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Insolvency and Bankruptcy - Case Laws
Showing 81 to 100 of 128 Records
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2021 (2) TMI 720
Seeking to extend the CIRP for 90 days in order to get a Potential Resolution Applicant - Section 12 of the Insolvency and Bankruptcy Code 2016 - HELD THAT:- From a reading of sub-section (2) of Section 12, it is clear that Resolution Professional should file an application to the Adjudicating Authority for extension of the period of the Corporate Insolvency Resolution Process, only if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 75% of the voting shares.
In the present case, the subject matter of the case is regarding the extension of the CIRP period, when the CoC resolved for liquidation of the Corporate Debtor. It is seen that the resolution for further extension of time for submission of EoI has been rejected by the Committee of Creditors in the 3rd CoC meeting held on 30.11.2020 and the Resolution Professional have no power for seeking extension based on a letter submitted by the erstwhile Director or the potential Resolution Applicant, who has not submitted any credentials to the Resolution Professional to prove his net worth and interest in the matter.
The underlying object and principle of the Code, in resolving a debt ridden Corporate Debtor, cannot be lost sight of. The adherence to specific timeline for resolution is the essence, which in effect would bring about successful resolution of a beleaguered Company. It is found that the invitation for EoI was widely published in two newspapers namely ‘Indian Express’ and ‘’Kerala Kaumudhi’, the last date of submission of EoI was 08.02.2020. The ground that the potential Resolution Applicant due to lack of knowledge failed to submit EOI within time cannot be accepted. Besides no indulgence can be given to someone who hasn’t been vigilant enough. The Potential Resolution Applicant has not shown sufficient cause for its delay in submitting its EoI. Mere stating by the applicant herein that it is on account of Covid-19 Pandemic would not be considered as sufficient reason to condone the delay. No reason is assigned as to how the pandemic affected the efforts of the potential Resolution Applicant in approaching the Resolution Professional in submitting the EoI.
The potential Resolution Applicant, if any, has been negligent in submitting the EoI to the RP and the present application filed by the erstwhile Directors to grant further time during the last minute of completion of CIRP is not acceptable - Application dismissed.
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2021 (2) TMI 605
CIRP proceedings - Seeking directions under Section19(3) of the IBC, 2016 to all the personnel of the Corporate Debtor to assist and cooperate with the Applicant and comply with the instructions of the applicant and provide the applicant all information, document etc,. required by the applicant - HELD THAT:- When the application was listed before the Bench, several notices were issued to the Corporate Debtors which had been returned unserved. Thereafter, a paper publication has also been made in the local dailies. In spite of all these exercises, the Respondent/Corporate Debtor did not appear before this Tribunal and the Bench relying on Sections 5(20) and (21) and Section (3)(1)(b) (c) of the IBC 2016, admitted the application and ordered Corporate Insolvency Resolution Process (CIRP). Non-cooperation of the respondent/Corporate Debtor is evident from their behaviour. Now after admission, all the steps taken by the Resolution Professional for getting cooperation from the side of the suspended Directors have been failed. Hence, he has appraoched this Tribunal seeking aforesaid reliefs, under Section 19(2) of the IBC, 2016.
As per Section 19(2) of the IBC, 2016, it is made clear that this Tribunal can direct such personnel or other person to comply with the instructions of the Resolution Professional and to cooperate with him for collection of information and management of the Corporate Debtor.
This Tribunal directs the Respondents 1&2 who are suspended Directors of the Corporate Debtor to assist and cooperate with the Applicant to provide all information, documents required by him and hand over all records, books and paper, books of accounts etc. for management of the Corporate Debtor and complete the CIRP without further delay. This direction should be carried out by the Respondents immediately, at any rate within two weeks from the date of receipt of this order - Application disposed off.
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2021 (2) TMI 519
Seeking extension of the mandate of the learned Arbitral Tribunal to conclude the arbitral proceedings and render award - Section 29A (5) of the Arbitration and Conciliation Act, 1996 - HELD THAT:- A reading of the counter affidavit filed by the BSNL, indicates that the learned Arbitral Tribunal is also conscious of the pendency of the CIRP proceedings pending before the NCLT, and the question of whether the mandate of the Arbitral Tribunal still continues in view of the said proceedings. It appears that, on 3rd October, 2020, the learned Arbitral Tribunal had directed the parties to intimate the learned Arbitral Tribunal whether, in view of the provision of the IBC and the 1996 Act, the learned Arbitral Tribunal was authorised to proceed with the matter. The parties were also requested to place, on record, the orders passed by the NCLT, in that regard, as well as the decision taken by RP for reviving the arbitration case. The fact that the petitioner was approaching this Court under Section 29A(5) of the 1996 Act also stands noticed by the learned Arbitral Tribunal in its order dated 27th October, 2020.
Section 29A(5) of the 1996 Act merely authorizes the Court to extend the mandate of the Arbitral Tribunal, on its expiry without completion of the arbitral proceedings. It is, no doubt, open to the respondent to question the maintainability of the petition preferred under Section 29A(5). Mr Tripathi has done so and, as opined hereinabove, the challenge fails to impress. All other issues, regarding the competence of the RP to represent the petitioner in the arbitral proceedings, or the impact, on the arbitral proceedings, of the proceedings pending before the learned NCLT or NCLAT, and the orders passed therein, would appropriately have to be addressed before the learned Arbitral Tribunal, and not before this Court, exercising jurisdiction under Section 29A(5).
The submission merely requires to be stated, to be rejected. Para 4 of the resolution clearly approves the appointment of Mr. Anish Niranjan Nanavaty as the Resolution Professional. Mr. Tripathi has not been able to show me any provision in the IBC, which limits the authority of the Resolution Professional and does not authorize the Resolution Professional, overseeing the affairs of the Company, to apply for extension of the mandate of the Arbitral Tribunal or file the present petition - This Court, therefore, deems it appropriate to extend the mandate of the learned Arbitral Tribunal, as prayed in the petition, by a period of 12 months, with effect from 8th September, 2020. While doing so, this Court makes it clear that this Court has not expressed any final opinion on the proceedings before the IBC, the authority of Mr. Anish Niranjan Nanavaty as RP of the Company, or the effect on the arbitral proceedings, of the proceedings pending before the NCLT. All these aspects are left open and the learned Arbitral Tribunal would be at liberty to take a decision, as it deems appropriate after hearing the parties in that regard.
The present petition stands allowed.
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2021 (2) TMI 518
Validity of illegal circular resolutions by which the employment agreement of Respondent Nos. 2 to 4 were extended - Seeking directions to nullify any actions taken by Respondent Nos. 2 to 4 pursuant to these illegal appointment/extension of employment agreements - seeking appointment of professional management for Respondent No. 1 - HELD THAT:- There is no procedure prescribed in the Act and Rules that separate interim applications can be filed only after the question of admission of main case is over. Ld. Counsel for the Respondents frankly admitted that there is no provision in the Act or Rules that for interim reliefs separate applications are not maintainable or such applications can be filed only after admission of the main Petition.
Section 242 (4) of Companies Act provides that it cannot be said that application for interim reliefs are not maintainable or such applications can be filed only after admission of the main Petition or if the interim reliefs claimed in the interlocutory applications are entirely covered by the reliefs sought in the main Petition then the applications are not maintainable.
Appeal allowed.
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2021 (2) TMI 517
Dissolution of the Corporate Person through voluntary liquidation - Section 59 of the Insolvency and Bankruptcy Code, 2016 read with the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process ) Regulations, 2017 - HELD THAT:- It is clear that the affairs of the company have been completely wound up and its assets have been completely liquidated. The Liquidator has also made necessary application to this Adjudicating Authority for dissolution.
Application is allowed with the following directions:
i. The Corporate Person, India Steamship Limited, stands dissolved from the date of this Order, i.e. 09.02.2021.
ii. The Liquidator is directed to file this order with the concerned Registrar of Companies, Income Tax Department and IBBI within 14 days from the date of receipt of an authentic copy this order, for information and necessary action.
iii. The Liquidator is also directed to file this order with all other Statutory Authorities connected with the affairs of the Company.
iv. The Liquidator shall preserve a physical or an electronic copy of the reports, registers and books of account referred to in Regulations 8 and 10 of IBBI Regulations for at least eight years after the dissolution of the Corporate Person, either with himself or with an information utility.
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2021 (2) TMI 516
Seeking direction to R1 to immediately refund/deposit the sum of ₹ 1,23,93,968/- back to the account maintained by the Corporate Debtor with R2 - seeking direction to R2 to strictly adhere to the provisions of section 17(1)(d) and henceforth only consider instructions of the Applicant RP for any "debits" to the account of the Corporate Debtor maintained with R2 - seeking directions to necessary directions requiring R1 to file an Affidavit confirming that it would refrain from taking any further adverse actions either against the Corporate Debtor or its assets during the "Moratorium" period.
HELD THAT:- A conjoint reading of section 14(1)(a) and section 238 of IBC Code, clearly shows that the Code overrides section 44 of the GVAT Act, as the same is inconsistent with the provisions of the Code. Thus the action of R1 is clearly barred by provisions of section 14(1)(a) - Even though the CIRP period was over and the liquidation order passed by this Bench was stayed by the Hon'ble Appellate Tribunal and the direction was given that the RP will manage the company and ensures that the company will remain as a going concern, we are of the considered opinion that CIRP is still continuing. Thus the Moratorium provided u/s 14 is in operation and the action of R1 is hit by section 14(1)(a) of the Code.
R1 is directed to refund the sum of ₹ 1,23,93,968/- to the account of the Corporate Debtor maintained with R2 - application allowed in part.
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2021 (2) TMI 474
Maintainability of new Application which was filed under Section 9 of I&B, Code, inspite of earlier Application under Section 9 - HELD THAT:- We have gone through the earlier Application under Section 9 which was filed and the new Application which was filed under Section 9 of I&B, Code. Both of the Applications referred to the same amount and similar facts are averred.
We are not ready to accept the submissions made by the Learned Counsel that the Corporate Debtor had stated that it would settle the dues and because of that the earlier Application was withdrawn. The Learned Counsel for the Appellant referred to earlier Order of withdrawal Annexure A/3 where the Tribunal recorded that “Learned Counsel for the Operational Creditor submitted that he has instructions from the Corporate Debtor to withdraw the matter”. On basis of such noting in the earlier Order (which could even be typing error) the argument is tried to be made that there was offer of settlement. We do not accept such submissions. It would be strange that the Opposite Party gives instructions to the other side and other side on instructions from the Opposite Party withdrawing petition.
Even otherwise, when present Application under Section 9 is filed, the earlier Reply Notice which was sent by the Corporate Debtor discloses Pre-existing dispute. The Section 9 Application claims debt relying on Ledger Account of Appellant itself. This read with the Notices on record shows various disputes pre-existing between parties. That being so, even if one is to look into merits in the alternative, the Application under Section 9 does not show that it deserves to be admitted.
Appeal dismissed.
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2021 (2) TMI 464
Maintainability of application - initiation of CIRP - corporate debtor committed default in making repayment of the loan facility availed by it from the financial creditor - Financial Creditor or not - existence of debt and default or not - HELD THAT:- There is a force in the submissions made by the petitioner with regard to the relevant factors to be looked into by the Adjudicating Authority in admitting the company petition. As rightly contended by the petitioner the Adjudicating Authority has to merely look into the existence of debt and default for admitting a Company Petition under Section 7 of the code as per law laid down by Hon’ble Supreme Court in various judgments. When once the debt and default is proved the company petition has to be admitted. Even otherwise the petitioner successfully demonstrated before this Tribunal that the subject matter of the vessels could not be disposed of by the financial creditor on account of their own mishandling of the financial affairs of the corporate debtor accumulating the losses and maritime liens on the vessels.
Mr. Rohan Rajadhyaksha also fairly conceded that the financial creditor has no objection for excluding the sale proceeds of the vessel ‘MT’ Premmala presently lying with the Bombay High Court in the pending appeal filed by State Bank of India from the purview of the CIRP process of this Company Petition - there are no merits in any of the contentions raised by the Corporate Debtor as they are beyond the scope of Section 7 of the Code.
Application admitted - moratorium declared.
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2021 (2) TMI 461
Liquidation of the Corporate Debtor - Section 33(1) of IBC, 2016 - HELD THAT:- In order to state that the Adjudicating Authority can approve the Liquidation of Corporate Debtor Company without taking any steps for resolution of the Corporate Debtor, the Applicant has referred to a decision of the Hon’ble NCLAT in the matter of Sunil S. Kakkad Vs. Altrium Infocom Private Limited [2020 (8) TMI 392 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI].
This Tribunal heard the learned counsel appearing for the Resolution Professional and had gone through all the case records including the Resolution passed by the Committee of Creditors in the 2nd meeting held on 07.12.2020, and being satisfied with the conditions enshrined in the CIRP Regulations and ordered that Corporate Debtor M/s. Auto Friction Components India Private Limited is hereby put under liquidation with immediate effect under Section 33(1) of IBC, 2016.
Application allowed.
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2021 (2) TMI 452
Seeking approval of the Resolution Plan - Section 30(6) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK & OTHERS [2019 (2) TMI 1043 - SUPREME COURT] the Hon’ble Apex Court held that if the CoC had approved the Resolution Plan by requisite percent of voting share, then as per section 30(6) of the Code, it is imperative for the Resolution Professional to submit the same to the Adjudicating Authority (NCLT). On receipt of such a proposal, the Adjudicating Authority is required to satisfy itself that the Resolution Plan as approved by CoC meets the requirements specified in Section 30(2) of the Code. The Hon’ble Court observed that the role of the NCLT is ‘no more and no less’. The Hon’ble Court further held that the discretion of the Adjudicating Authority is circumscribed by Section 31 and is limited to scrutiny of the Resolution Plan “as approved” by the requisite percent of voting share of financial creditors. Even in that enquiry, the grounds on which the Adjudicating Authority can reject the Resolution Plan is in reference to matters specified in Section 30(2) when the Resolution Plan does not conform to the stated requirements.
The instant Resolution Plan meets the requirements of Section 30(2) of the Code and Regulations 37, 38, 38(1A) and 39(4) of the Regulations. The Resolution Plan is not in contravention of any of the provisions of Section 29A of the Code and is in accordance with law. The same needs to be approved.
Application allowed - moratorium declared.
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2021 (2) TMI 451
Jurisdiction - power of Adjudicating Authority to examine the documents filed with the application under section 10 of I&B Code - HELD THAT:- Ld. Adjudicating Authority has analyzed the financial statements of the corporate applicant and held that there are discrepancies in financial statements. We are of the view that ld. Adjudicating Authority exceeded its jurisdiction in analyzing the financial statements of the Corporate Applicant.
It is held in the case of M/S. UNIGREEN GLOBAL PRIVATE LIMITED VERSUS PUNJAB NATIONAL BANK, CORPORATION BANK, VIJAYA BANK AND ORIENTAL BANK OF COMMERCE [2018 (1) TMI 505 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] that if any action has been taken by the financial creditor under SARFAESI Act 2002, against the Corporate Debtor or a suit is pending against the corporate debtor under Section 19 of DRT ACT before a Debt Recovery Tribunal or appeal pending before the Debt Recovery AT cannot be a ground to reject an application under Section 10 of I&B Code - In the present case the financial creditor has initiated proceedings under SARFAESI Act against the borrower. The applicant being a guarantor has filed the application under Section 10 of I&B Code hence the Adjudicating Authority has drawn an inference that the corporate applicant has filed the application under Section 10 with an intention to defeat the SARFAESI measures initiated by the financial creditor. Thus the application is filed with an ulterior motive.
The finding of ld. Adjudicating Authority also be cannot be agreed, and it is held that this fact is unrelated and beyond the requirement under I&B Code or forms prescribed under the Adjudicating Authority Rules. Therefore, the application cannot be rejected on this ground.
The existence of debt and default is established and no winding up proceedings against the appellant and appellant is not covered by the ineligibilities provided under Section 11 of the I&B Code. However, the adjudicating authority has rejected the application on extraneous grounds. Therefore, the impugned order is set aside.
The case is remitted back to the adjudicating authority (NCLT, Chennai) to admit the application under Section 10 after notice to the parties if there is no defect - Appeal allowed by way of remand.
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2021 (2) TMI 450
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor or not - existence of debt and dispute or not - Time Limitation - HELD THAT:- The present Application is filed before this Tribunal on 06.09.2019. The Financial Creditor has obtained a copy of the revival letter dated 01.06.2012 as per Section 18 of the Limitation Act in and by which the period of limitation is being extended for the further period of three (3) years from 01.06.2012. For the purpose of bringing the present Application within the period of limitation it is submitted that the Principal Borrower has given an OTS proposal on 06.10.2016. It is now well settled from the judgments of the Hon'ble Supreme Court and Hon'ble NCLAT that the OTS letter does not extend the period of limitation. Even for the sake of argument if the said OTS letter is taken into consideration, the same was obtained only on 06.10.2016 which is much after the expiry of 3 years from the date of default i.e. 31.05.2012. Therefore, in all respects, it is seen that the claim of the Financial Creditor is against a time barred debt.
In the present case, the Financial Creditor has not placed on record any Revival Letter obtained from the Respondent after 01.06.2012. From the records, it is also to be noted that the Account of the Principal Borrower had been declared as Non Performing Asset (NPA) on 06.06.2012 as evident from the Demand Notice issued to the Principal Borrower which is presently under Liquidation before this Tribunal, the CIRP of which was initiated by this Tribunal based on an Application filed by its Operational Creditor in the matter of M/S. CORTICA MANUFACTURING (INDIA) PRIVATE LIMITED VERSUS M/S. VICTORY ELECTRICALS LIMITED [2019 (4) TMI 1938 - NATIONAL COMPANY LAW TRIBUNAL, CHENNAI].
The CIRP in relation to the principal borrower was triggered not at the instance of the present Financial Creditor but by an Operational Creditor under Section 9 of the Insolvency & Bankruptcy Code, 2016. Even though the liability of the Principal borrower is co-extensive to that of the Guarantor, in an Application filed under Section 7 of IBC, 2016, the Applicant is required to satisfy the debt and default on the part of the Respondent independently and also it is a statutory duty of this Tribunal to ascertain as to whether the debt is a time barred debt or not, eventhough a defence to such an effect is not raised by the Respondent. The Demand Notice to the Respondent / Corporate Guarantor annexed at Page 335 and issued by the Applicant is to be noted is of the year 2013.
Thus, from the very documents filed by the Financial Creditor, we are of the considered view that the debt as claimed by the Financial Creditor is time barred and the Financial Creditor has failed to place on record any iota of document recognized under the law to substantiate that the debt falls well within the period of limitation - the debt on the part of the Respondent/Corporate Guarantor is time barred and as such the Application filed by the Financial Creditor is liable to be dismissed - Application dismissed.
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2021 (2) TMI 445
Seeking CIRP timeline of 27 days from the available 60 days exclusion timeline for approval of Resolution Plan - section 12 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- A bare perusal of Section 12 of the IBC, 2016 mandates that the CIRP period should be completed within the period of 330 days. Further, it has been clearly stated that the CIRP extension, beyond the stipulated period of 180 days, shall be granted only once, not exceeding 90 days. However, the IBC, Amendment Act, 2019 fails to address on how this Tribunal can treat the Applications which seek for CIRP extension beyond the period of 270 days to 330 days.
In the facts of the present case, it is evident from the records that CIRP extension was already granted once for a period of 60 days from 18.01.2020 till 18.03.2020 and thereby the 240 days period of CIRP came to an end on 18.03.2020. The second proviso to sub-section 3 of Section 12 of the IBC, 2016 states that the CIRP shall be mandatorily completed within a period of 330 days from the Insolvency commencement date, including any extension of the period of the CIRP granted under this section and the time taken in the legal proceedings - thus, it can be inferred from the second proviso to subsection 3 of Section 12 of the IBC, 2016 that after granting extension once for a maximum period of 90 days, and upon 270 days of the CIRP coming to an end, this Tribunal has the power to exclude certain period from the CIRP proceedings provided the said exclusion period should not exceed the total CIRP period of 330 days. In other words, exclusion can be granted only for a period of 60 days after the expiry of 270 days.
As to the facts of the present case, it is seen that the Resolution Plan is already approved by the CoC and is pending adjudication before this Tribunal and also keeping in mind the rationale of the decision of the Supreme Court in the matter of COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA & OTHERS [2019 (11) TMI 731 - SUPREME COURT], the period of lockdown from 25.03.2020 till 31.08.2020 is excluded in view of Regulation 40C of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and also the period of 27 days i.e. from 19.03.2020 till 24.03.2020 (6 days) and from 01.09.2020 to 21.09.2020 (21 days) is also excluded from the period of CIRP - Since, it was submitted by the Learned Counsel for the Resolution Professional that the Resolution Plan is already filed before this Tribunal on 21.09.2020, extension of CIRP period beyond the period as already excluded does not arise.
Application allowed.
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2021 (2) TMI 443
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - unpaid operational Debt due from M/s Web Date Systems Private Limited - Application under section 9 of the IBC before the NCLT, wherein it is mentioned in Part-IV for Particulars of Operational Debt is due -
As per ANANT BIJAY SINGH, JUDICIAL MEMBER:
HELD THAT:- The Ld. Adjudicating Authority has rightly distinguished the facts of the case from Judgment in M. RAVINDRANATH REDDY VERSUS G. KISHAN [2020 (2) TMI 56 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] of this Appellate Tribunal.
♦ In as much as this is not a simple case where the rent is due which is part of the rent.
♦ The Respondent No. 1 has provided different type of services to the Appellant which has been referred hereinabove.
♦ There are dues of electricity, diesel, sewer and water charges which are undisputed by the Corporate Debtor which is more than ₹ 1 Lac.
♦ We are of the considered view that the Ld. Adjudicating Authority has rightly admitted the Application filed under section 9 of IBC.
Thus there are no merit in this Appeal. The Appellant has failed to demonstrate that the impugned order suffers from any legal infirmity. The Appeal being devoid of merit is dismissed. Interim orders, if any, stand vacated.
As per V.P. SINGH, TECHNICAL MEMBER:
HELD THAT:- In this case, the dispute relates to the deemed continuation of lease deed. The Corporate Debtor claims that lease of the ground floor was terminated after notice, and part of the premises was vacated. Per contra, the Operational Creditor claims that vacation of part premises was not permissible and therefore, lease rent for whole premises is recoverable as an operational debt. Thus, even if the Lease Rent is considered as an operational debt U/S 5(21) of the Code, in case of pre-existing dispute, such operational debt is beyond the scope of Sec 9 of the Insolvency & Bankruptcy Code, 2016.
Based on the demand notice, it is clear that the alleged operational debt is related to the lease rent of Ground Floor and Basement Floor of the said premises. In response to the demand notice dated 27th September 2018, the Corporate Debtor submitted its reply on 08th October 2018 - thus, it is clear that in reply to the demand notice, the Corporate Debtor had contended that there was a pre-existing dispute between the parties. The Corporate Debtor emphasised our attention towards mail dated 13th September 2018.
It is clear that dispute between "AITHENT" and "WDS" existed till the date of issuance of demand notice, i.e. 27th September 2018. Since the provision of Section 9 can only be invoked for the realisation of the undisputed operational debt, the petition u/s 9 is thus, not maintainable - The Operational Creditor's contention is that since the basement floor and ground floor were part of the same lease deed, therefore, part vacation of the property and subsequent termination of lease for the said portion is not permissible. Therefore, the request made by the Corporate Debtor through an email dated 23rd March 2018 was not accepted. The Operational Creditor further wrote that in case the Corporate Debtor surrenders basement floor, new lease deed could be executed after full payment of ₹ 40,27,179/- - there was pre-existing dispute from the time before issuance of demand notice dated 27th September, 2018.
The Adjudicating Authority has admitted the petition under section 9 without giving any finding on the pre-existing dispute, even though the Corporate Debtor has raised the plea in its reply to the demand notice. On perusal of the record of the case, I am satisfied that there is sufficient evidence to show that there was pre-existing dispute between the parties - Adjudicating Authority has admitted the petition ignoring the fact that the alleged dues are relating to the outstanding Lease Rent. In contrast, there is sufficient evidence to show that pre-existing dispute existed regarding vacation of part of the leasehold premises, i.e. Basement Floor only, despite there being a Joint lease Agreement for Ground Floor and Basement. Such questions cannot be decided in summary jurisdiction exercised by the Adjudicating Authority under the Code u/s 9 of the Code.
The Application preferred by 1st Respondent under section 9 of the 'I&B Code' is dismissed. The appellant 'Corporate Debtor' (company) is released from all the rigours of 'Moratorium' and is allowed to function through its Board of Directors with immediate effect. The 'Interim Resolution Professional'/'Resolution Professional' will provide and intimate the fees for the period he has functioned and costs of 'Corporate Insolvency Resolution Process' incurred by him to the Appellant/'Corporate Debtor' and amount, if any, already received. The 'Interim Resolution Professional' will hand over the assets and records to the Board of Directors of the Corporate Debtor.
However, it is to be clarified that the view taken by me is in the minority. Hence, it shall not come into effect, and the view taken by the Hon'ble co-Members of the Bench shall prevail - application dismissed.
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2021 (2) TMI 440
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Debt - allegation is that the petitioner herein does not fall under the definition of "Person" - existence of debt and dispute or not - HELD THAT:- A look at the definition of 'Person' as per Section 3(23) of the IBC, specifies that it is an inclusive definition and hence the categories mentioned in the definition are only illustrative and there can be others also which can be covered under the definition. Thus to restrict the definition to those categories which have been enumerated in the definition is not the correct interpretation of the law.
The Hon'ble National Company Appellate Tribunal ('NCLAT') in the case of Neeta Saha v. Ram Niwas Gupta [2020 (2) TMI 1442 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] has addressed the issue of the maintainability of an application filed under Section 9 by a sole proprietorship and clarified that Section 2 of IBC amongst other entities, applies to proprietorship firms. Moreover, it also noted that the definition of 'person' in Section 3(23) of IBC is an inclusive definition. Thereafter, Hon'ble NCLAT has approved the initiation of CIRP against the CD after the sole proprietor filed the amended memo of parties by including his name.
Thus, the operational creditor is a sole proprietorship firm and would fall within the definition of a person. An Operational Creditor means a person to whom an operational debt is owed/due. From the above, it is clear that the petitioner is an operational creditor of the respondent." Accordingly, the petition filed by a proprietary concern under Section 9 of the Code was held to be maintainable.
The operational creditor has clearly established the existence of debt and default on the part of the corporate debtor - CIRP started - application admitted - moratorium declared.
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2021 (2) TMI 439
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 National Company Law Appellate Tribunal in Suo Moto-Company Appeal IN RE : SUO MOTO [2020 (6) TMI 495 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] has 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.
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 and the same is as: 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 reads as 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.
Since the facts are not disputed and in view of the orders of the Hon'ble Supreme Court of India, National Company Law Appellate Tribunal and in view of the Regulations issued by Insolvency and Bankruptcy Board of India, we allow the instant IA and extend the period of CIRP 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 438
Liquidation of the Corporate Debtor - section 33 of the IB Code - CIRP expired on 18.05.2020 i.e. during the lockdown period - HELD THAT:- It is found that the CoC has resolved for liquidation of the Corporate Debtor vide its Seventh meeting dated 30.06.2020. It is also to be noted that this Adjudicating Authority has no jurisdiction to interfere in the commercial wisdom of the CoC as observed in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK & OTHERS [2019 (2) TMI 1043 - SUPREME COURT].
The moratorium declared under Section 14 of the IB Code shall cease to have effect from the date of the order of liquidation - the application so filed by the RP under Section 33 & 34 of the IB Code, 2016 is allowed and the Adjudicating Authority passes an order for initiation of liquidation of the Corporate Debtor viz., Dhorajia Engineering Company Private Limited. The RP i.e. Mr. Kiran Shah, shall act as the Liquidator for the purpose of liquidation of the Corporate Debtor. Further, the lockdown period of 68 days i.e. from 25.03.2020 to 31.05.2020, is exempted from the CIRP period.
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2021 (2) TMI 394
Initiation of CIRP - Cut of date for deferring IBC provisions due to COVID-19 - Financial Distress or not - insertion of section 10A of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Whether the provisions of Section 10A stand attracted to an application under Section 9 which was filed before 5 June 2020 (the date on which the provision came into force) in respect of a default which has occurred after 25 March 2020? - HELD THAT:- The onset of the Covid-19 pandemic is a cataclysmic event which has serious repercussions on the financial health of corporate enterprises. The Ordinance and the Amending Act enacted by Parliament, adopt 25 March 2020 as the cut-off date. The proviso to Section 10A stipulates that "no application shall ever be filed" for the initiation of the CIRP "for the said default occurring during the said period”. The expression "shall ever be filed" is a clear indicator that the intent of the legislature is to bar the institution of any application for the commencement of the CIRP in respect of a default which has occurred on or after 25 March 2020 for a period of six months, extendable up to one year as notified. The explanation which has been introduced to remove doubts places the matter beyond doubt by clarifying that the statutory provision shall not apply to any default before 25 March 2020. The substantive part of Section 10A is to be construed harmoniously with the first proviso and the explanation - it is evident that Parliament intended to impose a bar on the filing of applications for the commencement of the CIRP in respect of a corporate debtor for a default occurring on or after 25 March 2020; the embargo remaining in force for a period of six months, extendable to one year. Acceptance of the submission of the appellant would defeat the very purpose and object underlying the insertion of Section 10A. For, it would leave a whole class of corporate debtors where the default has occurred on or after 25 March 2020 outside the pale of protection because the application was filed before 5 June 2020.
The correct interpretation of Section 10A cannot be merely based on the language of the provision; rather it must take into account the object of the Ordinance and the extraordinary circumstances in which it was promulgated. It must be noted, however, that the retrospective bar on the filing of applications for the commencement of CIRP during the stipulated period does not extinguish the debt owed by the corporate debtor or the right of creditors to recover it - Section 10A does not contain any requirement that the Adjudicating Authority must launch into an enquiry into whether, and if so to what extent, the financial health of the corporate debtor was affected by the onset of the Covid-19 pandemic. Parliament has stepped in legislatively because of the widespread distress caused by an unheralded public health crisis. It was cognizant of the fact that resolution applicants may not come forth to take up the process of the resolution of insolvencies (this as we have seen was referred to in the recitals to the Ordinance), which would lead to instances of the corporate debtors going under liquidation and no longer remaining a going concern.
The date of the initiation of the CIRP is the date on which a financial creditor, operational creditor or corporate applicant makes an application to the adjudicating authority for initiating the process. On the other hand, the insolvency commencement date is the date of the admission of the application. This distinction is also evident from the provisions of sub-section (6) of Section 7, sub-section (6) of Section 9 and sub-section (5) of Section 10. Section 7 deals with the initiation of the CIRP by a financial creditor; Section 8 provides for the insolvency resolution by an operational creditor; Section 9 provides for the application for initiation of the CIRP by an operational creditor; and Section 10 provides for the initiation of the CIRP by a corporate applicant.
Appeal dismissed.
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2021 (2) TMI 366
Right to participate in the Corporate Insolvency Resolution Process - case of the Appellant is that the Appellant is a financial service provider and a Category II- Alternate Investment Fund registered with the Securities and Exchange Board of India (SEBI) and floated by UTI Structured Debt Opportunities Trust having SEBI Registration as per the applicable laws - HELD THAT:- The Appeal is disposed off with the following directions.
i) Resolution Professional is permitted to receive the Resolution Plan but he will not open Resolution Plan and will not take any decision. The status quo prevailing as on today, shall be maintained till one week after the Ld. third Member decide the matter.
ii) The Ld. third Member of the Adjudicating Authority is directed to hear the I.A. No. 1628 of 2020 & I.A. No. 1746 of 2020 and decide the same on such as expeditiously as possible.
iii) This Appeal is disposed of accordingly.
iv) The Registry is directed to send the copy of this order to the Ld. Adjudicating Authority, National Company Law Tribunal, Court-V, Mumbai Bench for compliance.
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2021 (2) TMI 364
TDS liability during the pendency of CIRP proceedings - Interpretation of statute - Whether the provisions of u/s 194-IA of the Income Tax Act, 1961 are inconsistent with Section 53 (1) (e) of the Insolvency and Bankruptcy Code, 2016? - HELD THAT:- Hon’ble Supreme Court in the case of Imperial Chit funds (P) Ltd. Vs. Income Tax Officer [1996 (3) TMI 397 - SUPREME COURT] considered Section 178 of the IT Act, in relation to the preferential payments covered by Section 530 of the Companies Act, 1956. The Supreme Court took the view that the Income Tax Department is to be treated as a secured creditor in the light of the words occurring in Sections 178 (3) and (4) of the IT Act to the effect that the liquidator shall set aside the amount notified by the Income Tax Officer and if it is not so done, the liquidator is personally liable to pay the amount of Tax. With this proposition, the Income Tax Department is to be treated as a secured creditor and in liquidation proceedings such dues shall get priority. Whereas, as per Section 53 (1) (e) of the Code, the legislature assigned the 5th position in the order of priority to government dues (including Income Tax Dues).
Thus, in Section 53(1) (e) of the Code and in Section 178 of the IT Act for Government dues priority is different. Section 178 (6) of the IT Act and Section 53 of the Code both Sections start with non-obstante clause, therefore, legislature in its wisdom to give effect to the scheme of the Code amended Section 178(6) of the IT Act. By virtue of the amendment the whole of Section 178 has no application to the liquidation proceedings initiated under the Code. With the aforesaid, it was necessary to amend Section 178(6) of the IT Act - Section 194 IA of the IT Act provides that where the consideration for transfer of the immovable property is more than 50 Lakhs, then the transferee is responsible to deduct the amount which is 1% of the consideration as Income Tax.
As per Section 194 IA of the IT Act 1% TDS is recovered on priority to other creditors of the transferor, which is partial capital gain tax, whereas, Section 53(1)(e) of the Code in waterfall mechanism provides that the Government dues comes fifth in order of priority. Thus, in regard to recovery of the Government dues (Including Income Tax) from the Company in Liquidation under the Code, there is inconsistency between Section 194IA of the IT Act and Section 53(1) (e) of the Code therefore, by virtue of Section 238 of the Code, Section 53 (1) (e) of the Code shall have overriding effect on the provisions of the Section 194 IA of the IT Act. Otherwise also Section 53 starts with a non-obstante clause, whereas Section 194 IA of the IT Act, does not start with a non-obstante clause, and it would necessarily be subject to overriding effect of the Code and therefore, there was no requirement to amend the Section 194 IA of the IT Act.
Thus, it is clear that when the Company is wound up under the orders of Court or otherwise the return shall be verified by the Liquidator referred to in Sub-Section 1 of Section 178 of the IT Act, during corporate insolvency resolution process under Section 7, 9 or 10 of the Code, the return shall be verified by the Insolvency Professional appointed by the Adjudicating Authority. However, there is no such provision in the IT Act, Code or IBBI (Liquidation Process Regulation, 2016) that the Liquidator of the Company in Liquidation under the Code is required to file Income Tax Return. For filing of return, the financial statements are required to be annexed but the Code/IBBI (Liquidation Process Regulation 2016) does not assign a duty on the Liquidator to prepare financial statements - the Liquidator of a Company in liquidation under the Code is not required to file Income Tax Return, then there is no question of claiming refund of TDS deducted under Section 194 IA of the IT Act.
Ld. Adjudicating Authority has erroneously held that the deduction of Tax at source does not mean raising demand for collection of tax by the Department. Actually TDS under Section 194 IA, is an advance capital gain tax, recovered through transferee on priority with other creditors of the company. Hence, inconsistent with the provision of Section 53 (1) (e) of the Code and by virtue of Section 238 of the Code, the provision of Section 53(1) (e)shall have overriding effect. Thus, the impugned order is not sustainable in law - Respondent No.1 is directed to refund the amount of TDS to the Appellant which is deposited by the Respondent No. 2 with the department - Appeal allowed.
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