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State Bank of India and Others. V/S Daaj Hotel And Resorts Pvt. Limited and Others.

    OA No. 3549 of 2017

    Decided On, 03 January 2020

    At, Debts Recovery Tribunal Hyderabad

    By, THE HONORABLE JUSTICE: S. PRAVEENA
    By, (PRESIDING OFFICER)

    For Petitioner: G. Sanjeeva Reddy And For Respondents: Ch. Pushyam Raju



Judgment Text


1. Initially, the applicants 1 to 3 filed Original Application No. 3549 of 2017 u/s. 19 of the Recovery of Debts and Bankruptcy Act, 1993 for recovery of a total sum of Rs. 131,88,29,454.89 ps i.e., a sum of Rs. 64,37,60,776.89 ps with interest @13.90% p.a. with monthly rests to 1st applicant, a sum of Rs. 50,47,47,470/- with interest @15.80% p.a. with monthly rests to 2nd applicant and a sum of Rs. 17,03,21,208/- with interest @14.35% p.a. with monthly rests from the date of application till the date of realization together with costs from defendants 1 to 3 jointly and severally together with costs and in default for sale of OA schedule properties and share the sale proceeds on pari passu basis among the applicants.

2. The case of the applicants, in brief, is;- that the 2nd applicant bank and applicants 1 and 3 are the consortium members. The 1st defendant is a company and defendants 2 and 3 are its Managing Director and Director respectively. They approached applicants 1 and 2 and assignor bank of 3rd applicant i.e., State Bank of Hyderabad for grant of term loan of Rs. 80 crores for construction of a five star deluxe hotel at Banjara Hills, Hyderabad. Considering the request of defendants, the consortium banks sanctioned term loan of Rs. 80 crores vide sanction letters of applicant banks 1 to 3 dated 21.11.2006, 21.02.2007 and 30.09.2015 at the rate of Rs. 40 crores, Rs. 30 crores and Rs. 10 crores respectively with interest @10% repayable in 31 quarterly instalments. Defendants 2 and 3 as Managing Director and Director executed loan documents on behalf of 1st defendant company. They have also executed personal guarantees for the loan. The loan is primarily secured by way of hypothecation of all fixed assets of 1st defendant company. It is also collaterally secured by pledge of 80 lakhs of company share worth Rs. 8 crore on pari passu charge. Defendants also created mortgage over OA schedule-A property by deposit of title deeds as a security for the loan. At the request of defendants, the applicants rescheduled the term loan facilities on 13.11.2008 and further changed payment schedule from September, 2008 to March, 2010. Defendant further availed 2nd term loan of Rs. 25 crores vide sanction letters dated 21.06.2010, 29.12.2010 and 30.09.2015. At the request of defendants, applicants restructured the loans under CDR mechanism. Defendants agreed for appointment of SBI CAP Trustee Company Ltd. (4th defendant) as Security Trustee to act and hold the securities for the benefit of consortium banks vide letter dated 05.04.2013. The credit facilities are also secured by pledge of 43,32,227 shares belonging to defendants 2 and 3 which constitute 58.49% of the total equity of 1st defendant company. The member of consortium banks i.e., State Bank of Hyderabad assigned the debt to 3rd applicant vide assignment deed dated 30.09.2015. On authorization, defendants executed revival letters dated 01.07.2015 and 19.02.2016. Since the defendants failed to repay the loan amount as per agreed terms in spite of repeated demands and requests, applicants filed the OA.

3. Subsequently, applicants 1 and 3 and defendants 1 to 3 entered into one time settlement and accordingly applicants 1 and 3 filed IA No. 3710/2018 before this Tribunal and obtained compromise decree dated 08.08.2018 against defendants 1 to 3.

4. As per 2nd applicant bank, since the OTS proposal of defendants 1 to 3 failed, the OA is being continued by 2nd applicant bank for OA claim.

5. All the defendants were served with summons. Out of them, the 4th defendant which is the Security Trustee of applicants was set ex parte on 13.04.2018 as called, absent and no representation.

6. The 1st defendant filed written statement which has been adopted by defendants 2 and 3. The submissions of the defendants, as per the written statement, in brief, are that;- the claim amounts of applicants 1 to 3 are not as per consortium agreement. Hence, the applicants 1 to 3 cannot seek for issuance of recovery certificate for a total debt of Rs. 131,88,29,454.89 ps and direction for sale of OA schedule properties. In the Joint Lenders Forum (JLF) meeting held on 12.02.2015, lenders agreed to reschedule the loan and recovery of loan as per the guidelines issued by RBI. In the meeting of JLF held on 06.06.2015, the applicants 1 to 3 agreed to restructure the loan with cut off date as 01.04.2015. Since then number of proposal were submitted from June 2015 to June 2017 but no decision was taken by the applicants which resulted in increase in the liability of defendants. Vide Circular dated 05.05.2017, RBI issued guidelines on Joint Lenders Forum (JLF) and Corrective Action Plan (CAP) for early identification of stressed assets and timely implementation of CAP. In order to facilitate time decision making, it has been agreed that the decisions agreed upon by a minimum of 60 percent of the creditors in value and 50 percent of the creditors in number in JLF, it would be considered as the basis for deciding the CAP and the same would be binding on all the lenders. If one of the lenders is not agreeable to the majority decision, such lender would be subject to exit by substitution option within stipulated timeline, failing which such a lender shall abide by the decision of JLF. In the meeting of consortium banks held on 11.05.2017 all the member lenders agreed for OTS and 1st applicant bank conveyed its approval. The 1st defendant has been making payments as per compromise terms. Applicants 1 and 3 obtained comprise decree from this Tribunal. As regards OTS proposal with 2nd applicant, it has a share of 37.50% in the entire project share whereas Applicants 1 and 3 who have accepted OTS jointly constitute 62.50% of the entire project debt. As per the RBI Circular dated 05.05.2017, if a lender does not support the majority decision on CAP, such lender may exit within stipulated timeline. Having agreed to adhere to the conditions of the JLF, the 2nd applicant bank cannot object to the OTS which is under implementation. Hence, the claim of the 2nd applicant may be rejected and a direction be issued to 2nd applicant to accept the OTS in terms of RBI Circular dated 05.05.2017.

7. In order to prove its case, the applicant bank examined K. Ramesh, Manager as AW-1 and marked 58 documents through him as Ex. A.1 to A.58.

8. In order to substantiate the defence of defendants, Ms. Ramyanka Yadav, authorized signatory of 1st defendant company is examined as DW-1 and marked 12 documents through her as Exs. B.1 to B.12.

9. Heard learned counsel appearing for the applicant bank, learned senior counsel Sri S. Ravi representing advocate Sri Ch. Pushyam Kiran appearing for the defendants 1 to 3. Perused the material brought on record.

10. It is contended by learned counsel appearing for the 2nd applicant bank that the 1st defendant is a company registered under the provisions of Indian Companies Act, 1956. Defendants 2 and 3 are the Managing Director and Director respectively of the 1st defendant company. The 1st defendant company availed credit facilities ie., term loan of Rs. 80 crores from the applicant banks 1 and 2 and assignor bank of the 3rd applicant under consortium agreement. The 1st defendant mortgaged the OA schedule-A property and defendants 2 and 3 pledged their shares morefully described in OA schedule-B as a security. The share of the 2nd applicant in the corporate debt is Rs. 30 crores out of Rs. 80 crores. The 1st applicant bank is the consortium leader. Defendants 2 and 3 representing the 1st defendant company executed loan documents on 28.04.2007. The loan came to be rescheduled on the request of the defendants on 13.11.2008. The 1st defendant approached the applicant banks for grant of second term loan of Rs. 25 crores. The consortium banks considered the representation of the defendants and sanctioned second term loan repayable in 25 equal instalments commencing from June, 2012. The share of the 2nd applicant bank in the second term loan is Rs. 9.67 crores. The 2nd defendant being the Managing Director of 1st defendant company executed the loan documents on 31.01.2011 and extended the securities to the second term loan. The loan came to be restructured from time to time and 2nd defendant as Managing Director of 1st defendant company executed revival letters on 30.03.2009 and 17.07.2015. The defendants also agreed for appointment of SBICAP Trust (4th defendant) to act and hold the securities for the benefit of the consortium banks. The State Bank of Hyderabad assigned the debt to the 3rd applicant under the deed of assignment dated 30.09.2015. The 1st defendant having availed the credit facilities committed default in repayment of the loan amount. The applicants 1 to 3 jointly filed this OA for recovery of loan dues.

11. Pending the OA, the applicants 1 to 3 and defendants entered into OTS and moved IA No. 3710 of 2018 by applicants 1 and 3 and obtained compromise decree against the defendants. Since the defendants 1 to 3 did not come forward to pay the management fee of Rs. 1028.02 lakhs, the OTS in respect of claim of the 2nd applicant bank did not materialize and that the 2nd applicant bank proceeded with the amount claimed in the OA. The 2nd applicant bank examined K. Ramesh, Manager as AW-1 and marked 58 documents through him as Exs. A.1 to A.58. According to learned counsel, the evidence of AW-1 coupled with recitals in Ex. A.1 to Ex. A.58 substantiates the OA claim of the 2nd applicant bank against the defendants 1 to 3 and OA schedule properties. Therefore, OA deserves to be allowed.

12. Per contra, Sri S. Ravi, learned counsel representing the advocate Sri Ch. Pushyam Kiran for defendants 1 to 3 submits that 2nd applicant bank is a member of consortium banks and it is bound by the terms of consortium agreement. The applicants 1 to 3 constitute joint lender forum and all the applicant banks participated in the discussion in the meeting held on 11.05.2017 on OTS proposal wherein applicant banks agreed to consider the OTS proposal and subscribed their signatures on the resolution passed in the meeting. Pursuant to the OTS, the applicant banks accepted the part payments. Indeed, applicants 1 and 3 moved IA No. 3710/2018 seeking compromise decree and this Tribunal considered the IA and passed compromise decree. Since the second applicant bank being party to the joint lender forum meeting and having accepted the part payments towards OTS is barred from backing out from the terms of OTS. The second applicant is bound by the guidelines issued by the RBI which have a statutory force. The OTS is pursuant to guidelines issued by RBI and 2nd applicant bank having accepted to receive Rs. 2021.98 lakhs towards settlement of the claim in the OA under letter dated 29.09.2018 which has been marked as Ex. B.7, cannot press for entire claim in the OA. Learned senior counsel further submits that the circulars issued by the RBI neither permits nor authorizes the individual banks forming part of the consortium to receive the management fee. The demand of the 2nd applicant bank for management fee is wholly unjustified and withdrawal of OTS for nonpayment of the management fee is contrary to the terms and conditions agreed by the parties under OTS. In support of his submissions, learned senior counsel placed reliance on the following judgements of:

(i) Hon'ble Supreme Court of India in Central Bank of India vs. Ravindra and Ors. reported in: AIR 2001 SC 3095 decided on 18.10.2001;

(ii) Hon'ble Supreme Court of India in Sardar Associates and Ors. vs. Punjab and Sind Bank and Ors. reported in : AIR 2010 SC 218 decided on 31.07.2009;

(iii) Hon'ble High Court of Calcutta in Eastern Paper Mill Machinery Pvt. Ltd. and Ors. vs. State Bank of India and Ors. reported in : AIR 2005 Cal 21 decided on 23.08.2004;

(iv) Hon'ble High Court of Chhattisgarh in Central Bank of India vs. Sharad Rice Industries and etc. reported in : AIR 2010 Chh 69 decided on 08.03.2010.

With these submissions learned senior counsel sought for allowing the claim of the 2nd applicant to the extent of the amount indicated under OTS.

13. Now, the points that arise for consideration are:-

i) Whether the 2nd applicant bank is entitled to claim the entire claim made in the OA or the amount agreed under OTS?

ii) To what relief?

Point No. (i)-

14. Availment of credit facilities by the 1st defendant company from the consortium banks comprising applicant 1 and 2 banks and assignor bank of 3rd applicant is not under dispute. It is also not under dispute that the 2nd applicant bank is a party to the joint lenders forum meeting held on 11.05.2017 to consider the OTS proposal moved by the 1st defendant company. The outcome of the meeting has been indicted in the minutes of the meeting dated 11.05.2017 which has been marked as Ex. B.12. The OTS proposal moved by the defendants has been accepted by all the consortium banks. OTS proposal is in pursuance of Ex. B.2 circular dated 05.05.2017 issued by RBI. I deem it appropriate to refer the relevant portion of the Ex. B.2 and it is thus:

"4. In the context, it is reiterated that tenders must scrupulously adhere to the timelines prescribed in the Framework for finalising and implementing the CAP. To facilitate time decision making, it has been decided that, henceforth, the decisions agreed upon by a minimum of 60 percent of creditors by value and 50 percent of creditors by number in the JLF would be considered as the basis for deciding the CAP and will be binding on all lenders subject to the exit (by substitution) option available in the Framework. Lenders shall ensure that their representatives in the JLF are equipped with appropriate mandates, and that decisions taken at the JLF are implemented by the lenders within the timelines."
15. The above referred Circular is issued by the RBI in exercise of powers conferred by Sections 21, 35A and 35AB of Banking Regulation Act, 1949. The Hon'ble Supreme Court of India considered the effect of the Circulars issued by RBI in the 1st cited decision in Central Bank of India vs. Ravindra and Ors. case (supra) and held that they are binding on the banks. The relevant portion of the judgment needs to be noted and it is thus:

"The power conferred by Sections 21 and 35A of the Banking Regulations Act, 1935 is coupled with duty to Act. Reserve Bank of India is prime banking institution of the country entrusted with a supervisory role over banking and conferred with the authority of issuing binding directions, having statutory force in the interest of public in general and preventing banking affairs from deterioration and prejudice as also to secure the proper management of any banking company generally. Reserve Bank of India is one of the watchdogs of finance and economy of the nation. It is, and it ought to be, aware of all relevant factors including credit conditions as prevailing, which would invite its policy decisions. RBI has been issuing directions/circulars from time to time which, inter alia, deal with rate of interest which can be charged and the periods at the end of which rests can be struck down, interest calculated thereon and charged and capitalised. It should continue to issue such directives Its circulars shall bind those who fall within the net of such directives. For such transaction which are not squarely governed by such circulars, the RBI directives may be treated as standards for the purpose of deciding whether the interest charged is excessive, usurious or opposed to public policy."
16. The proposition of law laid down in Central Bank of India vs. Ravindra and Ors. case (supra) came to be quoted by Hon'ble Supreme Court in the 2nd cited case with approval. Therefore, it is well settled that the guidelines issued by RBI are binding. Once the account is settled under OTS, the DRT can take note of the same while passing the orders in recovery proceedings vide judgement of Hon'ble Supreme Court in the 3rd and 4th cited cases. For better appreciation, I may refer the relevant portion of the 4th cited case and it is thus;

"19. Next question for our consideration is whether the DRT and the DRAT were justified in holding that the RBI guidelines for the OTS scheme are enforceable by the Courts/tribunals and the banks are bound to comply with and follow the guidelines?

20. The above issue came up for consideration before the Hon'ble Supreme Court in its latest judgment in the matter of Sardar Associates v. Punjab and Sind Bank, : (2009) 8 SCC 257 : (AIR 2010 SC 218) and the Hon'ble Supreme Court referring to Para 15 of the Constitution Bench judgment in the matter of Central Bank of India v Ravindra,: (2002) 1 SCC 367 : (AIR 2001 SC 3095) has observed in Para 32 of its judgment thus:

"32. If a public sector bank is otherwise bound by any guidelines issued by Reserve Bank of India, we see no reason as to why the same cannot be enforced in terms of the provisions of the Act by the Tribunal and consequently by the Appellate Tribunal. It is not a case where the appellants had prayed for quashing of a policy decision, taken by the respondent Bank."
17. AW-1 admits in cross examination that the competent authority of the 2nd applicant bank authorized to issue Ex. B.7 letter dated 29.09.2018 As per Ex. B.7 letter, the 2nd applicant bank agreed to receive Rs. 2021.98 lakhs towards full settlement of the claim and the amount is to be paid by the 1st defendant company on or before 01.03.2020. The payment of management fee is not at all the subject matter of the OTS. AW-1 categorically admits in the cross examination that OA does not include the management fee. For better appreciation I may refer the relevant portion of the cross examination of AW-1 and it is thus:

"The competent authority of applicant no. 2 also authorise the issuance of letter dated 29.09.2018 Ex. B.7. There is no stipulation of management fee under Ex. B7 this was accepted by the defendant in Ex. B8. There is no claim for any management fee in the original application."
8. The evidence of AW-1 does not indicate that the management fee form

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s part of the OA claim. Therefore, insistence of 2nd applicant bank for payment of management fee to give effect to One Time Settlement is arbitrary, irrational and baseless. It is matter of record that the 2nd applicant bank accepted the instalments as per OTS terms. Applicants 1 and 3 obtained the compromise decree on 08.08.2018 against the defendants in terms of OTS. The 2nd applicant bank being the member of consortium of OTS is bound to give effect to the terms and conditions of the OTS. The binding nature of the decision agreed upon by a minimum 60 percent of creditors by value and 50 percent of creditors by number in Joint Lenders Forum is indicated in Ex. B.2 circular issued by RBI. Therefore, the 2nd applicant bank is entitled to decree against the defendants in terms of OTS indicated in Ex. B.7 i.e., Rs. 2021.98 lakhs subject to defendants 1 to 3 paying the amount on or before 01.03.2020 failing which the 2nd applicant bank is entitled to the amount claimed in the OA with future interest less the payments made by the defendants, if any, and accordingly, OA deserves to be allowed for Rs. 2021.98 lakhs against the defendants and OA schedule properties on pari passu charge basis. Point No. (ii):- 19. In the result, the present Original Application is allowed for Rs. 2021.98 lakhs subject to defendants 1 to 3 jointly and severally paying the amount on or before 01.03.2020, failing which the 2nd applicant bank shall be entitled to the amount claimed in the OA with future interest less the payments made by the defendants, if any and proceed against the OA schedule properties subject to pari passu charge held by the 2nd applicant bank. 20. Consequently, Interlocutory Applications, pending if any, shall stand closed. 21. No order as to costs. 22. Communicate a copy of this order to the parties concerned. (Dictated to the PS, transcribed by him, corrected, signed and pronounced by me in the open court on this the 03rd January, 2020).
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