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IN THE HIGH COURT OF DELHI AT NEW DELHI

Decided on : 28.01.2015

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W.P.(C) 5857/2014

IDBI BANK LIMITED

………………Petitioner

Through : Sh. Sanjay Bhatt, Advocate.

Versus

ESSLON SYNTHETICS LTD. AND ORS.……………..Respondents

Through : Sh. Rajiv Kapur and Ms. Aparna Iyer,

Advocates, for Respondent No.6.

Ms. Praveena Gautam, Advocate, for Respondent No.8.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT

HON'BLE MR. JUSTICE R.K. GAUBA

MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)

%

1.

The Writ Petitioner (hereafter "IDBI") is aggrieved by and impugns

an order dated 19.02.2014, of the Debts Recovery Appellate Tribunal

(“DRAT”) in M.A. No. 161/2010 (“impugned order”).

2.

IDBI is a banking company within the meaning of Section 5 of the

Banking Regulation Act, 1949. The first Respondent (“Esslon”) is an

incorporated company currently under liquidation proceedings before the

Allahabad High Court. The third Respondent are Public Financial

Institutions under Section 4A of the Companies Act, 1956, which extended

independent financial assistance to the first respondent. Respondent Nos. 6

to 9 are banks that have extended independent financial assistance to the

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first respondent. The Petitioner and Respondent Nos. 3 to 9 hold pari passu

charge over all properties of Esslon; Respondent Nos. 3 to 9 have been

impleaded proforma in the case.

3.

Lohia Machines Limited (“LML”) was a company in possession of a

Scooter Manufacturing Division and four units of Manufacturing and

Processing Synthetic Fibre (“Fibre Division”). At the request of LML, the

Petitioner granted approval to the revival scheme for LML, which provided

for

a.Converting LML into a Joint Venture of Indian Promoters and

PIAGGIO (LML’s Italian Collaborators);

b.Delinking the first Respondent from LML, then a subsidiary of

LML and going by the name of LML Fibres Ltd.;

c.Transferring LML’s Fibre Division to the first Respondent;

d.Taking over and assuming the LML liabilities to the Petitioner,

among others, in part consideration for transfer of the Fibre

Division to the first Respondent.

e.Creation of securities on the assets by the first Respondent in

favour of the Petitioner, among others for the entire financial

exposure.

4.

IDBI, Esslon, LML and IFCI (acting as lead institution for itself and

others) approved the Revival Scheme. IDBI entered into a Multi-Partite

Agreement (“MPA”) dated 28.12.1990 setting out the terms and conditions

of the agreement between LML and Esslon; in this Esslon inter alia,

undertook all of the liabilities of LML in respect of IDBI’s dues.The parties

to the MPA were LML, LML Fibres Ltd. (now Esslon Synthetics), IFCI

2015:DHC:867-DB

(Lead Institution), IDBI, ICICI, IRBI, and SBI Kanpur, Bank of India

(Kanpur), Bank of Baroda (Kanpur), and Bank of Tokyo. Under the Deed of

Conveyance dated 27.12.1990, Esslon agreed to take over and assume the

term loan liabilities of LML worth ` 2999 lakhs as on 31.08.1990 to various

banks; this included the Petitioner’s dues of ` 958.29 lakhs. Esslon executed

a Joint Deed of Hypothecation dated 28.12.1990 with IDBI and the other

banks creating a first pari passu charge in favour of all of them on the whole

of its movable properties. Esslon also created an equitable mortgage on its

immovable properties in favour of IDBI and the other institutions.

Simultaneously, Shri Sitaram Singhania (“second Respondent”) executed an

unconditional and irrevocable Deed of Guarantee on 28.12.1990

guaranteeing the repayment of the monies payable by Esslon in favour of

IDBI, as well as fulfilment of agreement between the two, inter alia. As

further security, Esslon procured Pledge of Equity Shares held by its

promoters/group companies along with voting rights in favour of IDBI, inter

alia. Respondent No. 2 was the Chairman and Managing Director of LML

prior to the Deed of Conveyance executed on 27.12.1990, pursuant to which,

he became the Ch