Supreme Court - Daily Orders
Gtl Infrastructure Limited vs Canara Bank on 6 December, 2021
Bench: Uday Umesh Lalit, S. Ravindra Bhat
1
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE/ORIGINAL JURISDICTION
CIVIL APPEAL NO(S).7449 OF 2021
(Arising out of SLP(C) No(s).5256 of 2020)
GTL INFRASTRUCTURE LIMITED ..APPELLANT(S)
VERSUS
CANARA BANK & ORS. ..RESPONDENT(S)
WITH
CIVIL APPEAL NO(S).7450 OF 2021
(Arising out of SLP(C) No(s).5667 of 2020)
AND
WRIT PETITION (C) No.649 of 2021
O R D E R
Leave granted in SLP(C) No.5256 of 2020. This appeal arises out of Special Leave Petition (C) No.5256 of 2020 preferred by GTL Infrastructure Limited challenging the judgment and order dated 03.02.2020 passed by the High Court of Judicature at Bombay in Writ Petition No.1893 of 2019.
The aforestated Writ Petition was filed by the appellant praying for following reliefs:
“(a) Issue a Writ of Mandamus or any other Signature Not Verified appropriate writ, order or direction, directing Digitally signed by Indu Marwah Date: 2021.12.14 Respondents Nos.1 to 6 to forthwith comply with 13:17:58 IST Reason: paragraph 6.4 of the Master Circular dated July 1, 2015 issued by the Reserve Bank on Prudential Norms on Income Recognition Assets Classification and Provisioning Pertaining to Advances and execute agreements assigning their respective debts in 2 favour of Respondent No.7;
(b) pending the hearing and final disposal of the Petition, the Respondent Nos.1 to 6 be restrained from taking any coercive steps against the Petitioner for recovery of their purported dues under the financial facilities granted by the Respondent Nos. 1 to 6 to the Petitioner including but not limited to filing or prosecuting any proceedings under the IBC and/or Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(c) grant and interim relief in terms of prayer clause (c);
(d) grant costs in favour of the Petitioner;” Paragraph 6.4 of the Master Circular dated July 1, 2015 issued by the Reserve Bank of India on “Prudential Norms on Income Recognition Assets Classification and Provisioning Pertaining to Advances” reads as under:
“Procedure for sale of bank’s/ FIs financial assets to SC/RC, including valuation and pricing aspects.
(a) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) allows acquisition of financial assets by SC/RC from any bank/FI on such terms and conditions as may be agreed upon between them. This provides for sale of the financial assets on ‘without recourse’ basis, i.e., with the entire credit risk associated with the financial assets being transferred to SC/RC, as well as on ‘with recourse’ basis, i.e., subject to unrealized part of the asset reverting to the seller bank/FI. Banks/FIs are, however, directed to ensure that the effect of the sale of the financial assets should be such that the asset is taken off the books of the bank/FI and after the sale there should not be any known liability devolving on the banks/FIs.
(b) Banks/FIs, which propose to sell to SC/RC their financial assets should ensure that the sale 3 is conducted in a prudent manner in accordance with a policy approved by the Board. The Board shall lay down policies and guidelines covering, inter alia, i. Financial assets to be sold;
ii. Norms and procedure for sale of such financial assets;
iii. Valuation procedure to be followed to ensure that the realizable value of financial assets is reasonably estimated;
iv. Delegation of powers of various functionaries for taking decision on the sale of the financial assets; etc.
(c) Banks/FIs should ensure that subsequent to sale of the financial assets to SC/RC, they do not assume any operational, legal or any other type of risks relating to the financial assets sold.
(d) (i) Each bank/FI will make its own assessment of the value offered by the SC/RC for the financial asset and decide whether to accept or reject the offer.
(ii)In the case of consortium/multiple banking arrangements, if 75% (by value) of the banks/FIs decide to accept the offer, the remaining banks/FIs will be obligated to accept the offer.
(iii) Under no circumstances can a transfer to the SC/RC be made at a contingent price whereby in the event of shortfall in the realization by the SC/RC, the banks/FIs would have to bear a part of the shortfall.
(iv)Banks using auction process for sale of NPAs to SCs/RCs should be more transparent, including disclosure of the Reserve Price, specifying clauses for non-acceptance of bids, etc. If a bid received is above the Reserve Price and a minimum of 50 percent of sale proceeds is in cash, and also fulfills the other conditions specified in the Offer Document, acceptance of that bid would be mandatory.
(e) Banks/FIs may receive cash or bonds or debentures as sale consideration for the financial assets sold to SC/RC.
4
(f) Bonds/debentures received by banks/FIs as sale consideration towards sale of financial assets to SC/RC will be classified as investments in the books of banks/FIs.
(g) Banks may also invest in security receipts, Pass-through certificates (PTC), or other bonds/debentures issued by SC/RC. These securities will also be classified as investments in the books of banks/FIs.
(h) In cases of specific financial assets, where it is considered necessary, banks/FIs may enter into agreement with SC/RC to share, in an agreed proportion, any surplus realized by SC/RC on the eventual realization of the concerned asset. In such cases the terms of sale should provide for a report from the SC/RC to the bank/FI on the value realized from the asset. No credit for the expected profit will be taken by banks/FIs until the profit materializes on actual sale.” Relying on Paragraph 6.4(d)(ii), it was submitted that the remaining banks/financial institutions were obligated to accept the offer, once 75% (by value) of banks/ financial institutions decided to accept the offer. The rival contentions were considered by the High Court. By its judgment and order which is presently under challenge, the High Court rejected the submission that said Paragraph created a mandatory or obligatory duty upon the remaining banks/financial institutions to assign the financial assets as suggested and prayed for.
The conclusions in that behalf are to be found from Paragraph No.72 onwards in the decision of the High Court. 5 While issuing notice in the matter, this Court by its order dated 06.03.2020, directed that status quo be maintained till the matter was considered by this Court. Thereafter IA No.48828 of 2021 was filed by the appellant seeking liberty to amend the writ petition which was disposed of by the High Court.
Around the same time, Writ Petition (C) No.649 of 2021 was filed by the appellant praying for following reliefs:
“a) Issue a writ of mandamus or other appropriate writ order or direction from this Hon’ble Court calling upon Respondent No.1 to cease its violations of the applicable laws including but not limited to the SARFEASI Act, ARC Guidelines, Change in Management Guidelines, Master Circular
-Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances (“IRAC Guidelines”) dated July 1, 2015, Stressed Asset Guidelines and Fair Practices Code:
b) Issue a writ of mandamus or other appropriate writ order or direction from this Hon’ble Court directing Respondent No.1 to comply with its obligations under applicable laws including but not limited to the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002. ARC Guidelines, Change in Management Guidelines, Master Circular
-Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances (“IRAC Guidelines”) dated July 1, 2015, Stressed Asset Guidelines and Fair Practices Code to restructure the debt to sustainable levels in accordance with the said applicable laws;
c) Issue a writ of mandamus or other appropriate writ order or direction from this Hon’ble Court directing Respondent No.1 to forthwith refund to the Petitioner monies amounting to INR 356 Crore debited by respondent No.1 (i) 6 prior to completion of the restructuring process of the Petitioner; and (ii) during the status quo issued by this Hon’ble Court vide its order dated March 6, 2020 in direct violation of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, ARC Guidelines, Change in Management Guidelines, IRAC Circular Stressed Asset Guidelines, Fair Practices Code and the Order dated March 6, 2020;
d) That this Hon’ble Court be pleased to issue a writ of mandamus or other appropriate writ, order or direction directing Respondent No.5 to expeditiously decide the Complaint of the Petitioner dated September 4, 2020 against Respondent No.1 and 2 in accordance with law within a period of four weeks or such other period as may be deemed appropriate by this Hon’ble Court.” We have heard Dr. Abhishek Manu Singhvi, learned Senior Advocate in support of the appeal and Mr. Salman Khurshid, learned Senior Advocate in support of the Writ Petition.
We have also heard Mr. Harish Salve and Mr. Amit Sibal, learned Senior Advocates for Respondent Nos.2, 3 and 4 in the Writ Petition; Mr. Neeraj Kishan Kaul, learned Senior Advocate for Edelweiss Asset Reconstruction Company Limited and Mr. Abhishek Singh, learned Advocate for Canara Bank. Paragraph No.6.4 (d)(i) itself makes the position quite clear that each bank/ financial institution must make its own assessment of the value offered by the SC/RC for the financial asset and decide whether to accept or reject the offer. The High Court was, therefore, right in holding that there would be no obligation upon the bank/FI in terms of 7 paragraph 6.4 (d)(ii) as was contended on behalf of the appellant. Thus the High Court was absolutely right and justified in rejecting the claim made on behalf of the appellant.
We, therefore, see no reason to entertain this appeal, which is accordingly dismissed without any order as to costs. For the same reasons, in our considered view, the writ petition also calls for no interference and is therefore, dismissed.
Civil Appeal (Arising out of SLP(C) No.5667 of 2020) Leave granted.
This appeal, filed by GTL Limited, challenges the judgment and order dated 03.02.2020 passed by the High Court of Judicature at Bombay dismissing Writ Petition (L) No.223 of 2020.
The aforestated writ petition had sought following reliefs:
“i. Restraining Respondent No.7 by itself, its servants, agents, officers and subordinates from in any manner whatsoever taking, or proceeding with, any steps or actions, that would prejudice the consideration by the domestic lenders of the Resolution Plan propounded by the petitioner pursuant to the domestic lenders having entered 8 into the Inter-Creditor Agreement (ICA);
ii. Taking any action against the Petitioner pursuant to and/or in furtherance of and/or in implementation of the Recall Notice dated 10/7/2018 (at Exhibit-R), Letter dated 4/6/2019 (at Exhibit- BB), Letter dated 27/6/2019 (at Exhibit-II) and the Letter dated 12/12/2019 (at Exhibit-VV) hereto.
iii. Restrain Respondent No.7, by itself, its servants, agents, officers and subordinates from in any manner proceeding with the Petition being CP(IB)-4535(MB)/2019 filed by it against the Petitioner under Section 7 of IBC before NCLT, Mumbai.
e) For ad-interim reliefs in terms of prayer clause
(c) above;” The petition was premised on paragraphs 9 and 10 of the directions on “Prudential Framework for Resolution of Stressed Assets” dated 07.06.2019 issued by the Reserve Bank of India. Said paragraphs 9 and 10 which were under the heading “Implementation of Resolution Plan” are to the following effect:
“9. All lenders must put in place Board-approved policies for resolution of stressed assets, including the timelines for resolution. Since default with any lender is a lagging indicator of financial stress faced by the borrower, it is expected that the lenders initiate the process of implementing a resolution plan (RP) even before a default. In any case, once a borrower is reported to be in default by any of the lenders mentioned at 3(a), 3(b) and 3(c), lenders shall undertake a prima facie review of the borrower account within thirty days from such default (“Review Period”). During this Review Period of thirty days, lenders may decide on the resolution strategy, including the nature of the RP, the approach for implementation of the RP, etc. The lenders may also choose to initiate legal proceedings for 9 insolvency or recovery.
10. In cases where RP is to be implemented, all lenders shall enter into an inter-creditor agreement (ICA), during the above-said Review Period, to provide for ground rules for finalization and implementation of the RP in respect of borrowers with credit facilities from more than one lender. The ICA shall provide that any decision agreed by lenders representing 75 per cent by value of total outstanding credit facilities (fund based as well non-fund based) and 60 per cent of lenders by number shall be binding upon all the lenders. Additionally, the ICA may, inter alia, provide for rights and duties of majority lenders, duties and protection of rights of dissenting lenders, treatment of lenders with priority in cash flows/differential security interest, etc. In particular, the RPs shall provide for payment not less than the liquidation value due to the dissenting lenders.” The matter was dealt with by the High Court and in paragraph 89 onwards, the issue whether the aforestated paragraphs made it obligatory upon the concerned lenders and whether R-7 (Canara Bank) was entitled to initiate proceedings under Insolvency and Bankruptcy Code were dealt with. The High Court thus concluded that the relief as prayed for could not be granted.
It was further observed that the Public Sector Financial Institutions/Banks could not be compelled to accept the settlement of Resolution Plan of a debtor.
In this appeal, we have heard Mr. K.V. Viswanathan and Mr.Nikhil Sakhardande, learned Senior Advocates in support of the appeal and Mr. Abhishek Singh, learned Advocate for 10 Canara Bank and Mr. Atul Sharma, learned Advocate for Reserve Bank of India.
In our view, the High Court was right and justified in rejecting the claim made by the appellant. The conclusions drawn by the High Court do not call for any interference. We, therefore, affirm the view taken by the High Court and dismiss this appeal without any order as to costs.
....................J. [UDAY UMESH LALIT] ....................J. [S. RAVINDRA BHAT] NEW DELHI DECEMBER 6, 2021 11 ITEM NO.43 Court 2 (Video Conferencing) SECTION IX S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Petition(s) for Special Leave to Appeal (C) No(s). 5256/2020 (Arising out of impugned final judgment and order dated 03-02-2020 in WP No. 1893/2019 passed by the High Court Of Judicature At Bombay) GTL INFRASTRUCTURE LIMITED Petitioner(s) VERSUS CANARA BANK & ORS. Respondent(s) ( IA No. 48828/2021 - AMENDMENT OF THE PETITION; IA No. 39889/2021
- CONDONATION OF DELAY IN FILING COUNTER AFFIDAVIT; IA No. 108868/2020 - EARLY HEARING APPLICATION; IA No. 48830/2021 - EXEMPTION FROM FILING AFFIDAVIT; IA No. 108872/2020 - PERMISSION TO PLACE ADDITIONAL FACTS AND GROUNDS; IA No. 108871/2020 - VACATING STAY) WITH SLP(C) No. 5667/2020 (IX) ( IA No. 108847/2020 - EARLY HEARING APPLICATION; IA No. 83590/2021
- PERMISSION TO FILE ADDITIONAL DOCUMENTS/FACTS/ANNEXURES IA No. 108846/2020 - VACATING STAY) W.P.(C) No. 649/2021 (X) (FOR ADMISSION and IA No.68204/2021-EXEMPTION FROM FILING AFFIDAVIT and IA No.68202/2021-PERMISSION TO FILE LENGTHY LIST OF DATES) Date : 06-12-2021 These matters were called on for hearing today. CORAM :
HON'BLE MR. JUSTICE UDAY UMESH LALIT HON'BLE MR. JUSTICE S. RAVINDRA BHAT For Petitioner(s) Mr. K V Viswanathan, Sr. Adv Mr Nikhil Sakhardande, Sr. Adv.
Mr Essaji Vahanvati, Adv Mr Saket Sikri, Adv Ms. Ranjeeta Rohatgi, AOR Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. Salman Khurshid Sr. Adv.
Mr. Nikhil Sakhardande, Sr. Adv.
Mr. Rohan Rajadhyaksh, Adv
12
Mr. Avishkar Singhvi, Adv
Mr. Ninad Laud, Adv
Mr. Muhammad Ali Khan, Adv.
Mr. Prasad Lotlikar, Adv
Mr. Omar Hoda, Adv.
Mr. Zafar Khurshid, Adv.
Ms. Sakshi Kotiyal, Adv.
Ms. Aishwarya Mohapatra, Adv.
Ms. Ranjeeta Rohatgi, AOR.
Mr. K.M.Nataraj,ASG
Ms. Garima Prasad Adv
Ms. Swati Ghildiyal Adv
Mohd. Akhil Adv
Ms. Vatsal Joshi Adv.
Mr. Raj Bahadur Yadav, Adv.
For Respondent(s) Mr.Abhishek Singh, Adv.
SLP(C) No.5667/2020 Mr.J.Amal Anand, Adv.
Mr.Elvin Joshy, Adv.
Mr.Kirtika Chhatwal, Adv.
Mr.Ishtiaq Ali, Adv.
Ms.Vinita Hombalkar, Adv.
Mr.Zaman Ali, Adv.
Mr.Sarvesh Singh, AOR(R-7)
Mr. Atul Sharma, Adv
Mr. Abhinav Sharma, Adv
Mr. Gautam Talukdar, AOR
Mr.A.P. Singh, Advocate
Mr. Akanksha Das, Advocate
M/S. M. V. Kini & Associates, AOR
Mr. Sumit Gupta, Advocate
Mr. Harish Salve, Senior Advocate Mr. Amit Sibal, Senior Advocate, Ms. Misha, Advocate, Mr. Siddhant Kant, Advocate Ms. Mahima Sareen, Advocate, Ms. Moulshree Shukla, Advocate Mr. Daksh Kadian, Advocate Mr. S. S. Shroff, AOR Mr. Vinay P. Tripathi, Adv.
Mr. Vinamra Kopariha, Adv.
Mr. Kaustubh Prakash Mr. Rishabh Sharma Mr. S. S. Shroff, AOR Mr. Neeraj Kishan Kaul, Senior Advocate 13 Ms. Misha, Advocate Mr. Siddhant Kant, Advocate Ms. Mahima Sareen, Advocate Ms. Moulshree Shukla, Advocate Mr. Daksh Kadian, Advocate Mr. S. S. Shroff, AOR(R-7) Mr. P.V. Dinesh, AOR (R-5) Mr. Ashwini Kumar Singh, Adv Mr. Bineesh K., Adv UPON hearing the counsel the Court made the following O R D E R SLP(C) No(s). 5256/2020 & 5667/2020) Leave granted.
The appeals are dismissed in terms of the signed order.
Pending applications, if any, shall stand disposed of.W.P.(C) No. 649/2021
The writ petition is dismissed in terms of the signed order.
Pending applications, if any, shall stand disposed of.
(INDU MARWAH) (VIRENDER SINGH) COURT MASTER (SH) BRANCH OFFICER
(SIGNED ORDER IS PLACED ON THE FILE)