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Insolvency and Bankruptcy - Case Laws
Showing 41 to 60 of 128 Records
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2021 (2) TMI 1173
Maintainability of application - initiation of CIRP - Time Limitation - right to file application was surviving on the date of its filing before the Adjudicating Authority or not? - HELD THAT:- It is abundantly clear that the financial debt which the Corporate Debtor owed to the Assignor- State Bank of India was declared NPA prior to 16th January, 2006 i.e. the date when the financial debt came to be assigned to Appellant- ‘Kotak Mahindra Bank Limited’. It also emerges from the record that the Assignor- State Bank of India had filed recovery proceedings before DRT, Jabalpur somewhere in year 2000 and the final order came to be passed on 23rd October, 2002 culminating in issuance of Recovery Certificate which is pending execution before the Recovery Officer. Thus, computed from the date of classification of account of Corporate Debtor as NPA or even from the date of issuance of Recovery Certificate, filing of application under Section 7 on 29th October, 2018 is beyond three years. It is by now settled that Article 137 of the Limitation Act, 1963 governs filing of an application under Section 7 of the ‘I&B Code’.
The default having occurred over three years prior to filing of application, prayer of Appellant to trigger CIRP against the Corporate Debtor has rightly been declined - Appeal dismissed.
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2021 (2) TMI 1169
Exclusion of period consumed in legal proceedings before the Adjudicating Authority for purposes of calculation of CIRP period - HELD THAT:- While the Adjudicating Authority deemed it fit, in the peculiar circumstances of the case, to extend time by 40 days beyond the extended time of 330 days for bringing the CIRP to a logical conclusion, the Adjudicating Authority has not taken care to exclude the period of judicial intervention viz. the period spent in pursuing the application seeking extension for exclusion to render the exercise productive. Mr. Abhishek Anand, learned counsel for the Appellant has brought to our notice that as a result of exclusion of period of judicial intervention not been allowed, the extension granted has virtually proved to be futile and meaningless as even the extended period expired on 19th February, 2021.
The period of judicial intervention w.e.f 21st October, 2020 till 9th November, 2020 (the period covering the time spent in pursuing the extension application in the first instance) and 12th January, 2021 to 3rd February, 2021 (i.e. the period for which the orders were reserved by the Adjudicating Authority on the application) is justifiably required to be excluded while counting and computing the period of CIRP - Appeal disposed off.
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2021 (2) TMI 1157
Territorial Jurisdiction to entertain the petition - Seeking enforcement and execution of partial Award - Foreign Award or not - Jurisdiction of Courts where the Award-debtor resides or where the assets, which are subject-matter of the Award are situated - Whether this Court has territorial jurisdiction to entertain the present petition? - HELD THAT:- The term “subject-matter of the arbitration” cannot be confused with “subject-matter of the suit”. The term “subject-matter” in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process.
Issue of territorial jurisdiction of a Court in the context of Sections 47 and 48 of the Act again came up for consideration before the Bombay High Court in WIRELESS DEVELOPERS INC VERSUS INDIAGAMES LTD [2012 (1) TMI 391 - BOMBAY HIGH COURT]. Relying on the judgment in case of TATA INTERNATIONAL LTD., MUMBAI VERSUS TRISUNS CHEMICAL INDUSTRY LTD. [2001 (10) TMI 1187 - BOMBAY HIGH COURT], the Court in clear words observed that at the stage of arbitration the subject-matter would be a contract and therefore factors such as place where the contract was entered into and related issues would become material to decide the territorial jurisdiction. However, once the arbitration concludes, and enforcement is sought, the only question that needs determination is the subject-matter of the Award as the disputes inter se the parties translated into Arbitration proceedings and have culminated into an Award. Therefore, it is with reference to the Award that the jurisdiction of the Court would have to be seen and decided.
By virtue of the Amendment, the definition of ‘Court’ under Section 2(1)(e) of the Act stood amended in relation to International Commercial Arbitration and a Proviso was inserted to Section 2(2) making the provisions of Sections 9, 27 and 37(3) and 37(1) (a) of the Act applicable to International Commercial Arbitrations even if the place of arbitration is outside India and the Arbitral Award is enforceable under Part II of the Act. Significantly, the definition of ‘Court’ as contained in Explanation to Section 47 of the Act was also amended to confer jurisdiction on the High Court to decide the questions forming the subject-matter of the Award. The object behind the Amendments were evidently to provide an efficacious remedy to a party seeking interim relief against the other party whose assets are located in India and there is a likelihood that the other party may dissipate its assets in the near future - it is clear from a reading of the provisions of Explanation to Section 47 of the Act and the various judgments referred to above that ‘Court’ as defined in under Section 47 of the Act is a Court distinct from a Court defined under Section 2(1)(e) of the Act. The position of law in this respect, in my view, is unchanged post the 2015 Amendment to the Act. The Court while enforcing the Foreign Award is concerned, post the Amendment, with the questions forming subject-matter of the ‘Award’ which can only be construed to mean and connote the ‘Relief’ given by the Award and can be a direction to pay money or a direction of specific performance etc.
Subject-matter of the Award in question in the present case - HELD THAT:- The subject-matter of the Award would determine the territorial jurisdiction of this Court in as much as in case the relief is in the nature of a money Award, the place of location of assets of the judgment debtor would give jurisdiction to the Court, while in case it is in the nature of specific performance then the considerations of the situs of the shares, registered office of the judgment debtor, etc. as argued by Respondent No.1 would be the relevant factors. Counsel for Respondent No.1 has conceded fairly during the course of arguments that in case the Award is a money Award, this Court would have jurisdiction as then the place of location of the assets of the Judgement Debtor shall be the determinative criterion for the territorial jurisdiction of the Court.
The learned Senior Counsel for the Petitioner is right in its argument that the Award in question is a money Award and not an Award for specific performance. The two Clauses referred to above are clearly in the nature of exit clauses which entitled the Petitioner to sell shares in the event of default by the Respondents. This was not dependent on any corresponding / reciprocal obligation on the part of the Respondents and in fact the Respondents were bound by the terms of the clauses to buy back the shares and pay the money to the Petitioner of a value equivalent to the fair market value of the shares plus 25% IRR. The direction to the Petitioner to return the title documents, was only a consequential direction once the shares were sold to Respondent No.1 and the money was received by the Petitioner.
It is evident from a reading of the affidavit that at this stage the Petitioner is not proceeding against Respondent No.2. Although it may be completely irrelevant at this stage, however, the Court prima facie finds merit in the contention of the Petitioner that the shareholding of the Petitioner in Respondent No.2 is an asset of the Petitioner and Section 18 of the IBC, inter alia, applies to assets over which the Corporate Debtor has ownership rights, besides the fact that the NCLAT order has directed that Respondent No.2 is to continue functioning as a going concern and the Petitioner’s shares in any case are dematerialized and not in a physical form and thus do not require an instrument of transfer / share transfer form.
Since this Court has held that this Court has Territorial jurisdiction to entertain the petition, the petition be now listed before the Roster Bench for further proceedings on 15.03.2021, subject to orders of Hon’ble the Chief Justice.
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2021 (2) TMI 1151
Seeking direction to Appellant not to demand the release of bank guarantee amount from the Respondent No. 2, in view of the moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the ‘M/s J.P. Engineers Private Limited.’ (Corporate Debtor) Respondent No. 1 - HELD THAT:- Admittedly the Appellant had entered into an agreement for sale and purchase of aluminium products for the period 01.04.2019 to 31.03.2020 with J.P. Engineering’s (Corporate Debtor). For ensuring the payments the Respondent No. 2 issued bank guarantee dated 22.04.2019 for an amount of ₹ 1 Crores 60 Lakhs in favour of the Appellant. The Respondent No. 2 vide letter dated 21.10.2019 extended the period of guarantee till 21.04.2020. The Appellant on 03.03.2020 sent a letter to the Respondent No. 2 for invocation of the bank guarantee - Ld. Adjudicating Authority rightly held that bank guarantee in question is a financial bank guarantee and not a performance bank guarantee.
Whether the financial bank guarantee can be invoked after issuance of moratorium under Section 14 of the IBC? - HELD THAT:- After substitution of Sub-Section 3(b) the provision of Section 14(1) of the IBC shall not apply to surety in the contract of guarantee to a Corporate Debtor - This amendment has been made on the recommendation of Report of Insolvency Law Committee March, 2018. In para 5.10 & 5.11 of the Report of Insolvency Law Committee specifies that the assets of the surety are separate from those of the Corporate Debtor and proceedings against the Corporate Debtor may not be seriously impacted by the actions against the assets of third parties like sureties. In Para 5.11 of the Report of Insolvency Law Committee concluded that Section 14 of the IBC does not intend to bar actions against assets of guarantors to the debts of the Corporate Debtor and recommended that explanation to clarify this may be inserted in Section 14 of the IBC. The scope of moratorium may be restricted to the assets to the Corporate Debtor only.
Validity of argument that the amendment of 2018, which makes it clear that Section 14(3), is now substituted to read that the provisions of sub-section (1) of Section 14 shall not apply to a surety in a contract of guarantee for corporate debtor - HELD THAT:- The object of the IBC is not allowed such guarantors to escape from an independent and co-extensive liability to pay off the entire outstanding debt, which is why section 14 of the IBC is not applied to them. Also held that contract of guarantee is between the creditor and principal debtor and the surety whereunder the creditor has a remedy in relation to his debt against both the principal debtor and surety. As per Section 128 of the Contract Act, 1872 the liability of surety is coextensive with that of principal debtor and the creditor may go against either principal debtor or surety or both in no particular sequence.
Corporate Debtor has issued bank guarantee for ensuring the price of goods. The bank guarantee is irrevocable and unconditional and payable on demand without demur. The assets of the surety are separate from those of the corporate debtor, and proceedings against the corporate debtor may not be seriously impacted by the actions against assets of third party like surety. Bank guarantee can be invoked even during moratorium period issued under section 14 of the IBC in view of the amended provision under section 14 (3)(b) of the IBC - Ld. Adjudicating Authority has not considered the aforesaid amended provision. Therefore, the impugned order is not sustainable in law.
It is declared that the bank guarantee in question can be invocated/encashed even during the moratorium period under section 14 of the IBC against the Corporate Debtor (Respondent No. 1) - application allowed.
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2021 (2) TMI 1147
Maintainability of application - initiation of CIRP by Operational Creditors - Adjudicating Authority has dismissed the application under Section 9 of IBC filed by the Operational Creditor (Appellant) as being barred by limitation of time - non-fulfilment of conditions of Limitation Act - HELD THAT:- Under Sub-Section 2 of Section 14 of the Limitation Act, in computing the period of limitation, exclusion of time can be claimed when in the court of first instance or of Appeal or revision, against the same party and for the same relief, such proceedings are prosecuted in good faith which the said court is unable to entertain, from defect of jurisdiction or other cause of like nature - Admittedly, the Appellant was not party in the winding up Petition. Thus, this case may be of non-joinder of parties and not the mis-joinder of parties. The Petition was dismissed by the Hon’ble High Court on the ground that the question of fact involved in the petition as to whether the Respondent Company is liable to pay the amount or not, which can only be proved by detailed evidence. Thus, the Appellant has not fulfilled any of the conditions enumerated in Sub-Section 2 of Section 14 of the Limitation Act - thus it is not correct to accept the contention of the Appellant that the winding-up petition No.6 of 2015 was dismissed on the ground of mis-joinder of parties, and the benefit of Section 14 of the Limitation Act, 1963 cannot be allowed to appellant.
Date of filing application under Section 9 of the IBC - HELD THAT:- In the impugned order, the winding up petition was filed in the High Court of Allahabad on 10.7.2015. Since, it was taken up for hearing, we accept that the winding up petition was filed within three years from the date of default, which appears to be 12.7.2012 (which is the date of clearing of the last payment cheque dated 10.6.2012). Since the benefit of Section 14 of the Limitation Act, 1963 is not available to the Appellant and no exclusion of time period spent in prosecuting the winding-up petition is possible, the time period starting from the date of default i.e. 12.07.2012 to the date of filing of application under Section 9 of IBC i.e. 06.01.2020 needs to be explained for deriving the benefit of extension of limitation under Section 5 of Limitation Act, 1963.
Relaxation under Section 5 of the Limitation Act, 1963 cannot be allowed for unexplained period of about two years and ten months.
The delay in filing the application was not adequately explained as required in law - application filed by the Appellant under Section 9 of the IBC is very clearly out of limitation - appeal dismissed.
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2021 (2) TMI 1096
Stay on various action such as sale of mortgaged property till completion of Liquidation proceedings - Scope of Liquidation estate - Appellant is aggrieved by the order of Adjudicating Authority as they have directed the Appellant Bank not to take any coercive steps such as sale of the properties mortgaged to the bank by the Respondent Companies till the completion of the Liquidation proceedings of the corporate debtor - HELD THAT:- The assets of the subsidiaries are outside the purview of liquidation estate and as such cannot form part of the liquidation estate as per section 36 (4) of IBC - The Adjudicating Authority and Appellate Authority being the creation of statute will have to ensure generally all the statutory compliances, unless it goes against the principle of natural justice and the intention of the legislature.
Since, these exclusive securities were not forming part of liquidation estate, correctly done by Liquidator to comply with the provisions of Section 36 of the Code and precedence of this Appellate Tribunal already exists & the Code vide Section 36(4)(d) prohibits inclusion of assets of Indian or Foreign subsidiary of the Corporate Debtor in the liquidation estate, we have to set aside the impugned order of the Adjudicating Authority and allow the present appeal.
Appeal allowed.
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2021 (2) TMI 1094
Maintainability of the Application in the name of proprietorship firm - Jurisdiction - power of proprietorship firm to file a claim - legal entity or not - HELD THAT:- Although the Adjudicating Authority in para – 15 referred to part of dispute raised by the Respondent, the Adjudicating Authority has not dealt with or decided the same. As such, in the Appeal, we are not going into the merits of the Application under Section 9 of IBC.
Maintainability of the Application in the name of proprietorship firm - HELD THAT:- Section 2(f) of IBC in Judgement in the matter of NEETA SAHA VERSUS RAM NIWAS GUPTA AND ORS. [2020 (2) TMI 1442 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] where the Section provides that the provisions of this Code shall apply to partnership firms and proprietorship firm. - However, without entering into legal issue if such Trade Name is “person”, we find that it was a curable defect. The learned Counsel for Appellant has rightly relied on the Judgement in the matter of “Neeta Saha”. The Adjudicating Authority should have given opportunity to the Appellant to appropriately amend the Application in part – 1 of the Format where name of the Operational Creditor is shown. Mr. Piyush Bangar can show his name and suffix that he is sole proprietor of M/s. Mateshwari Minerals.
The matter is remitted back to the Adjudicating Authority. The Adjudicating Authority will give opportunity to the Appellant to correct the description of the name of the Operational Creditor in the Format - Appeal allowed by way of remand.
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2021 (2) TMI 1090
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Debtor - Operational Creditor - designing of advertisement and allied services provided - existence of dispute regarding the operational debt between the corporate debtor and operational creditor prior to the filing of application by the Operational Creditor under Section 8 of the IBC.
Whether Katalist View paper Pvt. Ltd. is the Corporate Debtor and Inspired Traveller (proprietor Saurav Keshan) the Operational Creditor with regard to the designing of advertisement and allied services provided? - HELD THAT:- There is certainly no dispute regarding the quality of work and service given or any other aspect of the services provided by the Operational Creditor to the Corporate Debtor. This is also supported by the fact that Katalist View paper Pvt. Ltd. has been making payments as per invoices raised by Inspire Travellers and only later some payments remained, when this imaginary dispute has been raised. Reading the e-mails the impression we have gathered is that after Corporate Debtor placed Purchase Orders and as per the purchase Orders services were rendered by Operational Creditor, Corporate Debtor released some payments but later made Operational Creditor run for its dues to other entities claiming amount had to come from Group M. In such situation only because Operational Creditor approached other entity does not mean that it was a tripartite relationships. It was plain and straight matter. Corporate Debtor placed Purchase Order and Operational Creditor rendered service accordingly which has only been partly paid by Corporate Debtor. In absence of any formal agreement entity placing Order for services is the entity liable to pay when matter is under I&B Code, 2016 - it is quite evident that some dues as claimed by the Operational Creditor Inspired Travellers remained unpaid by the Corporate Debtor Katalist View paper Pvt. Ltd.This responsibility cannot be shifted or apportioned to any other party. Whatever informal and internal arrangements exist between Honor, Group M and Katalist View paper Pvt. Ltd. cannot affect or impact status of Inspired Traveller as Operational Creditor and also the relationship of Inspired Traveller with Katalist View paper Pvt. Ltd. as Corporate Debtor.
It is abundantly clear that Appellant M/s Katalist View paper Pvt. Ltd. is the Corporate Debtor and Inspired Traveller (with its proprietor Saurav Keshan) is the Operational Creditor in accordance with the definitions given in the IBC.
Whether any real dispute exists regarding the operational debt between the corporate debtor and operational creditor prior to the filing of application by the Operational Creditor under Section 8 of the IBC? - HELD THAT:- A dispute is sought to be raised by alluding to the trail of email exchanged between all the parties concerned, which are attached in the appeal paper book on pages 49-71. A close examination of these emails makes it clear that the dispute that is sought to be shown is a creation as an afterthought to escape from the responsibility of making good the operational debt owed by Katalist (the Corporate Debtor). A detailed discussion on this point has already been done.
It stands to reason that the Operational Creditor Inspired Traveller should not be made victim of the unresolved issues of accounts reconciliation between Group M and Katalist View paper Pvt. Ltd. This dispute has no relevance to the provision of services or its quality by Inspired Traveller and, therefore, it is not a dispute as covered under Section 5(6) of IBC. Since it is not a pre-existing dispute regarding the services rendered by the Operational Creditor and hence, it will have no cover of help from the judgment of the Hon’ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT].
Thus, the Appellant has not been able to make a water-tight case in his favour by either refuting the relationship of Corporate Debtor with Operational Creditor (between itself and Inspired Traveller) or establish pre-existing dispute as is required in Section 8 (2)(a) of the IBC to escape from the rigours of CIRP - there is no pre-existing dispute with regard to the services rendered and considering the purchase orders issued by the Corporate Debtor, in the absence of any documents to the contrary establishing liability to the contrary, the Corporate Debtor was/ is liable for the Operational Debt. The dispute created in the e-mails by the Corporate Debtor to shift liability to Group M is not true dispute with regard to the services taken from the Operational Creditor and services rendered by the Operational Creditor. The defence raised by the Appellant is spurious and illusory and thus can be no basis to deny admission of the Application under Section 9.
There are no merit in the appeal - appeal dismissed - decided against appellant.
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2021 (2) TMI 1051
Contempt Jurisdiction - Approval of Resolution Plan - whether recourse to the contempt jurisdiction is valid and whether it should be exercised in the facts of this case? - HELD THAT:- Undoubtedly, the conduct of DVI has not been bona fide. The extension of time in the course of the judicial process before this Court enures to the benefit of DVI as a resolution applicant whose proposal was considered under the auspices of the directions of the Court. DVI attempted to resile from its obligations and a reading of its application which led to the passing of the order of this Court dated 18 June 2020 will leave no doubt about the fact that DVI was not just seeking an extension of time but a re-negotiation of its resolution plan after its approval by the CoC. Then again, despite the order of this Court dated 18 June 2020 rejecting the attempt of DVI, it continued to persist in raising the same pleas within and outside the proceedings before the NCLAT. The conduct of DVI is lacking in bona fides.
The issue however is whether this conduct in raising the untenable plea and in failing to adhere to its obligations under the resolution plan can per se be regarded as a contempt of the order of this Court dated 18 June 2020. DVI was undoubtedly placed on notice of the order that should it proceed in such terms, it would invite the invocation of the contempt jurisdiction. Having said that, it is evident that the order of this Court dated 18 June 2020 rejected the IA moved by DVI and as a necessary consequence, the basis on which the reliefs in the IA were sought. Therefore correctly, it has been now stated on behalf of the DVI that it will not set-up a plea of force majeure in view of the dismissal of its IA on 18 June 2020.
However lacking in bona fides the conduct of DVI was, we must be circumspect about invoking the contempt jurisdiction as setting up an untenable plea should not in and by itself invite the penal consequences which emanate from the exercise of the contempt jurisdiction. Likewise, the default of DVI in fulfilling the terms of the resolution plan may invite consequences as envisaged in law. On the balance, we are of the considered view that it would not be appropriate to exercise the contempt jurisdiction of this Court - Since DVI is in appeal before the NCLAT, we express no opinion on the merits of the submission. The NCLAT will take a view on the tenability and merits of the submission of DVI that the conditions precedent under the resolution plan have not been fulfilled after hearing the parties. This is not an issue which arises before the Court in the present proceedings either upon the application for rectification moved by DVI or the contempt petition moved by the CoC.
There is no merit in the application for rectification moved in appeal shall stand dismissed.
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2021 (2) TMI 1027
Validity of decision of the first respondent/RP in rejecting the Expression of Interest (EOI) submitted by the applicant for submission of resolution plan in respect of the corporate debtor - Section 60(5) of the I&B Code, 2016 - undischarged insolvent and an undischarged insolvent - relevant date for excess investment in the plant and machinery of the corporate debtor - HELD THAT:- Section 240A exempted the promoters of the MSME to be the resolution applicants of the same corporate debtor for which the resolution plans are sought to be invited. Section 240A has not exempted the corporate debtor itself, even though it happens to be an MSME, to be a resolution applicant to itself. In the present case, M/s Bhandari Deepak Industries Private Limited which is the corporate debtor itself submitted EOI for submitting resolution plan to itself i.e. for Bhandari Deepak Industries Private Limited. This is not permissible under the Scheme of I&B Code, 2016. The applicant has not disputed the fact of submission of EOI by the corporate debtor itself, i.e. Bhandari Deepak Industries Private Limited itself, and not by its promoters, i.e. Mr. Deepak Bhandari and Mrs. Anita Bhandari. It is also not the case of the applicant at any stage that submitting the EOI on behalf of the corporate debtor Bhandari Deepak Industries Private Limited was a mistake and that the actual persons submitting the EOI were Mr. Deepak Bhandari and Mrs. Anita Bhandari, the promoters of the corporate debtor. Once a CP is admitted, the corporate debtor is to be represented by the RP alone and none else such as Suspended Directors of the Board of the corporate debtor. Therefore, we do not find any illegality in the RP rejecting the EOI submitted on behalf of the corporate debtor, M/s Bhandari Deepak Industries Private Limited itself.
Admittedly, the corporate debtor Bhandari Deepak Industries Private Limited is an undischarged insolvent and an undischarged insolvent is ineligible to be the resolution applicant under Clause (a) of Section 29A and Section 240A has not exempted any person including MSME from the applicability of Clause (a) of Section 29A - the action of RP upheld.
Relevant date for excess investment in the plant and machinery of the corporate debtor - Another reason for rejection of the EOI of the applicant given by the RP was that the corporate debtor does not fall under the definition of MSME or ME as defined in MSME Development Act, 2006, since the investment in plant and machinery as on the date of commencement of CIRP was ₹ 14,14,82,754/-, which is beyond the prescribed limit - HELD THAT:- The relevant date for consideration of exemption from applicability of Clauses (c) and (h) of Section 29A, in terms of Section 240A is the date of submission of EOI but not the date of consideration of the plan by the COC. Hence, the contention of the applicant, that the issue with regard to excess investment in the plant and machinery of the corporate debtor cannot be considered as on the date of submission of EOI, is untenable.
Application dismissed.
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2021 (2) TMI 1002
Seeking extension of CIRP period by 90 days beyond 180 days after excluding the lockdown period - Section 12(2) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 40 of the IBBI Regulations 2016 - HELD THAT:- The Hon'ble Supreme Court of India in Suo Motu Writ Petition IN RE : COGNIZANCE FOR EXTENSION OF LIMITATION [2020 (5) TMI 418 - SC ORDER] has held that a period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by this Court in present proceedings.
Thereafter, 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 has 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.
Similarly, 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.
The period of CIRP is extended by 90 days, beyond 180 days after excluding the period from 25.03.2020 to 31.07.2020 - application allowed.
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2021 (2) TMI 1000
Professional Misconduct - Validity of accepting the assignment as the Interim Resolution Professional (IRP) in the Corporate Insolvency Resolution Process (CIRP) without holding a valid Authorisation for Assignment (AFA) from his IPA - contraventions of sections 208(2)(a) & (e) of the Insolvency and Bankruptcy Code, 2016 (Code), regulations 7(2)(a) & (h) and 7A of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) read with clauses 1, 2, 11, 12 and 14 of the Code of Conduct contained in the First Schedule - HELD THAT:- It is clear from the Regulation that one of the essential condition for undertaking any assignment by an IP is that he should have a valid AFA which is issued by the IPA with which he is enrolled. In other words, without AFA, an IP is not eligible to undertake any assignments or conduct various processes thereof. Regulation 7A was inserted in the IP Regulations vide notification dated 23rd July 2019.
The bye-laws of Indian Institute of Insolvency Professionals of ICAI defines in para 4(1)(aa) the expression "authorisation for assignment" as an authorisation to undertake an assignment, issued by an insolvency professional agency to an insolvency professional, who is its professional member, in accordance with its bye-laws regulation. An application for grant of AFA can be made by the IPs to the IPA under para 12A of said bye-laws. An IP who is more than 70 years of age is ineligible to make an application for AFA under para 12A (2)(e) of the said bye-laws.
Section 208(2) of the Code provides that every IP shall take reasonable care and diligence while performing his duties and to perform his functions in such manner and subject to such conditions as may be specified. Further, the Code of Conduct specified in the First Schedule of the IP regulations enumerates a list of code of conduct for insolvency professionals including maintaining of integrity and professional competence for rendering professional service, representation of correct facts and correcting misapprehension, not to conceal material information and not to act with malafide or with negligence - DC finds that an order by the Disciplinary Committee of the IPA dated 1st December 2020 has been passed disposing the SCN issued by IPA dated 31st August 2020 to Mr. Samson, on the issue of accepting assignment as IRP after 31st December, 2019 without holding a valid AFA in the CIRP of the CD, wherein Mr. Samson was not held guilty of Professional Misconduct as Mr. Samson had given his consent on 4th April, 2019 and appointment of IRP was confirmed by the AA based on his written consent.
The Disciplinary Committee of the Indian Institute of Insolvency Professional of ICAI has already passed order in this matter, the DC, in exercise of the powers conferred under Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, disposes of the SCN without any direction - SCN disposed off.
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2021 (2) TMI 952
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - payment / recovery of their dues such as remuneration / wages, other perquisites including terminal benefits, if any - existence of debt and dispute or not - HELD THAT:- Regulation 9 of the CIRP Regulations lays down the procedure for the workmen and employees to submit their claims before the IRP. IRP / RP is then to verify and determine the amount of the claim. The workers and employees thus are operational creditors. They are not members of the CoC of the Corporate Debtor. Regulation 22 of the IP Regulations mandates that an Insolvency Professional must ensure that the confidentiality of the information relating to insolvency resolution process, liquidation or bankruptcy process is maintained at all times. The exception to this disclosure can only be made to the relevant parties as required under the CIRP Regulations or the Code or for any other law for the time being in force. Therefore, reluctance and refusal of the Respondent in sharing the copy of the Resolution Plan with the Applicants cannot be faulted.
It would not be appropriate or permissible for this Authority to do anything otherwise than what is expressly provided under the Code. Section 30 of the Code provides detailed procedure for submission of the Resolution Plan to the Resolution Professional, presentation of the Plan to the CoC for its approval and approval of the Plan by the CoC by a vote of not less than 66% of the voting share after considering its feasibility and viability, the manner of distribution proposed which would take into account the order of priority among creditors as laid down in sub-section 1 of Section 53 including priority and value of the security interest of Secured Creditors. The Committee shall also examine the viability or otherwise of the Plan in terms of the conditions provided under Section 30. Upon its approval by the CoC the Resolution Plan would have to be submitted to the Adjudicating Authority for its satisfaction and approval.
In view of such express provisions in relation to the Resolution Plan it is clear that the statutory mandate requires that the Resolution Plan can only be presented to the CoC for its approval and presented before the Adjudicating Authority for its satisfaction in approving the same. The Code or the Regulations there under do not contemplate presentation or supply of the Resolution Plan or a copy thereof to any other body or entity - Workmen of the Corporate Debtor who stand on a different footing than other employees under Section 53 may have a prerogative in satisfaction of their claims under Section 53, but they certainly do not have any other privilege beyond that. To say that workmen being at par with the secured creditors are also entitled to privileges of a member of CoC would be fallacious and would go against the grain of the intent and purpose of the Code.
The role of the Operational Creditors in the Resolution Process is very limited and is essentially confined to the satisfaction of their claims. Taking the facts of the case at hand and the law as it stands today into consideration we are of the humble view that the Applicants cannot be found entitled to a copy of the Resolution Plan or any portion thereof. They would also not be eligible to be heard or intervene during the process of consideration of the Resolution Plan by this Authority. The payments as to their wages and gratuity and other terminal benefits shall be in accordance with the law and in terms of the Resolution Plan guided by the provisions under the Code.
Application dismissed.
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2021 (2) TMI 951
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditor - availability of alternative remedy - existence of debt and dispute or not - HELD THAT:- The Adjudicating Authority should have, in absence of any dispute contemplated under Section 8(2) having been raised by the Respondent – Corporate Debtor as a pre-existing dispute or that the claim of Appellant – Operational Creditor had been satisfied, proceeded to admit the Application, as no dispute had been raised before it, justifying its disinclination to admit the Application. Instead, the Adjudicating Authority proceeded to make out a case for the Respondent-Corporate Debtor on the premise that the Appellant-Operational Creditor has not invoked other remedies available under law. We cannot understand as to how the availability of alternate remedy would render the debt and default disputed. In absence of pre-existing dispute having been raised by the Corporate Debtor or it being demonstrated that a suit or arbitration was pending in respect of the operational debt, in respect whereof Corporate Debtor was alleged to have committed default, the Adjudicating Authority would not be justified in drawing a conclusion in respect of there being dispute as regards debt and default merely on the strength of an Agreement relied upon by the Appellant – Operational Creditor, notwithstanding the fact that such Agreement provided for reference of a dispute arising between the parties in relation to a claim through arbitration. Even otherwise, Section 238 of the I&B Code, which has an overriding effect over the existing laws or any other law or contract, would not admit of the alternative remedy being a disabling provision for Operational Creditor to seek resolution of a dispute in regard to operational debt claimed against the Corporate Debtor by triggering the Corporate Insolvency Resolution Process.
The Adjudicating Authority was concerned with the insolvency resolution qua the operational debt, which the Corporate Debtor owed to the Operational Creditor. It was immaterial whether it was solvent or insolvent qua other creditors. The I&B Code would not permit the Adjudicating Authority to make a roving enquiry into the aspect of solvency or insolvency of the Corporate Debtor except to the extent of the Financial Creditors or the Operational Creditors, who sought triggering of Corporate Insolvency Resolution Process - The Adjudicating Authority clearly landed in error by observing that the course adopted by it was warranted on the principle of ease of doing business, ignoring the fact that such course was not available to it, ease of doing business only being an objective of the legislation viz. I&B Code along with other objectives specified in the preamble, which are sought to be achieved through CIRP process.
The Adjudicating Authority is directed to pass an order of admission in respect of the Application filed by the Appellant-Operational Creditor under Section 9 of the I&B Code within two weeks of communication of this order - appeal allowed - decided in favor of appellant.
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2021 (2) TMI 947
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - HELD THAT:- The demand notice dated 06.12.2018 was sent at the address mentioned in the master data of the corporate debtor as well as at the email address. The postal receipt along with tracking report and email sent to the corporate debtor are at Annexures-8 and 9 respectively. A compliance affidavit filed vide Diary No.862 dated 20.02.2019 showing the postal envelope vide which the demand notice was sent to the corporate debtor and same was returned with remarks “left” is at Annexure A-1.
Whether the operational debt was disputed by the corporate debtor? - HELD THAT:- The respondent-corporate debtor has neither filed any reply to the petition nor disputed the liability towards the operational creditor. Thus, there is no dispute regarding the liability between the corporate debtor and the operational creditor. It is also observed that till the last date of hearing, there has been no representation from the respondent-corporate debtor.
There is a total unpaid operational debt (in default) of ₹ 21,57,659.69. It is stated that the demand notice dated 06.12.2018 was sent for an amount of ₹ 21,57,659.69. Copy of ledger account of corporate debtor in the books of operational creditor for the period 17.04.2018 to 26.09.2018 is appended as Annexure-4. As a statutory requirement under Section 9(3)(b) of the Code, an affidavit dated 18.01.2019 (page Nos.17A to 18) stating that despite service of the demand notice dated 06.12.2018, the corporate debtor did not raise any dispute qua the outstanding payment and even no dispute was pending with or arose from the corporate debtor prior to sending of the statutory demand notice.
Debt and default or not - HELD THAT:- It has been shown that the corporate debtor has failed to make payment of the aforesaid amount due as mentioned in the statutory notice till date. It is also observed that the conditions under Section 9 of the Code stand satisfied. The operational creditorpetitioner states that from the above mentioned fact it is clear that the liability of the respondent-corporate debtor is undisputed. Accordingly, the petitioner has proved the debt and the default, which is more than ₹ 1 lac by the respondent-corporate debtor.
The present petition being complete and having established the default in payment of the Operational Debt for the default amount being above ₹ 1,00,000/-, the petition is admitted in terms of Section 9(5)(i) of the IBC and accordingly, moratorium is declared in terms of Section 14 of the Code - Application admitted.
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2021 (2) TMI 944
Seeking for withdrawal of the Company Petition - whether the IRP is duty bound to file the Form-FA before the Adjudicating Authority within 3 days of receiving the settlement agreement? - whether the adjudicated authority can allow the withdrawal of CIRP in view of pending claims of other creditors and whether IRP has followed the letter and spirit of law as enunciated under Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
HELD THAT:- It is an undisputed fact that the Corporate Debtor settled the dues of the original Operational Creditor soon after initiation of admission of CIRP on 23.10.219 against Corporate Debtor. The IRP upon receipt of Form FA immediately within 3 days filed an application to withdraw the CIRP against the Corporate Debtor - It is a trite law that Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, mandates the IRP that upon the receipt of Form FA, has to file an application for withdrawal with adjudicating authority within 3 days of receipt of the same.
It is clear that once a code gets triggered by admission of CIRP against the Corporate Debtor, it is necessary that the body which is to oversee the resolution process must be consulted before any individual Corporate Debtor is allowed to settle his claims. This being a collective action is a proceeding in rem. The moot question now remains to be answered is whether the Adjudicating Authority can allow a withdrawal of CIRP against Corporate Debtor before constitution of COC - it is irrelevant whether the last date for receiving claims is still open or lapsed as per the public notice, upon receiving Form FA, it is bounded duty of IRP to file the application for withdrawal within 3 days under Section 12A of the Code read with Regulation 30A (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. It is an undisputed fact that the IRP has filed the application within 3 days and has acted in letter and spirit of law.
This Adjudicating Authority is not vested with any powers under the Insolvency and Bankruptcy Code to direct settlement of parties while allowing withdrawal of CIRP against Corporate Debtor - further there are no misconduct of the IRP in filing application for withdrawal, within 3 days of receiving Form FA. The Cost of ₹ 10 lakhs on the Corporate Debtor is set aside - application allowed.
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2021 (2) TMI 931
Liquidation of Corporate Debtor - seeking to direct the Liquidator to arrange with prior notice to the Applicant for a sitting for a minimum period of a week to enable the Workmen to prefer their claim afresh by enlarging the period for preferring their claim for a further period of three months or till the disposal of the assets, whichever is earlier - seeking to direct the Liquidator to include the nominee of the applicant in the Stakeholders Consultation Committee Viz. Rajesh. R as workmen representative in place of the present incumbent Shri Venugopal, who is actually a management representative, within a time to be fixed by the Hon'ble Tribunal - seeking to direct the Liquidator to decide and admit the amount due to each Workmen in the same format as Annexure- W-5, irrespective of whether they have preferred a claim, based on the books and records of the company especially as some of the workmen may have expired and their legal heirs may not be aware of the Liquidation proceedings - Section 33 read with Section 53 of the Insolvency and Bankruptcy Code 2016 read with Rule 11 and 32 of the National Company Law Tribunal Rules, 2016.
HELD THAT:- It is found that according to the learned counsel for the applicant , the purpose of forming the association was to collectively agitate before all the forums including this Bench and that there are 132 former workmen of the Company in Liquidation who are the members of this association, who have joined together to bring the issues before this Bench relating to the said workmen. Along with the written submission the learned counsel has submitted a copy of the members list, whereas, in the IA the applicant has not mentioned the number of employees in the association and only the signatories of Memorandum were annexed, in which only 7 members name are mentioned. Therefore, it is apparent from the records that the applicant Association itself is not sure as to how many workmen the association filed this application for the reliefs sought.
The respondent is in the process of issuing fresh orders under Section 40 (2) of the I & B Code clearly categorizing the amounts accepted and the amounts rejected, with reasons, the application filed under Section 33 read with Section 53 of the I & B code, 2016 and Rules 11 and 32 of the National Company Law Tribunal Rules,2016 cannot be accepted. In case the applicants are aggrieved by the order passed by the liquidator, the applicants are at liberty to approach the appropriate forum under Section 42 of the I & B Code.
Application dismissed.
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2021 (2) TMI 926
Seeking interim order of attachment - seeking order of injunction against the defendant - HELD THAT:- In the facts of the present case, the plaintiff has claimed a decree for a sum in excess of ₹ 81 crores on the basis of an agreement under which, the defendant was to construct and deliver flats to the plaintiff. The ultimate agreement between the parties, had obliged the defendant to construct and make over unit Nos. 12W, 13W and 14W located on the 12th, 13th and 14th floor on the proposed building “Wellside Camac” to be constructed by the defendant upon the plaintiff paying the agreed consideration in respect thereof. Admittedly, the plaintiff had paid a sum of ₹ 14,06,70,000/- to the defendant. Apparently, the parties had fallen out of the contract. The parties have claimed differently with regard to the termination of the contract. According to the plaintiff, it has originally terminated the contract and the defendant is obliged to refund the entirety of the consideration advanced along with interest at the rate of 18 per cent per annum. According to the defendant, the termination effected by the plaintiff has been premature therefore entitling the defendant to deduct amounts stipulated in the contract. According to the defendant, it has to pay a sum of ₹ 12,81,22,349/- to the plaintiff after deduction as claimed. The plaintiff has expressed its unwillingness to accept such sum in full and final settlement of its claim. This stand of the respective parties has raised triable issues.
The parties to the instant suit have raised triable issues. However, it can be garnered out of the facts of the present case at this stage that, the defendant is liable to pay the plaintiff. The quantum of liability has to be decided - Till such time such quantum of liability is decided and the defendant pays the same, and since, the contract that the parties had entered into related to units Nos. 12W, 13W and 14W on the 12th, 13th and 14th floor of the proposed building, it would be appropriate to grant an order of injunction restraining the defendant from creating any third party rights over and in respect of such units without the leave of the Court.
Application disposed off.
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2021 (2) TMI 901
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - clear-cut stand of the ‘Appellant’ is that the ‘Adjudicating Authority’ (National Company Law Tribunal) had failed to take into consideration that the amount paid by the ‘Applicants’ to the ‘Respondent’ was clearly of ‘Financial Debt’ - HELD THAT:- It is to be pointed out that Section 3(11) of the Code defines ‘Debt’ meaning, a liability or obligation in respect of ‘claim’ which is due from any person and includes a ‘financial debt’ and ‘operational debt’. Section 3(12) of the Code defines ‘default meaning, non-payment of debt when whole of any part or instalment of the amount of debt has become due and payable and is not (paid) by the debtor or the corporate debtor, as the case may be - It is to be remembered that for a ‘default’, there must be a subsisting debt. After all, the word ‘default’ is like not doing something which one should do. In fact, the term ‘default’ refers to an ‘omission’ or ‘failure’ to perform a legal or contractual duty. Suffice it to point that the word ‘default’, applies to a sum of money which was promised at a future date as against a sum now due and payable.
It cannot be forgotten that Section 5(8) of the ‘Insolvency & Bankruptcy’ Code speaks of ‘time value’ and these words are interpreted to mean ‘compensation’ or the ‘price paid for the length of time for which the money was disbursed. An existing obligation to pay a sum of money is the sine qua non of a ‘financial debt’. The ‘Financial Creditor’ has a right to ‘financial debt’. Thus, the essence of any debt to be mentioned as ‘financial debt’ is the ‘time value of money’, as borrowing money is for monetary transaction - To determine the plea of ‘occurrence of default’ is the debt which must be due and become payable. An existence of ‘debt’ and ‘default’ are to be met for ‘admission’ of an ‘Application’ under section 7 of the ‘Insolvency and Bankruptcy’ Code. A ‘Debt’ is/was recoverable from the ‘Corporate Debtor’.
There is no second opinion of an important fact that distinction between ‘Deposits’ and ‘Loans’ may not be a significant factor for interpreting the word, ‘Deposit’. One cannot ignore a candid fact that ‘maturity of claim’, ‘default of claim’ or ‘invocation of guarantee’ has no nexus in regard to the filing of claim before the ‘Interim Resolution Professional’ under section 18(1)(b) of the ‘Insolvency & Bankruptcy Code’ and the ‘Resolution Professional’ under section 25(2)(e) of the Code - As per the ‘Companies (Acceptance of Deposits) Rules, 2014’, the term ‘deposit’ is defined under rule 2(1) (c ) in an inclusive fashion. The meaning of ‘deposit’ is elongated by covering receipts of money in any other form. For approaching the jurisdiction of the ‘Tribunal’ as per Section 74(2) of the ‘Companies Act, 2013’, even a partial failure by the Company to repay the deposit was sufficient.
Resting on the fact that the ‘Respondent’/’Corporate Debtor’ under the ‘Recurring Investment Plan’ had assured to provide the Investors’ interest on their investment sum along with the Investment amount, for the ‘time value of money’ (of course based on the amounts of investments made by the Investors) and in view of the fact that the ‘Respondent’/’Corporate Debtor’ failed in its commitment to offer the allotment and/or the possession of the ‘Plots of Land’ as promised by it or pay the assured returns, or repay the sums collected by it along with interest on the maturity of the schemes etc, this ‘Tribunal’ comes to a consequent conclusion that the ‘Appellant’s’ position is that of a ‘Financial Creditor’ as per Section 5(7) read with Section 5(8) of the ‘Insolvency & Bankruptcy Code’ and that there is default in payment of the accepted amounts by the ‘Respondent’/’Corporate Debtor’ - the ‘Respondent/’Corporate Debtor’ squarely comes within the ambit of definition of ‘Financial Debt’ and the contra conclusions arrived at by the ‘Adjudicating Authority’ (National Company Law Tribunal, New Delhi Bench-V) to the effect that ‘the amount which the applicants deposited does not come under the definition of ‘Debt’ and further that it was unable to accept the contention of the applicants that there was a default in payment of debt, are incorrect, invalid and the same is set aside by this ‘Tribunal’ to secure the ends of justice.
The ‘Impugned Order’ of the ‘Adjudicating Authority’ (National Company Law Tribunal, New Delhi, Bench-V) is set aside by this ‘Tribunal’ for the reasons ascribed in the instant ‘Appeal’ - the ‘Adjudicating Authority’ (National Company Law Tribunal, New Delhi Bench-V) is directed to restore the Company Petition filed by the ‘Appellants’/’Financial Creditors’/’Petitioner’ (under Section 7 of the ‘Insolvency & Bankruptcy Code’) to its file and admit the same and to proceed further in accordance with Law.
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2021 (2) TMI 888
Maintainability of petition - service of notice to Corporate Debtor - Rule 49(2) of NCLT Rules, 2016 - HELD THAT:- It appears that the petition was admitted by this Adjudicating Authority after taking the proper measure to serve the notice of hearing to the Corporate Debtor. Moreover, multiple times notice has been sent to the Corporate Debtor but, the corporate Debtor refused to accept the notice which was itself sufficient to admit the matter in CIRP. Even after, evading the service of notice by the corporate debtor, this Authority has advised the operational creditor for paper publication which has already been made.
As per Rule 49(2) of NCLT Rules, 2016, it is clear that averment made by the respondent for non-receipt of notice is not sustained as Corporate Debtor refused to accept the notice, Moreover, Paper publication has also been made. Hence, in view of this, the present application is liable to be dismissed.
Further, Rule-49(2) of NCLT Rules, 2016 comes into play only when the matter is disposed of in a summary manner generally for want of prosecution. Otherwise, the said rule is applicable only for the purpose of setting aside the order of Ex-parte hearing. When the matter is decided, though Ex-parte, on mertis after due consideration and material available on record, this rule cannot be pressed into service - application dismissed.
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