Bombay High Court
Hotel Horizon Private Limited Acting ... vs Union Bank Of India on 12 April, 2024
Author: Bharati Dangre
Bench: Bharati Dangre
2024:BHC-OS:6153
(48)IAL-11371-2024.doc
rajshree
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION (L) NO.11371 OF 2024
IN
SUIT (L) NO.11235 OF 2024
Hotel Horizon Pvt. Ltd. ]
Through its Authorized Signatory and Director] .. Plaintiff
vs.
Union Bank of India & Ors. ] .. Defendants
Mr.Simil Purohit a/w Jeehan Mehta, Prerak Choudhary and Trisha
Ranka for the Plaintiff.
Mr.Charles De Souza a/w Rupak Sawangikar i/b M/s.Orbit Law
Services for the Respondents.
CORAM : BHARATI DANGRE, J DATE : 12th April, 2024.
P.C. 1] Hotel Horizon Private Limited, incorporated under the Companies Act and engaged in the business of Hotels, hospitality and other allied services alongwith its Directors Sagar Sharma and Vishal Sharma, have filed the Suit, seeking a declaration that there exist a concluded contract with the Defendant No.1, Union Bank of India, as the Agreement was reached between the Parties in the meeting dated 18.01.2024, in terms of the proposal dated 28.12.2023 and it is prayed that the said shall be held to be valid and subsisting, where the Defendant Bank has agreed to settle the account of the Plaintiff for a sum of Rs.200 Crores.
1/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 :::(48)IAL-11371-2024.doc Specific performance of the said Agreement is prayed for with a direction to the Defendants to issue acceptance letter to the Plaintiff for One Time Settlement (OTS) amount of Rs.200 Crores, so that the Plaintiff shall make the necessary payment within a period of 90 days from the receipt of such letter.
It is in this Suit, Interim Application (L) No.11371/2024 is filed, praying for a restraint order and injunction against the Defendants, in any manner dealing with, disposing off, alienating, encumbering, selling creating third party interest in respect of the loan account of the Applicant or any of its assets, pending the hearing of the Suit.
It is also prayed that the auction which is scheduled by the Bank on 03.04.2024, be stayed.
2] I have heard the learned counsel Mr. Simil Purohit representing the Plaintiff/Applicant and Mr. Charles De Souza representing the Union Bank of India and its Officers.
According to Mr. Purohit, the Suit is filed by the Plaintiff for specific performance of the Agreement and it seek enforcement of an oral Agreement entered in chambers of Executive Director of Defendant No.1, in the presence of Defendant No.2, their officers Defendant Nos.3 to 6, when the Plaintiffs were given an impression, that they have requisite power to negotiate and close the Agreement. According to him, it is in this meeting, it was agreed that the account of the Plaintiff and all the claims of the Bank against the Company and Guarantors, stand settled by One Time Settlement (OTS) in the sum of Rs.200,00,00,000 (Rupees Two Hundred Crores Only). According to him, it was agreed by the Plaintiff that the amount shall be paid to the Defendants, within a period of 90 days from the date of issuance of the firm sanction letter, sanctioning OTS proposal of the borrower and this 2/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 ::: (48)IAL-11371-2024.doc would result in withdrawal of the respective cases filed against each other.
3] Mr.Purohit submit that, the Defendant agreed to issue Letter of Acceptance to enable the Plaintiff to get the amount paid through its investor, M/s.Kotak Alternate Asset Manager Ltd., a financial institution of repute and upon receipt of the payment, the bank had agreed to release all securities, guarantees, pledge shares, movables, hypothecated assets, receivables and other entitlements in favour of the Plaintiff and on receipt of the OTS amount, it was to issue a 'No Due Certificate' and cancel the indenture of mortgages/ pledges/ personal guarantees.
According to Mr. Purohit it was also agreed that till the said period of 90 days, the bank shall keep its actions for recovery against the Plaintiff in abeyance.
4] It is the contention of Mr.Purohit that the amount of settlement was crystalized in the said meeting and the terms of settlement were accepted orally, which constitute a valid and binding oral agreement and the Defendant No.1 was bound to reduce the same into writing as per contract in an Acceptance Letter, so that the Plaintiff would have processed the same through its investor and within 90 days the payment could have been made.
According to him, the settlement was effected after consistent rounds of discussion and joint meetings and the Defendant No.1-Bank in fact made a statement before NCLT that the matter has been amicably settled, leading to an inference that the settlement was to be acted upon. Pursuant to the statement, the Bank unconditionally withdrew the Company Petition on 19.01.2024, but now the 3/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 ::: (48)IAL-11371-2024.doc Defendants have taken a U turn and instead of settling the matter, are attempting to unjufiably enrich themselves and the act of the Defendants is alleged to be in breach of the contract.
Certain subsequent events are also pressed into service by Mr. Purohit to contend that Defendants always intended to have OTS and therefore, he seek a restraint order against the Defendants, from taking action for enforcing the loan and realization of the amount.
5] In contrast, the learned counsel representing the Defendants has submitted that the term loan and consortium finance was availed by the Plaintiff, but since it failed to repay, the account was declared as NPA on 31.10.2018, which was followed by a Demand Notice issued by the Bank for Rs. 228 Crores. For the recovery of the amount, the Bank filed proceedings before DRT and the Plaintiff submitted OTS proposal to DRT which could not fructify, as a result in March, 2022, the Bank issued an auction notice interalia putting up the loan account of the Plaintiff for auction by fixing the reserve price at Rs.165 Crores on 100% cash basis.
It is not disputed by the learned counsel representing the Defendants that meetings were held between the representatives of the Plaintiff and the Bank officers and the Plaintiff proposed OTS settlement and offered a sum of Rs.200 Crores.
However, the parties were never ad idem as regards the timelines of payment and the learned counsel for the Bank would invite my attention to a letter addressed on 29.02.2024, to the Director of the Plaintiff and this is in reference to the OTS proposal dated 28.12.2023 for an amount of Rs.200 Crores, for the captioned account.
It is intimated that the Competent Authority had approved the OTS proposal of 200 Crores with the write-off amount of 4/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 ::: (48)IAL-11371-2024.doc Rs.12,67,76,687.00 and the waiver of interest to the tune of Rs.1,39,95,73,115.00.
The payment schedule was, however, indicated as " Entire OTS amount of Rs.200 Crores to be paid on or before 29.03.2024."
The terms and conditions of the OTS were set out to the following effect :
1. Borrower has to pay upfront amount of Rs.20.00 Crore (10% of OTS amount) within 15 days of issuance of sanction letter.
2. Borrower to pay entire OTS amount of Rs.200.00 Crore on or before 29th March 2024 failing which legal action shall be initiated immediately.
3. Consent terms with default clause to be filed in DRT (if any) and consent decree to be obtained. The Bank will withdraw suit/legal proceeding against the borrowers/guarantors only on receipt of full and final payment of offer/OTS amount.
4. NOC for release of securities/assets shall be issued only upon receipt of full OTS amount and legal charges/other expenses.
5. Settlement certificate may be issued after receipt of full settlement amount mentioned in the note.
6] The learned counsel for the Respondent, therefore has specifically argued that there is no concluded contract between the Parties and he would oppose grant of interim relief in favour of the Plaintiffs, premised on the ground that there exist one and hence the OTS proposal is finally accepted, which would result in discharge of the liabilities at the end of the Plaintiff.
7] On hearing the respective counsel and perusal of the Plaint as well as the Interim Application, it did not appear to be in dispute that the Union Bank of India had advanced facilities in form of term loan 5/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 ::: (48)IAL-11371-2024.doc and consortium finance and when the demand for repayment was not satisfied, it instituted proceedings under the SARFAESI Act.
The demand resulted in the proposal of OTS at the end of the Plaintiff on 21.11.2021, with a specific admission that the company had suffered set back on account of Covid pandemic and the lock-down as the prospect of Hospitality industry were diminished and remained bleak and an understanding was given to the Bank that the promoters are in the process of sourcing capital for its revival plan, entailing project completion and settling the existing debts of the company. Therefore, OTS offer was made to its lenders, which included the Union Bank of India and HDFC.
In the interregnum, Defendant No.1 published a request for bid (RFB) for sale of the non performing assets to the ARCs/NBFCs/Banks/Fis, duly licensed by Reserve Bank of India to bid the specific non performing asset.
8] The Union Bank of India, also instituted a Petition under Section 7 of the IBC Code, 2016, against the corporate debtor, Hotel Horizon Pvt. Ltd. by referring to the default in repayment of all term loans advanced and the accounts being turning into NPA.
The proceedings set out the outstanding dues of Rs.320,50,75,647.07, Crores being the principal amount including interest.
During the pendency of these proceedings, once again an offer for OTS emanated from the Plaintiffs and this was discussed in the meeting held with the Bank on 28.12.2023, about an all inclusive offer of Rs.200 Crores as full and final settlement, being in form of OTS, of all dues and claims, arising out of all loan accounts of the Company with the Union Bank of India.
6/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 :::(48)IAL-11371-2024.doc 9] It is the case of the Plaintiff that it offered the OTS amount to be settled within 90 days from receipt of the firm sanction letter from the Bank , subject to executing requisite documentation and simultaneous release of all securities, mortgages etc. related to the loans.
This offer is reflected in the communication dated 28.12.2023 addressed by the Plaintiff to the Defendant No.1, being made, on a without prejudice basis by reserving the claims, contentions and rights available to the Plaintiff.
In furtherance thereof, the Defendant No.1 did sought certain compliances in form of information which would put a seal on the OTS proposal and the necessary information was also furnished.
The Plaintiff Company also intimated the officers of the Bank that it is raising funds by roping in an investor and the funds for OTS will be disbursed in one installment of 100%, within 90 days of receipt of firm sanction from the Bank.
10] In the interregnum, when the proceedings filed by the bank were listed before NCLT Mumbai Bench, an order was passed on 17.01.2024 directing the AGM/DGM of the asset management to be present during the proceedings and accordingly, on 19.01.2024 , in their presence, the NCLT passed the following order :-
"5. ON 17.01.2023, the counsel for the Financial Creditor submitted that no decision is taken on the OTS and submitted that she wants to proceed with the case. However, as the counsel for the Financial Creditor was not well prepared with the facts of the case and could not assist the bench order that the officers of the bank incharge of stressed Assets management be available in person to assist the court.
6. Today, the officers of the bank were present in person and Counsel for the Petitioner submits that the matter has been amicably settled between the parties and seeks to withdraw the present petition. Withdrawal is allowed."7/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 :::
(48)IAL-11371-2024.doc 11] It is this order, which is pressed into service by Mr. Purohit by submitting, that, the withdrawal support the plea that, the concluded contract has come into existence, by accepting the offer of the Plaintiff for an OTS amount of RS.200 Crores which was to be cleared within 90 days of receipt of receipt of the firm sanction of the bank and this is the basis, why even the bank withdrew the proceedings before the NCLT.
12] From reading of the communication dated 29.02.2024 from the Defendant no.1 Bank to Mr.Sagar Sharma, the Director of the Plaintiff, it is evident that though OTS of Rs.200 Crores is approved by the Competent Authority, but the payment schedule in the offer was not agreed upon and rather the Bank accepted the offer of Rs.200 Crores as an OTS amount, to be paid on or before 29.03.2024 i.e. within one month from its acceptance.
It is evidently clear that though a proposal emanated from the Plaintiff, it is not accepted by the Bank on the same terms and conditions, as a result of which, no concluded contract came into force and since parties are not ad idem on the terms of settlement, it cannot be said that a contract is born.
For coming into force of a valid contract , it is necessary that the parties should agree as to the terms and they must be ad idem on the terms of settlement, but what is noted by me is, the offer of OTS of the Plaintiff was hedged with a condition of making the payment within 90 days from receipt of the firm sanction from the bank. But this condition of making the payment is not accepted by the Bank and on the contrary, it accepted the proposal of OTS, provided payment is made within a period of 30 days of the issuance of communication by it i.e. 29.02.2024.
8/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 :::(48)IAL-11371-2024.doc Since no consensus could be arrived between the parties, no concluded contract come into existence and I do not deem it appropriate that the Defendant Bank should be restrained from prosecuting its remedies before the DRT, which include the remedy of auction, which it has already resorted to.
It is also informed by Mr. Dsouza that the Bank is now armed with an order under Section 14 of the SARFAESI Act and is ready with a mechanism to follow.
The offer of Mr. Purohit when once again put to Mr. Dsouza of making the payment within 90 days of receipt of the firm sanction letter, is turned down by him, on instructions.
13] In the wake of the above, I do not find any merit in the Interim Application, which seek a restraint order against the Bank and its officers from prosecuting its legal action for recovery of the loan due and payable to it, and hence IA(L) No.11371/2024 is dismissed.
[BHARATI DANGRE, J] 9/9 ::: Uploaded on - 15/04/2024 ::: Downloaded on - 27/04/2024 17:16:04 :::