Delhi High Court - Orders
Aditya Birla Finance Limited vs Siddartha Educational And Welfare ... on 25 March, 2022
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~29
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 398/2021
ADITYA BIRLA FINANCE LIMITED ..... Petitioner
Through Mr. Sandeep Sethi & Mr. Akhil Sibal,
Sr. Advs. with Mr. Ashim Sood, Ms.
Asavari Jain, Mr. Prasad Dhande, Mr.
Saahil Menon & Ms. O. Mukherjee,
Advs.
Versus
SIDDARTHA EDUCATIONAL AND WELFARE
SOCIETY AND ORS ..... Respondents
Through Mr. Manish Gupta, Mr. Neelmani
Guha & Ms. Harshal Gupta, Advs.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 25.03.2022
1. The petitioner has filed the present petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter the 'A&C Act'), inter alia, praying as under:
"a. Pass an order directing Respondents, jointly and/or severally, to deposit the fee receipts for FY 2018-19, FY 2019-20 and FY 2020-21 respectively) with the Petitioner or in the designated Escrow Account with Axis Bank/Kotak Mahindra Bank, being the shortfall in the amount required to be routed through such Escrow Accounts.
b. Pending the hearing and final disposal of the Arbitration Proceedings and for a period of 6 months after the passing of the A ward, pass an order directing the Respondents to deposit future/subsequent fee receipts directly into the designated Escrow Accounts as per the terms and conditions of the Escrow Agreements.Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:29.03.2022
c. Pass an order directing the Respondents, jointly and/or severally, to furnish security to the Petitioner for the outstanding dues under the Facility Agreements, amounting to an aggregate of INR 115,37,67,214/- (Rupees One Hundred and Fifteen Crore Thirty Seven Lacs Sixty Seven Thousand Two Hundred and Fourteen Only), by way of bank guarantee, for securing compliance of their obligations under the Facility Agreements and the respective Guarantee Agreements.
d. Pass an order that pending the furnishing of security under prayer (c), restraining the Respondents, their employees, servants, agents, representatives or anyone claiming through or under them from in any manner, dealing with, selling, disposing, alienating, or creating any third-party interest or in any manner encumbering any of their movable and immovable assets as mentioned in para 91 of the present petition; e. Direct the Respondents to, jointly or severally, replenish the DSRA by an amount of INR 3,38,01,150/- (Rupees Three Crores Thirty Eight Lakhs One Thousand One Hundred and Fifty only) immediately.
f. Appoint a reputed Chartered Accountants' / firm to act as a receiver / concurrent auditor for the Respondents, at the cost of the Respondents, for a scope of work to be detailed by the Petitioner, including inter alia to:
i. Take possession of the financial records of the Respondents for the period from 2017 till day and review all the books of accounts, bank statements, fee received (through cash or otherwise), expenses incurred, and other such verification and audit into the accounts of the Respondent;
ii. Receive all future revenues in designated escrow accounts, and for such purpose, operate the bank accounts of Respondents and ensure utilization of monies as per Escrow agreement;Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:29.03.2022
iii. Participate as an observer in all meetings of the Trustees, governing committees, management committees etc. of Sidhartha.
g. Direct the Respondents to furnish under an affidavit the information to the Petitioner as sought in paragraph of the present petition;
h. Pass an-exparte ad-interim order in terms of prayers (a) to (g) above; and or;"
2. The petitioner claims that the respondents had approached the petitioner for availing a Term Loan and Line of Credit Facilities for operating its existing franchise of DPS Panipat and DPS Junior School, Panipat as well as for acquiring a new franchise of DPS Ambala and setting up that school.
3. The petitioner states that it had sanctioned the Credit Facility by a letter dated 08.06.2017. In terms of the said Sanction Letter, a sum of ₹102.50 crores was proposed to be disbursed as Term Loan and a further facility of ₹7.50 crores was sanctioned as a Line of Credit to respondent no.1 (Siddhartha Educational & Welfare Society). One of the conditions imposed by the petitioner was that 100% of the fee receipts of the respective schools would be routed through the designated Escrow Account.
4. The said Sanction Letter was subsequently modified on 13.06.2017.
5. On the same date (that is, 13.06.2017), the Term Loan Agreements for extending the Term Loan Facility for an aggregate sum of ₹102.50 crores were executed between respondent nos. 1 to 3 (the Borrowers) and the petitioner. Another Loan Agreement, extending the Line of Credit Facility for a sum of ₹7.50 crores, was also entered into on that date. The petitioner claims that the aforesaid facilities were secured by various documents Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:29.03.2022 including mortgage of the land and building of DPS Panipat and DPS Junior School. In addition, respondent nos. 4 and 5 executed Deeds of Personal Guarantees guaranteeing the repayment obligations of the Borrowers.
6. The petitioner claims that on 11.08.2017, an Escrow Agreement was also entered into between the petitioner, the respondent and Kotak Mahindra Bank, whereby an Escrow Account in the name of Delhi Public School - Panipat City (DPS Panipat) was opened with Kotak Mahindra Bank. Subsequently, under another Escrow Agreement entered into on the same date (that is, 11.08.2017), it was agreed between respondent no.2 (TKB), the petitioner and Kotak Mahindra Bank that an account in the name of TKB Global Pre-School, Ashok Vihar be opened with Kotak Mahindra Bank. Further Escrow accounts were also opened in Kotak Mahindra Bank and Axis Bank.
7. The learned counsels appearing for the parties state that currently there are four bank accounts that are operational. The said bank accounts are maintained with Axis Bank. The details of the said bank accounts are as under:
Sl. Escrow A/c No. Bank Name
No.
1 918020022091701 Axis Bank
2 918020022095211 Axis Bank
3 918020022083315 Axis Bank
4 918020022073208 Axis Bank
8. The petitioner alleges that the respondents have defaulted in repayment of the loan facilities. It is also alleged that the respondents are not following the discipline of the Escrow Agreements and have been diverting funds received on account of various schools. The said allegations are Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:29.03.2022 stoutly disputed by the respondents.
9. It is also the case of the respondents that there is no wilful default on the part of the respondents under any of the Loan Agreements. They claim that the defaults have occurred due to the force majuere event resulting from the outbreak of Covid-19 and the measures taken for combating the same.
10. The learned counsel appearing for the respondents states that the revenue from the fees dropped from around ₹60 crores to ₹22 crores. He further states that in view of the drastic fall in the revenues, the respondents could not repay the instalments, which were due for servicing the financial assistance availed from the petitioner. He states that the situation has since improved considerably and it is expected that the revenue from the fees shall increase in the coming months.
11. After some arguments, on 18.0.2022, the parties agreed that protective orders similar to the order dated 22.12.2020 passed in OMP(I)(COMM) No.418/2019 captioned Aditya Birla Finance Ltd. v. Presidium Educational and Charitable Trust & Anr., be also passed in the present petition. By the said order dated 22.12.2020, this Court has appointed a former Judge of the Supreme Court as a Receiver, inter alia, to monitor the Escrow Accounts being maintained. In the said order, a further direction was also passed to verify whether the parties had, in the past, adhered to the terms of the Loan Agreement.
12. The respondents are apprehensive that in the event an order appointing a Receiver is passed, the same would adversely affect the functioning of the schools. It is contended by the learned counsel for the respondents that the arrangement in Aditya Birla Finance Ltd. v. Presidium Educational and Charitable Trust & Anr. (supra), as directed by the order Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:29.03.2022 dated 22.12.2020, did not work satisfactorily as there were delays of more than three months in clearing certain payments.
13. Mr. Sethi, learned senior counsel appearing for the petitioner, fairly states that the object of the present petition is to secure the petitioner and to ensure that the funds of the schools are not diverted. He suggested that a professional Chartered Accountant may be appointed to verify and monitor the withdrawal from the Escrow Accounts.
14. In view of the above, Mr. Deepak Joshi, Chartered Accountant (Mobile no: 9899119115) is appointed as the Court Commissioner to verify that all payments made from the Escrow Accounts, as set out in paragraph 7 above, are for the purposes of running the schools.
15. The respondents shall ensure that all fees and any other amounts receivable by the schools are deposited only in the Escrow Accounts and no part of it is utilized otherwise. In the event of any cash received, the same would, without any adjustment, be deposited directly in the said Escrow Accounts. No amount would be withdrawn from the Escrow Accounts except for running the schools and / or to make payments to the petitioner.
16. The respondents shall present documents supporting each withdrawal to the Court Commissioner prior to any withdrawal or issuance of any cheque. All withdrawals shall take place only after the prior written approval of the Court Commissioner.
17. The respondents shall produce all documents and books of accounts as may be required by the Court Commissioner for the purpose of verification and satisfying the Court Commissioner that the payment is essential for running the schools.
18. The learned counsel appearing for the respondents submits that the Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:29.03.2022 respondents are also actively considering offers for investments by private equity funds and other qualified investors, inter alia, to settle the dues of the petitioner. The learned counsel for the respondents states that the respondents are anxious that the present order should not impede that process. It is specifically clarified that the respondents are permitted to settle the dues of the petitioner from any funds that they may receive from such private equity funds or investors.
19. It is further clarified that the respondents shall not be impeded in any manner for running the schools or for making any other arrangement for the benefit of the schools including considering the proposals of private equity funds and investors.
20. The limited import of the order is to ensure that no funds collected by the respondents are utilized in any manner except for the functioning of the schools or for payment of the dues of the petitioner.
21. This order shall be operative for a period of six months from today.
22. In the meanwhile, the parties are at liberty to take steps for appointment of the Arbitral Tribunal.
23. The fee of the Court Commissioner is fixed at ₹1.50 lacs per month besides any other expenses that the Court Commissioner may incur for discharging his function. The same shall be paid by the respondents.
24. The petition is disposed of in the aforesaid terms.
VIBHU BAKHRU, J MARCH 25, 2022 'gsr' Click here to check corrigendum, if any Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:29.03.2022