Vikram Bhawanishankar Sharma vs Union Bank Of India And Anr

Union Bank of India & Anr. ...Respondents

Present: For Appellant: Mr. Abhirup Das Gupta and Jayashree S. Das Gupta, Advocates. For Respondents: Mr. Dhrupad Vaghani & Ajiz MK, Advocates for R2. Mr. Sunil Fernandes, Sr. Advocate with Ms. Shankari Mishra, Mr. Arun Kumar Shukla and Mr. Naman Shukla, Advocates for R1. JUDGMENT

Per: Justice Rakesh Kumar Jain:

This appeal is filed by the suspended director of the Corporate Debtor

(CD) to challenge the order dated 19.05.2023 by which CP (IB) NO.

3219/MB/2018, filed by the Financial Creditor (Union Bank of India) under

Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') for

initiation of the Corporate Insolvency Resolution Process against Supreme

Manor Wada Bhiwandi Infrastructure Pvt. Ltd. (CD), has been admitted by

the NCLT, Mumbai Bench (in short 'the Tribunal') and Sudip Bhatacharya

was appointed as the Interim Resolution Professional (IRP). 2

2. This appeal came up for preliminary hearing on 21.06.2023. While

issuing notice in this appeal, this court had directed that "if CoC has been

constituted, no further steps shall be taken by the CoC"

3. Brief facts of this are that the FC has filed the petition under Section 7

of the Code on 23.08.2018 for the resolution of an amount of Rs.

168,83,00,000/- alleging the date of default as 31.07.2018.

4. The Financial Creditor had allegedly disbursed the following facilities to

the CD:-

5. The CD is a special purpose vehicle (SPV) promoted by Supreme

Infrastructure India Ltd. The Govt. of Maharashtra (GoM) through its public

works department granted a concession to the CD for a period of 22 years and

10 months by way of exclusive right, license and authority for construction,

operation, maintenance and handing over of four laning of Manor Wada SH 3

No. 34 KM, 29.55 to 53.18 in Taluka Wada/Bhiwani/Palghar, District Thane

(for short 'Project') on build, operate and transfer (BOT) basis. The GoM and

CD executed a concession agreement (CA) for implementing the project.

6. The CD, in order to fund its project, availed a rupee term loan facility

of Rs. 322,50,00,000/- from the Financial Creditor and other lenders forming

part of the consortium which was led by the Financial Creditor (Union Bank

Of India). This facility may be referred to as Term Lona I. The CD executed a

common loan agreement dated 30.08.2010 with Allahabad Bank, Bank of

India, Indian Overseas Bank, L&T Infrastructure Finance Company Ltd.,

Oriental Bank of Commerce, State Bank of India, State Bank of Patiala and

Union Bank of India (FC). In this common loan agreement, the share of the

present financial creditor was Rs. 60,00,00,000/- and in order to secure term

loan I, various documents were executed, namely, (a) Lender's Agent

Agreement dated 03.08.2019. (b) Security Trustee Agreement dated

30.08.2010. (c) Inter Creditor Agreement dated 30.08.2010. (d) Escrow

Agreement dated 30.08.2010. (e) Indenture of Mortgage dated 23.09.2010. (f)

Deed of Personal Guarantee dated 30.08.2010 executed by Vikas Sharma.

and (g) Deed of Personal Guarantee dated 30.08.2010 executed by Vikram

Sharma.

7. Since the CD missed the original commercial operation date qua the

project, therefore, scope of the project was changed by the GoM vide its order

dated 20.07.2013. The CD was to undertake construction and development

of the bypass state Highway at Vishwabharti Phata Bhinnar Vdpa Junction

from 0.000 KMs to 7.900 KMS District Thane, State of Maharashtra on BOT

basis (Bypass Project).

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8. The CD, in order to finance the bypass project, executed another

common loan agreement on 30.07.2013 with financial creditor (new Lenders),

the lender's agent and the security trustee for availing the additional facility

of Rs. 83,66,00,000/-. This is called term loan II for which various documents

were executed for securing it, namely, (a) Security Trustee Agreement dated

20.07.2013 (b) Lender's Agent Agreement dated 30.07.2013 (c) Indenture of

Mortgage dated 05.09.2013 (d) Deed of Personal Guarantee dated 30.07.2013,

executed by Vikram Sharma (e) Deed of Personal Guarantee dated

30.07.2013, executed by Vikas Sharma and (f) Escrow Agreement dated

30.07.2013.

9. Since the CD faced various difficulties in meeting its debt obligation in

prescribed time, therefore, consortium lenders approved a restructuring

package on 18.02.2015 by which it was agreed upon to restructure the debt

of the CD and to provide loan for an aggregate principal amount not exceeding

Rs. 414,18,00,000/-. This arrangement is called JLF Restructuring Package

(Package).

10. In this package, the share of the FC is as under:-

(a) Term Loan I INR 59,65,37,049.22 (b) Debenture Loan INR

12,45,00,000/- (c) -Term Loan II INR 76,98,28,676.05 and (d)

FITL Facility - INR 12,72,00,000/-.

11. All the aforesaid facilities were collectively called as 'Facilities'.

12. The Financial Creditor issued sanction letter dated 23.03.2015 to

approve the terms of the Package in pursuance to which a master

restructuring agreement was executed on 27.03.2017 between the CD, FC, 5

other Consortium Lenders, SBICAP Trustee Company Ltd. (acting as the

project security trustee, by pass security trustee and debenture trustee,

bypass debenture trustee and debenture trustee. These trustees called as

'Security Trustee'. A Debenture Trust Deed was also secured between the CD

and SBICaP Trustee Company Ltd. on 27.03.2015.

13. As per the master restructuring agreement, the CD was required to

issue to the FC secured, unlisted, redeemable, non-convertible debentures in

consideration of the package, therefore, CD allotted to the FC NCDs of an

aggregate nominal value of Rs. 12,45,00,000/- on 06.03.2015.

14. It is pertinent to mention that for the purpose of securing the package,

following documents were executed, namely, (a) Escrow Agreement dated

30.07.2013 (New Escrow Agreement), as amended by a supplemental

agreement to the common loan agreement. (b) Indenture of Mortgage dated

16.09.2015 (New Indenture of Mortgage), executed by and between the

Corporate Debtor in favour of the Security Trustee as the Project Security

Trustee), Security Trustee (as the Bypass Security Trustee) and Security

Trustee (as the Debenture Trustee). (c) Pledge Master Report dated

16.09.2015 (Pledge Master Report), with respect to the Compulsory

Convertible Debentures executed by Supreme Infrastructure BOT Private

Limited in favour of the Security Trustee. (d) Deeds of Personal Guarantee

dated 27.03.2015 (New Deeds of Personal Guarantee), each executed by

Vikram Sharma and Vikas Sharma respectively in favour of the Security

Trustee, to secure the various term loans and rupee term loans availed by the

Corporate Debtor from the Consortium lenders.

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15. The CD failed to pay the debt mentioned herein above, therefore, it was

declared as Non-Performing Asset (NPA) on 24.11.2016. The CD also

acknowledged its debt which was due and payable by executing and signing

a revival letter on 22.01.2018 to the FC and the other consortium lenders.

Since, CD failed to discharge its debt, therefore, the FC issued recall notice

on 01.06.2018, recalling the entire facilities and demanding the payment of

Rs. 160,80,69,112/- on 30.04.2018.

16. According to the FC, the CD had admitted its debt due and payable in

the balance sheet for the financial year 2016-17.

17. On the other hand, the case set up by the CD is that the concession

agreement (CA) was executed on 08.03.2010 by GoM and to facilitate the

project, a substitution agreement (SA) was entered into on 31.08.2010

amongst GoM, FC as lead bank and the CD. It was alleged by the CD that as

per the SA, debt stand assigned to GoM and was to be paid by it to the lenders.

It is also the case of the CD that as per clauses of Article 16 of CA in which

events of default and termination was provided, GoM was liable to pay the FC

by way of termination payment. The CD also referred to clauses of SA but it

emphasised that upon the termination of CA the debt would stand taken over

by the GoM and nothing was due from the CD to the FC. It is further the case

of the CD that CA was terminated by the GoM on 11.10.2019. The CD invoked

arbitral proceedings in which huge amount was recoverable from the GoM,

therefore, the case was covered by the decision of the Hon'ble Supreme Court

in the case of Vidarbha Industries Power Limited vs. Axis Bank Limited, Civil

Appeal No. 4633 of 2021.

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18. It is also alleged that the CD vide its letter dated 12.07.2022 offered

OTS of Rs. 128 Cr. by inducting an investor, by change in the management

via substitution route under the SA and the same was at the advanced stage.

It was also alleged that FC alongwith other lenders had agreed to the request

of the CD for OTS and revised proposal was pending.

19. However, the Tribunal came to a conclusion that CD has not disputed

the disbursal of the amount and the default in repayment. The CD had tried

to shift its liability on the basis of provisions of CA and SA to GoM and came

to a firm conclusion that once the debt and default has been proved and also

admitted by the CD in its revival letter, the petition under Section 7 has to be

admitted in terms of the decision of the Hon'ble Supreme Court in the case of

Innoventive Industries Ltd. Vs. ICICI Bank & Ors., 2018 1 SCC 407. The

Tribunal has held that the decision in the case of Vidharbha Industries

(Supra) is also not applicable merely on the basis that the arbitral proceedings

are pending with GoM and admitted the application.

20. Aggrieved against the impugned order, the present appeal has been filed

in which Counsel for the Appellant has submitted that with the termination

of the CA and as per the terms of the CA the debt stand transferred to the

GoM and nothing was payable by the CD. It is submitted that as per the terms

of CA, event of default provides that an event of default can be either a

concessionaire event of default or a GoM event of default. Termination

Payment and Mode of payment makes it clear that irrespective of

concessionaire event of default or GoM event of default, the GoM was liable to

pay termination payment directly to the lenders. It is further submitted that

in the arbitration proceedings the CD has made a claim of Rs. 456.71 Cr. and 8

the GoM, during the pendency of the arbitration proceeding, made an offer of

Rs. 174 Cr. which according to him the CD is at least entitled to an amount

of Rs. 174 Cr. which is sufficient to pay the debt of the FC. He has further

submitted that the decision in the case of Vidarbha Industries (Supra) is

squarely appliable because in that case when the application under Section 7

was filed, a civil appeal filed by the Maharashtra Electricity Regulatory

Commission was pending before the Hon'ble Supreme Court by which the

order passed by the Appellate Tribunal for Electricity in favour of the CD

(Vidharbha Industries), entitling it to receive a sum of Rs. 1730 Cr. was under

challenge. The Supreme Court after taking into account the fact that even

though such amount has not been materialised, but the CD in that case was

entitled to Rs. 1730 Cr. which was sufficient to pay the debt of the FC and

dismissed the order of NCLT initiating the CIRP.

21. It is further submitted that the Tribunal has decided the main petition

without deciding the pending application. It is contended that the Tribunal

reserved the order in the application filed under Section 7 on 01.03.2023,

however, on 06.03.2023 the CD filed I.A No. 1248 of 2023 to apprise the

Tribunal of the pending arbitration proceedings and that the GoM had

proposed a settlement on 03.11.2021 at an amount of Rs. 173.3701 Cr. which

was sufficient to discharge the debt of the FC. It is submitted that notice was

issued in the application which was adjourned to 27.04.2023 and thereafter

on 15.06.2023, without considering the said application the main petition was

admitted and later on the said application was dismissed as infructuous.

22. On the other hand, Counsel appearing on behalf of the FC has

submitted that for the purpose of admission of an application, the Court has 9

to consider as to whether there is a debt and default on the part of the CD. It

is submitted that the debt has been duly acknowledged by the CD in its revival

letter dated 22.01.2018. The debt due and payable was also reflected in the

balance sheet for the FY 2016-17 of the CD. It is further submitted that

default on the part of the CD existed for a period of 7 years as the account

was classified as NPA in November, 2016. It was also submitted that the

arbitration proceedings were initiated in 2020 because of the termination of

the CA by GoM and has no relation with the default in repayment of the dues

of the FC. It is also submitted that CD has wrongly claimed that GoM had

offered Rs. 174 Cr. which was allegedly sufficient to discharge the debt

because, firstly, no material has been placed on record to substantiate the

existence of such an offer, secondly, even if it is presumed to be there, though

without admitting the same, the said offer is grossly insufficient because the

total debt as on 19.05.2023 stands at approximately Rs. 824,72,95,922/- out

of which Rs. 249,06,39,613.51 belongs to the FC alone.

23. Counsel for the FC has further submitted that the Tribunal has rightly

relied upon the decisions of the Hon'ble Supreme Court in the case of E.S

Krishnamurthy Vs. Bharath Hi-Tech (P) Ltd., (2022) 3 SCC 161 and

Innoventive Industries Ltd. (Supra) for deciding the application filed under

Section 7 of the code.

24. It is further contended that the decision in the case of Vidharbha

Industries (Supra) is not applicable to the facts of this case because in that

case there was already an award whereas in the present case the proceedings

are still pending.

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25. In the end, it is submitted that the CD has not disputed the debt and

default which is pre-requisite for admitting the application filed under Section

7 of the Code.

26. Counsel for the Respondent No. 2 (IRP) has submitted that the

application under Section 7 was admitted on 19.05.2023 and after his

appointment as such, he issued public announcement on 21.05.2025 for

inviting the claims from the creditors. It is further submitted that he received

7 claims from the financial creditors and after collating their claims, the first

CoC meeting was convened on 19.06.2023 with the following CoC members:-

27. It is further submitted that agenda was put to e-vote in the 1st CoC

meeting held on 19.06.2023 but could not materialise because stay was

granted by this Court on 21.06.2023. It is also submitted that in the past two-

year, Respondent No. 2 has incurred expenses of Rs. 62,59,704/- which may

be ordered to be paid.

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28. We have heard Counsel for the parties and perused the record with their

able assistance.

29. In so far as the facilities are concerned, the CD has not denied the same.

The CD has also acknowledged the debt which is evident from the revival letter

dated 22.01.2018 which was addressed not only to the FC (Lender) but to all

the lenders. The default is also proved because the account of the CD was

declared as NPA in November, 2016 itself. The debt has also been proved from

the balance sheet of the CD in the FY 2016-17. Once, the debt and default

has been duly proved, the Tribunal has to admit the petition as has been held

by the Hon'ble Supreme Court in the case of Innoventive Industries (Supra).

30. The argument of the Appellant that the termination of CA has resulted

into shifting of liability upon the GoM, the same cannot be made the basis for

dismissing the application because the liability was enjoined upon the CD to

make the payment to the FC.

31. The last argument of the Appellant is based upon the decision of the

Hon'ble Supreme Court in the case of Vidharbha Industries (Supra) which is

also not applicable to the facts and circumstances of this case because in the

said case the award was already there but in the present case there is no such

award and the amount which has been allegedly offered by GoM of Rs. 174

Cr. is neither here nor there because of non-production of any proof. Even if,

it is presumed, for the sake of argument, that offer was made of Rs. 174 Cr.

yet it will not discharge the entire debt of the CD which is more than 824 Cr.

and even the debt of the FC is more than 200 Cr. whereas the application 12

under Section 7 can be admitted if the debt crosses the threshold of Rs. 1 Cr.

as provided under Section 4 of the Code.

32. Thus, in our considered opinion, looking from any angle, there is hardly

any merit in the present appeal for the purpose of interference and hence, the

appeal is found without any merit and the same is hereby dismissed. No costs.

I.A,s if any, pending are hereby closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Naresh Salecha] Member (Technical)

New Delhi 11th September, 2025 Sheetal