Delhi High Court - Orders
Asian Hotels North Ltd vs Yes Bank Ltd & Ors on 2 March, 2023
Author: Chandra Dhari Singh
Bench: Chandra Dhari Singh
$~7
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(COMM) 128/2022, I.A. 3102/2022, I.A. 16410/2022, I.A.
21082/2022, O.A. 71/2022, O.A. 80/2022, I.A. 4231/2023 & I.A.
4248/2023
ASIAN HOTELS NORTH LTD ..... Plaintiff
Through: Mr. Vikram Nankani, Sr. Advocate
with Mr. Gurpreet Singh Bagga,
Advocate
versus
YES BANK LTD & ORS. ..... Defendants
Through: Mr. Sandeep Sethi, Sr. Advocate with
Ms. Ananya Dhar Choudhury, Mr.
Raunak Dhillon and Mr. Nihaad
Dewan, Advocates for D-1 and 5
Mr. Sidhant Kumar, Ms. Manyaa
Chandok, Ms. Vidhi Udayshankar
and Dr. Joginder Singh, Advocates
for D-2 and 3
Mr. Mohinder Rupal, Advocate for
D-4
Mr. Vivek Tankha, Sr. Advocate with
Mr. Arjun Rekhi, Mr. Inder Dev
Singh and Mr. Tushar Gupta,
Advocates for applicant in I.A. No.
1746/2023
CORAM:
HON'BLE MR. JUSTICE CHANDRA DHARI SINGH
ORDER
% 02.03.2023 I.A. 1747/2023 (u/O I R-10(2) of CPC)
1. The present application under Order I Rule 10 of the Code of Civil Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 Procedure, 1908 (hereinafter "CPC") has been filed on behalf of the applicant/plaintff seeking the following prayers:-
"a. Allow the present Application and implead J.C. Flowers Asset Reconstruction Private Limited as Defendant No. 5 in the present Suit;
b. Pass an order taking on record the amended Memo of Parties;
c. Pass any other order or orders that may deemed fit and proper in the interest of justice."
2. Mr. Vikram Nankani, learned senior counsel appearing on behalf of the applicant/plaintiff submitted that the captioned suit has been filed challenging the Loan Recall cum Guarantee Invocation Notice dated 17 th February 2022 issued by the defendant no. 1 Bank, whereby the defendant no. 1 Bank had recalled the loan facilities extended to the plaintiff as well as its guarantors to deposit a sum of Rs. 2,22,92,43,603/- in respect of the said loan facilities.
3. It is submitted that the party sought to be impleaded by the instant application, i.e., JC Flowers Asset Reconstruction Private Limited (hereinafter "JC Flowers"), was illegally and erroneously assigned the plaintiffs' loan facilities by the defendant bank. It is further submitted that vide order dated 24th February 2022 passed by the Predecessor Bench in the captioned suit, an interim order of restraint against the defendant no. 1 qua the impugned Notice dated 17th February 2022 was granted which remains to be in operation till date. However, the defendant no. 1 in clear and deliberate disobedience of the said interim order assigned the plaintiffs' loan facilities to JC Flowers. It is submitted that the said assignment is Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 inconsistent with the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the applicable regulations enacted by the Reserve Bank of India. Therefore, it is submitted that JC Flowers is a proper and necessary party to the instant suit.
4. Learned senior counsel relied upon order dated 18 th January 2023 passed by the Joint Registrar (Judicial) in the instant suit and submitted that on the said occasion, the learned counsel for defendant no. 1 had herself taken time to take steps in pursuance to the take over of defendant no. 1 by JC Flowers in the process of reconstruction and hence, it is evident that the rights of defendant no. 1 will not be prejudiced if the instant petition is allowed.
5. It is submitted that no prejudice will be caused to either of the parties if the instant application is allowed and therefore, it is prayed that JC Flowers, being a necessary party, be impleaded as defendant no.5 to the instant suit.
6. Heard.
7. By way of the instant application, the plaintiff is seeking to implead JC Flowers as defendant no. 5 on the ground that it is a necessary and proper party to the suit and its presence is required for proper adjudication of the disputes before this Court.
8. This Court has perused the record including the order dated 18 th January 2023 passed by the Joint Registrar (Judicial). The relevant portion of the said order is reproduced hereunder:-
"Ld. Counsel for the defendant No. 1 seeks adjournment on the ground that defendant No. 1 has been taken over by JC Flowers and Co. in the process of reconstruction and she wishes to take appropriate steps in this regard. Request Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 allowed."
9. It is clear upon perusal of the aforesaid order that the defendant no. 1 is in consensus with the plaintiff for impleadment of JC Flowers Asset Reconstruction Private Limited.
10. Therefore, in terms of the submissions made by learned senior counsel for the plaintiff as well as the statement made on behalf of defendant no. 1 in the order dated 18 th January, 2023 passed by Joint Registrar (Judicial) of this Court, the application is allowed. The JC Flowers Asset Reconstruction Private Limited is impleaded as defendant no. 5.
11. The amended Memo of Parties filed alongwith the application is taken on record.
12. Accordingly, the application stands disposed of.
I.A. 1755/2023 (u/O VI R-17 of CPC)
1. By way of this application under Order VI Rule 17 read with Section 151 of the Code of Civil Procedure, 1908, the plaintiff is seeking the following reliefs:-
"a. To allow the present Application seeking amendment of the Captioned Suit;
b. To allow the Plaintiff to file Amended Plaint..."
2. Mr. Vikram Nankani, learned senior counsel appearing on behalf of the plaintiff submitted that despite the One-Time Restructuring (hereinafter "OTR") resolution dated 9th June 2021 and Master Amendment Agreement dated 24th June 2021 executed between and amongst the parties and lenders respectively, the impugned Notice dated 17th February 2022 was issued. Vide order dated 24th February 2022, the Predecessor Bench granted interim Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 order in favour of the plaintiff. However, despite the interim order, the defendant no. 1 Bank assigned the loan facilities of the plaintiff to the newly impleaded defendant no. 5.
3. It is submitted that the plaintiff is seeking amendment in the captioned plaint that has been necessitated in account of illegal and erroneous assignment by the defendant no. 1 Bank to the JC Flowers Asset Reconstruction Private Limited. Therefore, it is prayed that the instant application be allowed and the amended plaint be taken on record.
4. Per Contra, learned counsel for the defendant no. 1 has vehemently opposed the instant application and submitted that the same is liable to be dismissed.
5. Heard the learned counsel for the parties.
6. This Court has perused the contents of the application as well as the amended plaint sought to be filed on behalf of the plaintiff. It is found that the amendments sought to be made are in accordance with the mandate under Order VI Rule 17 of the CPC and they do not prejudice the rights of either of the defendants to the suit.
7. Hence, for the reasons stated in the application, the same is allowed. The amended plaint is taken on record.
8. Accordingly, the application stands disposed of.
I.A. No. 1735/2023 (u/O XXVI Rule 9 CPC by plaintiff)
1. The present application has been filed on behalf of the plaintiff seeking the following prayers:
"A. Appoint an experienced expert as a Local Commissioner to examine and investigate the loan account of the Plaintiff for the purpose of determining whether the OTR was implemented and Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 acted upon and specifically the Questions "A" to "E"
identified in paragraph 13 of the present Application; and b. Pass any other order or orders that may deemed fit and proper in the interest of justice."
2. Mr. Vikram Nankani, the learned senior counsel appearing for the plaintiff seeks leave to withdraw the present application with liberty to file afresh within two days from today.
3. Leave granted.
4. The application is thus dismissed as withdrawn with liberty granted, as prayed for.
5. The application stands disposed of.
I.A. 4163/2023 (u/O-XXXIX R-1 & 2 of CPC)
1. The instant application under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 has been filed on behalf of plaintiff seeking the following reliefs:-
"a. Stay the operation and effect of the Minutes of the Joint Lenders Meeting dated 23.01.2023 and restrain the parties from acting upon the said Minutes, including but not limited to taking any recovery action based on the consent of proposed Defendant No. 5 recorded in the meeting and the appointment of M/s S.S. Periwal & Co. as the forensic auditor;
b. Restrain the Proposed Defendant No. 5 from acting as, or holding themselves out as Lenders of the Plaintiff Company, pending an adjudication on the legality of the Assignment of debt by Defendant No. 1 to Proposed Defendant No. 5 by this Hon'ble Court;
c. Appoint a reputed Auditor from the list of Empaneled Forensic Auditors For Conducting Forensic Audit of Borrowal Accounts having exposure above Rs. 50 Crores (valid upto Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 27.08.2023) published by the Indian Banks Association to conduct Forensic Audit as well as Cash Flow Monitoring of the Applicant Company;
d. Pass any other order or orders that may deemed fit and proper in the interest of justice."
2. Mr. Vikram Nankani, learned senior counsel appearing on behalf of the applicant/plaintiff submitted that vide Joint Lenders' Meeting dated 23rd January 2023, the decision was taken to initiate recovery action and appoint M/s S.S. Periwal & Co. as a forensic auditor with respect to plaintiff's accounts. The plaintiff, by way of the captioned suit, has assailed the Notice dated 17th February 2022, whereby the defendant no. 1 sought to recall the loan facilities sanctioned to the plaintiff in the event of failure of payments detailed thereunder. The Predecessor Bench on 24th February 2022 passed the interim order restraining the defendants to take any action qua the Notice of 17th February 2022. It is submitted that the question of default by the plaintiff for the loans assigned to JC Flowers Asset Reconstruction Private Limited is the subject matter of the instant suit and remains to be adjudicated upon by this Court. However, in complete violation and contravention of the orders of this Court, the said Joint Lenders' Meeting was held to initiate action against the plaintiff.
3. It is submitted that the decision taken in the Joint Lenders' Meeting is without sanctity and illegal, since the defendants have already been restrained to take any action in terms of the order dated 17th February 2022. It is submitted that proposal was raised in the Lenders' Meeting to appoint forensic auditor to audit the accounts of the plaintiff. The said action was in the teeth of the order passed by this Court and was an attempt to circumvent Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 the said order. The defendant no. 1 and defendant no. 5, in an attempt to overreach and pre-empt the determination of the issues raised in the captioned suit by this Court, have taken actions that are detrimental to the operations of the plaintiff company.
4. It is further submitted that during the discussions with regard to future course of recovery actions in the Joint Lenders' Meeting, the vote of defendant no. 5 was considered by the Lead Banker illegally. It is submitted that the Minutes of the Meeting clearly record the dissent of one of the lenders. Another lender opposed the appointment of forensic auditor by various emails addressed to the defendant no. 1 Bank. It is submitted that even if it be assumed without admitting, that the assignment to defendant no. 5 by the defendant no. 1 was valid, the consent of the defendant no. 5 itself is in gross violation of the interim injunction dated 24th February 2022 granted by this Court.
5. Learned senior counsel also stated that in the Meeting of Lenders on the manner of appointment of forensic auditor, one of lenders raised concerns on the unilateral manner in which the appointment was made. The process of inviting proposals, sharing proposals with the lenders, making of presentations by proposed applicants, etc., was completely bypassed. The said action was again in contravention of the order of this Court granting interim restraint.
6. Therefore, it is prayed that this Court may grant a stay on the operation and effect of decisions taken by the Joint Lenders Forum in the Joint Lenders' Meeting dated 23rd January 2023 thereby also restrain the defendants and other lenders from taking any action against the plaintiff.
7. Heard.
Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:438. The captioned suit on behalf of the plaintiff has been filed assailing the Loan Recall cum Guarantee Invocation Notice dated 17th February 2022 issued by the defendant no. 1. The relevant portion of the Notice is reproduced hereunder:-
"4. Please note that pursuant to submission of request by the Borrower on September 28, 2020, the Bank had approved One Time Restructuring ("OTR'') under the Resolution Framework for Covid-19 Related Stress ("Resolution Framework") dated August 6, 2020 subject to Borrower meeting terms and conditions stipulated under the extant RBI guidelines. Under the OTR scheme, Bank also sanctioned fresh FITL limits amounting to ~INR 321 MM for interest servicing till Mar 2022 apart from extending repayment terms, reducing interest rate and other benefits to the Borrower.
5. However, the Borrower deviated from the Resolution Framework and kept compliances under OTR scheme pending, including but not limited to, implementation beyond 180 days of invocation, documents execution not completed within 180 days of invocation, reclassification of asset exposure as commercial real estate, pending revised independent credit evaluation rating, the Bank was constrained to declare OTR as not implemented. In view of the above, the Borrower is bound by the sanction terms of the Facility as captured in the Facility Agreements. Further, in the joint lender's meeting conducted on September 24, 2021, two lenders in the multiple banking arrangement of the Borrower i.e., Indusind Bank Limited and Axis Bank Limited confirmed that in their view OTR have not been implemented/ cannot be considered as implemented.
Pursuant to terms and conditions of the Facility Agreements, the Borrower was required to make the payment(s)/repayment(s) towards the Facility promptly on the due dates, without any delay. However, the Borrower did not honor the terms and conditions of the Facility Agreements and neglected in making payment/repayment(s), despite repeated Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 reminder(s) by the Bank. Accordingly, the Borrower has been classified as NPA with effect from December 20, 2020. In such circumstances, the Bank has become entitled to and does hereby recall the Facility and declare the Facility as due and payable by the Borrower to the Bank forthwith. Accordingly, we hereby call upon you, the 'Borrower, and demand of you to pay amount to the Bank at its office at 4th Floor, Max Towers, Sector-16B, Noida, Uttar Pradesh - 201301, within 7 days of the receipt of this notice, the outstanding amount under the Facility together with interest, liquidated damages and other charges of the particulars of which are set out in the Schedule- II hereto together with further interest and other charges thereon at the contractual rates upon the footing of interest until payment/realization.
9. The Bank hereby recalls the Facility as sanctioned/ disbursed to the Borrower and in case you, the Borrower and the Guarantors fail to make the payments as aforesaid, we shall be constrained to take such steps and measures as may be permissible under law for recovery of all the monies due and payable by you, more particularly mentioned in Schedule - II hereto, at your own risk as to the costs and consequences.
10. In the event the monies due and payable as mentioned above are not paid in full within a period of seven (7) days from the date of receipt of this notice by the Borrower and/ or the Guarantors, we shall be constrained to exercise our rights and remedies against the Borrower, the Guarantors and obligors/ security providers."
9. A perusal of the order passed by the Predecessor Bench on 24th February 2022 shows that after appreciation of the grounds raised on behalf of the plaintiff while prima facie satisfying this Court to issue summons in the suit, the Predecessor Bench passed the interim order of restraint on the defendant no. 1 with respect to the impugned Notice dated 17 th February 2022. The relevant portion of the said order is reproduced hereunder:-
"50. As such, given the nature of the dispute and keeping in Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 mind the order passed by this Court on 6th December, 2021 in IA 16083/2021 in CS (COMM) 626/2021, the Court deems it appropriate to balance the interests by granting a temporary stay of the operation of the impugned letter dated 17th February, 2022 till 7th March, 2022 and fixing IA 3102/2022 for hearing, along with IA 16083/2021 in CS (COMM) 626/2021, on 7th March, 2022.
59. Till the next date of hearing, Defendant 1 shall remain restrained from taking any action against the plaintiff on the basis of the impugned letter dated 17th February, 2022."
10. At this stage, the instant application has been filed on behalf of the plaintiff whereby the holding Joint Lenders' Meeting and the decision followed by the same has been sought to be stayed. The Minutes of the Meeting dated 23rd January 2023 have been brought on record and produced before this Court. A perusal of the Minutes reveal that the defendant no. 5 as well as other lenders/Banks have sought to make decisions and take actions for the account of M/s Asian Hotel (North) taking note of the fact that an interim order, qua Notice dated 17th February 2022 and any action arising therefrom, is already in operation. The relevant portion of the Minutes of the Meeting is reproduced hereunder:-
"2) Discussion on the status of the account, Suit filing, OTS Status and recovery action by individual Bank BOM asked all the Lenders to inform the current status of the account with all Lenders:
JC Flowers ARC informed that YES Bank has assigned the portfolio to them. YBL has already informed that they have issued LRM and has done pledge invocation. The company has taken stay from high Court on the ground that OTR was implemented and there was no default on the part of Borrower. Next hearing is in the end of Jan-2023.
BOM informed that they have issued 13 (2) under SARFAESI in the said account. The same has been objected by the company.Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43
BOM further added that they have replied to the objection raised by the company. BOM further informed that they have conveyed OTS sanction on bilateral basis to the borrower which is not accepted by the borrower as on date. BOM further added that they will go for recovery action and will proceed for all option available i.e. PIRP/CIRP/IBC/DRT. xxxxx Axis Bank informed that they recalled the loan and have proceeded for recovery action. They have already invoked personal guarantee (not as per Sec-95 of IBC). Axis Bank further added that they will go ahead with BOM for filling of NCLT. He further added any kind of settlement will be looked only after finalisation of forensic audit. xxxxx
5) Discussion on Progress of Forensic Audit BOM informed to all the Lenders that the Forensic audit has been initiated and a list of required documents is already shared to al the Lenders and the borrower for onward submission. BOM further added that the Forensic audit is in initial stages only and will go simultaneously with OTS or recovery action....
BOM requested all the lenders to provide the documents as required by the auditor.
Axis bank further added that both recovery action and forensic audit will go hand in hand....
xxxxx
7) Discussion on future course of recovery action- PIRP/CIRP/DRT/NCLT JC flowers ARC enquired BOM about the recovery action initiated by them. BOM replied that as the company has offered OTS offer to all the Lenders and out Bank has also convey OTS sanction to them, which is not yet accepted by the company. Hence they are looking for all the course of recovery action. BOM will proceed for all the option available i.e. PIRP/CIRP/IBC/DRT. BOM further informed to all the Lenders that nay lender can join them for joint recovery action or otherwise they will go individually.
Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43All the Lenders except DBS an ECL supported BOM and will be jointly go for recovery action.
xxxxx
9) Discussion on the Performance of the Company. Performance of the company was discussed with the Lender. The company officials informed that nine month revenue is Rs. 184.09 crore approx. as compared to previous year 9 month sale Rs. 97.85 crore. Revenue for the quarter is Rs, 70.50 crore. The company also informed that the EBITA as on 31.12.2022 is around 21%.
BOM enquired company officials why there is decline in the cash flows for the Dec-22 and Jan-23 months. The Company officials informed that maximum revenue comes from corporate bookings. But from 15.12.2022 to 15.01.2023, there is minimal corporate bookings as due to New Year Eve and Christmas all over the world. Even the weddings are minimal due to some religious issues. Hence the sale declines. Lenders asked the company officials to inform the estimated revenue for this FY. Company informed that it will be around Rs. 250.00 crore."
11. A conjoint reading of the order dated 24th February 2022 and the aforementioned paragraphs of the Minutes of the Meeting dated 23rd January 2023 reveal that the action that has been taken on behalf of the defendant no. 5 and the other lenders is in the teeth of the interim order passed by this Court. The lenders/Banks have either initiated or have decided to initiate recovery action against the plaintiff despite clear directions from this Court restraining the defendant no. 1 Bank to take any action in furtherance of Notice dated 17th February 2022. Hence, at this stage, this Court is inclined to issue notice of the application to the defendants.
12. Since learned counsel for the defendants no. 1 and 5 and learned counsel for defendants no. 2, 3 and 4 appear on advance notice, there is no need for issuing a formal notice of the application. The learned counsel Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43 appearing on behalf of the defendants vehemently opposed the instant application and prayed for some time to file reply/objection to the application. Let the same be filed within two weeks.
13. List on 29th March, 2023.
14. Since a prima facie case is made out on behalf of the plaintiff, all defendants are directed to restrain from taking any action in pursuance of the Minutes of the Meeting dated 23rd January 2023, till the next date of hearing.
I.A. 1754/2023 (u/O-XXXIX R-1 & 2 of CPC)
1. The instant application under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 has been filed on behalf of applicant/plaintiff seeking the following reliefs:-
"a. Stay the operation and effect of the Communication dated 30.12.2022 issued by Defendant No. 1 and any assignment of the loan facility extended to the Plaintiff by the Defendant No. 1; and b. Restrain Defendant No. 1 from in any manner acting upon or implementing any assignment of the credit facilities extended to the Plaintiff by Defendant No. 1..."
2. Heard.
3. On the last date of hearing, i.e., 30th January 2023, this Court heard the applicant at length on the instant application, upon being prima facie satisfied, issued notice to the non-applicants. At this stage, since JC Flowers has been impleaded as defendant no. 5, it is pertinent to make clear that the order passed by this Court on 24th February 2022 shall be extended to the said party.
Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:434. Learned counsel appearing on behalf of defendants no. 1 to 4 and learned counsel appearing on advance notice for defendant no. 5 pray for and are granted two weeks' time to file reply/objection to the application.
5. List on 29th March, 2023.
6. All parties are directed to comply with the order dated 24 th February, 2022 passed by the Predecessor Bench. Interim Order passed in the said order, to continue, till the next date of hearing.
CS(COMM) 128/2022 (Amended plaint)
1. In view of the order passed in I.A. 1755/2023 seeking amendment of plaint, issue summons to the defendants in the amended suit.
2. Summons accepted by learned counsel appearing on behalf of defendant no. 1 and newly impleaded defendant no. 5 and learned counsel appearing on behalf of defendants no. 2, 3 and 4, respectively. Learned counsel appearing on behalf of the defendants vehemently opposed the amended plaint and hence, prayed for some time to file written statement.
3. Let the written statement be filed within a period of two weeks. Replication, thereto, be filed within a week thereafter.
4. List on 29th March, 2023.
I.A. No.1746/2023 (u/O I Rule 10 CPC by proposed defendant Exclusive Capital Limited) in CS (COMM) 128/2022 Argument heard.
Orders reserved.
CHANDRA DHARI SINGH, J MARCH 2, 2023 dy/sv/ms Click here to check corrigendum, if any Signature Not Verified Digitally Signed By:GAURAV SHARMA Signing Date:03.03.2023 12:10:43