Delhi High Court
Atv Projects India Limited vs Punjab National Bank & Ors. on 29 April, 2015
$~7
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on : 29.04.2015
+ W.P.(C) 4226/2013, C.M. NOS.9854/2013, 5227/2014 & 1457/2015
ATV PROJECTS INDIA LIMITED ..................Plaintiff
Through: Mr. U.K. Chaudhary, Sr. Advocate with Mr.
Kuljeet Rawal, Mr. Saurabh Malhotra, Mr. H.P. Sharma
and Mr. Himanshu Vij, Advocates.
Versus
PUNJAB NATIONAL BANK & ORS. ...........Respondents
Through : Mr. Neeraj Chaudhary, Advocate, for
Respondent No.2 with Mr. Avtar Singh, Chief Manager
(Legal), Central Bank of India.
Mr. P.K. Mullick, Advocate, for Respondent No.3.
Mr. Rajiv Kapur, Advocate, for Respondent No.4.
Mr. Karan Khanna, Advocate, for Respondent No.19.
Mr. Sarat Chandra with Mr. Sachin Chandra, Advocates,
for Respondent No.17.
Mr. Abhishek Anand, Advocate, for IDBI.
Mr. Kunal Manav, Advocate, for Respondent No.20.
Ms. Nupun Kanungo, proxy for Ms. Rama Ahluwalia,
Advocate, for Sales Tax Department, State of
Maharashtra.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.K. GAUBA
MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)
%
1. The writ petitioner is a sick company which had approached the
Board for Industrial and Financial Reconstruction (BIFR) under the Sick
W.P.(C) 4226/2013 Page 1
Industrial Companies (Special Provisions) Act, 1985 (SICA). Its secured
creditors and debenture trustees sought leave of BIFR to continue legal
proceedings, which was granted conditionally on 09.07.2002. The petitioner
approached the appellate authority (AAIFR), aggrieved by the said order.
During the pendency of its appeal, a meeting of its creditors was held where
an agreed schedule of certain payments and a proposal for One Time
Settlement (OTS) for `72 crores was apparently examined. The company
expressed its agreement and deposited 10% of the amount in terms of the
proposal. One creditor, i.e. Central Bank of India (CBI) had reservations and
a meeting was held on 15.01.2008 wherein the creditors were of the opinion
that the aggregate value that can be realized from sale was in the range of
`85 crores. It was agreed that fresh valuation of assets would take place.
When these proposals were pending consideration, the AAIFR passed an
order dated 13.02.2008. The AAIFR directed the company to deposit `82
crores within two months.
2. The company felt aggrieved by the AAIFR's order and challenged it
before this Court under Article 226 by filing W.P.(C) 5659/2010. The writ
petition was disposed of and the matter was remitted to the AAIFR for
further hearing of the appeals in the following terms. This Court directed
inter alia as follows:
"On hearing learned counsel for the parties at length we find the
grievances justified. The proposal of the company was not for the
lumpsum payment of Rs.82 crores, but for payment of Rs. 82
crores instead of Rs.72 crores as per the terms of meeting dated
13.01.2007. The Central Bank of India was not agreeable to the
OTS. The matter was, thus, at an initial stage. The effect of the
impugned order is that both the sides of the parties have been
thrust with the OTS of Rs.82 crores to be paid in terms of the
W.P.(C) 4226/2013 Page 2
impugned order while this was not the proposal or the acceptance
of any of the parties. Whether the OTS is possible or not is
determined on the consent of all the parties and the Appellate
Authority could, thus, have only explored the matter further in
pursuance to the OTS proposal of the company contained in its
letter dated 16.01.2008 inviting the comments of Central Bank of
India and other creditors. Thus, the impugned order cannot be
sustained.
Learned counsel for the company points out that a large
number of secured creditors have taken their proportionate
amount out of Rs.7.2 crores deposited by the company and have
given their consent. This aspect would have to be examined by the
Appellate Authority.
The impugned orders dated 13.02.2008 and 09.07.2008 are,
accordingly, set aside and the matter remanded back to the
Appellate Authority for further hearing on the appeals in terms of
the observations made. Petitions are accordingly allowed leaving
the parties to bear their own costs."
3. It is thus evident that the AAIFR was directed to monitor the further
progress of the OTS proposals. On 15.05.2013, the AAIFR held that the
BIFR's order permitting conditional leave to secured creditors and debenture
trustees of company to go ahead with legal proceedings was in order. The
AAIFR inter alia observed that the CBI had refused to accept the OTS offer
of `11.02 crores plus interest. The AAIFR was of the opinion that even
though secured creditors had accepted their proportionate amount out of
`7.2 crores deposited, nevertheless, the CBI's position rendered the overall
settlement unfeasible since consent of the other secured creditors could not
compel the CBI to agree with the proposal. On the basis of these findings,
the AAIFR held as follows:
"8. Since there is no consent of the secured creditors on the
W.P.(C) 4226/2013 Page 3
OTS offered by the company, it is not possible to work out a
rehabilitation scheme for the revival of the appellant company.
Moreover, the reference of the company has been pending for the
last 14 years. A sick company has to be revived within a
reasonable period of time so as to achieve the objectives of SICA.
Any prolonged delay in the process only puts undue burden on the
financial institutions as they are unable to recover their dues due
to pending reference under SICA. If their dues were recovered, the
same could have been used for lending to others, thereby
increasing the production as well as employment. The delay of 14
years is far beyond any reasonable time required for revival of a
company. As such, reference of company pending for such a long
period is liable to be dismissed on this ground alone.
9. For the aforesaid reasons, we do not find any infirmity or
illegality in the impugned orders passed by the BIFR which may
require any interference by this Authority. There is no merit in the
appeals and these are liable to be dismissed."
4. The company in these writ proceedings has made various
submissions. Firstly, it contends that the CBI is a secured creditor only to the
extent of 13% of the overall credits and that its views cannot prevail against
those of other 27 secured lenders who formed 87% of the lending strength. It
is also contended that AAIFR had incorrectly assumed that CBI's consent is
necessary and that such view is contrary to Section 19(2) of the SICA. It was
thirdly contended that during the pendency of these proceedings, all the
while the present petition was adjourned from time to time to explore the
possibility of an agreement, overwhelming number of company's secured
creditors have accepted OTS and also issued a no dues certificate. It is
submitted that similarly OTS proposal has been accepted by other secured
creditors, including banks such as SBI, PNB, UTI and that even CBI has
now given its consent.
W.P.(C) 4226/2013 Page 4
5. In the light of the submissions made and considering that
adjournments were being granted by the Court on several occasions, the
Court had called the Operating Agency (OA), i.e. Industrial Development
Bank of India (IDBI) to file a status report supported by an affidavit as to the
current developments with respect to the OTS proposal. The IDBI
accordingly issued notice to the 24 secured creditors out of which it
apparently received response from 13 secured creditors; copies of its letters
have been placed on record. It also mentions that on 27.01.2015, BIFR had
observed that since the company had settled dues of 27 secured creditors,
excluding CBI, it was expected to file a fully tied-up DRS. Importantly,
IDBI submits that a DRS was in fact circulated and given to it in the
capacity as an OA on 16.04.2015.
6. During the course of the hearing, all the parties were present,
including the CBI; learned counsel for the parties, including that of IDBI
asserted that since there is some progress with respect to the acceptance of
the OTS, proceedings before the BIFR should go ahead unimpeded. Learned
counsel for the CBI submitted that as a secured creditor, the bank cannot be
compelled to accept the scheme and that its right to insist upon the remedies
available with it should be preserved. It was submitted on behalf of the State
of Maharashtra that certain statutory dues are pending and outstanding from
the petitioner and that it should be permitted to take steps to enforce the
same.
7. Having regard to the totality of the circumstances, this Court is of the
opinion that there has been a significant change in the circumstances on
account of developments which occurred during the pendency of the present
W.P.(C) 4226/2013 Page 5
petition. The sick company/petitioner is aggrieved by the AAIFR's order
which approved the conditional permission granted to its secured creditors
to maintain and continue legal proceedings. In view of the OTS proposals
apparently accepted by a large number of creditors, this Court is of the
opinion that it would not be conducive and in the interest of the sick
company to allow the order of the BIFR to stand. At the same time, this
Court is of the opinion that instead of requiring the AAIFR to monitor OTS
proposals it would be in the fitness of things if the BIFR does so as is its
statutory duty. Accordingly, the observations of the AAIFR as to the
maintainability of the proceedings before the BIFR are hereby set aside. All
other portions of the impugned order regarding the nature of the progress
with regard to OTS and DRS are part of the record and shall be considered
in further proceedings before the BIFR. The DRS lodged with BIFR is
directed to be circulated to all the concerned parties, i.e. secured and
unsecured creditors who are parties before the BIFR. The State of
Maharashtra is at liberty to file such application concerning its dues as is
permissible in law before the BIFR. The order of the BIFR, permitting the
petitioner's secured creditors to go ahead with legal proceedings shall be
kept in abeyance till final decision is recorded on the DRS dated 16.04.2015
circulated before it.
8. The parties are, therefore, directed to appear before the BIFR on
06.07.2015 which shall proceed to consider the DRS at its earliest
convenience having regard to the fact that the present matter pertains to an
old case. The decision on the DRS shall be rendered expeditiously,
preferably by end of October 2015.
9. The impugned order of AAIFR is set-aside. The writ petition and the
W.P.(C) 4226/2013 Page 6
pending applications are allowed in the above terms with no order as to
costs.
S. RAVINDRA BHAT
(JUDGE)
R.K. GAUBA
(JUDGE)
APRIL 29, 2015
W.P.(C) 4226/2013 Page 7
