Partha Paul vs Kotak Mahindra Bank Ltd. & Anr

For Respondents: Mr. Amit Mahaliyan, Advocate for R-1. Mr. Jitendra Lohia, RP

JUDGMENT

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 1 of 31 DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The Present Appeal has been filed by the Appellant under Section

61 of the Insolvency and Bankruptcy Code, 2016 (for short 'Code')

against the impugned order dated 04.10.2019 passed by the

National Company Law Tribunal, Kolkata Bench, Kolkata (the

Adjudicating Authority) in CP(IB) No. 204/KB/2019.

2. The Appellant has sought the followings relief:

a. To set aside the order dated 04.10.2019 passed by the

National Company Law Tribunal, Kolkata Bench, Kolkata in

CP/IB/204/KB/2019 etc.

3. The Appellant is the 'Erstwhile Director' of the Corporate Debtor (CD)

namely Multiple Hotels Pvt. Ltd. The CD was incorporated on 1998

and was successfully running the business of construction. The

Respondent No.1, Kotak Mahindra Bank sanctioned facilities vide

sanction letter for amount of Rs. 3 Crores to M/s. Camellia Educate

Services Ltd and Rs. 8.5 Crores each to M/s. Multiple Educational

and manpower Development Trust (MEMDT) and Camellia Educate

Trust (CET) respectively, in the year 2012 for the purpose of

furtherance of the objectives of the Trust in development of

educational services. The loan amount was disbursed vide its

sanction letter dated 05.11.2012 and 27.09.2012 and as such in

pursuance to such sanction, an agreement dated 11.11.2012 was

executed by and between the said borrowers and the bank to the

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 2 of 31 tune of Rs. 20.80 Crore. On 30.11.2012, the CD had executed a

Corporate Guarantee agreement in lieu of the above said loans apart

from offering its properties in mortgage. Out of the three borrowers,

two of them are 'Trusts' as incorporated under the Indian Trust Act,

1961 namely Multiple Educational and Manpower Development

Trust and Camellia Educare Trust while the other borrower is a

company incorporated as per the provisions as laid down in the

Companies Act, 1956. It is pertinent to mention that all the three

borrowers were engaged in the field of education and for the reason

of enhancing the same and to spread their goods cause among the

various parts of West Bengal, they have approached the Respondent

for the financial facilities which was duly sanctioned on agreed

mutual terms and conditions as contained in the Loan agreement.

The above said loan facilities were payable in equated monthly

installments, carrying an interest rate of 25% p.a., payable every 6

months. Bifurcating, the first component of the loan was payable

within a time period of 18 months, ending 2014, while the other

component was payable within 60 months. The borrowers were

regular in making payments, the Respondent failed to provide them

with a statement of accounts and started disputing on the order of

satisfaction of the equated monthly instalments in terms of the

agreement executed in respect of the financial facilities. Without

answering to the calls of the appellant to furnish a detailed

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 3 of 31 statement of claims, the Respondent with all its malafide intention

issued a notice under Section 13(2) of the SARFAESI Act, 2002 vide

their letter dated 29.12.2016 demanding an amount of Rs. 14 Crore

approx. to the borrowers and the corporate guarantors. That it is

pertinent to note that the date of default as mentioned in the above

said notice was on 28.09.2015 and 29.09.2015 for MEMDT and CET

respectively. On receipt of such demand notice of the Respondent,

the CD through its Ld Advocate immediately replied and requested

the Respondent to recall the same and also to rectify the gross

irregularities committed by the Respondent in respect of the said

accounts and financial facilities.

4. The Appellant further stated that the Respondent has completely

suppressed the amount that they have received till December, 2018

in respect of the said financial facilities from the date of

commencement. It is further stated that till December, 2018 the

Respondent has approximately received an amount to the tune of

RS. 28 crores, more particularly an amount of Rs. 6.97 Crores was

paid by the Appellant, from the date of default till present. The said

fact was completely suppressed before the Adjudicating Authority

while passing the impugned order dated 04.10.2019. The Appellant

has also stated that the Respondent has with all its malafide

intention filed the application under Section 7 of the Code,

suppressing the fact, that the said demand notice along with other

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 4 of 31 gross irregularities has been challenged by the Appellant's Company

i.e. the CD before the DRT-II Kolkata under Section 17 SARFAESI

Act, 2002 being S.A No. 360 of 2017, whereby several orders were

passed and the matter is sub judice. The DRT-II Kolkata had passed

an order under an instance of an Interim Application moved before

the Adjudicating Authority, whereby the Adjudicating Authority by

virtue of an order dated 14.12.2018, and directed the borrowers to

visit the Head office of the Respondent and to meet the decision

making officer and to resolve the same through One Time Settlement

(OTS). It is pertinent to mention that the said order direction was

also given upon the Respondent that any measures under the

SARFAESI Act taken up by the Respondent shall be communicated

to the Appellant's company prior to such effect. The borrower visited

the head office of the Respondent to settle the issue and also made

representation by providing an OTS to the Respondent vide letter

dated 14.01.2019 with Demand Draft as an ad-hoc upfront amount

but the same was refused by the Respondent without any reasoning

vide its letter dated 08.02.2019

5. The Appellant has also stated that the Respondent did not comply

with the same solemn order and without any prior notice had issued

a notice under SARFAESI Act. The Appellant has stated that

challenging such action, the Appellant's company further filed an

Interim Application in the said SARFAESI Application whereby the

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 5 of 31 ld court without any prayer and / or pleadings of either parties has

appointed a Joint Receiver vide its order dated 08.08.2019 and the

same was challenged before the Hon'ble High at Calcutta, whereby

the Hon'ble High Court was pleased to set aside the same vide its

order dated 06.09.2019. In the meantime, the Respondent has also

filed an O.A No. 189 of 2019 under Section 19 of the Recovery of

Debts and Bankruptcy Act, 1993 for the issuance of Certificate of

Recovery against all the borrowers and the guarantors including the

corporate guarantor i.e. the Appellant's company to the tune of Rs.

10 Crore approx. It is also stated by the Appellant that the

Respondent has initiated multiplicity of proceedings in different

avenues of law for the purpose of fulfilling of their own mala fide

intention and to take over the management of the Trust and also of

the Appellant's company.

6. The Appellant has also stated that the Respondent also tried to grab

the management of Trusts by filing a Suit under the Indian Trust

Act against the actual borrowers before the Hon'ble High Court at

Calcutta and such plea of the Respondent was refused and rejected

by the single bench vide order dated 16.08.2018 and the same was

appealed before the Division Bench of the Hon'ble High Court at

Calcutta and the same had upheld by the Single Bench vide its order

dated 03.12.2018. The Appellant has further stated that

subsequently after being refused from the avenues of the Law, the

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 6 of 31 Respondent preferred an application under Section 7 of the Code as

mentioned above before the Adjudicating Authority and moved the

same, whereby the Adjudicating Authority pleased to pass an order

vide order dated 13.03.2019, to serve the copy of the same upon the

Appellant's company and the matter was further posted for

consideration on 09.07.2019, whereby the Adjudicating Authority

allowed the erstwhile Advocate who appeared on behalf of the

Appellant's company i.e. CD to submit the reply upon the payment

of cost of Rs. 10,000/- to the Respondent as fixed by the

Adjudicating Authority and the same was further posted for hearing

on 05.08.2019. On 05.08.2019, whereby the Adjudicating Authority

has granted time to the Appellant to file all their reply and to pay the

cost of the Respondent and the same was further posted for

consideration on 01.10.2019. It is pertinent to mention that though

the entire contention of the CD were submitted before the

Adjudicating Authority below by the erstwhile advocate but the same

was neither recorded nor heard. The Appellant has also stated that

being dissatisfied with the erstwhile conducting advocate, the

Appellant changed the advocate and appointed Mr.Joydip

Mukherjee, Advocate, to look after the same and the matter stood

thus, without any knowledge neither to the Appellant nor to the

erstwhile advocate, the said matter was listed on 27.08.2019,

despite of recording that the said matter shall appear next on

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 7 of 31 01.10.2019. It is pertinent to mention that the said matter was listed

as Ex parte vide order dated 27.08.2019 without any knowledge or

intimation upon the Appellant neither to the Advocate. It is further

stated that the Adjudicating Authority has failed to appreciate that

the supporting document/ annexures in connection to the said

application placed before the Adjudicating Authority by the

Respondent is already under challenged before the appropriate

forum and as such fixing the matter as ex parte on an earlier date

would render the CD helpless. That though, its present advocate as

mentioned in the erstwhile paragraph made an appearance on

01.10.2019, whereby the Appellant came to know the fact that the

same has been moved and/or kept in Ex parte and such has been

kept reserved for judgment without considering the issue and

objection raised by the advocates of the Appellant's company in

regard to the same. The matter stood thus, the impugned order was

passed on 04.10.2019, by initiating the Insolvency Resolution

Process and by appointing Shri Jitendra Mohan Lohia, as the IRP

alongwith declaration of Moratorium period as per Section 14 of the

Code and paper publication thereto. The Appellant has also stated

that the Adjudicating Authority has failed to appreciate its own order

dated 05.09.2019, and take up the matter arbitrarily and

whimsically on 27.08.2019 without any knowledge to the Appellant.

The Adjudicating Authority has failed to appreciate the objection

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 8 of 31 raised before it in respect of the said application and also the facts

as mentioned in the above paragraph and the dispute in the

agreement and the said demand notice and the pendency of the

same dispute in DRT. The Adjudicating Authority failed to

appreciate the Respondent is not the creditor of the Appellant's

Company and moreover has no outstanding debt in respect of the

same as placed in the said application. The Appellant has stated

that a mere perusal of the said documents will suggest that the

original borrowers are the two trusts and another company as

referred tin the above-mentioned paragraph and moreover, the

property of the said trust are still under the possession of the

Respondent and such as been reflected in the said agreement. It is

further stated that the R1 Bank in all its mala fide has made all

attempts to ensure that the business of the Appellant's company

comes to a halt whereby the R1 bank can illegally, forcefully and by

making misuse of law grab hold of the management of the

Appellant's company and/or the assets of the co-

guarantors/borrowers, which are of the much higher value than the

entire loan amount or the outstanding amount at any given point of

time which has been admitted by the Respondent Bank in its several

correspondences, while rejecting the OTS proposal offered by the

borrowers and / or guarantor. The Appellant craves the kind leave

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 9 of 31 of this Tribunal to refer to such copies of correspondences at the

time of hearing, if necessary.

7. It is stated that the Appellant is only a corporate guarantor in

respect of the loans granted to three separate entities and that the

Respondent bank without initiating appropriate action against the

borrowers and/ or stating the exact amount received from the

borrowers till date has in all its mala fide filed the application under

Section 7 of the Code against the Appellant company. It is stated

that the Respondent bank has totally suppressed that the Appellant

company/CD was not required to make payment as long as the

borrowers were making payment to the Respondent Bank. It is also

stated that although the borrowers were regularly making payment

to the Respondent Bank, the Respondent Bank in all its malafide

declared those amounts as NPA and issued notice under Section

13(2) of the SARFAESI Act, 2002 vide their letter dated 29.12.2016.

The Respondent bank has also suppressed the fact that the

borrower has immediately replied to the said notice for recalling of

the same as the said notice was issued based on gross

misrepresentations and irregularities as committed by the

Respondent Bank in declaring the accounts as NPA. It is stated that

accounts could at the most be declared as substandard accounts

but not NPA and as such the same was also challenged before the

DRT, Kolkata which is still pending adjudicating and both the

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 10 of 31 parties are contesting the same. Under such circumstances, the

Respondent Bank could not have filed the application under Section

7 of the Code against the Appellant company which is one of the

corporate guarantors and more so when the factum of interest over

interest and the component of the outstanding amount is under

challenge.

8. It is also stated by the Appellant that the Respondent Bank has

made no efforts to recover the outstanding amounts and/or co-

operate with the borrowers for settlement of such amount and

instead has been deliberately raising false and frivolous claims. It is

extremely germane to the state herein that the Respondent bank has

never declared the entire amount of money as received by them

against the sanctioned loans / financial facilities availed, on the

other hand had made whimsical and arbitrary adjustment of such

payment towards interest over interest. It is stated that had the

respondent bank been diligent in its conduct then the present

matter could have been settled long back without wasting precious

judicial hours by embroiling the Appellant in multiplicity of

proceedings. It is stated that the conduct of the Respondent Bank is

wholly unethical and unsustainable in the eyes of law. It is stated

that the Respondent Bank has been indulging in forum shopping

and as when the illegal and arbitrary actions of the Respondent

Bank have been challenged before the appropriate court of law the

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 11 of 31 Respondent Bank has sought to divulge to other avenues and has

deliberately delayed the proceedings in which its action has been

challenged and the same are pending adjudication. That all the

actions of the Respondent bank are devoid of any merit or at all and

that the Respondent Bank has created a web of litigations by

initiating multiplicity of proceedings which are extremely prejudicial

to the Appellant's company and wastage of precious judicial hours.

It is stated that the Respondent Bank has indulged in reckless

spending of public money and has been constantly availing the

luxury of initiating frivolous litigations at the costs of public money

only in order to satisfy its illegal and insatiably greed which is not

permissible in the eyes of law. It is stated that such illegal conduct

of the Respondent Bank has immensely prejudiced the Appellant

company and has put a huge financial loss on the appellant

company which has adversely affected the business of the Appellant

company for no valid reason, whatsoever. It is stated that as per the

notice under Section 13(2) of the SARFAESI as sent by the R1 bank

the total outstanding dues as on 29th December, 2016 was Rs.

14,73,14,456/- astonishing the same total amount due and payable

as on 30.11.2018 as per the claim of the R1 bank in its application

under Section 7 of the Code has leaped to Rs. 21,60,18,331/-

although a hefty amount of Rs. 5.5 Crores has been paid to the

Respondent bank post the issuance of notice under Section 13(2) of

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 12 of 31 the said Act, 2002. More shockingly, the R1 bank did not disclose

the amount received by them during the period from 2016 to 2018

from the borrowers and/or guarantors far less any adjustment

thereof, if at all so under which head. It is stated that the R1 bank

entirely suppressed before this Tribunal that the R1 bank has

preferred a SLP (C) No. 26419 of 2019 before the Hon'ble Apex Court

in the self-serving cause of action and that the same is subjudice.

The Respondent therein has entered appearance and the matter is

being contested by both the parties. It is further stated that the

Appellant herein had already sent a fresh proposal for settlement in

pursuance of solemn order dated 04.12.2019 showing its bonafide

intention to make payment towards the outstanding dues minus the

penal interest and the same would be evident from the directions as

contained in the said order dated 04.12.2019. It is stated that the

submissions of the Appellant on 04.12.2019 before this Tribunal

and it is subsequent fresh proposals for settlement dated

07.12.2019 proves the bonafide of the Appellant herein and at the

same time exposes the malafide and deceitful conduct of the R1

bank as the Respondent No.1 Bank has altered their claim time and

again without providing logical reasoning thereof.

9. The R1 Bank, is a banking company incorporated under the banking

Companies (Acquisition and Transfer of Undertakings) Act, 1970,

having its registered office at 27 BKC, C 27, G Block Bandra Kurla

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 13 of 31 Complex, Bandra (E) Mumbai - 400 051 and having its Branch office

at 6th floor, 12BKC, Plot No. C-12 G Block Bandra Kurla Complex,

Bandra (E), Mumbai - 400 051. Mr. Parag B.Dholakia, Vice

President presently posted at Kotak Mahindra Bank Limited, 6th

floor, 12 BKC, C 12, G Block Bandra Kurla Complex, Bandra (E)

Mumbai - 400 051 is authorised representative of the R1 bank.

10. The Ld counsel for the R1 has submitted that on 27.09.2012,

on request of Camellia Educare Services Limited (CESL), the

Appellant bank - Kotak Mahindra Bank Limited had sanctioned a

Term Loan of Rs. 300 lakhs. The said loan facility is secured apart

from other security/collaterals by mortgage qua property being land

measuring 157 cottah at badu Road, Madhyamgram (owned by

Camellia Educational and manpower Development Trust). Similarly,

on 05.11.2012, on request of MEMDT, the Appellant bank had

sanctioned a Term of Rs. 850 lakhs. The said loan facility is secured

apart from other security/collaterals by mortgage qua property

being land measure 341 Cottah & building at Ghola Barasat,

Kolkata (owned by Camellia Educare Trust). Simultaneously on

05.11.2012, on request of CET, the Applicant Bank has sanctioned

a Term Loan of Rs. 850 Lakhs. The said loan facility is also secured

apart from other security/ collaterals by mortgage qua property

being land measure 341 Cottah & building at Ghola Barasat,

Kolkata. The said loan facilities of (i) Rs.300 lakhs to CESL, (ii) Rs.

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 14 of 31 850 lakhs to MEMDT, and (iii) Rs. 850 lakhs to CET is duly secured

by way of Corporate Guarantee by the CD vide Deed of Guarantee

dated 30.11.2012. It is pertinent to mention that the said loan

facility was disbursed, availed and utilized by (i) CESL availed Rs.

300 lakhs, (ii) MEMDT availed Rs. 840 Lakhs and (iii) CET Rs. 850

lakhs. However, (i) CESL, (ii)MEMDT, and (iii) CET failed to pay the

principal amount of loan, interest and other dues and have

defaulted. Further, they also failed to observe and perform other

terms and conditions of the said agreement, the Applicant as per

guideline of RBI declared loan accounts of the CD as NPA, as (i)

CESL on 29.09.2015, (ii) MEMDT on 28.09.2015 and (iii) CET on

28.09.2015. Therefore, the Appellant had issued a Recall Notice

dated 27.02.2018 to the said Borrowers, Mortgagors and also the

CD (being Corporate Guarantor). An Insolvency Proceedings was

initiated against the CD by the Applicant bank and was filed before

the Adjudicating Authority bearing no. CP(IB) 204(KB)/2019, and

title as Kotak Mahindra Bank Limited Vs. Multiple Hotels Pvt. Ltd.

Vide hearing dated 11.02.2019, the Adjudicating Authority was

issued notice to the CD, returnable on 13.03.2019. Thereafter, on

13.03.2019, the CD made appearance through counsel and sought

time to file Vakalathnama and Affidavit in Reply. The Adjudicating

Authority was granted that and re-notified the matter to 08.05.2019.

On 08.05.2019, the Adjudicating Authority had noted and recorded

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 15 of 31 in the order that the Vakalathnama and Affidavit in Reply has not

been filed. However, the Adjudicating Authority was again granted

another opportunity to the CD to file the same within two weeks and

re-notified the matter to 09.07.2019. On 09.07.2019, the

Adjudicating Authority had again noted and recorded in the order

that the Vakalathnama and Affidavit in Reply has not been filed.

Because of which, however, the Adjudicating Authority was pleased

to impose cost of Rs. 10,000/- on the CD and again granted another

opportunity to the CD to file Vakalathnama and Affidavit in reply

within seven days with memo of cost and re-notified the matter to

05.08.2019. on 05.08.2019 the Adjudicating Authority had noted

and recorded in order that the Vakalathnama and Affidavit - in

Reply not filed and cost also not been paid. However, the

Adjudicating Authority was again granted another opportunity to

the CD to file the same within 3 days from 05.08.2019. Failing which

no reply shall be accepted and the matter shall be heard ex parte,

and was re-notify the matter to 01.10.2019. Thereafter, the matter

was listed on a priority list on 27.08.2019 and the Adjudicating

Authority was informed about the non-compliance of the directions

by the CD. The Adjudicating Authority has observed that the CD is

already ex parte and again adjourned the matter to 04.10.2019. It

is pertinent to mention that vide hearing dated 04.10.2019, the

Adjudicating Authority was pleased to admit the Petition and IRP

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 16 of 31 was accordingly, appointed. Hence, the present appeal against the

said impugned order dated 04.10.2019 by the Appellant.

11. It is stated by the ld counsel for the R1/ Bank that the present

appellant had never submitted before the Adjudicating Authority

about the intention of settling the matter, by returning the public

money, which CD had utilized and enjoyed before defaulting in the

repayment of the same. The Appellant do not deserve any relief from

this Tribunal and is prayed to dismiss the present appeal. The R1

Bank has already given the credit of all the payments made by the

borrowers/ CD and proof of the fact is that the Appellant herein in

hearing dated 04.12.2019 had submitted that they want to pay the

outstanding dues minus the contractual penal interest charged by

the R1/ Bank. However, it is submitted that till date no relief has

been granted by the DRT, Kolkata to the borrowers/CD. The option

for settlement given to the borrower, since the borrower never had

intention to make any payment, was gone in-vein as well. The

Borrower/CD had never got any relief to their I.As, thereby

challenging the action initiated by the R1 Bank from DRT, Kolkata.

It is submitted that the R1 bank has and is exercising the legal

remedies available in the law, in order to recover the outstanding

dues, which is the public money. The order dated 16.08.2018 and

03.12.2018 are based upon the technical requirement for take over

the management of trust of the borrower. The said proceedings have

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 17 of 31 no relevance to the present matter in hand. That action was against

borrower trusts and the present matter is against the Corporate

Guarantor Company. The List of date of Dates has depicted below:

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 18 of 31 Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 19 of 31

12. The Adjudicating Authority while passing the impugned order

dated 04.10.2019 has observed the followings:

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 20 of 31

13. We have carefully gone through the pleadings of the parties

and further submissions made by the Ld counsel for the Respondent

bank and extant provisions of the Code and we are having the

following observations:

a. It is undisputed fact that the impugned order of Adjudicating

Authority dated 04.10.2019 was passed ex parte.

b. This Tribunal has observed that loan facility has been granted to

the 'Trust' which is engaged in 'Educational Services' @25% p.a

by the R1/Bank which itself seems to be very high. It is difficult

to predict about the bargaining power of the Trust/CD with the

banks to borrow at such a high rate of interest.

c. Although, not much details are provided but as it looks that

sanctioned amount is Rs. 3 Crore to M/s. Camellia Educare

Services Ltd., and Rs. 8.5 Crore each to M/s. Multiple

Educational and Manpower Development Trust and Camellia

Educare Trust sanctioned in the year 2012 for the furtherance of

the objective of the trust for Development of Education Services

and the Corporate Guarantee Agreement was executed apart

from offering its properties in mortgage for Rs. 20.80 Crore

(appearing at page 5 of the Appeal Paper Book)

d. The CD has paid to the Bank of Rs. 28 Crore from 2013 to

December, 2018. However, it is not in the domain of the Code to

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 21 of 31 go into these details. However, the impugned order being ex

parte, it is thought prudent to look at these issues.

e. It is also evident from the pleadings that the Corporate

Debtor/Guarantor has executed a 'Corporate Guarantee

Agreement', in lieu of the above said loans apart from offering its

property in mortgage.

f. The demand notice was issued on 29.12.2016 apart from the

Corporate Debtor, the Corporate Guarantor and Borrower. It also

appears from the Appeal Paper Book at page 62 to 65, the

Bank/R1 has approached the Hon'ble High Court of Calcutta and

the orders passed by the Single Bench dated 16.08.2018 and the

Division Bench order dated 03.12.2018 are extracted below for

ease of reference:

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 22 of 31 Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 23 of 31 Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 24 of 31 Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 25 of 31

The Bank has also used the same for removal of Trustee

apart from the chasing of payment at the Hon'ble High Court of

Calcutta as it is evident from the above order.

a. It is very much evident from the order of the Hon'ble High Court

of Calcutta that the Respondent Bank is chasing for payment,

which the Hon'ble High Court has categorically mentioned in the

Judgment as above.

b. It is also observed that the R1/Bank also issued 'demand notice'

on 29.12.2016 under the provisions of SARFAESI Act, 2002 to

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 26 of 31 the Appellant demanding further Rs. 14 Crore from the Appellant

being the Corporate Guarantor. It is also observed from the

pleadings that the Appellant has given reply of the said 'demand

notice' as per provisions laid in SARFAESI Act, 2002 vide their

letter dated 13.02.2017 denying and disputing the said

'demand notice' and the quantum. It has also been mentioned

in the pleadings that the borrower was continuously making

payment inspite of receiving 'demand notice' under the relevant

provisions of SARFAESI Act, 2002. As per the pleadings, it is also

mentioned that the 'original borrower' has paid an amount of Rs.

92 lakhs during the time of pendency of the said application. The

pleadings also confirms that the DRT, Kolkata vide its order dated

14.12.2018 (appearing at page 9 of the Appeal paper book)

directed the borrowers to visit head office of the Respondent and

to meet decision making officer to resolve through OTS. The

Borrower visited the head office of the Respondent to settle the

issue and also made representation for OTS vide its letter

14.01.2019 with 'demand draft' as an ad hoc upfront amount but

the same was refused by the Bank/R1 without assigning any

reason vide its letter dated 08.02.2019 (appearing at page 10 of

the Appeal Paper Book). The bank/R1 has even approached

under 'Section 19 of the Recovery of Debts and Bankruptcy Act,

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 27 of 31 1993' for the issuance of certificate of recovery against Borrowers

and Guarantors.

c. All this suggests that the Bank/R1 is involved in forum shopping

to the multiple 'Courts/Tribunals' just to harass the 'Guarantor'

as it has moved the Hon'ble High Court of Calcutta at Calcutta

to coerce the trust into paying of its debts and involving the

Appellant in time consuming and expensive litigation at the

behest of this concerned branch of the Bank/Respondent No.1.

d. It is a settled law that the practice of Forum Shopping be

condemned as it is an abuse of law. This case is beyond doubt

falls under the category of Forum Shopping as it is a classic

example of Forum Shopping when the Respondent Bank has

approached one Court for relief but does not get the desired relief

and then approached another court for the same or similar relief;

(refer) Hon'ble Apex Court Judgment in Union of India & Ors. Vs. Cipla

Ltd. & Anr (2017) 5 SCC 262- para 148, Vijay Kumar Ghai & Ors. Vs.

The State of West Bengal & Ors. in Criminal Appeal No. 463 of 2022-

para 9.

e. The Hon'ble Supreme Court has already settled the matter that

the provision of the Code is not intended to be a substitute to

be a recovery forum. The Hon'ble Supreme Court in Civil

Appeal No.9597 of 2018, "Transmission Corporation of Andhra

Pradesh limited Vs. Equipment Conductors and Cables

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 28 of 31 Limited" vide para 15 has already held that IBC is not intended

to be a substitute to a recovery forum and also laid down that

whenever there is existence of real dispute, the IBC provisions

cannot be invoked. The Code cannot be used whenever there is

existence of real dispute and also whenever the intention is to

use the Code as a means for chasing of payment or building

pressure for releasing the payments.

f. Reliance is placed on the celebrated case of Swadeshi Cotton

Mills Vs. UOI (1981) I SCC 664 (paras 26-30). The Hon'ble

Madras High Court has also in Shree Krishna Educational

Trust Vs. Government of TN 2016 SCC Online Mad 20115

(para 6.12 to 6.17) succinctly laid down the components of a

fair hearing which have not been complied with in the present

case. The principles of natural justice are embedded in the

Indian Legal jurisprudence. In Meneka Gandhi Vs. Union of

India (1978) 1 SCC 248, the Hon'ble Supreme Court has held:

"....The court must make every effort to salvage

this cardinal rule to the maximum extent

permissible in a given case. It must not be

forgotten that "natural justice is pragmatically

flexible and is amenable to capsulation under the

compulsive pressure of circumstances". The audi

alteram partem rule is not cast in a rigid mould

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 29 of 31 and judicial decisions establish that it may suffer

situational modifications. The core of it must,

however, remain, namely, that the person

affected must have a reasonable opportunity of

being heard and the hearing must be a genuine

hearing and not an empty public relations

exercise. That is why Tucker, L.J., emphasized in

Russel v. Duke of Norfolk (1949) 1 ALL ER 109

that "whatever standard of natural justice is

adopted, one essential is that the person

concerned should have a reasonable opportunity

of presenting his case".

g. Considering all the above aspects, we thought it fit and proper

to remand back the matter to the Adjudicating Authority to

give a patience hearing also to the Appellant and the

Respondents including the RP and then to decide the matter

considering the fact of the case as well as the provisions of

applicable laws on the issue and then to finally pass

appropriate order in accordance with law.

h. Hence, we are setting aside the order of the Adjudicating

Authority and remanding back the matter to the Adjudicating

Authority as stated above.

i. Accordingly, the Appeal is allowed.

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 30 of 31

Interim order, if any, passed by this Tribunal stands vacated.

Pending application, if any, stands disposed of. No order as to

costs.

(Justice M. Venugopal) Member(Judicial)

(Dr. Ashok Kumar Mishra) Member(Technical) 10th June, 2022

New Delhi

Raushan

Company Appeal(AT)(Insolvency) No. 1138 of 2019 Page 31 of 31