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Insolvency and Bankruptcy - Case Laws
Showing 1 to 20 of 8680 Records
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2024 (4) TMI 1042
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt or not - Civil Suit for specific performance - non-allotment of 39100 sq. ft. built-up area of land or not - default in terms of Section 3(12) of the I&B Code, 2016 - it was held by NCLAT that There is no financial debt in favour of the Appellant. It is pertinent to mention that Appellant's pleading is that the amounts have been paid by the Appellant to the Respondent and the consent decree itself is the debt for which Section 7 Application has been filed - HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and hence, the present appeal is dismissed.
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2024 (4) TMI 1015
Approval of Resolution Plan - appellant submitted that the personal guarantees given by the individual guarantors, could not have been made the subject matter of the resolution plan with regard to the Corporate Insolvency Resolution Process of the corporate debtor - HELD THAT:- Issue notice, returnable in the week commencing 20.08.2024.
Notice will be served by all modes, including dasti.
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2024 (4) TMI 1014
Liquidation of the Corporate Debtor - Application seeking extension of timeline for making the payments under the approved Resolution Plan dismissed - HELD THAT:- The Resolution Plan indicates that Resolution Applicant is a technocrat entrepreneur, who is a M. Tech from Indian Institute of Technology (IIT), Mumbai and holds more than three decades of experience in the field of Boilers and Thermal systems related equipment’s design and manufacturing. In his Resolution Plan, the Appellant claimed completion of various projects and detailed the potential and technologies developed by the CD.
As per the Resolution Plan, the amount was to be paid in six tranches. There is no dispute that first three tranches were paid in time and the fourth tranche, which was due on 15.04.2023, could not be paid and fifth tranche also became due in October 2023. It is relevant to notice certain clauses of the Resolution Plan, which contains the sources of fund. Para 5.1.2 refers to ‘Sources of funds’ and one of the items, which was mentioned at Item 10 in table ‘funds for Resolution’ is ‘Recoveries from Litigation, from which it was expected that between 18-24 months Rs.51.40 lakhs would be recovered and total recovery was expected to be Rs.1040.85 lakhs.
The Adjudicating Authority has jurisdiction to grant extension of timeline in making the payment in a Resolution Plan and the view of the Adjudicating Authority that granting of extension of the timeline is modification of the terms of the Resolution Plan is not a correct view. Further, for extension of timeline it is not necessary that CoC should express its concurrence, only then the Adjudicating Authority can exercise its jurisdiction. The jurisdiction is there with the Adjudicating Authority in appropriate case. Granting extension of time in payment as per Resolution Plan for implementation of the Resolution Plan, appropriate jurisdiction is always vested with the Adjudicating Authority to pass appropriate order.
The Adjudicating Authority committed error in rejecting application filed by the Appellant seeking extension of time for payment, on the wrong premise that since the CoC has not approved the extension, the extension cannot be granted. The extension of time in payment is not the modification of the Plan - the order passed by the Adjudicating Authority rejecting application filed by the Appellant is unsustainable and is set aside.
The Appellant is entitled for extension of sometime under the Resolution Plan, so as to ensure that the Plan is fully implemented and complied with - application allowed.
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2024 (4) TMI 970
Initiation of CIRP - Maintainability of application filed u/s 9 of the Code - additional work got done, with the approval of MD of the Respondent, was not approved by the competent committee - Appellant has taken recourse to Arbitration under MSME Act - Respondent being a government company (PSU) is out of purview of the Code or not - debt of default was not correctly mentioned in the original petition - HELD THAT:- The Impugned Order records that the Respondent doubted existence of letter dated 02.12.2016 and 05.12.2016 as these were not available in the files of the Respondent. It is strange to note that the same Impugned Order, observed in Para 3(vii) of the Impugned Order, where it has been mentioned that the Respondent has stated that a letter dated 11.01.2017 was issued to the claimant intimating that vide earlier letter dated 02.12.2016 and 05.12.2016 the representative of claimant has already been informed that revised BOQ for Kopaganj Project and Ghosi Project has been approved along with terms and conditions as per agreement - Clearly, both the statement recorded in the Impugned Order as submitted by the Respondent are contradictory. The fact is that the Respondent has accepted and communicated to the Appellant regarding acceptance of the revised BOQ and the same should have been dealt with by the Adjudicating Authority suitably.
We feel that it will be travesty of justice, if the claims of the Operational Creditor like the Appellant herein are refuted and denied by Public Sector Undertakings like Respondent herein in such casual, catastrophic and unfortunate manner. Afterall it is the faith on such PSUs, Operational Creditors like the Appellant here in start the execution of the work immediately, sometimes even without for formal contract, based on LOI.
Hence, the ground of alleged lack of proper approval by the committee of the Respondent and therefore, the Respondent is not bound to make the payment is just not acceptable and stand rejected in the strongest terms.
Pre-existing dispute - HELD THAT:- Without going into controversy of Arbitration Award under MSME Act, 2006 V/s the application filed under Section 9 of the Code, it is suffice to note that at the time of filing the application by the Appellant under Section 9 of the Code i.e., on 16.11.2019, there was no petition by the Appellant regarding any arbitration nor any award came in favour of the Appellant which was wrongly presumed to be pre-existing dispute by the Adjudicating Authority in the Impugned Order. On face of it, the assumptions and rational taken by the Adjudicating Authority in this regard on the aspect of pre-existing dispute it patently illegal and required to be treated accordingly.
The Adjudicating Authority has jurisdiction to reject the application being incomplete but is also obligated that before such rejection has to give a notice to the Applicant to rectify the defects in his application within seven days of the date of receipt of such notice from the Adjudicating Authority - no notice seems to have been issued by the Adjudicating Authority to the Appellant.
Once the date of the original application filed under Section 9 of the Code is treated as 26.11.2019, there is no question of any pre-existing dispute - the demand notice under Section 8 of the Code was issued on 03.09.2019 to the Respondent and no dispute was ever raised by the Respondent prior to issue of such demand notice. In fact, the Respondent chose not to reply to such demand notice.
The impugned order is set aside - appeal allowed.
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2024 (4) TMI 969
CIRP - Validity of deed of assignment of lease - Seeking to set aside of the notice served upon them by the Respondent - Resolution Professional wanting to inspect and access certain premises belonging to the Appellant - whether the Deed of Assignment was disputed or not by the Appellant? - whether the Lease Deed in respect of the subject property, consequent on its expiry on 14.11.2021, was further extended? - whether the Corporate Debtor was in clear possession of the same at time of commencement of CIRP?
HELD THAT:- Clause 2.1 of the Deed of Lease as placed at para 9 states that the Lease deed clearly stipulated that any extension of the lease after expiry of the lease period shall be through a Lease deed executed between the parties herein and that if no terms are agreed upon, the lease period shall stand automatically expired at the end of the lease period. It is pertinent to point out that the RP had sent a letter to the erstwhile management on 03.08.2023 seeking information on the arrangement under which the Lease Deed had been extended to the Corporate Debtor and whether the store in the subject property was in the possession of the Corporate Debtor as maybe seen at page 156 of Appeal Paper Book (APB). However, no response was admittedly received from the erstwhile management. Neither have any proof of rental payments to the Appellant by the Corporate Debtor after the expiry of the lease has been placed on record to substantiate that the lease continued to subsist - there are no documentation available on record which reliably establishes the extension of lease term beyond the original period.
On looking at the legal notice of vacant possession which was served upon the FSWL by the Appellant on 24.05.2022, the same was undisputedly addressed by them to FSWL and not to the Corporate Debtor. Thus, when this legal notice for vacating the subject property was addressed by the Appellant to the FSWL and not to the Corporate Debtor, it is clear that in the Appellant’s mind the Corporate Debtor had no role or interface qua the subject property - There is nothing on record to substantiate that there is any evidence of renewal/extension of lease. The Adjudicating Authority has only held that there is no evidence to establish handing over of the subject property to the Appellant.
In terms of Section 18(1)(f) of the IBC, undoubtedly the RP is required to take control and custody of any asset belonging to the Corporate Debtor. However, it is significant to note that this provision is subject to the exclusion of assets owned by a third party as provided for under the Explanation Clause. Further, Section 25(2)(a) of the IBC also mandates the RP to take immediate custody and control of all assets of the Corporate Debtor so as to determine the valuation of all the assets of Corporate Debtor - The legislative intent of IBC is that there should be a temporary freeze and prohibition of all actions against the Corporate Debtor to preserve the status quo as it exists on the date of initiation of CIRP so as to enable the Corporate Debtor to resolve its insolvency and bring it back from the throes of corporate death.
The present is a case where CIRP was initiated on 27.02.2022. By virtue of the CIRP order, the IRP/RP was appointed and moratorium had kicked in w.e.f. 27.02.2022. The lease deed in respect of the subject property had been entered into by the Appellant with FSWL on 19.07.2018 for a duration of 3 years and 5 months. The lease deed of the subject property had been allegedly assigned by FWSL to FRL by a purported Deed of Assignment dated 06.08.2018 which is clearly disputed. The lease period between FWSL and the Appellant had ended on 14.11.2021 and documents regarding extension of lease period are not available.
The right of the Corporate Debtor not to be dispossessed as contemplated in Section 14(1)(d) of IBC will have no bearing on the present facts of the case given that the subject property was not under the possession of the Corporate Debtor at the time of admission of the Corporate Debtor into CIRP. Additionally, neither any factual analysis has been done either by the RP or any application of mind shown by the Adjudicating Authority on how the assets located on the subject property was central for the success of the CIRP and Corporate Debtor's survival as a going concern.
Assets owned by a third party in possession of the Corporate Debtor is excluded from the scope of CIRP and moratorium in view of Explanation (a) to Section 18 of the IBC. As the Appellant is a third party and undisputedly the subject property is owned by the Appellant and there is nothing foolproof to show that the Corporate Debtor was in occupation of the same, the subject property clearly fell outside the scope of CIRP and consequently the moratorium - no compelling reasons have been made out before the Adjudicating Authority by the RP to allow access into the subject property and inspection of stock/assets lying therein failing which the CIRP would have been jeopardised.
The impugned order is set aside - appeal allowed.
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2024 (4) TMI 968
Rejection of Section 7 Application - NPA - live guarantee constitute debt or not - existence of default or not - Corporate Debtor unable to de-risk the live BGs within the time allowed - A settlement was reached between the parties, where the Corporate Debtor agreed to pay a certain amount and de-risk live Performance Bank Guarantees (PBGs) within specified timelines. - HELD THAT:- It is clear that settlement amount having been paid, the Adjudicating Authority did not commit any error in rejecting Section 7 Application, which was only based on Corporate Debtor not being able to de-risk the live BGs within the time allowed. The present is not a case that BGs were invoked and the Corporate Debtor was asked to deposit the amount for invoked BGs. The BG were given by the Bank with regard to various contracts, which were undertaken by the Corporate Debtor and Corporate Debtor was always ready to deposit the amount by 100% cash margin or by giving CBGs. The learned Senior Counsel for the Corporate Debtor has further submitted that after filing of the Appeal the Corporate Debtor has deposited amount of Rs.3.38 crores, which was required by the Bank for extension of two BGs, which were expiring and the amount of Rs.3.38 crores was deposited by the Corporate Debtor, reducing the amount of live BGs to the extent of Rs.4.27 crores only.
In the facts of the present case, the ends of justice will be served in directing the Corporate Debtor to deposit the amount of Rs.3.68 crores with the Appellant, which will be kept in no lien account, to be utilized for clearing the liabilities pertaining to outstanding PBGs, if any. The SBI after adjusting all its liabilities towards live PBGs, may refund the balance amount to the Corporate Debtor. On deposit of the amount of Rs.3.68 crores by the Corporate Debtor, the SBI to release all securities over subject facilities.
The impugned order of the Adjudicating Authority dated 18.07.2023 dismissing Section 7 Application filed by the Appellant, is upheld - The Corporate Debtor to deposit the amount of Rs.3.68 crores with the Appellant within thirty days from today, which shall be kept in no lien account, to be utilized for clearing the liabilities of existing live PBGs, if any. After satisfaction of all live PBGs, the SBI to refund the balance amount to the Corporate Debtor - On deposit of amount of Rs.3.68 crores, the Appellant shall release securities over subject properties and handover the relevant documents to the Corporate Debtor.
Appeal disposed off.
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2024 (4) TMI 914
Offences triable by Special Court - Offenses under the IBC - offences other than the Companies Act cannot be tried by the Special Court consisting of Sessions Judge or Additional Sessions Judge or not - Whether the Special Court under the Code would be as provided under Section 435 of the Companies Act as it existed at the time when the Code came into effect, or it would be as provided under Section 435 of the Companies Act after the 2018 Amendment?
HELD THAT:- This Court has held that once a finding is recorded that an Act is a self-contained code, then the application of either of the doctrines i.e. “legislation by reference” or “legislation by incorporation” would lose their significance particularly when the two Acts can coexist and operate without conflict.
This Court further held that, in case of general reference in the Act in question to an earlier Act but there being no specific mention of the provisions of the former Act, then it would clearly be considered as ‘legislation by reference’. In such a case, the amending laws of the former Act would become applicable to the later Act. However, when the provisions of an Act are specifically referred and incorporated in the later statute, then those provisions alone are applicable and the amending provisions of the former Act would not become part of the later Act.
This Court in the case of Girnar Traders [2011 (1) TMI 1343 - SUPREME COURT] held that, if the legislature intended to apply the provisions of the Land Acquisition Act generally and wanted to make a general reference, it could have said that the provisions of the Land Acquisition Act would be applicable to the MRTP Act, 1966. This Court observed that such expression was conspicuous by its very absence. This Court held that both these Acts i.e. Land Acquisition Act and the MRTP Act, 1966 are self-contained codes within themselves. This Court observed that the State Legislature while enacting the MRTP Act, 1966 has referred to the specific sections of the Land Acquisition Act in the provisions of the State Act. This Court further observed that none of the sections require application of the provisions of the Land Acquisition Act generally or mutatis mutandis.
The provisions of Section 236(1) of the Code. Under Section 236(1) of the Code, reference is “offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013” - It can thus be seen that the reference is not general but specific. The reference is only to the fact that the offences under the Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act.
The provision of Section 435 of the Companies Act, 2013 with regard to Special Court would become a part of Section 236(1) of the Code as on the date of its enactment. If that be so, any amendment to Section 435 of the Companies Act, 2013, after the date on which the Code came into effect would not have any effect on the provisions of Section 236(1) of the Code. The Special Court at that point of time only consists of a person who was qualified to be a Sessions Judge or an Additional Sessions Judge.
The impugned judgment and order dated 14th February 2022, passed by the learned Single Judge of the High Court of Judicature at Bombay in Writ Petition No.2592 of 2021 is quashed and set aside - Appeal allowed.
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2024 (4) TMI 913
Condonation of delay of 181 days in filing appeal - HELD THAT:- The delay of 181 days is beyond the maximum period which can be condoned under Section 62 of the Insolvency and Bankruptcy Code 2016.
The Civil Appeal is accordingly dismissed on the ground of limitation.
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2024 (4) TMI 869
Rejection of application filed by the Appellant (Suspended Director) before the Adjudicating Authority - Challenging the authority of another director's actions and Approval of Resolution Plan CIRP - The appellant contends that the reply filed by another director on behalf of the Corporate Debtor was unauthorized and vexatious, intended to obscure alleged collusions and mismanagement. - HELD THAT:- The Adjudicating Authority in the impugned order has although noted certain submission of the Appellant made in the application but held that there being no authorization of the Board of Directors to file the application, application appears to be frivolous and seem to have been filed with the view to delay the proceeding. Appellant in the application has not claimed the application is being filed by any authorization of the Board. In the reply which was filed by Respondent No.2, which is also on the record, does not indicate that Respondent No.2 claimed any board resolution for filing reply on behalf of the Corporate Debtor. When reply filed by Respondent No.2 dated 09.05.2023 did not claim any board resolution for filing reply, we fail to see that how the application filed by the Appellant can be rejected on the ground that there is no board resolution supporting filing of the application. Appellant has filed the application as Director of the Corporate Debtor to bring various facts which according to the Appellant indicate that there is collusion between Respondent No.2, 3 and the Financial Creditor and several relevant facts have not been brought before the Adjudicating Authority by Respondent No.2 in his reply. The facts and material brought on the record does indicate that there has been serious dispute between the Directors inter se and a Memorandum of Understanding was also executed on 2901.2022, in which Memorandum of Understanding both the Appellant as well as Respondent No.2 and 3 with other persons were parties.
The observations of the Adjudicating Authority that application has been filed to delay the proceeding also does not commend us. 11.05.2023 was the first date of hearing on which order was reserved. The application was filed within three days i.e. on 14.5.2023, hence, conclusion drawn by the Adjudicating Authority that application has been filed to delay the proceeding is without any basis.
The impugned order set aside - appeal allowed.
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2024 (4) TMI 868
Direction for payment of fees to the Interim Resolution Professional and reimbursement of Rs 9 lakhs as CIRP expenses - wrong fixation of IRP fees - lack of earnestness and proficiency on the part of the IRP - HELD THAT:- There is no dispute over the fact that only three CoC meetings were held. The 1st, 2nd and 3rd meetings of the CoC were held on 24.06.2019, 13.11.2019 and 31.01.2020 respectively and all the three meetings were attended by the Authorised Representatives of the Appellant. However, when the decision-making process is analysed, it is noticed that that there were clear signs of lethargy and tendency on the part of the Appellant to defer decisions.
Coming to the subject matter of ratification of CIRP expenses incurred by the IRP and appointment of legal counsel; to approve fees to be paid to the IRP @ Rs. 2 lakhs per month and appointment of Resolution Professional and to fix his fees, it is found that this had figured in the agenda for discussion in the first CoC meeting itself but remained inconclusive since the Appellant had informed that they would convey the approval only after securing internal approval from their competent authority. The same paralysis in decision-making continued in the second CoC meeting wherein though the extension of the 90 days of the CIRP of the Corporate Debtor was agreed to by the CoC, on the issue of IRP fees and CIRP expenses it was informed that they would convey the approval within 15 days after securing internal approval from their competent authority.
The Appellant which had been delaying the CIRP process by deferring to take decisions in the CoC meetings on the ground that approval of higher authorities was required. There is substance in the contention of the IRP that the Appellant displayed non-responsive behaviour and lackadaisical approach in the CoC meetings inspite of being the sole CoC member.
During the entire CIRP process, the CoC neither approved the fees of the IRP nor did it raise any objection to the quantum of fees claimed by the IRP - when the IRP has on his own reduced his fees by 50% shows that his endeavours has been to keep his fees reasonable, there was no error on the part of the Adjudicating Authority to agree to the reduced quantum of fees. The IRP had also submitted the detailed chart of CIRP expenses before the Adjudicating Authority. Even the CIRP expenses has been reduced from Rs.11.91 lakhs to Rs.9 lakhs. Hence, there are no cogent ground to entertain any doubt on the application of mind on the part of the Adjudicating Authority in finding the IRP fees and CIRP expenses to be reasonable.
There are no reason to interfere in the impugned order passed by the Adjudicating Authority. The Appellant is directed to pay the erstwhile IRP/Respondent No.1 the fees of Rs 33 lakhs within one month from the date of the order - In so far as, payment of Rs 9 lakhs CIRP expenses is concerned, in terms of orders of this Tribunal dated 01.11.2023, any dues thereof which still remain payable maybe made directly to the bank accounts of those who have incurred the expenses as per details to be provided by the IRP.
Appeal dismissed.
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2024 (4) TMI 867
Admission of Section 9 application filed by Operational Creditor - time limitation - Section 10A of IBC - HELD THAT:- Section 10A of the Code prohibited filing an application under Sections 7, 9 & 10 for any default arising on or after 25.03.2020. The prohibition continues for one year from 25.03.2020 i.e., upto 24.03.2021. On looking into the Part IV of the application as well as the statement showing particulars of claim it is clear that apart from lease rental from April 2021, all claim was within the 10A period. For lease rental of April 2021, no CIRP can be commenced since it did not fulfil the threshold.
The Adjudicating Authority was of the view that Company Petition is hit by Section 10A and not maintainable. Despite the above observation, the Adjudicating Authority proceeded to admit Section 9 application by the impugned order. It is further relevant to notice that in paragraph 5 of the order dated 09.02.2024, Adjudicating Authority noted the Operational Creditor’s admission, that amount falls within a period stipulated in Section 10A of the Code - Section 10A came to considered by the Hon’ble Supreme Court in Ramesh Kymal Vs. Siemens Gamesa Renewable Power (P) Ltd. [2021 (2) TMI 394 - SUPREME COURT], Hon’ble Supreme Court after noticing the legislative scheme noticed that Section 10A provides that no application for initiation of CIRP can be initiated for a default occurring on or after 25.03.2020. The Hon’ble Supreme Court held that the expression “shall never be filed with the clear indicator that the intent of legislature is to bar the institution of any application”.
When there is a bar of initiation of an application, the mere fact that in the Reply filed of the Corporate Debtor no plea of the Bar was taken is in consequential. Further, Adjudicating Authority itself is aware of plea of Section 10A and has rejected the Amendment Application filed by the Operational Creditor on the ground that Company Petition is barred by Section 10A. Adjudicating Authority committed an error in proceeding to admit Section 9 application without adverting to the bar under Section 10A. Although in paragraph 5 itself the bar of Section 10A was noted which was admission of the Operational Creditor itself.
The purpose and object of Section 9 sub-Section (1) & Section 10A is entirely different. The scheme of the Sections 8 & 9 clearly indicate that Demand Notice can be issued only when there is a default, thus default has to be prior to Demand Notice. In the present case Demand Notice was issued dated 20.04.2021 and the default in the Part IV mentions from March 2020. The lease rental period which was claimed in the Part IV was from March 2020 till April 2021 - even if the lease rental of April 2021 is excluded, the entire claim of Operational Debt falls within 10A period and no application ever could have been filed for the default of the lease rental during the 10A period.
The application filed by the Operational Creditor was clearly hit by Section 10A and ought not to have been admitted. Adjudicating Authority committed error in admitting Section 9 application disregarding the bar under Section 10A - The application filed by the Operational Creditor under Section 9 was clearly barred by Section 10A, and the Adjudicating Authority committed an error in admitting Section 9 application by the impugned order dated 09.02.2024.
The Corporate Debtor is freed from CIRP. The IRP fee and expenses as fixed by the Adjudicating Authority in the impugned order i.e., ₹2,00,000/- shall be paid by Operational Creditor to the IRP if not already paid - the impugned order is set aside - appeal allowed.
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2024 (4) TMI 866
Approval of Resolution plan - Propriety of the valuation exercise conducted by the RP - lenders of the Corporate Debtor are allowed to pursue the personal guarantees given by the Appellant - Corporate Debtor intended to be kept as a going concern or not - resolution plan was within the contours of Section 30(2) of the IBC or not.
Propriety of the valuation exercise conducted by the RP - HELD THAT:- The RP did not violate the CIRP Regulations in the conduct of the valuation exercise. The RP had followed Regulation 27 to disclose the estimated fair and liquidation value of the Corporate Debtor. Further, we find that the CoC had duly considered and deliberated upon the valuation reports before deciding not to have any report from a third valuer. That being the considered business decision of the CoC, the supremacy of the commercial wisdom cannot be questioned by the Appellants. In fine, there are no infirmity in the conduct of the valuation exercise.
Tenability of the contention of the Appellants that the resolution plan by allowing the lenders of the Corporate Debtor to pursue the personal guarantees given by the Appellant was in violation of law as after the transfer of debts, the liability of the Corporate Debtor would stand extinguished - HELD THAT:- The Appellant was never discharged from its liability qua the personal guarantees under the resolution plan. Moreover, under Section 128 of the Contract Act, the liability of the borrower and guarantor are coextensive and the lender can choose to recover the outstanding shortfall amount from either of them. The contract of guarantee is an independent contract from the Loan Agreement and hence the contract of guarantee does not end if the borrower has failed to discharge the entire liability. Now when we apply the ratio of the judgement of the Hon’ble Supreme Court in Lalit Kumar Jain Vs UOI and Ors [2021 (5) TMI 743 - SUPREME COURT] to the present resolution plan, the personal guarantor is not discharged of his liabilities under the contract of guarantee. The release or discharge of a principal borrower from the debt owed by it to its creditor by operation of law or due to insolvency proceedings or liquidation does not absolve the guarantor of his liability which arises out of an independent contract. There is no specific bar under the IBC that a creditor cannot claim its remaining debt from the guarantor which has not been recovered from the Corporate Debtor - when the CoC in its wisdom has approved the resolution plan which provided for the continued rights of the Financial Creditor against the personal guarantor and did away with the subrogation rights of the personal guarantors, the contention of the Appellant that the liability of the personal guarantors should stand extinguished, not being in sync with the commercial wisdom of the CoC, is clearly devoid of merit.
Allegation that the SRA did not intend to keep the Corporate Debtor as a going concern - HELD THAT:- The SRA did not conceal the fact that he was submitting his plan along with his associates and since there is no bar in bringing other associates as co-applicants, there was nothing irregular in the submission of resolution plan by the SRA along with associates. All that the RP was required to do in such circumstances was to check the eligibility of the associates and this prescriptive requirement of Section 29A of IBC was complied with by the RP. To field response to the third issue raised by the Appellant, it is held that there is no irregularity in the conclusion of the Adjudicating Authority that the RP had carried out the verification exercise in terms of Section 29A of the IBC.
Whether the resolution plan was within the contours of Section 30(2) of the IBC in that it did not contravene the provisions of any law for the time being in force and that no material irregularity was committed by the RP in the CIRP process? - HELD THAT:- The law is thus well settled that commercial wisdom of the CoC approving the Plan cannot be interfered and it can be interfered only when there is statutory non-compliance, i.e., noncompliance of Section 30(2). The Adjudicating Authority has duly analysed the contents of the resolution plan of the SRA which has been approved by the CoC on 26.02.2020 with 99.69% vote share. Furthermore, in the present case, no grounds have been made that resolution plan approved by the CoC and the Adjudicating Authority violates any of the provisions of Section 30(2). Hence the resolution plan passes the muster - Given that the CoC has considered the resolution plan and passed the same with requisite majority and given the well settled legal position that the Adjudicating Authority has limited scope of judicial review available to it and cannot interfere on merits with the commercial wisdom of the CoC, there was no error committed on the part of the Adjudicating Authority in approving the resolution plan.
There are no ground in this appeal to interfere with the impugned order of the Adjudicating Authority approving the Resolution Plan. There is no merit in the Appeal - appeal dismissed.
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2024 (4) TMI 828
Release of assets (machines) seized by the Customs Authorities before initiation of CIRP - violation of principles of natural justice - HELD THAT:- On looking into the order of the Adjudicating Authority, it is clear that the order contains only direction to release the goods to the Customs Department without giving any reason and without even adverting to the facts, which were mentioned by the Applicant himself in the Application. The order of Adjudicating Authority, which does not give any reason for allowing the Application, deserves to be set aside on this ground alone.
The statutory provision of Section 126 is clear and it does not need any interpretative exercise to know the legislative intendment. The option of paying the redemption fine given under the order dated 03.12.2020 has not been availed of, which is an admitted fact. The submission, which has been pressed by the learned Counsel for the Respondent is that since the period of 120 days did not expire and the CIRP commenced, the vesting of goods in Central Government shall not take place. Vesting of goods under Section 126, sub-section (1) is not dependent on exercise of option to pay the redemption fine. The payment of redemption fine and redeeming the goods is a benefit, which is provided by the statute, which option can be availed after the confiscation of the goods - In the present case, it is not the case of RP that any option was exercised for payment of redemption of fine.
In the entire pleading of the Application, there is no claim of exercise of any option. Thus, the argument of Shri Rishav Banerjee that there shall be no vesting till the period for exercising the option comes to an end, has no relevance in the present case. More so, even CIRP commenced against the Corporate Debtor on 30.12.2020, it was always open for the RP, who was entitled to represent the Corporate Debtor to exercise option and redeem the goods by payment of redemption fine. The contention of the Respondent that even though, it has neither exercised the option of payment redemption fine nor redeemed the goods, but sill they continued to be owner of the goods cannot be accepted.
The vesting of goods is on confiscation by the Central Government by provision of Section 126, sub-section (1) and the option to pay redemption fine and redeeming the goods, is only a benefit given to the Corporate Debtor, which however, shall not arrest the vesting of the goods as contemplated by Section 126, sub-section (1) - the submission of learned Counsel for the Respondent is not accepted in the present case that till the option for payment of redemption fine is not exercised within 120 days, the goods continued to vest in the Corporate Debtor.
The order of the Adjudicating Authority impugned in the Appeal is unsustainable and deserve to be set-aside - Appeal allowed.
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2024 (4) TMI 827
Bench Reconstitution and Order Pronouncement - Whether an order reserved by a bench could be pronounced by a reconstituted bench without considering a subsequent application that called for a re-hearing based on new developments. - Admission of section 7 application - challenge to proceedings in SARFAESI Act initiated by Financial Creditor - HELD THAT:- In exercise of appellate jurisdiction, the Appellate Court can take all decision, which could have been passed by Adjudicating Authority while deciding Section 7 Application. In the present case, sequence of events and facts as noticed above shows that subsequent Application filed in November 2023, i.e., IA No.5177 of 2023, the Applicant prayed for rehearing of the matter on account of subsequent events, that is an order passed by Debt Recovery Tribunal dated 05.10.2023 and on which Application notices were issued by the existing Court-III and orders were reserved. For the purpose of this case, the issue as to whether the plea raised in IA No.5177 of 2023, ought to be allowed or not, need not be perused. But when these facts were brought before the Special Bench on 22.03.2024, on which date the case was listed for pronouncement, the Adjudicating Authority ought to have awaited the orders in IA No.5177 of 2023.
It is well settled that although lis between the parties have to be decided on the date when proceedings were initiated, but subsequent events can very well be taken into consideration by Adjudicating Authority.
There was no fetter on the jurisdiction of the Adjudicating Authority in deferring the pronouncement and awaiting the orders passed in IA No.5177 of 2023. Thus, on this ground alone the order dated 22.03.2024 deserved to be set aside - The Bench, which has delivered the order on 22.03.2024, i.e., Special Bench, which is no more available at Mumbai Bench, ends of justice will be served in directing for hearing of Company Petition afresh before the regular Court-III of the Mumbai Bench.
appeal allowed.
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2024 (4) TMI 826
Admission of Section 7 Application of the Financial Creditor - commission of default or not - Corporate Debtor / Guarantor failed to fulfil obligations - existence of debt and default or not - HELD THAT:- Admittedly, in the instant case on hand, the Loans, were given by the Financial Creditor / Bank to the Principal Borrower (Coastal Energen Private Limited) and the Corporate Debtor (Fossil Logistics Private Limited), is the Corporate Guarantor, for the Loans, availed by the Coastal Energen Private Limited, as against the Coastal Energen Private Limited / Principal Borrower, an Application for initiating CIRP, was filed by the 1st Respondent / Bank, before the Adjudicating Authority / Tribunal, and an Order of Admission, was passed on 04.02.2022 and later, as against the above Order, the Company Appeal filed by the Shareholder Cum Investor, before this Appellate Tribunal, came to be dismissed.
In the present Appeal on hand, before this Tribunal, although, a plea, is taken by the Appellant, that Corporate Insolvency Resolution Process, cannot be initiated against the Guarantor, if CIRP, against the Principal Borrower, was already initiated by the same Financial Creditor, for the same set of Claim / Default, this Tribunal, unhesitatingly points out that the Liability of the Corporate Debtor / Guarantor, is coextensive and that the Corporate Debtor, having executed a Deed of Guarantee dated 05.07.2016, to and in favour of the 1st Respondent / Bank (Financial Creditor), is bound to act, as per terms and conditions of the Guarantee. In reality, the Corporate Debtor / Guarantor, having not repaid the obligations of the Principal Borrower (M/s. Coastal Energen Private Ltd.) in Law, is deemed to have committed Default.
In the instant Appeal, as per Clause 22 of the Deed of Guarantee, dated 05.07.2016, executed by the Corporate Debtor / Corporate Guarantor (Fossil Logistics Private Ltd.) and the SBICAP Trustee Company Ltd., the Respondent / Corporate Debtor (Corporate Guarantor), in unequivocal terms, had guaranteed to discharge and fulfill the obligations of the Guarantee - it cannot be brushed aside that Clause 3 & 5 of the Deed of Guarantee, dated 05.07.2016, unerringly, mentions that the Guarantor (Corporate Debtor), shall Indemnify, and keep indemnified the Secured Parties Viz. 1st Respondent / Bank, against Losses, Damages, Costs, Claims, and Expenses, whatsoever which the Secured Parties, would suffer.
As on date, there is no embargo, under the I & B Code, 2016, to initiate simultaneous / independent proceedings, under Section 7 of the I & B Code, 2016, by a Financial Creditor, against the Principal Borrower and the Corporate Debtor / Guarantor, in the considered opinion of this Tribunal.
The Impugned Order of the Adjudicating Authority / Tribunal, in admitting the Section 7 Application of the 1st Respondent / Bank, for initiating Corporate Insolvency Resolution Process, against the Corporate Debtor (Guarantor), is perfectly in order - Accordingly, the instant Appeal sans merits and it fails.
Appeal dismissed.
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2024 (4) TMI 825
Rejection of application by the impugned order - Secured creditors or not - It is submitted that the NOIDA Authority was treated as an Operational Creditor and an amount of Rs.10 Crore was earmarked in the plan - HELD THAT:- NOIDA Authority was the lease holder and the records of lease were already with the Resolution Professional being record of the Corporate Debtor, therefore, the claim has to be reflected by the Resolution Professional in the Information Memorandum.
In view of the judgment of this Tribunal in MR. ANIL MATTA VERSUS GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY AND ATUL MITTAL (RESOLUTION PROFESSIONAL OF ZEAL DEVELOPERS PVT. LTD.) VERSUS NEW OKHLA INDUSTRIAL DEVELOPMENT AUTHORITY [2024 (4) TMI 439 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] as well as judgment of Hon’ble Supreme Court in GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY VERSUS PRABHJIT SINGH SONI & ANR. [2024 (2) TMI 681 - SUPREME COURT], the Appellant is clearly a Secured Operational Creditor - the order of the Adjudicating Authority rejecting the application of NOIDA Authority is unsustainable. The order dated 22.12.2023 is set aside. It is held that the Appellant as Secured Operational Creditor. The Adjudicating Authority may proceed accordingly in accordance with law.
Appeal allowed.
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2024 (4) TMI 727
Approval of Resolution Plan - whether the Appellant is secured creditor of the Corporate Debtor or not? - whether the decision of the RP declaring the Appellant as unsecured creditor is in accordance with law? - HELD THAT:- It is true that Section 3(31) does not refer to any registration of charge under Section 77. The judgment of the Hon’ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. vs. Raman Ispat Pvt. Ltd. [2023 (7) TMI 831 - SUPREME COURT], which has been relied by learned Counsel for the Appellant, is noticed. The above was a case where a claim was filed under IBC for government dues. The assets of the Corporate Debtor were attached and in the above context issue arose as to whether Electricity Department is ‘secured creditor’ or not and further in the above context Section 77 of the Companies Act was looked into - Hon’ble Supreme Court did not consider it appropriate to rule on the submissions of the Liquidator, vis-à-vis the fact of non-registration of charges under Section 77 of the Companies Act.
On looking into the definition of Section 3(31), it is clear that right, title or interest or a claim to property, created in favour of, or provided for a secured creditor by a “transaction which secures payment or performance of any obligation and includes mortgage, charge, hypothecation, assignment and encumbrances or any other agreement or arrangement securing payment or performance of any obligation of any person”, no transaction has been placed on record, under which a security interest is created in favour of the Corporate Debtor with regard to assets of the Corporate Debtor. As noted above, mortgages of immovable property and non-agricultural land were mortgages, which were referred in Sanction Letter, were mortgages by Guarantors and no assets of the Corporate Debtor was mortgaged to the Appellant. The Sanction Letter cannot be said to be a transaction, which secures payment or performance of an obligation.
The Adjudicating Authority, thus, was very well aware that Application has been filed for extension on 11.08.2023 and the Plan was approved on 23.08.2023. The mere fact that no formal orders were passed on that Application are not sufficient to set aside the impugned order on this ground. It is to be noted that 13.08.2023 was a date when 180 days was expiring. Present is not a case that there was any other extension claimed for. The Adjudicating Authority after noticing the aforesaid fact, approved the Resolution Plan, which makes it clear that Adjudicating Authority did not find any infirmity in approval of the Resolution Plan on 23.08.2023. In any view of the matter, exclusion having been prayed for and no order having been passed by the Adjudicating Authority on the said extension, no infirmity can be found on that ground and exclusion as prayed for was fully admissible and is required to be granted.
There are no error in order of the Adjudicating Authority approving the Resolution Plan - appeal dismissed.
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2024 (4) TMI 692
Dismissal of application seeking direction to release payment as an Operational Creditor, for the services rendered during the CIRP period - it was held by NCLAT that In view of the aforesaid discussion and the fact that Resolution plan was approved way back on 28.02.2020 by the Hon’ble Supreme Court and has been implemented, we do not find any merit in the present appeal and the same is hereby dismissed.
HELD THAT:- There are no reason to interfere with the impugned order - appeal dismissed.
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2024 (4) TMI 691
Prayer for condonation of delay - it was held by NCLAT that Our jurisdiction to condone the delay being limited to 15 days and we having held that benefit of Section 14 of the Limitation Act cannot be extended to exclude period during which I.A. No. 2337 of 2023 and I.A. No. 3270 of 2023 remained pending before the Adjudicating Authority, the Delay Condonation Applications which prays condonation of 74 days delay deserves to be dismissed.
HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal since no substantial question of law is involved in the appeal - appeal dismissed.
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2024 (4) TMI 690
CIRP - Preferential Transaction - transactions infringing section 43 of the IBC - it was held by NCLAT that In the background of the report of ‘Forensic Audit’ of the ‘Corporate Debtor’, it is quite clear that the said transactions amounting to Rs.7,81,352 are ‘preferential transactions’, as defined under section 43 of the IBC - HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and hence, the present appeal is dismissed.
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