NOORUDDIN KHAN Vs. ORIENTAL BANK OF COMMERCE

JUDGEMENT

(1.) Mr.K.G.Raghavan, learned Senior counsel along with Mr.Himanshu Satiya, Smt.Varsha S., Smt.Trisha Chandran, learned counsel for the petitioner No.1.

(2.) The petitioners are shareholders of Associate Decor Limited, a Public Limited Company (hereinafter referred to as 'the Company' for short). The petitioner No.2 is a majority shareholder of the Company holding 51.47% of the equity shares in the Company. The petitioners company executed a term loan agreement on 15.02.2010 with a consortium of banks comprising respondent Nos. 1 to 3 for a term loan facility of Rs.233 Crores. Subsequent to the execution of term loan agreement, the company was in need of additional capital. Therefore, it executed subsequent loan agreements between the period from 03.12.2010 to 10.07.2014. The company provided substantial collateral securities in respect of credit facilities availed by it from the consortium by creating a mortgage in respect of its assets. The Company also pledged shares to the extent of 73.71%. However, it is averred in the writ petition that in the year 2015-16, the company faced operational difficulties due to which its cash flow was hampered severely. Thereupon the Company's loan account with the consortium came to be declared as 'Non Performing Asset' with respondent Nos.1 to 3 on 31.03.2016, 29.10.2016 and 31.03.2017 respectively.

(3.) On 25.07.2017, the company submitted a restructuring plan to consortium to standardize the accounts of the company. However, the proposal of the petitioners failed to evoke any response. Thereafter, on 12.02.2018 Reserve Bank of India promulgated a Circular dated 12.02.2018, by which all previous methods and modes of restructuring of debt being undertaken by the Scheduled Banks were superseded. The respondent No.1 initiated insolvency proceeding against the company before the Tribunal, Bengaluru. The Company in the light of Circular, on 17.02.2018, submitted a restructuring proposal. However, the Deputy General Manager of respondent No.1 vide email dated 09.02.2018 rejected the restructuring proposal. In the meeting of the consortium held on 20.03.2018, the representatives of the company as well as the consortium were present. The Corporation Bank proposed to recover the outstanding debts through invocation of pledge held by consortium over 73.71% shares of the company. The consortium thereafter, invoked the pledge of shares of the company in accordance with the Circular issued by the Reserve Bank of India.