Bank of Baroda vs Arch Pharmalabs Limited.
INTERVENTION PETITION No. 26 OF 2024 IN C.P. (IB) – 686 (MB)/2023
Facts:
1) Intervention Petition been filed by JM Financial Asset Reconstruction Company Limited (“JMFARC”) under Section 60(5) of IBC, 2016 read with Rule 11 of NCLT Rules, 2016 to intervene in the captioned Company Petition numbered as C.P. (IB)- 686 (MB)/2023 as a necessary party.
Issue: Whether the application can be allowed ?
Arguments:
Applicant:
1) Applicant submitted that Applicant, acting in its capacity as trustee of various trusts, acquired the financial assets of the Corporate Debtor from 40 lenders representing about 97% debt of the Corporate Debtor, together with all the underlying security interest and all rights, titles and interests therein by way of executing various assignment agreements. Subsequently, the debt of the Corporate Debtor was restructured by the Intervener/ Applicant vide the Restructuring Agreement dated December 4, 2017 (“Restructuring Agreement”).
2) Counsel submitted that they have an exposure of over Rs. 9500 crores in the Corporate Debtor, whereas the claim of Bank of Baroda is miniscule as compared to the Intervener/ Applicant herein. Moreover, Bank of Baroda is only an unsecured creditor for the majority of its debt and is a subservient charge holder for a small portion of its debt; whereas, the Intervener/ Applicant, being the 100% first charge and second charge holder on the secured assets of the Corporate Debtor, will be adversely affected, in case
orders are passed in the present Company Petition without the Intervener/ Applicant being heard.
3) It was submitted that Applicant, being the major financial creditor, has assessed the viability of the Corporate Debtor and rendered support in order continue to its business operations and to ensure successful recovery from the business of the Corporate Debtor. In case orders are passed in the present Company Petition, without the Intervener/ Applicant being heard, it shall jeopardize the efforts taken by the Intervener/ Applicant to revive the Corporate Debtor and the same shall have extremely negative impact on the business operations of the Corporate Debtor
Respondent:
1) Counsel submitted that primary objective of restructuring the Corporate Debtor’s debt is to put the company back on its feet and ensure its continued business operations. As on date, the restructuring process has been completed, as is being the implemented with support of JMFARC. It submitted that Financial Creditor would, at best, has share amounting to not more than 2% of the overall debt, totalling Rs. 134.99 crores, whereas JMFARSC’s total claimed debt exceeds 9,500 crores.
2) It was submitted that even if the Company Petition is admitted, it is highly likely that the corporate insolvency resolution process (CIRP) would be withdrawn, as JMFARC with a vote share greater than 90%, would support the petition’s withdrawal. Consequently, admitting the present Company Petition would be a useless/empty formality, as ultimately it would be withdrawn upon the constitution of the CoC.
3) Counsel submitted that Intervention Petition is not maintainable, as the precedents cited by the Financial Creditor assert that an Intervention Petition at the stage of admitting a Section 7 petition is unnecessary. Consequently, JMARC has no right to be heard in the above captioned Company Petition.
Decision: NCLT dismissed the application.
Rationale:
1) It held that at the stage of admission in a petition under Section 7 of the Code, ordinarily no intervention is permissible as has been held by the Hon’ble NCLAT in number of cases relied upon by the Ld. Counsel for the Respondent/ Financial Creditor.
2) It held that here one cannot be unmindful of the fact that admittedly the Corporate Debtor owes a sum of Rs. 130 Crores to the Respondent. Even if the same may be a meagre amount when compared with the outstanding dues of the intervener which are stated to be to the tune of Rs. 9500 Crores the intervener cannot be allowed to usurp the legitimate rights of the other financial creditors to pursue the remedies available under the law. In any case, an amount of Rs. 130 odd crores are also not a mean amount.
Order:
