Promoter-Directors Of Resolution Applicant, Who Are Also Guarantors Of Company, Not Entitled To Immunity Blanket Of IBC S.14: Calcutta HC [Read Order]

first_imgNews UpdatesPromoter-Directors Of Resolution Applicant, Who Are Also Guarantors Of Company, Not Entitled To Immunity Blanket Of IBC S.14: Calcutta HC [Read Order] Mehal Jain22 Sep 2020 7:17 AMShare This – xThe Calcutta High Court has ruled that section 29-A or 31 of the IBC would not provide a shield against the operation of its section 14(3)(b) and that the promoter-directors of the Resolution Applicant-Company, who are also guarantors of the Company, would not come under the immunity-blanket of Section 14.The Court also iterated that the 2015 RBI Master Circular on Wilful Defaulters does…Your free access to Live Law has expiredTo read the article, get a premium account.Your Subscription Supports Independent JournalismSubscription starts from ₹ 599+GST (For 6 Months)View PlansPremium account gives you:Unlimited access to Live Law Archives, Weekly/Monthly Digest, Exclusive Notifications, Comments.Reading experience of Ad Free Version, Petition Copies, Judgement/Order Copies.Subscribe NowAlready a subscriber?LoginThe Calcutta High Court has ruled that section 29-A or 31 of the IBC would not provide a shield against the operation of its section 14(3)(b) and that the promoter-directors of the Resolution Applicant-Company, who are also guarantors of the Company, would not come under the immunity-blanket of Section 14.The Court also iterated that the 2015 RBI Master Circular on Wilful Defaulters does not mandate that the Show Cause Notice must disclose the basis of the satisfaction of the concerned Committee or the conclusion arrived at from the evidence before it that there has been a “wilful default”.The challenge in the writ petition before Justice Moushumi Bhattacharya was to a notice issued by the respondent State Bank of India to the petitioners by which the petitioners have been called upon to show cause and make submissions in writing within 30 days from the date of receipt of the notice as to why their names should not be included in the list of wilful defaulters as per the Reserve Bank of India (RBI) Guidelines. The Show Cause Notice dated 14th November, 2019 was followed by correspondence between the parties culminating in a notice for personal hearing dated 6th August, 2020 by which the petitioners were called upon to personally appear before the WilfulDefaulter Identification Committee on 24th August, 2020 at a specific time. Both these notices had been challenged in this writ petition and the petitioners sought cancellation of these notices.The Single Judge appreciated that the scheme framed by the RBI was to identify events of wilful default by borrowers where the particular unit has defaulted in its payment obligations to the lender despite having a capacity to pay or has diverted the borrowed funds for some other purpose other than the specific purpose for which the funds were made available. The scheme evolved a mechanism of identifying such defaults by various methods of monitoring and prevention.”The first point in this writ petition is whether the Company and the petitioners can be subjected to proceedings for identification of Wilful Defaulters under the RBI Master Circular, 2015 in the face of the ongoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. Section 14 of the IBC is relevant. Paragraph 1 of the writ petition describes the petitioners as the erstwhile directors as well as the erstwhile promoters and guarantors of the Company, Mohan Motor Udyog Private Limited, which is presently undergoing CIRP by virtue of an order dated 17th March, 2020 passed by the NCLT, Kolkata Bench. By the said order, Moratorium was declared for the purposes as referred to under Section 14 of the IBC. The order of Moratorium is to remain effective from the date of admission till the completion of the CIRP”, recorded the bench.The bench appreciated that it is clear from section 14(3)(b) that the prohibition on institution or continuation of suits and other proceedings against the corporate debtor do not extend to a surety. The bench noted that Section 29-A (Persons not eligible to be Resolution Applicant) lists the categories of persons who are not eligible to submit a resolution plan and includes a wilful defaulter under the RBI guidelines (clause (b)) as well as “a connected person” enumerated under clause (j) including a promoter of the resolution applicant (the Company in this case).Against these provisions, the case sought to be made out on behalf of the petitioners was that the petitioners would altogether be excluded from participating in the resolution process despite being inextricably linked to the fate of the corporate debtor. In other words, the petitioners would suffer a double-whammy as it were and be left to fend for themselves even when a moratorium is declared under section 14 while being deprived of the fruits of a successful resolution process.”However attractive this argument may be in the context of the apparent unfair treatment meted out to promoters of a corporate debtor, section 128 of the Indian Contract Act, 1872 must be kept in mind where the liability of the surety is co-extensive with that of the principal debtor unless the contract provides to the contrary”, reflected the bench, ruling that the argument that section 29-A or 31 would provide a shield against the operation of section 14(3)(b) and that the petitioners would come under the immunity-blanket of section 14 is contrary to the law governing insolvency resolution process and the RBI guidelines for dealing with wilful defaults of corporate entities.Moving on to the second issue, the Court noted that the second issue is validity of the impugned Show-Cause Notice on the ground that the said notice does not comply with the RBI guidelines relating to wilful defaults by an entity as expressed in the Master Circular which is binding on the respondent Bank. According to the petitioner, the impugned show-cause notice belied not only the formation and constitution of the “Committee” under clause 3(a) of the Master Circular but also sub- clause (b) which requires formation of opinion by the Committee before a show-cause notice is issued to the intended party.The bench appreciated that Clause 3(a) specifies the composition of the Committee which is entrusted with the task of first identifying and then examining the evidence of wilful default. The petitioners’ case was that the Show Cause Notice which was issued by the Deputy Managing Director and signed by the Deputy General Manager, falls short of clause 3(a) and that any deviation from the prescribed composition would warrant quashing of the Show Cause Notice.”The question which would arise is whether the post of Deputy Managing Director (mentioned as the head of the ‘appropriate committee’ in the impugned notice) is equivalent to that of the Executive Director (under clause 3(a)) of the Master Circular. The stress on equivalence would be justified from the use of this very expression in clause 3(a) which allows for a loosening of the composition of the Committee by prescribing “…headed by an Executive Director or equivalent…” (underlined for emphasis). It is also significant that the show cause notice clarifies that the composition of the Committee- or the departure from the recommended composition- is “as approved by RBI”. It is also significant that clause 3 of the Master Circular slackens the rigour of the requirements by using the expression “…should generally include the following” and puts the stress more on a pyramidal power structure of the Committee of a head who is ranked higher than the two senior officers of the rank of GM/DGM who form the base of the structure”, observed the bench. Therefore, it ruled that the first contention with regard to an improperly constituted Committee under a Deputy Managing Director instead of the recommended Executive Director, fails.The next issue was of the appointed Committee not applying its mind or making such non-application evident in the Show Cause Notice thus rendering it vulnerable. The bench noted that Clause 3(b) starts with “If the Committee concludes that an event of wilful default has occurred…” thereby implying that the condition precedent to issuing a Show Cause Notice to the concerned borrower is of the Committee forming an opinion on the basis of available evidence as to whether there has been a “wilful default” under clause 3(a).The petitioners contended that the impugned Notice was devoid of any indication that the ‘appropriate Committee’ had indeed done what it is supposed to do under clause 3, namely apply its mind to the materials which would identify the petitioners for the purposes of the Show Cause Notice.” For assessing the worth of this contention, the impugned Notice should be seen against the mandate of clause 3(b). While it is correct that the first page of the Notice is opaque in terms of making the workings of the Committee’s mind known to the petitioners/recipients of the Notice, the lacuna is addressed by theAnnexure to the Notice stating the “Justification/Reasons for declaring the Borrower as Wilful Defaulter”. The accompanying tabulated statement lists the criteria for classification as Wilful Defaulter as per the RBI Master Circular dated 1st July, 2015 with further references to the “Events of Default” and “Evidences and documents substantiating each event of wilful default”. It should also be mentioned that the respondent has furnished a Resolution of the Wilful Defaulter Identification Committee dated 17th June, 2019 in relation to the Company which contains a Proposal “For approval for identification of Wilful Defaulters and issuance of Show Cause Notices”. The Resolution further encloses “Agenda Item No. 2080″ followed by factual events of default corresponding to the relevant clauses of the Master Circular”, narrated the bench.The bench framed two questions in this behalf: a) It is necessary for a Show Cause Notice to disclose the basis of the conclusion arrived at by the Committee under clause 3(a)? and b) If yes, how can such application of mind/formation of opinion be made apparent on the face of the Show Cause Notice?The bench opined that both these questions can be answered from a plain reading of clause 3 of the Master Circular. First, the clause does not mandate that the Show Cause Notice must disclose the basis of the satisfaction of the concerned Committee or the conclusion arrived at from the evidence before it. What clause 3(a) requires is that the Committee and its members must “examine” the evidence of wilful default of a borrower before proceeding to sub-clause (b). Clause 3(b) comes at the stage of completion of examination of the available evidence whereupon the Committee may or may not conclude that an event of default has occurred. If it does, only then will it take steps for issuing a Show Cause Notice under the said clause.Accordingly, the court concluded that in the facts of the present case, the contention of the petitioners of the impugned Notice being devoid of any indication of application of mind by the Committee is not acceptable on two grounds. First, the Master Circular does not require it and more important, the Annexure to the Show Cause Notice coupled with the Resolution of the Committee dated 17th June, 2019 provides sufficient material (and particulars specific to the Company of which the petitioners are guarantors) to satisfy that the Committee had indeed fulfilled its mandate under both sub-clauses (a) and (b) of clause 3.”One of the most obvious ways in which working of the mind or some sort of deliberation by the persons concerned can be shown is by articulation of the findings arrived at with reference to a meeting (including of minds) where such deliberation palpably took place and the findings being relatable to the materials/evidence before the Committee entrusted with the duty to sift through the evidence to come to the conclusions”, held the bench.The Court declared that the challenge to the impugned notices failed and dismissed the writ petition.Click Here To Download Order[Read Order] Next Storylast_img read more

Fatty acid composition as an indicator of carnivory in Antarctic krill,Euphausia superba

first_imgIn a previous study at South Georgia, carnivory was invoked as a cause of high polyunsaturated fatty acid (PUFA) content of Antarctic krill, Euphausia superba. To examine this, krill were sampled and fed for 16 days exclusively on the locally abundant copepod Drepanopus forcipatus. After 16 days, the krill had increased their PUFA content from 28 to 54% of the total fatty acids. Concurrently, monounsaturated fatty acids (MUFAs) and saturated fatty acids (SFAs) decreased from 41 to 27%. Thus, the krill appeared to accumulate PUFAs as reflected in their diet of D. forcipatus, which also had a relatively high PUFA content (50%). Overall, the results support omnivorous feeding by krill at South Georgia during nonbloom periods. We propose that the ratio of PUFA to SFA content may be used to detect carnivory in the recent feeding history of krill and suggest that this may be an index which could be applied to other zooplankton.last_img read more

Ocean City’s $80 Million To-Do List Up for Vote on Thursday

first_imgA project to rebuild the Ocean City Boardwalk between Sixth Street and Plaza Place was completed last month. Work will continue next year in a multiphase project.City Council will vote Thursday on a plan to spend about $80 million catch up on long-neglected improvements to roads, public facilities, beaches, the boardwalk and the bay in Ocean City.At is public meeting 7 p.m. March 12 at City Hall, Council will consider a resolution to approve a five-year capital plan in which Mayor Jay Gillian’s administration proposes spending $79.4 million.The spending plan for 2015 through 2019 represents a $27.8 million increase over the five-year plan for 2014 to 2018.Gillian’s plan increases spending on bayside dredging from $2 million to $10 million over the next five years. It doubles the pace of multiyear boardwalk reconstruction project. And it dedicates $29.3 million to roads and drainage improvements alone — including about $7.9 million for 2015.Read more about the proposed capital plan and see links to full detail.Despite the massive financial commitment, some in town have questioned priorities in the plan. The meeting on Thursday includes public comment.The plan will be financed by borrowing money and takes advantage of historically low interest rates and Ocean City’s exceptional bond rating.In a separate vote on Thursday, City Council will consider a bond ordinance authorizing the borrowing of $7.9 million for the following capital projects:$3,985,000: For continued phases of a multi-year boardwalk reconstruction project.$1,910,000: For construction and repair of public buildings, including historic Life Saving Station, Ocean City Community Center, 46th Street and West Avenue (published documentation does not specify which building), Route 52 Welcome Center, Humane Society, Ocean City Municipal Airport and others.$962,000: Improvement of public facilities including tennis courts, basketball courts, ball fields and playgrounds.$750,300: Equipment for Ocean City Music Pier, Ocean City Police Department, Fire Department and Beach Patrol.For full detail on all agenda items from Thursday’s meeting, see documentation below._____Sign up for free breaking news updates from Ocean City.Get Ocean City updates in your Facebook news feed. “Like” us._____Download (PDF, 2.22MB)last_img read more