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Insolvency and Bankruptcy - Case Laws
Showing 21 to 40 of 86 Records
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2020 (11) TMI 993
Maintainability of application - initiation of CIRP - default in payment of Settlement Agreement - financial debt or not - it is stated by appellant that Corporate Guarantor had undertaken to discharge the liability arising out of dishonoring of cheques issued by the Principal Borrower in favour of the Financial Creditor - HELD THAT:- Mere obligation to pay does not bring the liability within the ambit of ‘financial debt’. The debt, along with interest, if any, should be disbursed against the consideration for the time value of money. Breach of terms of an agreement including a Settlement Agreement whereunder payment may be due would not fall within the ambit of Section 5(8) so as to constitute a ‘Financial Debt’ - Admittedly, inter se the parties, there is no disbursement against the consideration for the time value of money. Principal borrower is not a party to Settlement Agreement. Viewed in the context of Settlement Agreement, there is no borrowing on the part of Respondent from the Appellant. Mere obligation to pay under a Settlement Agreement would not amount to disbursal of amount for consideration against the time value of money and breach thereof would not entitle the Appellant in the instant case to trigger Corporate Insolvency Resolution Process against the Respondent.
It is found that bouncing of cheques issued in discharge of obligation under the Settlement Agreement would not fall within the purview of default in regard to financial debt.
The Appellant may have other remedies available under law for effecting recovery of money due in terms of the Settlement Agreement but the triggering of Corporate Insolvency Resolution Process is not warranted. Insolvency proceedings stand at a different footing and cannot tantamount to recovery proceedings. Corporate Insolvency Resolution Process cannot be initiated for purposes of recovery of money - appeal dismissed.
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2020 (11) TMI 992
Admission of application of State Bank of India - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Issue notice upon Respondents. Appellant to provide mobile Nos./ e-mail address of the Respondents. Notice be issued through e-mail or any other available mode. Requisites along with process fee be filed within three days.
List the appeal on 13th January, 2021.
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2020 (11) TMI 988
Initiation of Moratorium against Personal Guarantor - Section 97 (1) of IB Code - HELD THAT:- Upon verification of the record, that there is material reflecting admission of company petition against the principal debtor (M/S Multiwal Pulp and Board Mills Pvt Ltd.) and this personal guarantor standing as guarantor to the loan availed by the said corporate debtor, the interim moratorium is deemed to have commenced from the date of filing of this application in relation to all the debts and any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed and the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt and further directs IBBI to provide information as to any disciplinary proceedings pending against the Resolution Professional sought to be appointed in this case so as to appoint him as RP u/ s 97 (5) of the Code.
List this application on 25.11.2020 for the recommendation of IBBI as stated u/ s 97 (2) of the Code.
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2020 (11) TMI 982
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors or not - existence of debt and dispute - time limitation - Whether the Application filed under section 7 of IBC by Applicant/Financial Creditor is maintainable against the Corporate Debtor? - HELD THAT:- The guarantee stood extinguished on approval of the resolution plan. Such extinguishment of the guarantee cannot extinguish the right of a lender available against the principal borrower. Discharge from guarantee cannot be construed as a discharge of the principal borrower. The approved Resolution Plan nowhere stated that the right of the Financial Creditor against the principal borrower stands extinguished - As per Section 128 of the Indian Contract Act, 1872, the liability of the surety is coextensive with that of the principal debtor, unless it is otherwise provided by the contract.
In the matter of GOURI SHANKAR JAIN VERSUS PUNJAB NATIONAL BANK & ANR. [2019 (11) TMI 1169 - CALCUTTA HIGH COURT], the Kolkata High Court has considered the issue that when a secured financial creditor received a haircut in respect of its pursuit of claim against a guarantor, what is the effect of a secured financial creditor receiving payment of a part of its claim, on full and final settlement basis, in terms of the Resolution Plan, on the guarantor's liability. The HC held that the liability qua a surety gets extinguished. However, it cannot be said that, the financial creditor entered into a voluntary compromise with the corporate debtor with regard to the quantum of the claim. Acceptance of the haircut amount from approval of a resolution plan where the FC is a member of the COC, does not mean that the right of the financial creditor to recover the balance amount from the guarantor of the corporate debtor is impaired.
Whether the Application is filed within Limitation? - HELD THAT:- The present application is within period of limitation. The reason is that although the loan was defaulted for the very first time on 15.04.2012, the parties were exploring settlement by way of DRSA. The DRSA was entered within three years from the date of default where the loan amount was expressly acknowledged. The DRSA was cancelled by way of Cancellation Deed dated 29.05.2017, on that date, both parties once again unequivocally admitted the outstanding liability to the tune of ₹ 231 ,48,67,202/- as due and payable by the CD to the Financial Creditor. The said acknowledgment gave rise to a new and fresh period of limitation. The present petition filed in February, 2020, is within three years from the last date of express and undisputed acknowledgment dated 29.05.2017 and is within limitation from such date of acknowledgment - In case of B.K Educational Services Pvt Ltd v. Parag Gupta and Associates [2018 (10) TMI 777 - SUPREME COURT], the Hon'ble Supreme Court held that the Limitation Act, 1963 is applicable to applications filed under Section 7 and Section 9 of the Code and will be governed by Article 137 of the Schedule of the Limitation Act, which provides three years' period of limitation for initiation of the proceedings.
The documentary evidence placed on the case file by the Financial Creditor is sufficient to ascertain the existence of a default on the part of the Corporate Debtor. The Financial Creditor has fulfilled all the requirements of law and proposed the name of the Resolution Professional for appointment as the IRP. Hence, the Application stands admitted and the commencement of the Corporate Insolvency Resolution Process is initiated.
Application admitted - moratorium declared.
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2020 (11) TMI 981
Appointment of Resolution Professional of Corporate Debtor - HELD THAT:- Mr. Radhakrishnan Dharmarajan, Reg.No.lBBl/lPA-001/lP-P00508/2017- 2018/10909 has been appointed as RP by this Tribunal vide order dated 15.10.2020 and confirmation in this regard has been received from the IBBI vide e-mail communication dated 26.10.2020.
Application closed.
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2020 (11) TMI 974
Permission for withdrawal of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor - existence of default or not - HELD THAT:- The Adjudicating Authority has, overlooked the mandate of law while deciding the maintainability of application on the basis of the objection raised by the Corporate Debtor.
The appeal is accordingly dismissed as withdrawn.
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2020 (11) TMI 973
Claim of the appellant not being reflected under the heading ‘Claims of Operational Creditors’ in the Information Memorandum prepared by the Resolution Professional - HELD THAT:- It is not in dispute that the claim of the appellant is still pending adjudication before the Arbitrator and it has been, therefore, rightly described in the memorandum as other creditor claims (claims under adjudication) - The purpose of memorandum is only to provide relevant information regarding the financial position of the company in question. It is not about deciding the claim or disregarding the claim amount, if it exists in law.
Suffice it to observe that the claim of the appellant has been taken note of in the information memorandum and does not get extinguished as such; but it will be subject to adjudication by the Arbitrator. Since it is part of the memorandum, it is obvious that the resolution applicant would take the same into account while submitting his proposal, due notice whereof will be taken by the committee of creditors as well, and dealt with appropriately in the final resolution plan - In the event, the appellant has any grievance about the nature or manner of provision made in the final resolution plan qua its claim; and if aggrieved with the final resolution plan, may take recourse to appropriate remedy as per law.
Appeal disposed off.
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2020 (11) TMI 968
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - impugned order of admission of application under Section 7 of I&B Code passed in ex-parte - HELD THAT:- No notice was served upon the Corporate Debtor and even the impugned order does not speak of notice being issued by the Adjudicating Authority. However, since the order is an ex-parte, we deem it appropriate to allow learned counsel for the Appellants to withdraw the appeal with liberty to agitate the matter before the Adjudicating Authority. The appeal is disposed of as withdrawn giving liberty to Appellant to raise the issue before the Adjudicating Authority in regard to notice not being served on the Corporate Debtor and the impugned order being passed in ex-parte without according opportunity to the Corporate Debtor of being heard. Appellants will be at liberty to demonstrate that no notice was served upon the Corporate Debtor before the impugned order came to be passed.
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2020 (11) TMI 964
Maintainability of review petition - HELD THAT:- Review Petition is rejected as it is always open to the petitioner to file a review petition before the National Company Law Appellate Tribunal, if it is otherwise permissible in law.
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2020 (11) TMI 960
Application for Replacement of Resolution Professional - HELD THAT:- Mr. Nikhil, Learned Counsel for the Ex-Directors mentions and confirms that the Resolution Professional is not following the procedure of law and in the appeal filed by the Ex-Management which is pending before the Hon'ble National Company Law Appellate Tribunal, the issue of behaviour of Resolution Professional is also being agitated. The minutes though not in the form of Resolution but records at various places about the disapproval of RP's behaviour & actions by the CoC and dire-need to replace RP is placed on record. The e-mail sent by the majority CoC Member i.e. Power Department, Government of Sikkim has already intimated about this removal and lack of authority to RP. Considering the documents placed and submissions made before us, we allow the application, thereby Mr. Diwan Chand Arya present Resolutiion Professional is be and hereby replaced by Mr. Debrath Rana. Consent Form 'AA' is also annexed with the application.
List on 16-12-2020.
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2020 (11) TMI 957
Seeking payment of his fee by IRP and staying of his replacement - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In the instant case, the sole Financial Creditor (Indian Bank) has voted to replace the Resolution Professional under Section 22 of the ‘I&B Code’ which means the replacement is sought with 100% voting shares while the requisite vote is 66%. It is well settled that the commercial wisdom of the Committee of Creditors which covers matters including the replacement of the Resolution Professional does not fall within the limited scope of judicial review and is not justiciable.
Fees of IRP - HELD THAT:- The Adjudicating Authority has rightly observed that under Regulation 33(3) of the IBBI, fee has been fixed by the Committee of Creditors at ₹ 50,000/- which does not brook interference - In view of the same, we are not inclined to interfere with the impugned order which does not suffer from any legal infirmity.
Appeal dismissed.
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2020 (11) TMI 850
Jurisdiction of the NCLT to hear applications under Section 43 after the approval of the Resolution Plan - Whether an application filed under Section 43 for avoidance of preferential transactions can survive beyond the conclusion of the resolution process and the role of the RP in filing/pursuing such applications?
Structure of the IBC 2016 and Role of Resolution Professionals - HELD THAT:- Under Section 31, if the NCLT is satisfied with the Resolution Plan, it shall approve the same which shall be binding on the Corporate Debtor, all its employees, members, creditors, Central and State Governments, including all local authorities to whom dues may be owed, and all other stakeholders and guarantors. The NCLT has to also satisfy itself that the Resolution Plan has sufficient provisions for its implementation. Once a Resolution Plan is approved, the moratorium order under Section 14 shall cease to have effect and the RP shall forward all the records relating to the CIRP and the Resolution Plan to the Board to be recorded on its database. Thus, the role of a RP comes to an end here.
Applications for Avoidance Transactions - HELD THAT:- Similar is the situation in respect of undervalued transactions, transactions defrauding creditors and extortionate credit transactions. In the present case however, this Court is only concerned with preferential transactions - A perusal of Section 43, would show that not all transactions with related or unrelated parties would fall within this category. The same is limited by time. In relation to a related party, the transaction would be preferential if it has taken place two years before the insolvency commencement date and if it has put such party in a beneficial position as against other creditors, sureties or guarantors. In case of an unrelated party, the period is one year.
Chronology of Events - HELD THAT:- This Court had entertained the writ petition as there were fundamental issues of jurisdiction which were raised by the Petitioner. Vide order dated 23rd August, 2019, parties were directed to seek an adjournment before the NCLT. The said order continues till date - The matter was part-heard, when court hearings had been suspended due to the lockdown caused by pandemic. Thereafter, the matter was reheard in September, 2020. In the meantime, on 26th March, 2020, the erstwhile Corporate Debtor, now managed by Tata Steel Ltd – i.e. Tata Steel BSL Ltd. informed the Petitioner that the contract between them expired on 31st March, 2020 and would not be renewed.
Findings and Conclusions - HELD THAT:- While the IBC itself does not fix any time limits for filing of avoidance applications in respect of any transactions, the 2016 CIRP Regulations in Chapter X clearly stipulate the structure and methodology for dealing with objectionable transactions. Under Regulation 35A, as amended with effect from 3rd July, 2018, a specific timeline has been provided, by which the RP has to form an opinion if the Corporate Debtor has been subjected to any of the objectionable transactions. The time limit prescribed earlier was 105 days from the insolvency commencement date, which has now been reduced to the 75th day from the insolvency commencement date - A conjoint analysis of Sections 43 and 44 read with the applicable Regulations clearly shows that the assessment by the RP of the objectionable transactions including preferential transactions cannot be an unending process. The examination has to commence on the insolvency commencement date. The RP has to form an opinion by the 105th day (pre-amendment) and 75th day (post-amendment). If the RP comes to the conclusion that the Corporate Debtor has been subject to preferential transactions, the determination has to be made by the 115th day. The RP also has to apply to the NCLT for appropriate relief on or before the 135th day.
RP cannot continue to file applications in an indefinite manner even after the approval of a Resolution Plan under Section 31. The role of a RP is finite in nature. He or she cannot continue to act on behalf of the Corporate Debtor once the Plan is approved and the new management takes over. To continue a RP indefinitely even beyond the approval of the Resolution Plan would be contrary to the purpose and intent behind appointment of a RP. The Resolution Professional (RP), as the name itself suggests has to be a person who would enable the resolution. The role of the RP is not adjudicatory but administrative in nature. Thus, the RP cannot continue beyond an order under Section 31 of the IBC, as the CIRP comes to an end with a successful Resolution Plan having been approved. This is however subject to any clause in the Resolution Plan to the contrary, permitting the RP to function for any specific purpose beyond the approval of the Resolution Plan. In the present case, no such clause has been shown to exist.
The Resolution Applicant whose Resolution Plan is approved itself cannot file an avoidance application. The purpose is clear from this itself i.e., that the avoidance applications are neither for the benefit of the Resolution Applicants nor for the company after the resolution is complete. It is for the benefit of the Corporate Debtor and the CoC of the Corporate Debtor. The RP whose mandate has ended cannot indirectly seek to give a benefit to the Corporate Debtor, who is now under the control of the new management/Resolution Applicant, by pursuing such an application. The ultimate purpose is that any benefit from a preferential transaction should be given to the Corporate Debtor prior to the submission of bids and not thereafter.
The fact that the new management can take a decision in respect of any agreement which is deemed to be not beneficial to it also supports the interpretation that after the Plan is approved, the company is completely in the hands of the new management and neither the NCLT nor the RP has any right or power in respect of the said company. As can be seen in the present case, the Corporate Debtor in its new avatar has terminated the agreement with the Petitioner.
The above discussion is only in the context of Resolution processes and would however not apply in case of liquidation proceedings. In the case of a liquidation process, the situation may be different inasmuch as the liquidator may be able to take over and prosecute applications for avoidance of objectionable transactions. The benefit of orders passed in respect of such transactions may be passed on to the Corporate Debtor which may assist in liquidating the company at the final stage. However, that is not the case in the present petition.
The order of the NCLT impleading the Petitioner and any consequential orders are liable to be set aside - Petition allowed.
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2020 (11) TMI 849
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - default made by employees of Operational Creditor - existence of debt and dispute or not - HELD THAT:- The intent of Legislature is very vital for interpreting any law, which can be well deduced from the words of Section 8(2)(a) of I&B Code ‘existence of a dispute if any’. It can be easily inferred that dispute shall not be limited to instances specified in the definition as provided under Section 5(6), as it has far arms, apart from pending Suit or Arbitration as provided Under Section 5(6) of IBC. The IBC is not a substitute for a recovery forum - Section 9 of the IBC makes it very clear for the Adjudicating Authority to admit the application “if no notice of dispute is received by the Operational Creditor and there is no record of the dispute in the information utility.” Whereas, on the other hand, Section 9 also states that the Adjudicating Authority to reject the application so filed “if the Operational Creditor has received a notice of a dispute from the Corporate Debtor”.
The Operational Creditor cannot take recourse that the payment if any made to the employees were in their personal capacity and not on account of Operational Creditor. As it is a well settled principle under Law of Agency that “where an employee does some wrongful act, within the course of his employment, then for that act the employer’s liability shall arise. The employee would be liable for the wrongful act he has done, whereas the employer would be liable vicariously for the act due to the principal-agent relationship between the two. In that situation, the aggrieved person is at the choice whether to sue principal or agent or both. Therefore, fraud committed by any of the employees of the Operational Creditor cannot be said to be done in their personal capacity.
The Operational Creditor has admitted before the Adjudicating Authority that the Corporate Debtor have made the payment of ₹ 14,17,000/-, saying that those payments were towards the out of pocket expenses incurred during the process of custom clearing of Corporate Debtor’s goods - since there was a dispute existing prior to the issuance of Section 8 notice, the insolvency provisions cannot be invoked - Application admitted.
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2020 (11) TMI 848
Approval of Resolution plan - Whether a third party company, i.e. Facor Power Limited (FPL) can be dealt with in a Resolution Plan under corporate insolvency resolution process against the Corporate Debtor 'Ferro Alloys Corporation Limited' (FACL)? - HELD THAT:- The Resolution Professional submits that in accordance with Regulation 27 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process of Corporate Persons) Regulation 2016, (in short CIRP Regulation), two independent valuers were appointed to conduct a valuation of the assets of the Corporate Debtor (including the shares held by the Corporate Debtor in FPL), in order to arrive at the fair value and liquidation value of the Corporate Debtor. Further, a detailed presentation on the Valuation Report was duly discussed with the Members of the erstwhile COC of the Corporate Debtor on 11th November 2019, i.e. before voting on the Resolution Plan took place. It is also important to observe that out of the average liquidation value of ₹ 305 Crores, approximately one-third value i.e. ₹ 95 Crores is attributable to the shareholding of the Corporate Debtor in FPL - thus, it is clear that objection regarding the valuation of shares of Facor Power Ltd (FPL) is also not sustainable.
It is pertinent to mention that the shareholding pattern in any company demonstrates the extent of control that a shareholder has and can exercise over the said Company. Hence, even in the absence of such an express provision in Resolution Plan, the Resolution Applicant after taking over the Corporate Debtor is entitled to exercise its right over its subsidiary company - the Appellant’s objection regarding the inclusion of the subsidiary company of the Corporate Debtor in the Resolution Plan is not sustainable.
Whether the Adjudicating Authority can approve a Resolution Plan which is discriminatory and gives differential treatment amongst the same Class of the Financial Creditors, merely based on assenting or dissenting Financial Creditors? - HELD THAT:- The Amendment to Regulation 38(1) of CIRP Regulations mandates priority in payment to dissenting Financial Creditors. This amendment came into effect on 27th November 2019, i.e. post the approval of Resolution Plan by the erstwhile COC of the Corporate Debtor. Therefore, as on the date of approval of the Resolution Plan by the erstwhile COC, the only requirement under the provision of the Code qua the dissenting Financial Creditors was the payment of the minimum liquidation value, which is duly complied in the present Case - It is settled position in Law that provisions in a Statute would operate prospectively unless the retrospective operation is expressly provided for. There being no clarification provided to that effect, the amended Regulation 38 cannot be said to have retrospective application.
The approved Resolution does not give differential treatment among the same Class of Financial Creditors merely based on assenting or dissenting Financial Creditors. Thus, the approved Resolution Plan is not discriminatory.
Whether approved Resolution Plan filed by Sterlite Power Transmission Limited is violative of Section 30(2) of the I&B Code, 2016? - HELD THAT:- The legal position is well settled that an approved Resolution Plan can deal with the related party claim and extinguish the same which shall ensure that the Successful Resolution Applicant can take over the Corporate Debtor on a clean slate. The related Parties are being kept out to ensure continuity of operation of both FACL and FPL following the provisions of the Code. There are also no substance based on which it can be inferred that the Resolution Plan is not in conformity with the provisions of Code as provided under Sec 30(2) of the Insolvency and Bankruptcy Code, 2016.
Appeal dismissed.
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2020 (11) TMI 847
Liquidation of Corporate Debtor - section 33 & 34 of the Insolvency and Bankruptcy Code, 2016 - exemption of Lockdown period from the filling of the instant application - HELD THAT:- It is found that there is no possibility of receiving any Resolution Plan. Therefore, the CoC has resolved for liquidation of the Corporate Debtor vide its Sixth meeting dated 17.02.2020. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC as observed in K. Sasidhar's case [2019 (11) TMI 731 - SUPREME COURT].
The Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Neuromed Imaging Centre Private Limited - Application allowed.
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2020 (11) TMI 846
Inclusion of name of applicant in the CoC - related party or not - Applicant states that the Respondent/IRP acted in violation of the well established principles of the judicial process - whether this Deed of Assignment was entered to keep bunch of their men in the CoC? - HELD THAT:- The Corporate Debtor was already a sinking ship in a very deep financial crisis. At that point of time, the loan was assigned to the Applicant may be with a foresight to put their men in the CoC Meeting. However, the decision of the Respondent/IRP that Applicant is a "Related Party" is not challenged in this application.
The Applicant states that during the meeting of committee of creditors a biased opinion was formed by the Financial Creditors and the creditors alleged that Gita Power is a "Related Party" of the Corporate Debtor. Therefore, the Applicant being an assignee of Gita Power is Financial Creditor under the IBC, 2016.
As to the present case, it is seen that the Applicant was the Assignee of a loan from the Related Party of the Corporate Debtor and by following the principles laid down in the Judgment of the Hon'ble NCLAT, in Pankaj Yadav & Anr. [2018 (9) TMI 1223 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] as enumerated in para 7, the rights of the 'Assignee' are no better than those of the 'Assignor', the Applicant is stepping into the shoes of the Assignor and thereby takes over the right of the Assignor with the onerous crown, which also includes the disadvantage as found in the Assignment Agreement. Thus, if the Assignor of a debt is a Related Party of the Corporate Debtor, as per the ratio laid down by the Hon'ble NCLAT, the Assignee, who is a third party, is also liable to be held as a Related Party of the Corporate Debtor.
This Tribunal is of the considered view that the Applicant being Assignee of the Loan from the Assignor, is also a Related Party of the Corporate Debtor and as such the Application as filed by the Applicant is liable to the dismissed - Application dismissed.
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2020 (11) TMI 802
Maintainability of application - Assignment of Debt - It is argued that the Notice issued by SBI as Consortium Leader was already withdrawn and subsequent individual action of State Bank of India and Order passed in view of that action under SARFAESI cannot be reason for Adjudicating Authority to dismiss the Application under Section 7 as not maintainable - Argument is that action under Section 7 of IBC is not adversarial but to save the Corporate Debtor by bringing about resolution so that the debts can be fairly paid - time limitation - HELD THAT:- It is apparent that the Adjudicating Authority did not apply itself to the Orders which were being relied on by the Corporate Debtor and simply recorded that it is not empowered to pass any Order over jurisdiction of Hon’ble High Court or to clarify interim orders passed by the Hon’ble High Court. It appears to us that the Adjudicating Authority avoided to decide the issues raised and without going into the Record, it has thrown out the Application under Section 7 without justifiable reasons. Adjudicating Authority accepted individual Bank can maintain application beyond consortium and there is no bar to invoke provisions of Code but without even showing how the Orders in Writ Petition in which SIB was not even party, it should wait.
In the Writ Petition filed against State Bank of India and the I.A. referred above, the Appellant or SIB were not made parties. State Bank of India initially purported to act for the consortium but after filing of the Writ Petition, withdrew the Notice dated 17th October, 2015 which was the basis to file Writ Petition 52886 – 52887 of 2015. The prayers in the Writ Petition were in context of such Notice and that Corporate Debtor should be heard regarding declaration of N.P.A. Subsequently, State Bank of India acted on its own when it raised demand vide Annexure A-13 on 9th March, 2017 and Possession Notice (Annexure A-14) on 19th August, 2017. Directions given were to the Authorized Officer of SBI and State Bank of India which were the Respondents in Writ Petition. Present the Corporate Debtor is aware that both the Orders were against SBI as portions reproduced from its Statement of Objections (Diary No.18701) and highlighted supra show. We find it difficult to accept that there was restraint Order against SIB.
The Application under Section 7 of IBC filed is not confined to debt as arising in the arrangement due to Consortium Lending which was a term loan, but was also towards independent overdraft facility and amounts due in that context. As such, even if one was to stretch the Order of High Court dated 04.12.2015 to say that it affects SIB, still the South Indian Bank was competent to maintain Section 7 Application on the basis of overdraft facility which was provided outside the Consortium. Thus, the Order passed by the Adjudicating Authority is not at all justified and deserves to be set aside.
Time Limitation - HELD THAT:- Under the Limitation Act, 1963, as per Section 3, it is the duty of the Court/Authority to consider whether or not the matter brought before it is within limitation. It is the duty of the authority to apply its mind to the question of limitation although limitation has not been taken as the defence. The authority under law as appearing from Section 3 of Limitation Act, is bound to raise the question of limitation suo moto - Entry - 19A shows that after the Application under Section 7 of IBC was filed in the present matter, Section 238A of IBC extending provisions of the Limitation Act was inserted in IBC with effect from 6th June, 2018. When this is so, in fairness, it would be appropriate to give opportunity to the Financial Creditor to rectify defect in the Application before the Adjudicating Authority. It is necessary for us under Rule 11 of National Company Law Appellate Tribunal Rules, 2016, to exercise inherent powers to do Justice to pass such Orders.
The matter needs to be remanded back to the Adjudicating Authority so that the Appellant is given opportunity to rectify defects in the format - Appeal allowed by way of remand.
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2020 (11) TMI 801
Time Limitation - Deed of Guarantee - failure to prove default or not - legally enforceable debt or not - Whether dismissal of such reference in the given circumstances would attract Regulation 19(7) of BIFR Regulations to hold that such reference was never made for having been declined to be registered? - HELD THAT:- The answer lies in Regulation 19 itself. Regulation 19(3) provides that a reference may be filed either by delivering it at the office of the Board or by sending it by registered post. Regulation 19(4) provides that on receipt of a reference the Secretary/ Registrar shall cause to be endorsed on each reference the date on which it is filed or received in the office of the Board. Regulation 19(5) provides that if on scrutiny, the reference is found to be in order, it shall be registered, assigned a serial number and submitted to the Chairman for assigning it to a Bench. Regulation 19(6) provides that if on scrutiny, the reference is not found to be in order, the Secretary/Registrar may by order decline to register the reference. In the instant case the first reference was, after its receipt, registered and assigned case number 160/2001. It was placed before the Bench, which took up the reference on 25th June, 2002 for consideration so as to determine the status of company’s sickness. However, the reference came to be dismissed as being time barred. It is therefore manifestly clear that the reference was registered and came to be dismissed on consideration. Therefore, Regulation 19(7) would not come into play and the period from filing of reference with BIFR under Section 15(1) of SICA on 2nd March, 2001 till its dismissal on 25th June, 2002 will have to be excluded within the purview of Section 22 of SICA providing for suspension of legal proceedings including institution of suits for recovery of money or for enforcement of security against the industrial company or any guarantee in respect of any loans or advances granted to the industrial company.
Admittedly, the second reference case was filed on 21st February, 2003 before BIFR, therefore period from 25th June, 2002 till 21st February, 2003 (calculated at 241 days) has to be counted towards the limitation period. From 21st February, 2003 till 1st December, 2016 second reference case of the Corporate Debtor was pending consideration before BIFR and on 1st December, 2016, with enforcement of I&B Code, the SICA, 1985 was repealed. Thus, the period of limitation for triggering of CIRP at the instance of Assignee – SASF against the Corporate Debtor would commence from 1st December, 2016 till application under Section 7 was filed on 12th March, 2019. This is rightly calculated by Responded at 831 days - the period counting for limitation will be 241 days + 831 days = 1072 days i.e. 35 months and 12 days. It is abundantly clear that the application under Section 7 at the instance of SASF against the Corporate Debtor came to be filed well within three years from the date of invocation of corporate guarantee on 3rd December, 2001.
It is also settled law of the land that the period of limitation does not commence until the account is live i.e. not duly settled by payment of outstanding dues and/or there is no refusal from the Guarantor towards its obligations.
The liability of the Guarantor being coextensive to the liability of the Principal Borrower and the acknowledgment of liability by the Principal Borrower, in terms of letter dated 20th December, 2016 forming Annexure R-7 to the Reply affidavit (page 64), is binding on the Guarantor and he cannot wriggle out of its liability to discharge its obligations towards SASF. It goes without saying that in terms of Clause 11 of the Corporate Guarantee dated 16th July, 1997, the Corporate Guarantor is liable to be proceeded against by the lender or its assignee in the same manner as if it was the Principal Borrower/ Debtor.
The application filed by the Respondent under Section 7 of I&B Code for triggering CIRP against Respondent – Corporate Guarantor on 12th March, 2019 was not barred by limitation - Contention raised by the Appellant as regards plea of limitation and other contention in regard to discharge of obligation of Appellant – Corporate Guarantor towards SASF are accordingly repelled.
Appeal dismissed.
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2020 (11) TMI 800
Maintainability of application - initiation of CIRP - claim against Corporate Debtor second time on the same set of claims, initially made on principal borrower - Respondent stood Guarantor for the Principal Borrower - Borrower committed default in repayment of loan - when Application under Section 7 had been admitted against the Principal Borrower whether the present Application by the same Financial Creditor could be admitted against Corporate Guarantor on same set of claims and default.
HELD THAT:- It is clear that in the matter of guarantee, CIRP can proceed against Principal Borrower as well as Guarantor.
We are unable to agree with the arguments of Learned Counsel for Respondent that when for same debt claim is made in CIRP against Borrower, in the CIRP against Guarantor the amount must be said to be not due or not payable in law. Under the Contract of Guarantee, it is only when the Creditor would receive amount, the question of no more due or adjustment would arise. It would be a matter of adjustment when the Creditor receives debt due from the Borrower/Guarantor in the respective CIRP that the same should be taken note of and adjusted in the other CIRP. This can be conveniently done, more so when IRP/RP in both the CIRP is same. Insolvency and Bankruptcy Board of India may have to lay down regulations to guide IRP/RPs in this regard.
The law as laid down by the Hon’ble High Courts for the respective jurisdictions, and law as laid down by the Hon’ble Supreme Court for the whole country is binding - reliance can be placed in the case of STATE BANK OF INDIA VERSUS V. RAMAKRISHNAN AND ANR. [2018 (8) TMI 837 - SUPREME COURT] where it was held that The object of the Code is not to allow such guarantors to escape from an independent and coextensive liability to pay off the entire outstanding debt, which is why Section 14 is not applied to them.
Appeal allowed - decided in favor of appellant.
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2020 (11) TMI 799
Validity of CIRP initiated - fraudulent or malicious intent or purpose other than Resolution of Insolvency and Liquidation of the Corporate Debtor or otherwise? - time limitation u/s 7 - HELD THAT:- Although the suit was filed in time the Winding up Petition was beyond three years of the default and when such Winding up Petition was transferred in view of the Rules to the NCLT to convert the same into a proceeding under Section 7 of IBC, it was found that as the Winding up Petition itself was time-barred from the date of default, the same could not be proceeded further as Application under Section 7.
When developments in the present matter are seen, if IBHL classified the Borrower Entities as NPA in November, 1997, even if the suits were filed in 1998 and 1999, that would not be relevant or helpful to extend time of Limitation for the purpose of filing of Application under Section 7 of IBC which is independent proceeding required to be filed as per Article 137 of the Limitation Act within three years of default. When time begins to run it can only be extended in the manner provided in the Limitation Act, has been held. Proceedings under the IBC are not execution proceedings either for the decree which was obtained or for execution of the Certificates of Recovery which have been issued by DRT. The Learned Counsel for the Financial Creditor has not shown under which provision of Limitation Act, time which had started running in November, 2007, could be extended. If filing of Suit or O.A. does not extend time, or give right to exclude period for a Winding up Proceeding, it can not extend period for an independent right under IBC. Consequently passing of Decree or issue of Recovery Certificate will not give fresh right to trigger IBC.
There is substance in the submissions made by the Learned Counsel for the Appellant that the Application in the present matter was hopelessly time-barred. The Adjudicating Authority failed to see that the Financial Creditor had not indicated date of default in the format. The Adjudicating Authority was duty bound under Section 3 of the Limitation Act, 1963 to suo motu consider if or not the Application under Section 7 of IBC was within Limitation by considering if or not the debt said to be in default was within Limitation.
The Impugned Order is quashed and set aside - Appeal allowed.
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