MARBANIANG PROJECTS PRIVATE LIMITED Vs. PUNJAB NATIONAL BANK

JUDGEMENT

(1.) The writ petitioner by this instant petition impugns the action of the respondent Bank in not releasing the amounts which is deposited in an Escrow Account, for payment of statutory liabilities including GST from the year 2017 onwards till date.

(2.) The brief facts are that the petitioner Company had approached the respondent Bank for financial assistance, for construction of a hotel -cum-commercial complex, which was approved and a term loan of Rs.22.00 Crores was sanctioned. Thereafter, in order to meet the business expansion, an additional term loan of Rs.8.00 Crore was sought, which was agreed to by the Bank with the terms and conditions that all cash flows of the business was to be routed through a designated account such as revenue receipts/receivables from the project including deposits, service charges, equity/shareholders contribution and deposited into the Project Escrow Account. Accordingly, an Escrow Agreement was executed on 20/2/2015, by the parties with the condition that further withdrawals from the Escrow Account upto the final settlement under the financing agreements, shall be permitted for the purposes of taxes and statutory requirements. However, the petitioner Company received an email dtd. 5/11/2020 from one of its tenants, informing that the GST amount had not been paid to the concerned authorities, whereafter it was discovered that the respondent Bank despite the stipulated conditions had adjusted the entire funds towards its debt repayment. Hence the writ petition.

(3.) Mr. K. Paul, learned Senior counsel assisted by Ms. B. Kharwanlang, learned counsel for the petitioner has submitted that under the Escrow Agreement, it had been specifically provided that withdrawals from the Escrow Account upto the final settlement was that taxes and statutory payments would take first precedence over other dues such as project expenses, payment interest, debt service reserve account and debt repayment. However, he submits the respondent Bank without any intimation, had wrongly adjusted all the rental deposits towards the loan repayment, which is in absolute violation of the said Escrow Agreement. The action of the Bank he contends despite the stipulated conditions, in adjusting the entire funds including its debt repayment, has led to a cascading effect, whereby the Escrow Agreement stood frustrated leading to the non-payment of taxes further compounding the petitioner's GST liabilities. He then submits that with the input tax credit not being passed down the same has resulted in the non-payment of rent by the tenants of the petitioner Company, which led to the petitioner Company being classified as NPA in 2019.