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Insolvency and Bankruptcy - Case Laws
Showing 121 to 140 of 149 Records
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2021 (1) TMI 386 - NATIONAL COMPANY LAW TRIBUNAL , CHENNAI BENCH
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - on the garb of OTS settlement the Corporate Debtor wanted to gain time to settle of the dues to the Financial Creditor - debt and default existed or not - HELD THAT:- It is a fact borne on record that the Corporate Debtor is unable to repay the dues to the Financial Creditor and as such on the garb of OTS settlement the Corporate Debtor wanted to gain time to settle of the dues to the Financial Creditor. Further, a perusal of the record of proceedings dated 04.02.2020, also shows that the Corporate Debtor was putting in efforts to settle of the dues of the Financial Creditor and upon such representation being made, the Corporate Debtor was granted time to settle the matter and the matter was finally posted to 02.03.2020 for reporting settlement or to proceed with the matter. Thus, when the matter was taken up for enquiry on 02.03.2020, it has been brought to the notice of this Tribunal by the Counsel for the Financial Creditor that the Corporate Debtor has not paid the dues of the Financial Creditor and also the Learned Counsel for the Financial Creditor submitted that even in the affidavit filed by the Corporate Debtor, the outstanding debt has been admitted which is owed to the Financial Creditor.
There is a debt and default on the part of the Corporate Debtor and the Corporate Debtor is unable to repay its dues to the Financial Creditor.
It has also been consistently held by the Hon'ble Supreme Court both in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK & ANR. [2017 (9) TMI 58 - SUPREME COURT] as well as MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT] after going through the Scheme of I&B Code, 2016 in depth in relation to an Application under Section 7 filed by a Financial Creditor as compared to the one filed under Section 9 by an Operational Creditor, in relation to a Section 7 Application where there is an existence of a 'financial debt' and when there is a default, this Tribunal is bound to admit the Application and as a consequence trigger the Corporate Insolvency Resolution Process (CIRP) and in relation to a Section 7 Application defence of set off or counter claim put forth by the Corporate Debtor cannot be considered as a dispute in relation to the Financial debt and default in relation to it - In the present case, it is clear that there is a default on the part of the Corporate Debtor.
This Application as filed by the Applicant - Financial Creditor is required to be admitted under Section 7(5) of the I&B Code, 2016 - Application admitted - moratorium declared.
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2021 (1) TMI 344 - NATIONAL COMPANY LAW TRIBUNAL AHMEDABAD BENCH
Maintainability of application - Corporate Debtor failed to make repayment of its debt - operational creditor/applicant - applicant has stated that despite repeated reminders the respondent has not paid the outstanding operational debt - issuance of demand notice - HELD THAT:- The demand notice issued by the applicant under section 8 of the I & B Code on 18.12.2019 has been served upon the corporate debtor - On perusal of the reply filed by the corporate debtor it is found that the contentions raised in defence of the operational debt are vague, ambiguous and up-through merely to raise unnecessary and false dispute to escape the provisions of Insolvency and Bankruptcy Code, 2016. Moreover, no documentary proof is provided by the corporate debtor in support to the averments which thus makes it evident that the dispute is an after-thought post the issuance of the demand notice. Other contentions raised in the reply by the corporate debtor appears to be a part of moonshine defence which devoid of merits.
On perusal of the record it is also found that the instant petition filed by the applicant is well within limitation and there is no denial of the operational debt or any pre-existing dispute regarding the operational debt from the side of the corporate debtor - In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the operational debt due and payable to the Applicant - The documents produced by the operational creditor clearly establish the 'debt' and there is default on the part of the Corporate Debtor in payment of the 'operational debt'.
Thus, this adjudicating authority is of the considered view that operational debt is due to the Applicant and it fulfilled the requirement of I & B Code. No dispute has been raised by the respondent at any point of time. That, Applicant is an Operational Creditor within the meaning of Section 5 sub-section 20 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default and the amount claimed by operational creditor is payable in law by the corporate debtor as the same is not barred by any law of limitation and/or any other law for the time being in force - it is evident that the corporate debtor has committed default in payment of operational debt and, therefore, it is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code.
The petition admitted - moratorium declared.
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2021 (1) TMI 343 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCH
Permission for withdrawal of petition - Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Since the Company Petition is not yet admitted and the Parties have settled the issue by way of Settlement, we are inclined to permit the Petitioner to withdraw the instant Company Petition by reserving liberty to the Petitioner to file fresh Company Petition in accordance with law.
The petition is hereby disposed of as withdrawn in terms of the settlement dated 08.09.2020 by directing the Respondent to strictly adhere to the terms of settlement, failing which, the Petitioner is at liberty to file a fresh Company Petition in accordance with law.
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2021 (1) TMI 342 - NATIONAL COMPANY LAW TRIBUNAL , HYDERABAD BENCH
Seeking extension Corporate Insolvency Resolution Process period by 60 days - Section 60(5) of Insolvency & Bankruptcy Code (IBC), 2016, Read with Rule 11 of National Company Law Tribunal Rules, 2016 - HELD THAT:- The Adjudicating Authority already extended CIRP by 90 days as per Section 12 of the Code. It is true the lockdown period due to Covid-19 pandemic is allowed to be excluded from the CIRP. The lockdown started from 25.03.2020 and in the State of Telangana it was extended up to 07.06.2020. Therefore, CIRP of 270 days was expired by 19.06.2020. However, second proviso to Section 12 of IBC allows CIRP to be completed within 330 days. Even though there is no question of another extension, however, by virtue of second proviso to Section 12 of the Code, the CIRP to be completed within 330 days from the insolvency commencement date after exclusion of lockdown period. So, a direction can be given to the Resolution Professional to complete the CIRP within 330 days which will be over by 19.08.2020 after excluding the lockdown period.
The Resolution Professional is directed to complete the CIRP by 19.08.2020 relying on second proviso to Section 12 of the Code - application allowed.
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2021 (1) TMI 341 - NATIONAL COMPANY LAW TRIBUNAL , KOLKATA BENCH
Direction to respondent to complete the sale transaction and/or make payment of the balance amount - Section 32A of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulation, 2016 - Whether in a going concern sale all the assets and liabilities are to be taken by the successful bidder as per Regulation 32-A of IBBI (Liquidation Process) Regulations, 2016? - HELD THAT:- It is an admitted fact that a bidder before bidding has to buy the said bidding document which is valued for 5 lakh. The bidder in the instant case had one copy by paying the said amount. It is also significant to note here that the bidder is not a stranger to the CD. From the records it is understood that the very same bidder was an unsuccessful resolution applicant who had submitted a resolution plan which was rejected by the then CoC during the CIRP. So the conduct of the bidder in this case clearly leads to a conclusion that knowing well the existing liabilities of the CD and the terms of e auction the bidder participated in the bidding and therefore, it appears to me that the bidder could not place a conditional offer contrary to the terms of auction held in this case. The bidding document never permits the bidder to place a conditional offer.
Even before the commencement of I& B Code, the concept of transferring a company as a 'going concern' was entertained by various High Courts - The Supreme Court in Allahabad Bank v ARC Holding [2000 (9) TMI 931 - SUPREME COURT] held that "if the company is sold off as a going concern, then along with the assets of the company, if there are any liabilities relevant to the business or undertaking, the liabilities too are transferred". The above said position of law and the discussions lead to a legitimate conclusion that in a going concern sale all the assets and liabilities are to be taken by the successful bidder as per Regulation 32-A of IBBI (Liquidation Process) Regulations, 2016. This point is answered accordingly.
Can a bidder raise unilateral terms and conditions in the form of conditional offer inconsistent with the terms in the bidding document published? - Can a successful bidder upon writing a letter to liquidator before the date of E-auction date, stating that his bid is on the conditions that other liabilities will not be foisted upon the bidder amount to conditional offer and in case non acceptance of the said offer, the bidder is entitled to withdraw from the bid with refund of EMD as claimed? - HELD THAT:- It is significant to note here that the bidding document has not been permitted to make a conditional offer by a bidder. In view of that, I do not find any force in the argument advanced on the side of the bidder that a bidder can in any case of e auction sale make a conditional offer suitable to his choice. Even if the letter dated 4th September, 2019 is styled as a conditional offer, that offer was not accepted by the liquidator and liquidator's letter dated 5th September, 2019 makes it clear that he could not make any changes to the terms. Therefore, even if it is a conditional offer it was rejected by the liquidator before the bidder accepted the bid offered by the liquidator as per the terms of the bidding document. At this juncture the declaration given by the bidder makes it more clear that the bidder accepted the bid as per the terms and conditions stipulated in the bidding documents.
A bidder cannot raise unilateral terms and conditions contrary to the terms of the bidding document published. The law is settled as to the power of a Tribunal/Court that the terms of tender are not open to judicial scrutiny and that the authority calling for the tender is the best judge to prescribe the terms and conditions of the tender, therefore, in the light of these, a bidder may also not raise unilateral terms and conditions in a case of this nature - it is clear that when the bidder had participated in the e auction and had deposited the EMD, then he cannot ask for waiver of tax liabilities and other relief which were not permissible as per the bidding documents.
Whether the bidder is to be permitted to withdraw from the bid with a direction to the liquidator to refund the EMD as claimed by the bidder? - HELD THAT:- The conditional offer as alleged being found has no legal force he cannot as of right withdraw from the bid as per the terms of bid accepted by the bidder. It is significant to note here that the conditional offer raised by the bidder has been rejected by the liquidator and the letter dated 04.05.20 is superseded by the declaration dated 05.09.2020. Therefore, the bidder is disentitled to withdraw on his own as per the terms of bidding - whenever a bid is submitted it is done so only after knowing the terms of bidding. Even the amount of EMD is to be deposited in accordance with the terms of bidding. If there is any clarification on the terms of bidding including the EMD, it has to be made prior to submission of their bid. The clarification asked for was answered in the negative. Knowing fully well, by signing a declaration the bidder submitted their bid. In the declaration signed by the bidder he agreed unconditionally to abide by the terms of e auction inclusive of forfeiture of EMD in case he did not perform his part of obligation after acceptance of the bid in his favour.
To sum up, the fact that the bidder/Visisth Services Limited was an unsuccessful resolution applicant, that the bidder cannot withdraw from the bid in contravention of the bidding terms as per the position of law discussed above, that the terms of e caution provide for forfeiture of EMD upon withdrawal, and that the bidder has signed a declaration agreeing to forfeit in case of default on his side and since it becomes a binding contract once his bid is accepted the bidder is disentitled to claim back the EMD. He does not have a right to withdraw his offer at any time after the acceptance is conveyed to him - there are no hesitation in holding that the bidder is disentitled to get any relief as prayed for and therefore the unnumbered IA filed by the bidder is liable to be dismissed. In regards to the application filed by the liquidator, it appears to me that filing an application like the one is unwarranted and untimely. As per Section 35 of the Code read with Regulation 32-A and 33, of Liquidation Process Regulations, a liquidator is at liberty to confirm the sale following the procedure as laid down under Schedule I of the Regulations. Upon completion of sale what is expected to be from the liquidator is to submit a final report for closure of the liquidation process of the CD as per Regulation 45(3) ( a).
The liquidator shall issue fresh invitation to the bidder to provide balance sale consideration within such time as per clause (12) of Schedule I of Regulation 33 - In case of payment of the full amount the liquidator shall execute certificate of sale or sale deed to transfer the assets in the manner specified in the terms of sale as per bidding document following clause (13) of the Schedule I of Regulation 33 - In case of failure to pay the balance sale consideration he is at the liberty to cancel the sale in favour of the bidder by forfeiting the EMD and the amount paid towards the price of bidding document and to proceed with sale as per Regulation 32-A
Application dismissed.
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2021 (1) TMI 313 - DELHI HIGH COURT
Direction to Respondent No.1 to pass directions, guidelines or regulations under Section 196 of the Code - petitioner submits that in the present case applications having been filed against the promoters of the respondent nos. 5 and 6 under Section 25(2)(j) of the Code further CIRP proceedings of such companies must not be proceeded with - HELD THAT:- The provisions, especially Section 26 of the Code would clearly show that it is for the learned NCLT to consider the effect of the applications under Section 25(2)(j) and Section 29A of the Code at an appropriate stage of consideration of the Resolution Plan, if not earlier.
The Resolution Professional shall, at the time of submitting the Resolution Plan for approval of the learned NCLT, disclose details of applications filed under Section 25(2)(j) of the Act to the learned NCLT, for the learned NCLT to take an informed decision on the Resolution Plan. It is thus clear that it would be for the learned NCLT to consider the applications under Section 25(2)(j), if pending, and the effect thereof, especially in light of Section 29A of the Act, on the Resolution Plan submitted for its approval under Section 30 of the Code - as admittedly the proceedings with respect to respondent nos.5 and 6 are still pending before the learned National Company Law Tribunal, the present petition at this stage cannot be entertained.
Petition dismissed.
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2021 (1) TMI 312 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - allegation that the demand notice was issued without any authority - HELD THAT:- It is well settled by now that delivery of a demand notice of unpaid operational debt by the Operational Creditor upon the Corporate Debtor under Section 8(1) of the ‘I&B Code’ is a sine-qua-non for initiation of Corporate Insolvency Resolution Process (CIRP) by Operational Creditor under Section 9 of the ‘I&B Code’. Format in which the demand notice is to be issued by the Operational Creditor in terms of the ‘Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016’ is prescribed in Form-3. The delivery of notice is to be effected in the prescribed form which must emanate from the Operational Creditor or any authorized person on its behalf. In the case in hand, it is not in controversy that the demand notice in prescribed form has been issued by the lawyer of Operational Creditor and delivered upon the Corporate Debtor. Perusal of the demand notice forming Annexure A-16 to the appeal paper book at Page 227, Volume-II brings it to fore that the same has been issued by one Mr. Sumit Kumar, Advocate under instructions from and on behalf of Operational Creditor.
It is the dictum of the Hon’ble Apex Court in MACQUARIE BANK LIMITED VERSUS SHILPI CABLE TECHNOLOGIES LTD. [2017 (12) TMI 850 - SUPREME COURT] that a demand notice delivered by an Advocate duly instructed by the Operational Creditor would be a valid demand notice for purposes of initiation of CIRP. In view of the same, notice delivered could not be held to be bad in law unless it was shown that the lawyer was not duly instructed.
The finding recorded by the Adjudicating Authority in regard to invalidity of service of mandatory demand notice under Section 8(1) of the ‘I&B Code’ cannot be sustained - the matter is remitted back to the Adjudicating Authority with direction that in the event of the application being complete in all respects, it may, having regard to the key ingredients of debt and default, pass an order of admission or otherwise as warranted under law - Appeal allowed by way of remand.
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2021 (1) TMI 271 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH
CIRP Proceedings - Operational Debts or Financial Debts - The IRP however, was of the opinion that the Corporate Debtor being a financial guarantor owed a financial debt to the Respondent Nos. 2 and 3. Thus the Respondent Nos. 2 & 3 would have to be regarded as Financial Creditors of the Corporate Debtor. - HELD THAT:- Forward Purchase Agreement may or may not be regarded as a financial transaction for it to be a financial debt. It must have the commercial effect of a borrowing. The recitals of the Forward Purchase Agreement indicated above do not envisage the financial transactions in the nature of financial debt as defined under section 5(8) of the Code. The Agreements do not satisfy the parameters discussed in the cited precedent supra. A forward contract to sell a product at the end of a specified period cannot be regarded as a financial contract.
Both the FPAs indicate that they were essentially forward contracts for supply of specified goods (products). The Corporate Debtor or for that matter the purchaser under the Agreement dated 29.09.2018 has not raised any amount thereunder. Under the Agreements they agreed to purchase certain products and pay therefor. The Corporate Debtor executed deeds of guarantee binding itself to pay any shortfall in case of default. Such transactions accordingly may at best amount to an operational debt in terms of section 5(21) of the Code for provision of goods and services and payment in respect thereto. Therefore, the FPAs dated 29.09.2018 and 28.12.2018 cannot be regarded as financial transactions in which a debt was raised or payment was made against the consideration for the time value of money which also had the commercial effect of borrowing - the transactions were essentially simple agreements of sale and purchase. The same would not come within the definition of ‘financial debt’ under section 5(8)(f) of the Code. The principal agreements not being financial transactions and the amount of any liability in respect of the guarantee contemplated under section 5(8)(i) of the Code, would accordingly not come within the purview of the financial debt. The guarantee essentially was for payment against default in the sale consideration of the products agreed to be purchased respectively from Respondent Nos. 2 and 3. The guarantees being not a liability arising out of the transaction in terms of section 5(8)(f) of the Code, would not come within the purview of the financial debt.
The Respondent No 2 and Respondent No 3, accordingly cannot find a place in the CoC - decision of the Respondent No. 1 admitting the claims of Respondent Nos. 2 and 3 as financial creditors is set aside - Application is allowed in part on contest.
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2021 (1) TMI 270 - NATIONAL COMPANY LAW TRIBUNAL, NEW DELHI BENCH
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Time Limitation - HELD THAT:- In the part-IV of the application, it is mentioned that the date of default is 06.08.2012 i.e. the date of the NPA and it is mentioned that total days of default are 640 days calculated from 31.03.2018. We also notice that the application was filed on 26.02.2020 - Also, the agreement for restructuring of credit facility was executed on 29.04.2014 between the Corporate Debtor and the Financial Creditors bank. Therefore, the contention of the applicant is that although the NPA was declared on 06.08.2012, the Corporate Debtor within the period of three years had acknowledged the debt and restructuring of credit facility was arrived between the Corporate Debtor and the Financial Creditor within the period of three years.
The heading of the document is status of plant and repayment of loans and from the plain reading of the averment made in this document, it is noticed that there is no clear cut acknowledgment as it was in the settlement agreement dated 29.04.2014 - when we consider the letter dated 24.03.2017 upon which the applicant has placed reliance, we are of the considered view that this letter would not be treated as acknowledgement of debt under Section 18 of the Limitation Act.
Admittedly the date of default is the date of NPA - If we accept the contention of the Ld. Counsel for the applicant that within a period of three years from the date of NPA, the loan was restructured by the restructuring settlement agreement dated 29.04.2014 then, the limitation shall run from 29.04.2014 but we are unable to accept the contention of the applicant, that again during the period of three years vide letter dated 24.03.2017, there was acknowledgement of debt. In our considered view, that letter was regarding the status of the plant and not an acknowledgement of debt as it was earlier done by settlement agreement dated 29.04.2014, which is at page 475 of the application.
Thus, the present application is barred by limitation - application dismissed.
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2021 (1) TMI 187 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI
Admissibility of Application under Section 9 of Insolvency and Bankruptcy Code, 2016 - initiation of CIRP - Existence of debt and dispute or not - Appellant claims that there was collusion between the two Respondents and thus the admission Order was bad - grievance of the Appellant appears to be that it was the biggest Financial Creditor and instead of acting on its Application, the Application of Respondent No.2 was admitted.
Alleged Collusion - HELD THAT:- The Appellant is banking on such defence recorded in earlier matter. On such basis, collusion and fraud is alleged. We do not find any substance in such averments made by the Appellant. Present Application under Section 9 is undisputedly filed by the Respondent No.2 at a time when CIRP against the Respondent No.2 had been set aside on 13.03.2020, has to be appreciated on its own facts and documents. The definition of Financial Creditor in Section 5(7) and definition of Operational Creditor in Section 5(20) “includes” any person to whom the debt has been legally assigned or transferred. This, however, does not apply to the definition of Corporate Debtor as found in Section 3(8). Section 3(8) states that “Corporate Debtor” means a corporate person who owes a debt to any person. Thus, when the definitions of Financial Creditor and Operational Creditor are read with the definition of Corporate Debtor, it is clear that while Financial Creditor and Operational Creditor can assign their debt, the same is not applicable to a Corporate Debtor. Thus no such defence can be taken to show existence of dispute - The claim of the Appellant trying to build a case of collusion and fraud is thus not appealing to us. Even if Respondent No.2, a Corporate Debtor had debts to pay of M/s. Guptaji, it can have debt of its own to recover from Respondent No.1 who is another Corporate Debtor.
CIRP against Respondent No. 1 maintainable or not - HELD THAT:- Orris Infrastructure has itself filed Application seeking intervention pointing out proceedings which have taken place before Haryana Real Estate Regulatory Authority and High Court with the prayer that the amounts lying in Escrow Account in view of Orders of the High Court should be used only for the construction of Greenopolis Project. The IRP of the Corporate Debtor who has filed Reply (Diary No.23486) has stated (Reply para – 7.8) that it is denied that the development of the Greenopolis Project was in joint venture. IRP claims that there is no document in support. It is the Reply of IRP that Three C Shelters Pvt. Ltd. is the sole developer of the Greenopolis Project. Thus, we find that the contentions raised by the Appellant are not supported by documentary material and as regards the Intervention, Application filed by Orris Infrastructure, and the prayer made, it would be a matter for the IRP/RP to look into in the course of CIRP proceedings.
The alleged Bar under Section 11 of IBC - HELD THAT:- If Section 11 of IBC is perused, the incompetency attached is to initiation. Specified person is not “entitle” to make an application. Thus, the bar under Sub-Section (a) is for making an application when the person who is a Corporate Debtor is undergoing Corporate Insolvency Resolution Process. Under Sub-Clause (b), the bar is to “making an application” by the person – Corporate Debtor having completed CIRP twelve months preceding the date of making of the application. Based on this, the grievance of the Appellant is that when IB 2721/2019 was filed, twelve months had not been completed from the date of 13.03.2020 vide which CIRP in IB 1071/2019 had been set aside. It is argued now when the earlier CIRP has been restored, sub-clause ‘a’ is also attracted - Date of filing of IB 2721/2019 is not pointed out to us. There is no dispute, however, that it was filed after Orders dated 13.03.2020 in Appeal, in earlier matter. It appears to us that when the IB 2721/2019 was filed, the CIRP against the Respondent No.2 had already been set aside in view of the Orders of this Tribunal dated 13th March, 2020. Thus the bar “to making the application” was not there. If subsequently on 28.09.2020, the earlier CIRP has been restored against Respondent No.2, that would not hit the making of the application which was already complete and even the Petition was allowed on 20.07.2020. Once the Application in IB 2721/2019 was allowed on 20th July, 2020, (read with continuation Order dated 16th October, 2020), management vests with the IRP/RP and subsequent developments in another matter will not make difference.
The appeal is dismissed.
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2021 (1) TMI 186 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI
Service of notice - Direction to the Respondent (who was not yet served) to settle the issue - HELD THAT:- If the Respondent is not served, it has to be ensured that the Respondent is served with the Notice. If the Respondent has been served and does not appear, the Adjudicating Authority would be required to consider if the Application under Section 9 of IBC is complete and if there is debt due and default as required by the law. If application is complete, it has to be admitted. The present order however directs the Respondent to settle the issue who had not appeared before the Adjudicating Authority, which is most inappropriate.
Petition is restored to the file of Adjudicating Authority (NCLT Bengaluru Bench) - appeal allowed by way of remand.
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2021 (1) TMI 185 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - delivery of demand notice - impugned order assailed primarily on the ground that the delivery of demand notice sent by the Appellant to Respondent-Corporate Debtor was refused by the Corporate Debtor - Appellant submits that refusal to accept demand notice would not amount to non-delivery of notice - HELD THAT:- An application under Section 9 of the ‘I&B Code’ can be filed by the Operational Creditor for initiation of CIRP only after expiry of period of 10 days from the date of delivery of notice contemplated under Section 8(1) of the ‘I&B Code’ which obligates upon the Operational Creditor to deliver a demand notice of unpaid operational dues upon the Corporate Debtor, once default occurs. The delivery of demand notice is intended to put the Corporate Debtor on notice so that in the event of there being a pre-existing dispute like in the form of a Civil Suit or arbitration proceedings pending in regard to the amount in respect whereof default is alleged to have been committed, the Corporate Debtor can bring such pre-existing dispute to the notice of the Operational Creditor. It is also aimed at providing the Corporate Debtor with an opportunity of clearing the liability in case he does not dispute the claim. It is by now well settled that delivery of demand notice in terms of Section 8(1) of the ‘I&B Code’ is a sine-quanon for initiation of CIRP at the instance of Operational Creditor who is entitled to file the application under Section 9 of the ‘I&B Code’ only after complying with the statutory requirements. In the instant case, the Appellant has been able to demonstrate that the Appellant issued the demand notice but the postal article was returned undelivered as the Corporate Debtor refused to accept delivery.
In view of the material relied upon by the Appellant, which does not appear to have been projected before the Adjudicating Authority to demonstrate that it was not a case of non-issuance/non-delivery of mandatory statutory notice under Section 8(1) of the ‘I&B Code’ on the part of the Appellant- Operational Creditor but a case of refusal on the part of the Corporate Debtor to acknowledge the notice, the learned Adjudicating Authority has erred in arriving at a finding that the demand notice was not served on the Corporate Debtor as the same was returned unserved. Had the notice been returned unserved on account of the addressee being not available on the given address or the venue of addressee being non-existent or the delivery of notice being frustrated because of some reason other than that attributed to the Corporate Debtor, the fact of notice having been returned unserved would amount to non-delivery of notice but in a case like the present one where it is the Corporate Debtor who refused to accept delivery of notice, the Adjudicating Authority would not be justified in coming to conclusion that notice has not been served on the Corporate Debtor.
The finding recorded by the Adjudicating Authority in regard to delivery of demand notice cannot be supported. The finding is erroneous, to say the least. The impugned order suffers from grave legal infirmity and is required to be set aside - matter remanded back to the Adjudicating Authority who may, after providing the Corporate Debtor an opportunity of settling the claim, pass an order of admission or otherwise of the application under Section 9 of the ‘I&B Code’ filed by the Appellant- Operational Creditor upon recording of satisfaction in regard to its completion and other legal requirements.
Appeal allowed by way of remand.
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2021 (1) TMI 184 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI
Approval of Resolution Plan - impugned order is assailed primarily on the ground that the Appellants were kept unaware of the CIRP qua the Corporate Debtor, thus being wholly unaware of the progress of Resolution Process with no details provided by the Resolution Professional as regards disbursal of fund towards their claims and that their claims have not received a fair and equitable treatment - HELD THAT:- Admittedly being Operational Creditors cannot claim that they have been treated unfairly or inequitably as regards distribution of funds provided under the approved Resolution Plan. It is not the case of the Appellants that they have been completely ignored or left out of consideration while distributing the upfront money provided under the plan approved by the Committee of Creditors with the requisite majority and finally passing the muster under Section 30(2) of the Insolvency and Bankruptcy Code, 2016, which stands approved by the Adjudicating Authority. Infact what emerges from the record and is borne out from page 45 of the Appeal paper-book (Financial Terms of the approved Resolution Plan) is that the Operational Creditors other than related parties and Statutory Creditors (the Class to which the Appellants belong) have been allocated 19.62% of the upfront payment of ₹ 3,720 crores while the Financial Creditors have been paid only 10.32% of the upfront payment.
This factual position being undisputed, it should not lie in the mouth of the Appellants that they have been discriminated against and treated unfairly. The approved Resolution Plan ensures restructuring and revival of the Corporate Debtor. The Appellants are also not justified in claiming that they have been excluded from the Resolution Process proceedings. Admittedly they have filed claims during CIRP proceedings and their claims have been partly admitted. In the face of this factual position, it is of no avail on their part to allege being excluded from CIRP proceedings - It is by now well settled that equitable treatment can be claimed only by similarly situated creditors. Operational Creditors stand at a different footing as compared to Financial Creditors. They are entitled to receive a minimum payment being not less than liquidation value, which does not apply to Financial Creditors.
Admittedly, Appellants are Operational Creditors and being different from the Financial Creditors and Secured Creditors, they were not entitled to the same treatment. Their claim to proceeds of sale of preference shares, not being part of the assets value or a component of upfront payment is not warranted as the Corporate Debtor has been restructured and revived and protected from being pushed into liquidation. It is futile to contend on their behalf that the Financial Creditors being lenders having huge financial resources can take a bigger hair cut as compared to the financial condition of the Appellants. The distribution mechanism adopted in the instant case being not only conformable to the mechanism envisaged under Section 53 of the I&B Code but also according priority in upfront payment to Operational Creditors cannot be termed unfair or inequitable qua the Appellants – Operational Creditors.
Appeal dismissed.
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2021 (1) TMI 183 - NATIONAL COMPANY LAW TRIBUNAL , AHMEDABAD BENCH
Release of attached property - Inconsistency between IB Code and Gujarat VAT Act - attachment of raw materials, stock, machinery, factory building and land of the Corporate Debtor, during the period of CIRP - Applicant's contention is that if the assets/ properties are under charge/ attachment, then in that case, Corporate Debtor's asset/ property cannot be auctioned under Liquidation process and as such the very object of the IB Code will get frustrated - HELD THAT:- Admittedly, the assets/ property of the Corporate Debtor is under attachment/ charge of the Respondent. In view of Section 238 of the IB Code, when there is/ are any inconsistency between IB Code and any other law, IB Code will prevail - Under the facts and circumstances, the application so filed is partially allowed and Respondent No. 1 is hereby, directed to release the property of the Corporate Debtor so attached, in favour of the Liquidator and further directed to claim their dues before the Liquidator.
Applicant is hereby directed to file an application before the competent authority i.e. Mamlatdar cum Executive Magistrate, Taluk Seva Sdan, Nr. Vanikar Club, Mehsana for appropriate order, as records are required to be rectified by the revenue authorities for which this Bench has no jurisdiction, relying upon the judgement of Hon'ble Supreme Court in PR. COMMISSIONER OF INCOME TAX VERSUS MONNET ISPAT AND ENERGY LTD. [2018 (8) TMI 1775 - SC ORDER] as Section 238 of IB Code shall prevail, whenever there is any inconsistency between IB Code and any other law.
Application disposed off.
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2021 (1) TMI 149 - NATIONAL COMPANY LAW TRIBUNAL , MUMBAI BENCH
Maintainability of application - initiation of CIRP - Corporate Debtor committed default in making payment of its dues - existence of debt or dispute or not - period from 1st January, 2019 to 31st March, 2019 - HELD THAT:- There is no reply from the side of the Corporate Debtor despite of intimation of the date of hearing by the Petitioner, the Corporate Debtor failed to appear, despite service of notice, as such the bench decided to hear the matter ex-parte and posted the matter for final hearing. The Petitioner also produced the Ledger Account of the Corporate Debtor for the period 01.04.2019 to 24.10.2019 wherein it was shown that a sum of ₹ 49,41,663/- is due from the Corporate Debtor. The assurance of the Corporate Debtor to pay the said outstanding dues amounts to admission of its liability. The Corporate Debtor were in breach of terms and conditions of contract in not complying with the 90 days notice period as required under the Subscription form and also defaulted the payment terms and therefore there is a clear liability of payment of monies dues under the several invoices raised by the petitioner. The corporate Debtor having availed the services, failed to pay the monies due under the invoices.
This bench hereby prohibits the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgement, decree or other in any court of law; transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.
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2021 (1) TMI 145 - NATIONAL COMPANY LAW TRIBUNAL, CHENNAI BENCH
Liquidation of Corporate Debtor - extension of CIRP period beyond the 330 days period was declined - Section 33(1) of IBC, 2016 - HELD THAT:- Section 33(1) of IBC, 2016 contemplates that this Tribunal can pass an order of Liquidation of the Corporate Debtor if the maximum period permitted for the completion of the CIRP is over - Admittedly, in the present case, the extension of CIRP period beyond the 330 days period was declined and not granted by this Tribunal and as such by operation of Section 33(1)(a) of IBC, 2016, the Corporate Debtor is necessarily required to be ordered for liquidation as stipulated under 33(1)(b)(i) of IBC, 2016.
During the course of submissions, it was brought to the knowledge of this Tribunal that the promoters have submitted a Resolution plan and till such time the Resolution plan is considered this Tribunal should abstain from passing an order of Liquidation - However in the present case, it is to be noted that the 330 days period of CIRP has already expired and the CoC in its 6th meeting held on 27.02.2020 has unanimously resolved to liquidate the Corporate Debtor. Further, even during the Liquidation process, subject to Section 29A of the IBC, 2016 and as per Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016, a 90 day time period is provided to submit a Scheme as contemplated under Section 230 of the Companies Act, 2013, and if the Promoter / Director of the Corporate Debtor is otherwise found eligible can very well submit a Scheme for the revival of the Corporate Debtor.
The Liquidation of Corporate Debtor is ordered - Liquidator shall strictly act in accordance with the provisions of IBC, 2016 and the attendant Rules and regulations including Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017 as amended upto date enjoined upon him - application disposed off.
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2021 (1) TMI 144 - NATIONAL COMPANY LAW TRIBUNAL , BENGALURU BENCH
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- Since the Instant Company Petition is at admission stage, and the Parties are willing to settle the issue in question, we are inclined to dispose of the Company Petition by directing the Parties to settle the issue, as proposed, by granting liberty to the Petitioner to file fresh Company Petition case, in case, the Respondent failed to settle the issue in question.
Petition disposed off.
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2021 (1) TMI 143 - NATIONAL COMPANY LAW TRIBUNAL , CHANDIGARH BENCH
Seeking exclusion of 102 days of the CIRP period for the purpose of calculating 180 days - Section 60(5) read with Rule 11 and Regulation 40C of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The Hon'ble National Company Law Appellate Tribunal in IN RE : SUO MOTO [2020 (6) TMI 495 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] where it was held that the period of lockdown ordered by the Central Government and the State Governments including the period as may be extended either in whole or part of the country, where the registered office of the Corporate Debtor may be located, shall be excluded for the purpose of counting of the period for 'Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016, in all cases where 'Corporate Insolvency Resolution Process' has been initiated and pending before any Bench of the National Company Law Tribunal or in Appeal before this Appellate Tribunal.
The Insolvency and Bankruptcy Board of India, inserted Regulation 40C to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, vide notification dated 29.03.2020 held that Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.
The Insolvency and Bankruptcy Board of India, vide notification dated 20.04.2020, inserted Regulation 47 A to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and the said regulation states that Subject to the provisions of the Code, the period of lockdown imposed by the Central Government in the wake of Covid-19 outbreak shall not be counted for the purpose of computation of the timeline for any task that could not be completed due to such lockdown, in relation to any liquidation process.
Accordingly, the period of lockdown w.e.f. 25.03.2020 to 31.07.2020 is excluded from the calculation of 180 days which was originally expiring on 25.08.2020 - Application disposed off.
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2021 (1) TMI 142 - NATIONAL COMPANY LAW TRIBUNAL , CHENNAI BENCH
Exclusion of the time period in relation to CIRP - inherent powers of this Tribunal under Rule 11 of NCLT Rules, 2016 - HELD THAT:- Taking into consideration the decision of the Hon'ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT] as well as the Hon'ble NCLAT rendered in IN RE : SUO MOTO [2020 (6) TMI 495 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] following the matter of QUINN LOGISTICS INDIA PVT. LTD. VERSUS MACK SOFT TECH PVT. LTD., MOHD. SABIR PARVEZ AND MR. M.L. JAIN, (RESOLUTION PROFESSIONAL) [2018 (6) TMI 904 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] in relation to the exclusion of the time period in relation to CIRP analogy being adopted in the implementation of the Resolution Plan, this Tribunal allows the Application by excluding the time period from 15.03.2020 to 30.06.2020 for the purpose of implementing the Resolution Plan.
Application allowed.
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2021 (1) TMI 141 - NATIONAL COMPANY LAW TRIBUNAL , HYDERABAD BENCH
Preferential Transactions - direction to related parties to pay sums in respect of benefits received - Transactions Defrauding Creditors or not - fraudulent and/or wrongful trading has been done or not - contributions to the assets of the Corporate Debtor - HELD THAT:- Section 43 of the I&B Code deals with 'Preferential transactions and relevant time'. To be made clear a transaction will not come as a preferential transaction, if such transaction was made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee.
The applicant has given details of summary of transactions in tabular form in the application. One transaction under challenge is under section 43 of the I&B Code on the ground that it is a preferential transaction in respect of ₹ 10 lacs. According to the Liquidator an amount of ₹ 10 lacs was taken from Smt. Yerra Padmaja during the financial year 2016-17 and the same was repaid. The contention of the Liquidator is that this is an unsecured loan, which was given preference over secured loans. Therefore, this transaction is in the nature of preferential transaction and this transaction is to be declared as preferential transaction. The respondents have given details regarding this transaction. The case of the respondents is that this money was borrowed from Smt. Yerra Padmaja in order to meet urgent needs of the company, viz. to pay the fee to the Arbitrators on 22.07.2016 and for other urgent payments. This amount was credited into Corporation Bank account on the very same day. The respondents have given details in their reply at pages 22 to 24. The details furnished by the respondents were already stated in the Counter, which are discussed supra. Therefore, there is no need to reiterate the explanation given by the respondents. The amount was borrowed in connection with payment to the Arbitrators, who are dealing with an issue in the matter of Vishwa-BVSR JV Vs. Ministry of External Affairs, wherein the claim involved was ₹ 258.23 crores in three projects/packages. Ledger copies of three Arbitrators were also enclosed as ANNEXURE-2 COLLY. The said amount was repaid to Smt. Yerra Padmaja on 06.08.2016. Therefore, this cannot be treated as a preferential transaction.
The next contention of the Liquidator is that the respondents while in the management of the corporate debtor had written off an amount of ₹ 3.78 crores pertaining to Security Deposits, such as, Security Deposit (Works), VAT Deposit against assessment, Electricity Deposit, Excise Duty Deposit and other deposits. The case of the Liquidator is that this writing off is a pre-meditated move to keep the assets of the corporate debtor beyond the reach of any persons, who is entitled to make a claim against it. Hence the transaction is intended to defraud the creditors, which is to be annulled under section 49 of the I&B Code - As far as these transactions are concerned the respondents have given a detailed reply commencing from pages 24 to 54 of their counter. The respondents narrated the circumstances under which Security Deposits and other deposits were written off. It is not necessary to reproduce the detailed explanation given by the respondents with regard to writing off the Security Deposits and other deposits. The deposits traced back to the year 2005. These were the deposits made in 2005 in some cases. We are very much convinced with regard to the detailed explanation given by the respondents as to why Security Deposits relating to various projects were written off from time to time. The contention of the Liquidator is that these amounts were written off with a view to defraud the creditors. We are unable to agree with the opinion taken by the Liquidators that these are the transactions intended to defraud the creditors. The company was expected to write off these deposits in the circumstances stated by the respondents. We do not find any fraud involved in writing off the deposits in relation to various projects from time to time.
The respondents have given detailed explanation with regard to Security Deposit in respect of various projects. The explanation given by the respondents that projects were complete, therefore, the Security Deposits were invariably to be written off. The respondents also gave detailed explanation as to why the corporate debtor has written off the VAT Deposits and further reasons are given for writing off Electricity Deposits, Road Restoration Deposits and Rent Deposits. We do not find any ground to consider these transactions involving writing off the deposits as fraudulent transactions intended to defeat the interest of the creditors.
The last contention of the learned counsel for the Liquidator is that there was writing off an amount of ₹ 10 lacs on the ground that there were cash thefts at three sites - HELD THAT:- The employee involved in not handing over the money was the Project Manager. However, the Project Manager offered to adjust the amount against his salary, but no amount was due to him towards salary. Therefore, this amount was written off. Similarly, as regards the amount of ₹ 78,039/- concerning Agar Electrical site the respondents stated that the amount was stolen and an FIR was lodged. Copy of the FIR is also not available; the same copy is available in the records of the corporate debtor. The applicant can obtain a copy of the FIR from the records of the corporate debtor. This is the explanation given by the respondents. We are unable to agree with the view taken by the Liquidator that this is a fraudulent transaction liable to be annulled under section 66 of the I&B Code. So considering the detailed explanation the application deserves no consideration and it is liable to be dismissed.
Application dismissed.
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