National Company Law Appellate Tribunal
Mr. Markand Adhikari vs Central Bank Of India & Anr on 4 April, 2022
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Company Appeal (AT) (Insolvency) No. 80 of 2020
[Arising out of orders dated 20.12.2019 in CP (IB) - 4374/I&B/MB/2018
passed by the Ld. Adjudicating Authority (National Company Law Tribunal),
Mumbai Bench.]
IN THE MATTER OF:
Mr. Markand Adhikari
Share Holder of,
Sri Adhikari Brothers Television Network Ltd.
Residing at Adhikari Villa, 5th Floor,
Hatkesh CHS, Road No. 7 Plot No. 46, JVPD,
Ville Parle (West), Mumbai-400056. ..... Appellant.
Versus
1. Central Bank of India
Having its corporate office at
Chander Mukhi Building,
Nariman Point, Mumbai-400021 ...... Respondent No. 1.
2. Sri Adhikari Brothers Television Network Ltd.
Having registered address at 6th Floor,
Adhikari Chambers, Oberoi Complex,
New Link Road, Andheri (W),
Mumbai-400053.
Through
Mr. Vijendra Kumar Jain,
Interim Resolution Professional
Having his office at
401/402, Sai Trishul, Raviraj Oberoi Complex,
Off. New Link Road, Andheri (W)-400053 ....... Respondent No. 2.
2
For Appellant: Mr. Arpit Dwivedi and Mr. Sai J. Deepak, Advocates.
For Respondent: Mr. O.P. Gaggar, Advocate for R-1.
Ms. Udita Singh, Advocate for R-2/RP.
JUDGMENT
(04th April, 2022) Justice Anant Bijay Singh;
The Appellant - Mr. Markand Adhikari, Share Holder of, Sri Adhikari Brothers Television Network Ltd. has preferred this Appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016 (for short IBC) being aggrieved and dissatisfied by the order dated 20.12.2019 in CP (IB) - 4374/I&B/MB/ 2018 passed by the Ld. Adjudicating Authority (National Company Law Tribunal), Mumbai Bench whereby and where under the Application filed under section 7 of the IBC by Central Bank of India, the Respondent No. 1 herein was admitted and appointed Mr. Vijendra Kumar Jain as Interim Resolution Professional.
2. From the perusal of the record it appears that the Appeal has been filed vide Diary No. 17773 on 13.01.2020 and the matter was listed on 17.01.2022, on that date, the Learned Sr. Counsel for the Appellant submitted that the Appellant wants to settle the matter with the Central Bank of India, the Respondent No. 1 herein and the matter was directed to be listed on 06.02.2020. On 06.02.2020, the matter was listed before the three Hon'ble Members Bench and it was informed that no settlement has been arrived between the parties, therefore, the Learned Counsel for the Respondent No. 1 was directed to file Reply Affidavit and the matter was directed to be listed on 02.03.2020. On 02.03.2020, the Respondent has filed the Reply Affidavit and Company Appeal (AT) (Insolvency) No. 80 of 2020 3 the Learned Counsel for the Appellant was directed to file Rejoinder and the matter was directed to be listed on 19.03.2020. On 19.03.2020, the Appellant was again given time to file Rejoinder and the matter was directed to be listed on 09.04.2020. Thereafter, the matter could not be listed in between during Covid-19 1st Wave. On 22.12.2020, the matter was listed, the Learned Counsel for the Appellant and Respondent No. 1 were directed to file Written Submissions and the Learned Counsel for the Respondent No. 2 was also directed to file status report and the matter was directed to be listed on 19.01.2021. On 19.01.2019, the matter was again directed to be listed on 05.02.2021. On 05.02.2021, the matter was heard and further directed to be listed on 01.03.2021. On 01.03.2021, the Learned Counsel for the Appellant submitted that on 22.02.2021 sent an email to the Respondent as they have inclined to settle the matter outside the Court and the matter was adjourned to 17.03.2021. On 17.03.2021, the Learned Counsel for the Respondent No. 1 Bank submitted that they have received the email sent by Learned Counsel for the Appellant, wherein a request has been made by the Counsel for the Appellant for a personal meeting and the matter was directed to be listed on 12.04.2021. On 12.04.2021, the Learned Counsel for the Respondent No. 1 Bank was submitted that they have received a proposal for settlement but they are not agreeing with the terms and the matter was directed to be listed for hearing on 10.05.2021. Thereafter, due to Covid-19 wave the matter was taken up on 07.06.2021, on that date, in absence of Reply Affidavit to Additional Affidavit, the matter was directed to be listed on 19.07.2021. On that date, the Learned Counsel for the Respondent No. 1 in his Reply Affidavit stated that settlement proposal offering to pay a paltry sum of Rs. 1.95 Crore against total Company Appeal (AT) (Insolvency) No. 80 of 2020 4 dues of the Respondent Bank amounting to Rs. 32.77 Crores., therefore, the matter could not be settled and the matter was directed to be listed on 13.08.2021 for Direction. On that date, this Bench observed that on 28.07.2021 meeting was convened by Canara Bank, being the largest lender and further meeting was held on 06.08.2021 the lenders discussed the proposal of the Appellant who proposed staggered payment of Rs. 33.06 Crores without any upfront deposit amount against total outstanding of more than 504 Crores and the matter was again directed to be listed on 15.09.2021. On that date, there was no possibility of Settlement, the matter was again directed to be listed for hearing on 10.11.2021. On that date, the matter was heard and further directed to be listed on 06.01.2022. On that date, the matter was adjourned to 12.01.2022 and further directed to be listed on 12.01.2022. On that date, the Judgment was reserved in this matter.
3. The facts giving rise to this Appeal are as follows:
i) The Respondent No. 2 Company has availed three term loans facilities from Respondent No. 1 for an amount of Rs. 10 Crores each aggregating to Rs. 80 Crores. Accordingly, the Respondent No. 2 executed security documents for the grant of the loan amount by hypothecating the programme rights and pledging of its shares.
ii) Further case is that due to economic factors and other reasons beyond the control of Respondent No. 2 Company, as described in detail hereunder, the Respondent No. 2 could not service its debt to the Respondent No. 1 Bank.
iii) In confirmation of its bona fides to discharge its repayment obligations, the Respondent No. 2 Company on various occasions approached the Company Appeal (AT) (Insolvency) No. 80 of 2020 5 Respondent No. 1 for restructuring/review of the loan amount. However, the Respondent No. 1 neither rejected nor responded to the Respondent No. 2's restructuring proposal of the loan amount.
iv) Further case is that the Respondent No. 1 without giving any intimation/notice to Respondent No. 2, sold the shares pledged by Respondent No. 2 which resulted in the down fall of the market prices of the shares of the Respondent No. 2 Company.
v) The Respondent No. 1 illegally declared the account of Respondent No. 2 as Non-Performing Assets ("NPA"). Before the account became NPA, the Respondent No. 1 sold a large chunk of pledged shares at a price lower than the actual market price and that also without informing the Respondent No.
2.
vi) The Respondent No. 2 through their various emails from December 2017 till September 2018 requested the Petitioner No. 1 to furnish the details of the shares sold by Respondent No. 1. However, the Respondent No. 1 failed to furnish the same to Respondent No. 2.
vii) On 30.10.2018, the Respondent No. 1 Bank filed Petition under Section 7 of the IBC which was duly replied by the Respondent No. 2 Company and thereafter, the Ld. Adjudicating Authority vide its order dated 20.12.2019 admitted the Application filed by the Respondent No. 1 under Section 7 of the IBC and appointed Mr. Vijendra Kumar Jain as Interim Resolution Professional. Hence this Appeal.
Company Appeal (AT) (Insolvency) No. 80 of 2020 6 Submissions on behalf of the Appellant
4. The Learned Counsel for the Appellant during the course of argument and in his memo of Appeal along with Written Submissions submitted that in order to secure the loan advanced by Respondent No. 1 Bank had pledged 9,50,000 equity shares of M/s Global Showbiz Pvt. Ltd. and M/s Inayata Constructions Pvt. Ltd. at Rs. 256.35 each. The value of aforesaid shares at the relevant point of time was Rs. 24,35,32,500/-. In addition to above, the Appellant had pledged 9,50,000 equity shares of M/s TV Vision Ltd. of value Rs. 277.50/- each and 2,85,000 equity shares of SAB Events and Governance (now known as Media Ltd.) of Rs. 50.25 each. Resultantly, the aggregate valued of pledged shares lying with Respondent No. 1 Bank at the time of creation of pledge was Rs. 52.14 Crores approximately.
5. It is further submitted that as on the date of invocation, the price of pledged shares, according to the date available and procured from the official website of National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are hereunder.
Share No. of Share Price on Share on Value of Share on
Pledged Pledged the date of the date of
Invocation (in Rs.) Invocation
SABTNL 9,50,000 89.76 Rs. 8,52,72,000
TV Vision 9,50,000 129.34 Rs. 12,28,73,000
SAB Events 2,85,000 28.33 Rs. 80,74,050
Total 21,85,000 Rs. 21,62,19,050
Company Appeal (AT) (Insolvency) No. 80 of 2020
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6. It is further submitted that the Respondent No. 1 Bank allegedly declared and classified the account of the Appellant Company as Non- Performing Asset on 28.09.2017, however, no notice of information in this regard was given to the Appellant. Therefore, the Respondent No. 1 Bank has been acting in most arbitrary and illegal manner. The Appellant, on several occasions, had requested the Respondent No. 1 Bank to furnish details of sale of pledged shares. However, the Respondent No. 1 Bank for reasons best known to itself did not provide any information to the Appellant and the Appellant could not take any steps to oversee that maximum amount could have been realized against such sale of shares.
7. It is further submitted that the Resolution Professional and members of Committee of Creditors have acted in utter disregard and gross violation of order dated 17.01.2020 whereby this Appellate Tribunal had mandated that the Respondent No. 2 Company shall be maintained as going concern entity and shall carry out its functions accordingly. Despite such clear and unequivocal directions, the Resolution Professional and members of CoC proceeded to illegally terminate the Leave and License Agreement executed with TV Vision and SAB Events that too during subsistence of the Lease period.
8. It is further submitted that the action of Resolution Professional and CoC is not only patently illegal but the same is also not in the best interest of the Respondent No. 2 as firstly, it completely stops the recurring source of income of Respondent No. 2, which otherwise could have proved to be a boon in the present market situation. Secondly, since the said action is contrary to Company Appeal (AT) (Insolvency) No. 80 of 2020 8 the terms of the Agreement, it exposes the Respondent No. 2 to the risk of facing and defending legal action from SAB Events and TV Vision. The rental income is the only source of income for the Respondent No. 2 and despite being so, the Resolution Professional and CoC have decided to proceed with termination of Leave and License Agreement. The said termination further raises questions in light of the fact the Resolution Professional is struggling to pay the salaries of the employees of Respondent No. 2 and with aforesaid termination of Leave and License Agreements, the respondent No. 2 will not be able bear salaries of its employees and other monthly operating expenses or for that matter even payment of fees to the Resolution Professional. Moreover, the said illegal act of termination of Leave and License Agreement has also increased the financial burden/exposure of Respondent No. 2. Based on these submissions and also in the eyes of law, the impugned order is fit to be set aside and the Appeal be allowed.
Submissions on behalf of the Respondent No. 1
9. The Learned Counsel for the Respondent No. 1 during the course of argument and in his Reply Affidavit along with Written Submissions submitted that the Appellant has failed to show any ground or fault with the impugned order passed by the Ld. Adjudicating Authority. From the order passed by the Hon'ble Tribunal on 17.01.2020 it emerges that the Appellant got notice issued from the Hon'ble Tribunal representing that he wished to settle the matter with Central Bank of India but that seems to be a mere strategy for getting the notice because neither the Appellant nor his counsel has ever approached the Bank for any settlement and instead made a Company Appeal (AT) (Insolvency) No. 80 of 2020 9 statement on the returnable date that no settlement has been arrived at. The Appellant did not make any proposal of settlement with any other Financial Creditor as confirmed by them in the Committee of Creditors 13th meeting dated 17.12.2020.
10. It is further submitted that the Appellant's Company availed three term loans of Rs. 10 Crores each aggregating to Rs. 30 Crores from the Respondent Bank for financing their acquisition/production of proprietary rights/materials of entertainment content on primary security of hypothecation of programme rights and other entertainment content to be acquired by the Corporate Debtor Company and a collateral security of the pledge of shares in Shri Adhikari Brothers Television Network Limited and other two sister concerns.
11. It is further submitted that the account became a Non-Performing Asset on 28.09.2017 when total outstanding in all loan accounts was a sum of Rs. 25.03 Crores. The Corporate Debtor Company and its directors including the Appellant, who were in constant touch with the Bank had been citing one or other excuse for non-payment like implementation of the GST, deteriorating market conditions, filling revenue/viewership and had been seeking one or other accommodation from the Bank which the Financial Creditor Bank was providing upto the maximum extent possible as per rules.
12. It is further submitted that the Appellant has misrepresented about the share prices of their Company. When the term loans had been contracted by them and the shares were pledged, share prices were good but the share prices kept on falling substantially when the company's businesses dwindled Company Appeal (AT) (Insolvency) No. 80 of 2020 10 and their financial status became known to the market players. The share price is based on the perception of the market players about the profitability and growth prospects of the company and the consequent propensity of earning profit out of investment in such shares. When, as per the Appellant's own case, the condition of their business and finances began to fall, the market prices of their equities fell sharply.
13. It is further submitted that the shares which were subject matter of collateral security were all in dematerialized form. The dematerialized shares are merely a record in electronic form maintained in the depository. Since there were no physical scripts/certificates of the shares which could be pledged as per the requirement of the Contracts Act which mandatorily require delivery of the pledged goods, only the electronic data could have been earmarked in the name of the beneficial owner, therefore the action of pledge was completed by earmarking the dematerialized shares to the Corporate Debtor Bank.
14. It is further submitted that the argument of the Appellant on Section 176 of the Contract Act is untenable. That this Section is not applicable on dematerialized shares which are governed by Depositories Act, 1996 and the rules framed thereunder. Conjoint reading of Sections 9, 10, 11 and 12 of the Depositories Act, 1996 and regulation 58 of Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 show that dematerialised shares cannot be pledged in accordance with the provisions of the Contract Act which requires physical delivery of the goods pledged because it is obvious from the provisions of the Contract Act, that for a valid Company Appeal (AT) (Insolvency) No. 80 of 2020 11 pledge, there must be a delivery of goods i.e. a physical possession of the goods. The Goods (shares) held in dematerialised from are incapable of delivery i.e. by handing over de facto possession, since goods (shares) are invisible and intangible, it would be impossible to be delivered physically. Based on these submissions, no merit in the Appeal, the Appeal is fit to be dismissed.
Submissions on behalf of the Respondent No. 2
15. The Learned Counsel for the Respondent No. 2 - Resolution Professional during the course of argument and in his Affidavit, it has been stated that after issuance of notice in the present Appeal on 17.01.2020, the Deponent continued with conducting the Corporate Insolvency Resolution Process of the Corporate Debtor, while ensuring that it remained a going concern. While attempts at settlement were going on between the parties herein as well as other members of the Committee of Creditors, the Deponent continued with holding CoC meetings regularly as required under the provisions of the IBC.
16. Further it has been stated that in the 21st CoC meeting held at Mumbai on 24.08.2021, since the only Resolution Plan put forth by one M/s Pen India Ltd. was rejected by the CoC with 100% votes, a resolution was passed for liquidation of the Corporate Debtor and the CoC advised the Deponent to circulate the resolution of approval of Liquidation through E-voting and accordingly, e-voting took place on 27.08.2021 and the Resolution was approved with 79.75% voting in favour of liquidation (Annexure-2 at page 13 to 21 of the Affidavit).
Company Appeal (AT) (Insolvency) No. 80 of 2020 12
17. Further it has been stated that breaking down of settlement talks and proposal to go ahead with the liquidation and its details were also decided in a Joint Lenders Meeting of all the member Banks of the CoC held on 01.09.2021. In pursuance of the above Resolution so passed by the CoC, the Resolution Professional accordingly moved an Application for liquidation under Section 33 of the Code before the Ld. Adjudicating Authority on 15.09.2021.
18. The Learned Counsel for the Resolution Professional during the course of hearing submitted that an Application bearing I.A. No. 2179/2021 filed by the Resolution Professional seeking liquidation of Sri Adhikari Brothers Television Network Limited (Corporate Debtor) under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 has been allowed by the Ld. Adjudicating Authority on 16.12.2021 and the Corporate Debtor is ordered to be liquidated.
FINDINGS
19. After hearing the parties and having gone through the pleadings made on behalf of the parties, we are of the considered view that the following facts are admitted in the instant Appeal.
The Respondent No. 2 Company has availed three term loans facilities from Respondent No. 1 for an amount of Rs. 10 Crores each aggregating to Rs. 80 Crores. Accordingly, the Respondent No. 2 executed security documents for the grant of the loan amount by hypothecating the programme rights and pledging of its shares.
Company Appeal (AT) (Insolvency) No. 80 of 2020 13 The account of the Respondent No. 2 was declared NPA on 28.09.2017 when total outstanding in all loan accounts was a sum of Rs. 25.03 Crores.
On 30.10.2018, the Respondent No. 1 Bank filed Petition under Section 7 of the IBC which was duly replied by the Respondent No. 2 Company and thereafter, the Ld. Adjudicating Authority vide its order dated 20.12.2019 admitted the Application filed by the Respondent No. 1 under Section 7 of the IBC and appointed Mr. Vijendra Kumar Jain as Interim Resolution Professional.
It is also an admitted fact that during pendency of the Appeal behest of the Appellant that he wants to settle the matter with the Respondent No. 1 and further case was adjourned several times but no settlement arrived between the parties nor resolved the dispute. It is also an admitted fact that the 21st meeting of CoC was held at Mumbai on 24.08.2021, since the only Resolution Plan put forth by one M/s Pen India Ltd. was rejected by the CoC with 100% votes, a resolution was passed for liquidation of the Corporate Debtor and the CoC advised the Resolution Professional to circulate the resolution of approval of Liquidation through E-voting and accordingly, e-voting took place on 27.08.2021 and the Resolution was approved with 79.75% voting in favour of liquidation (Annexure-2 at page 13 to 21 of the Affidavit).
In pursuance of the above Resolution passed by the CoC, the Resolution Professional Mr. Vijendra Kumar Jain filed an Application bearing I.A. No. 2179/2021 seeking liquidation of Sri Adhikari Brothers Television Company Appeal (AT) (Insolvency) No. 80 of 2020 14 Network Limited (Corporate Debtor) under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 praying for following reliefs:
" a. That this Hon'ble Tribunal be pleased to order and direct that the Corporate Debtor be ordered and directed to go under liquidation as per Section 33(2) of the Insolvency and Bankruptcy Code, 2016;
b. That this Hon'ble Tribunal be pleased to grant liberty to Resolution Professional to file additional affidavit for appointment of Liquidator and estimated liquidation cost; & c. For such other and further reliefs as this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case."
The I.A. No. 2179/2021 has been allowed by the Ld. Adjudicating Authority on 16.12.2021 and the Corporate Debtor is ordered to be liquidated.
ORDER
20. Taking observing all these facts and circumstances of the case, we are of the considered view that till now the process of CIRP has failed and CoC by 79.75% voting has recommended the resolution for liquidation of the Corporate Debtor and the same has been allowed by the Ld. Adjudicating Authority and the Corporate Debtor is ordered to be liquidated vide order dated 16.12.2021, therefore, this Appeal has become infructuous. In view of the fact that the Appellant has challenged the order dated 20.12.2019 passed by the Ld. Adjudicating Authority (National Company Law Tribunal), Mumbai Bench in CP (IB) - 4374/I&B/2018. Accordingly, this Appeal is dismissed. No order as to costs.
Company Appeal (AT) (Insolvency) No. 80 of 2020 15
21. Registry to upload the Judgment on the website of this Appellate Tribunal and send the copy of this Judgment to the Ld. Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, forthwith.
[Justice Anant Bijay Singh] Member (Judicial) [Ms. Shreesha Merla] Member (Technical) New Delhi 04th April, 2022 R. Nath.
Company Appeal (AT) (Insolvency) No. 80 of 2020