 1. However, the Respondent No. 1 failed

to furnish the same to Respondent No. 2.

vii) On 30.10.2018, the Respondent No. 1 Bank filed Petition under Section

7 of the IBC which was duly replied by the Respondent No. 2 Company and

thereafter, the Ld. Adjudicating Authority vide its order dated 20.12.2019

admitted the Application filed by the Respondent No. 1 under Section 7 of the

IBC and appointed Mr. Vijendra Kumar Jain as Interim Resolution

Professional. Hence this Appeal.

Company Appeal (AT) (Insolvency) No. 80 of 2020 6

Submissions on behalf of the Appellant

4. The Learned Counsel for the Appellant during the course of argument

and in his memo of Appeal along with Written Submissions submitted that in

order to secure the loan advanced by Respondent No. 1 Bank had pledged

9,50,000 equity shares of M/s Global Showbiz Pvt. Ltd. and M/s Inayata

Constructions Pvt. Ltd. at Rs. 256.35 each. The value of aforesaid shares at

the relevant point of time was Rs. 24,35,32,500/-. In addition to above, the

Appellant had pledged 9,50,000 equity shares of M/s TV Vision Ltd. of value

Rs. 277.50/- each and 2,85,000 equity shares of SAB Events and Governance

(now known as Media Ltd.) of Rs. 50.25 each. Resultantly, the aggregate

valued of pledged shares lying with Respondent No. 1 Bank at the time of

creation of pledge was Rs. 52.14 Crores approximately.

5. It is further submitted that as on the date of invocation, the price of

pledged shares, according to the date available and procured from the official

website of National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)

are hereunder.

Share No. of Share Price on Share on Value of Share on Pledged Pledged the date of the date of Invocation (in Rs.) Invocation

SABTNL 9,50,000 89.76 Rs. 8,52,72,000

TV Vision 9,50,000 129.34 Rs. 12,28,73,000

SAB Events 2,85,000 28.33 Rs. 80,74,050

Total 21,85,000 Rs. 21,62,19,050

Company Appeal (AT) (Insolvency) No. 80 of 2020 7

6. It is further submitted that the Respondent No. 1 Bank allegedly

declared and classified the account of the Appellant Company as Non-

Performing Asset on 28.09.2017, however, no notice of information in this

regard was given to the Appellant. Therefore, the Respondent No. 1 Bank has

been acting in most arbitrary and illegal manner. The Appellant, on several

occasions, had requested the Respondent No. 1 Bank to furnish details of sale

of pledged shares. However, the Respondent No. 1 Bank for reasons best

known to itself did not provide any information to the Appellant and the

Appellant could not take any steps to oversee that maximum amount could

have been realized against such sale of shares.

7. It is further submitted that the Resolution Professional and members

of Committee of Creditors have acted in utter disregard and gross violation of

order dated 17.01.2020 whereby this Appellate Tribunal had mandated that

the Respondent No. 2 Company shall be maintained as going concern entity

and shall carry out its functions accordingly. Despite such clear and

unequivocal directions, the Resolution Professional and members of CoC

proceeded to illegally terminate the Leave and License Agreement executed

with TV Vision and SAB Events that too during subsistence of the Lease

period.

8. It is further submitted that the action of Resolution Professional and

CoC is not only patently illegal but the same is also not in the best interest of

the Respondent No. 2 as firstly, it completely stops the recurring source of

income of Respondent No. 2, which otherwise could have proved to be a boon

in the present market situation. Secondly, since the said action is contrary to

Company Appeal (AT) (Insolvency) No. 80 of 2020 8

the terms of the Agreement, it exposes the Respondent No. 2 to the risk of

facing and defending legal action from SAB Events and TV Vision. The rental

income is the only source of income for the Respondent No. 2 and despite

being so, the Resolution Professional and CoC have decided to proceed with

termination of Leave and License Agreement. The said termination further

raises questions in light of the fact the Resolution Professional is struggling

to pay the salaries of the employees of Respondent No. 2 and with aforesaid

termination of Leave and License Agreements, the respondent No. 2 will not

be able bear salaries of its employees and other monthly operating expenses

or for that matter even payment of fees to the Resolution Professional.

Moreover, the said illegal act of termination of Leave and License Agreement

has also increased the financial burden/exposure of Respondent No. 2. Based

on these submissions and also in the eyes of law, the impugned order is fit to

be set aside and the Appeal be allowed.

Submissions on behalf of the Respondent No. 1

9. The Learned Counsel for the Respondent No. 1 during the course of

argument and in his Reply Affidavit along with Written Submissions

submitted that the Appellant has failed to show any ground or fault with the

impugned order passed by the Ld. Adjudicating Authority. From the order

passed by the Hon'ble Tribunal on 17.01.2020 it emerges that the Appellant

got notice issued from the Hon'ble Tribunal representing that he wished to

settle the matter with Central Bank of India but that seems to be a mere

strategy for getting the notice because neither the Appellant nor his counsel

has ever approached the Bank for any settlement and instead made a

Company Appeal (AT) (Insolvency) No. 80 of 2020 9

statement on the returnable date that no settlement has been arrived at. The

Appellant did not make any proposal of settlement with any other Financial

Creditor as confirmed by them in the Committee of Creditors 13th meeting

dated 17.12.2020.

10. It is further submitted that the Appellant's Company availed three term

loans of Rs. 10 Crores each aggregating to Rs. 30 Crores from the Respondent

Bank for financing their acquisition/production of proprietary

rights/materials of entertainment content on primary security of

hypothecation of programme rights and other entertainment content to be

acquired by the Corporate Debtor Company and a collateral security of the

pledge of shares in Shri Adhikari Brothers Television Network Limited and

other two sister concerns.

11. It is further submitted that the account became a Non-Performing Asset

on 28.09.2017 when total outstanding in all loan accounts was a sum of Rs.

25.03 Crores. The Corporate Debtor Company and its directors including the

Appellant, who were in constant touch with the Bank had been citing one or

other excuse for non-payment like implementation of the GST, deteriorating

market conditions, filling revenue/viewership and had been seeking one or

other accommodation from the Bank which the Financial Creditor Bank was

providing upto the maximum extent possible as per rules.

12. It is further submitted that the Appellant has misrepresented about the

share prices of their Company. When the term loans had been contracted by

them and the shares were pledged, share prices were good but the share

prices kept on falling substantially when the company's businesses dwindled

Company Appeal (AT) (Insolvency) No. 80 of 2020 10

and their financial status became known to the market players. The share

price is based on the perception of the market players about the profitability

and growth prospects of the company and the consequent propensity of

earning profit out of investment in such shares. When, as per the Appellant's

own case, the condition of their business and finances began to fall, the

market prices of their equities fell sharply.

13. It is further submitted that the shares which were subject matter of

collateral security were all in dematerialized form. The dematerialized shares

are merely a record in electronic form maintained in the depository. Since

there were no physical scripts/certificates of the shares which could be

pledged as per the requirement of the Contracts Act which mandatorily

require delivery of the pledged goods, only the electronic data could have been

earmarked in the name of the beneficial owner, therefore the action of pledge

was completed by earmarking the dematerialized shares to the Corporate

Debtor Bank.

14. It is further submitted that the argument of the Appellant on Section

176 of the Contract Act is untenable. That this Section is not applicable on

dematerialized shares which are governed by Depositories Act, 1996 and the

rules framed thereunder. Conjoint reading of Sections 9, 10, 11 and 12 of the

Depositories Act, 1996 and regulation 58 of Securities and Exchange Board

of India (Depositories and Participants) Regulations, 1996 show that

dematerialised shares cannot be pledged in accordance with the provisions of

the Contract Act which requires physical delivery of the goods pledged

because it is obvious from the provisions of the Contract Act, that for a valid

Company Appeal (AT) (Insolvency) No. 80 of 2020 11

pledge, there must be a delivery of goods i.e. a physical possession of the

goods. The Goods (shares) held in dematerialised from are incapable of

delivery i.e. by handing over de facto possession, since goods (shares) are

invisible and intangible, it would be impossible to be delivered physically.

Based on these submissions, no merit in the Appeal, the Appeal is fit to be

dismissed.

Submissions on behalf of the Respondent No. 2

15. The Learned Counsel for the Respondent No. 2 - Resolution Professional

during the course of argument and in his Affidavit, it has been stated that

after issuance of notice in the present Appeal on 17.01.2020, the Deponent

continued with conducting the Corporate Insolvency Resolution Process of the

Corporate Debtor, while ensuring that it remained a going concern. While

attempts at settlement were going on between the parties herein as well as

other members of the Committee of Creditors, the Deponent continued with

holding CoC meetings regularly as required under the provisions of the IBC.

16. Further it has been stated that in the 21st CoC meeting held at Mumbai

on 24.08.2021, since the only Resolution Plan put forth by one M/s Pen India

Ltd. was rejected by the CoC with 100% votes, a resolution was passed for

liquidation of the Corporate Debtor and the CoC advised the Deponent to

circulate the resolution of approval of Liquidation through E-voting and

accordingly, e-voting took place on 27.08.2021 and the Resolution was

approved with 79.75% voting in favour of liquidation (Annexure-2 at page 13

to 21 of the Affidavit).

Company Appeal (AT) (Insolvency) No. 80 of 2020 12

17. Further it has been stated that breaking down of settlement talks and

proposal to go ahead with the liquidation and its details were also decided in

a Joint Lenders Meeting of all the member Banks of the CoC held on

01.09.2021. In pursuance of the above Resolution so passed by the CoC, the

Resolution Professional accordingly moved an Application for liquidation

under Section 33 of the Code before the Ld. Adjudicating Authority on

15.09.2021.

18. The Learned Counsel for the Resolution Professional during the course

of hearing submitted that an Application bearing I.A. No. 2179/2021 filed by

the Resolution Professional seeking liquidation of Sri Adhikari Brothers

Television Network Limited (Corporate Debtor) under Section 33(2) of the

Insolvency and Bankruptcy Code, 2016 has been allowed by the Ld.

Adjudicating Authority on 16.12.2021 and the Corporate Debtor is ordered to

be liquidated.

FINDINGS

19. After hearing the parties and having gone through the pleadings made

on behalf of the parties, we are of the considered view that the following facts

are admitted in the instant Appeal.

 The Respondent No. 2 Company has availed three term loans facilities

from Respondent No. 1 for an amount of Rs. 10 Crores each aggregating

to Rs. 80 Crores. Accordingly, the Respondent No. 2 executed security

documents for the grant of the loan amount by hypothecating the

programme rights and pledging of its shares.

Company Appeal (AT) (Insolvency) No. 80 of 2020 13

 The account of the Respondent No. 2 was declared NPA on 28.09.2017

when total outstanding in all loan accounts was a sum of Rs. 25.03

Crores.

 On 30.10.2018, the Respondent No. 1 Bank filed Petition under Section

7 of the IBC which was duly replied by the Respondent No. 2 Company

and thereafter, the Ld. Adjudicating Authority vide its order dated

20.12.2019 admitted the Application filed by the Respondent No. 1

under Section 7 of the IBC and appointed Mr. Vijendra Kumar Jain as

Interim Resolution Professional.

 It is also an admitted fact that during pendency of the Appeal behest of

the Appellant that he wants to settle the matter with the Respondent

No. 1 and further case was adjourned several times but no settlement

arrived between the parties nor resolved the dispute.

 It is also an admitted fact that the 21st meeting of CoC was held at

Mumbai on 24.08.2021, since the only Resolution Plan put forth by one

M/s Pen India Ltd. was rejected by the CoC with 100% votes, a

resolution was passed for liquidation of the Corporate Debtor and the

CoC advised the Resolution Professional to circulate the resolution of

approval of Liquidation through E-voting and accordingly, e-voting took

place on 27.08.2021 and the Resolution was approved with 79.75%

voting in favour of liquidation (Annexure-2 at page 13 to 21 of the

Affidavit).

 In pursuance of the above Resolution passed by the CoC, the Resolution

Professional Mr. Vijendra Kumar Jain filed an Application bearing I.A.

No. 2179/2021 seeking liquidation of Sri Adhikari Brothers Television

Company Appeal (AT) (Insolvency) No. 80 of 2020 14

Network Limited (Corporate Debtor) under Section 33(2) of the

Insolvency and Bankruptcy Code, 2016 praying for following reliefs:

" a. That this Hon'ble Tribunal be pleased to order and direct that the Corporate Debtor be ordered and directed to go under liquidation as per Section 33(2) of the Insolvency and Bankruptcy Code, 2016;

b. That this Hon'ble Tribunal be pleased to grant liberty to Resolution Professional to file additional affidavit for appointment of Liquidator and estimated liquidation cost; & c. For such other and further reliefs as this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case."

The I.A. No. 2179/2021 has been allowed by the Ld. Adjudicating

Authority on 16.12.2021 and the Corporate Debtor is ordered to be

liquidated.

ORDER

20. Taking observing all these facts and circumstances of the case, we are

of the considered view that till now the process of CIRP has failed and CoC by

79.75% voting has recommended the resolution for liquidation of the

Corporate Debtor and the same has been allowed by the Ld. Adjudicating

Authority and the Corporate Debtor is ordered to be liquidated vide order

dated 16.12.2021, therefore, this Appeal has become infructuous. In view of

the fact that the Appellant has challenged the order dated 20.12.2019 passed

by the Ld. Adjudicating Authority (National Company Law Tribunal), Mumbai

Bench in CP (IB) - 4374/I&B/2018. Accordingly, this Appeal is dismissed. No

order as to costs.

Company Appeal (AT) (Insolvency) No. 80 of 2020 15

21. Registry to upload the Judgment on the website of this Appellate

Tribunal and send the copy of this Judgment to the Ld. Adjudicating Authority

(National Company Law Tribunal), Mumbai Bench, forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

New Delhi 04th April, 2022 R. Nath.

Company Appeal (AT) (Insolvency) No. 80 of 2020