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Insolvency and Bankruptcy - Case Laws
Showing 101 to 120 of 120 Records
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2021 (7) TMI 290
Seeking direction to Liquidator to consider the proposals of the Applicant under Section 230 of the Companies Act - OTS cum Compromise proposals placed before the CoC, were both cancelled - HELD THAT:- The Appellant has not pointed out any irregularity in exercise of the powers committed by Ld. Adjudicating Authority. The CoC has taken commercial decision of rejecting the OTS proposals. It is settled law that the statute has not invested jurisdiction and authority either with NCLT or NCLAT to review the commercial decision exercised by the CoC of approving the resolution plan or rejecting the same.
It is also to be noted that in this Appeal the Appellant has raised the ground that the CoC has rejected the OTS cum Compromise proposals without assigning any valid reason and without any suitable opportunity to the Appellant to discuss with the Respondent No. 1 on OTS Proposals. Such objection was never raised before the Adjudicating Authority.
There is no allegation against the liquidator and no prayer for replacement of liquidator was made. The Appellant in the Appeal first time prayed for replacement of the liquidator. Such prayer cannot be considered at this stage, particularly when there is no allegation in the Application.
Appeal dismissed.
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2021 (7) TMI 289
Compnay under liquidation / CIRP - Tripartite Agreement - Pledge agreement - MSTC Limited had supplied goods to the Corporate Debtor - secured (Operational) creditor or not - goods procured by MSTC for consumption of Corporate Debtor, stored at the premises of Corporate Debtor, under custody of FSNL for MSTC, which were to be issued to Corporate Debtor on cash and carry basis was in practical execution modified accepting Memorandum of Pledge treating Corporate Debtor as Pledger delivering goods by way of arrival of shipment at its factory premises for payment of amounts mentioned in the Memorandum which was to be treated as advance by MSTC to Corporate Debtor. MSTC thus claims existence of pledge and goods at site to be of MSTC and to be secured.
HELD THAT:- The Interim Resolution Professional took note of the records and on said basis calculated the stocks. However, there is no material shown that before the second Inspection dated 12th May, 2018 was done, at any time the Interim Resolution Professional and the Resolution Professional did actually go and take or cause to be taken physical verification of the stocks. When the provisions require taking control and custody of the assets, it would be necessary for the Interim Resolution Professional/ Resolution Professional to show steps taken on such count. Without doing this, when MSTC was constantly mentioning in its letters that it was Secured Creditor with goods pledged to it lying on the premises of the Corporate Debtor, nothing was done and when the assessment was carried out on 29th March, 2018, fault is being found with the official of the Corporate Debtor signing the Joint Statement of Inspection. We discard such effort on the part of the Appellant.
The Appeal shows that the Appellant (Resolution Professional-now Liquidator) is conscious that ‘Geo Chem’ is an agency empanelled with MSTC which is an International Inspection and Testing Company. The Resolution Professional did not have any reason to question the action of ‘Geo Chem’ in the first Inspection Report. Grievance was not about the taking place of Inspection. It was only with regard to Authority of official of Corporate Debtor to sign the document.
Although the records of the Corporate Debtor of which the Interim Resolution Professional took note showed lower stocks (even lower that the Second Inspection Report) and were unreliable, the First Inspection Report dated 29th March, 2018 showed that there were much higher quantities of Steam Coal and MT Steel Billets. By the time the Second Inspection could happen on 3rd May, 2018, MT Steel Billets was almost not there and MT Steam Coal had drastically reduced - Fact remains that even the Resolution Professional did move the Adjudicating Authority so as to secure direction through SFIO which direction appears to have been later on modified to get investigation done through local police. Charge sheet now is pending.
The matter zeros down to the position that MSTC had in view of the agreements and arrangements with the Corporate Debtor to store the goods which appear to have been imported, on the premises of the Corporate Debtor but FSNL was to be the custodian. The access of FSNL and MSTC appears to have got lost when CIRP started and Interim Resolution Professional/ Resolution Professional came into management. First Inspection Report read with Second Inspection Report show Substantial goods have been lost/missing/ consumed (or whatever) for which MSTC cannot be blamed - if the Appellant claims that the goods were of the Corporate Debtor the taking over of control and custody would have to be shown. If the Appellant claims that the goods were not of the ownership of the Corporate Debtor (and inspection Report shows presence of the goods), there is no material to show that the same were returned to the owner.
The Appellant wants to claim that pledge should not be recognised. In the facts of the matter where goods of MSTC have disappeared drastically from custody of Corporate Debtor under management of IRP/ RP, if the Agreements (as on record) between parties are seen, the goods- (Steam Coal and Steel Billets which reduced between the First Inspection Report and Second Inspection Report) was of the ownership of MSTC. Same must be deemed to have been consumed at the Bankura Unit which was functional during CIRP. The value of the same should in that case have to step up the ladder under Section 53 of IBC as CIRP costs. However, this not having been claimed by MSTC, the impugned order is upheld, which placed MSTC on a lower rung, considering the facts.
There is no substance in the Appeal - appeal dismissed.
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2021 (7) TMI 288
Auction - appellant had vested right for sale or not - sale certificate issued in terms of the e-auction or not - Section 61 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The ‘Object of the Code’ is ‘Resolution’. If this concept fails, then the objective shifts to “maximization of the value of assets of the Corporate Debtor”. It is well settled principle that an auction should be transparent and visible to other bidder. As per IBBI (Liquidation Process) Regulations, 2016 vide Chapter –VI, the process of realisation of assets has elaborately been explained. Regulation 31 of IBBI (Liquidation Process) Regulation 2016 provides how the list of stakeholders be made by the Liquidator and Regulation 31 A - the stakeholders consultations committee to advice the Liquidators on the matters relating to sale under Regulation 32 - The Appellant has no vested right and has no sale certificate issued to him in terms of the e-auction. There appears has to be some technical glitches but the same is not support by the certificate of the administrator of the E-auction service provider of the agency involved.
This is a case where the ‘Liquidator’ has gone for e-auction based on the advice of the stakeholders consultation committee and this action is yet to be approved or disapproved by the Adjudicating Authority. This case is not right for review by the Appellate Tribunal as no order has been passed by the Adjudicating Authority. The Appellant has appealed under Section 61 of the Code where the appeal can be filed only against the order of the Adjudicating Authority vide 61(1) of the Code.
The Appellant has come in this appeal against the decision taken by the stakeholders consultation committee and Liquidator going ahead with the e-auction. The Adjudicating Authority is to appropriately consider the observations while disposing of the petition.
The Appellant is to approach first to the Adjudicating Authority for redressal of their grievance for any irregularity and only thereafter can approach before this Appellate Tribunal under Section 61(1) of the Code - there are no merits in the appeal - appeal dismissed.
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2021 (7) TMI 268
Seeking stay on admitted CIRP proceedings - proceedings against both principal borrower and Appellant initiated under SARFAESI Act - overriding effect of IBC - Respondent No. 1/Bank vehemently opposed grant of any interim relief including stay of formation of CoC as it will hamper the 'CIRP' - HELD THAT:- The CIRP proceedings cannot be stayed at this stage - Let the matter be fixed 'For Admission (After Notice) on 15th July, 2021.
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2021 (7) TMI 242
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The Financial Creditor has succeeded to make out a case for triggering the Corporate Insolvency Resolution Process. The material on record clearly goes to show that the Corporate Debtor had availed the loan facility and has committed default in the payment of the said debt amount. The applicant 'financial creditor' has placed on record evidence in support of the claim as well as to prove the default. There is no bar for Financial Creditor from proceeding under the provisions of Code. There is no document placed on record by Corporate Debtor to show that payment of debt, as claimed by the applicant, is made or is not due and payable.
It is evident from the record that the application has been filed on the proforma prescribed under Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code - thus, a default has occurred and debt has remained unpaid. Thus, the application warrants admission as it is complete in all respects and is admitted initiating CIRP as prescribed under the Code.
The scheme is approved - moratorium declared - application allowed.
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2021 (7) TMI 240
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - no document placed on record to substantiate the defense of the corporate debtor - Financial Creditors - existence of debt and dispute or not - time limitation - HELD THAT:- The default has occurred with respect to financial debt. It is observed that ex facie there is no satisfactory evidence produced by the corporate debtor with respect to the payment made to the applicant of its debt. Further, there is no document placed on record to substantiate the defense of the corporate debtor, that the default has not occurred. As long as the extension was granted by the applicant, debt was allowed to be restructured, but after the 21.10.2019 there is no document produced to show that the debt is not due and payable.
The date of default is 22.10.2019 and the application is filed on 07.11.2020, which is well within the period of limitation and not barred by law - the registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application - The application is complete which is filed on the proforma prescribed under Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of the Code. This bench is satisfied that a default has occurred, and debt has remained unpaid. Thus, the application warrants admission as it is complete in all aspects and is admitted initiating CIRP as prescribed under the Code.
Application admitted - moratorium declared.
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2021 (7) TMI 238
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The learned Counsel appearing for the FC submits that the Hon’ble Tribunal may not entertain this IA filed by the CD on account of the Appeal preferred by the FC before the Hon’ble Supreme Court against the order of the Hon’ble NCLAT dated 18/06/2020 [2020 (8) TMI 424 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI]. The Learned Counsel also submits that this matter may be taken up only after the verdict of the Hon’ble Supreme Court on the appeal preferred - the Learned Counsel for the CD also submits that the matter need not be taken up before the verdict of the Hon’ble Supreme Court on the appeal preferred by the FC.
From the documents, affidavits, orders of the Hon’ble NCLAT and the Hon’ble Supreme Court made available, there are no reason to entertain this IA - matter remanded back the matter to this Bench to pass an order afresh after providing an opportunity to the opposite party - the CIRP has been set aside but the Application filed by the FC before this Bench under Section 7 of the IBC is alive and not dismissed.
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2021 (7) TMI 219
Seeking reconsideration of an already approved Resolution Plan - Seeking to send approved Resolution Plan back to ‘Committee of Creditors’ for reconsideration - forfeiture of amount already paid - HELD THAT:- This ‘Tribunal’ pertinently points out that the ‘Appellants’ before this ‘Tribunal’ reiterates that they remain committed to the ‘Resolution Plan’ and as a matter of fact, as on date, according to the Learned Counsel for the ‘Appellants’, all amounts were paid, which fact is not disputed on the side of 1st Respondent/‘Resolution Professional’.
This ‘Tribunal’ taking note of the fact that all the amounts were paid by the ‘Appellants’ (as informed by the Learned Counsel for the ‘Appellants’) application passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Special Bench Court-1) inter alia to the effect that, “it is prima facie clear that successful resolution applicant had paid first instalment and dragged on the matter till date without implementing the plan or without making payment.
The approval of the plan, which has already been approved by the bench on 18.12.2019 and which was modified on 15.07.2020, requires reconsideration by the CoC. In view of the same entire Resolution Plan is remitted back to the CoC for fresh consideration and amounts paid by the successful resolution applicant is to be forfeited and CoC may consider the matter a fresh. Hence the order.” is of the earnest opinion that the said order is not in accordance with law, considering the fact that the ‘Adjudicating Authority’ had exceeded its jurisdiction besides cannot suo motto direct the reconsideration of an already approved ‘Resolution Plan’ because of the fact that after the approval of the ‘Resolution Plan’ the ‘Committee of Creditors’ become ‘functus officio’.
This ‘Tribunal’ is of the considered view that the ‘Adjudicating Authority’ had passed an illegal ‘Impugned Order’ while it directed these ‘Committee of Creditors’ to forfeit the amounts already paid to a sizeable extent - the matter is remitted back to the ‘Adjudicating Authority’ (National Company Law Tribunal, Hyderabad Bench) for passing necessary reasoned orders ‘de novo’ keeping in mind the object and spirit of the Insolvency and Bankruptcy Code and ‘in accordance with law’ - Appeal allowed.
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2021 (7) TMI 198
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 with 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). 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.
The Resolution Plan as approved by the CoC under Section 30(4) of the Code meets the requirements of Section 30(2) of the Code and Regulations 37 and 38 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 as provided under Section 31 of the Code - Application allowed.
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2021 (7) TMI 188
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make payment of its dues - corporate person is the applicant - Corporate Person keeping in view the interest of all stakeholders, filed this petition for revival of the Company CIRP under Section 10 of IBC - HELD THAT:- Due to the loss, the Company could not pay the banks and other creditors. As a result, the account became Non-Performing Asset (N.P.A.). The applicant further submits that the financial debt owed to Punjab National Bank was sanction on 30.03.2017. The said facility was utilised from time to time as and when the funds were required. Due to the severe incident of the fire and several losses, the Directors of the company were of the view that company will not be able to repay the defaults. Hence, the Corporate Person, keeping in view the interest of all stakeholders, filed this petition for revival of the Company CIRP U/s. 10 of the Code.
Perusal of records shows that the Corporate Person furnished/disclosed all information relating to all Books of Account. The applicant has produced on record the Board Resolution dated 03.10.2020 authorising the Director i.e., Mr. Subhash Agrawal/applicant to file this application U/s. 10 of the Code for initiation of the CIRP - Corporate Person suggested/proposed name of one Mr. Pratim Bayal for appointment as Interim Resolution Professional.
The application is defect free and deserves to be accepted - application admitted - moratorium declared.
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2021 (7) TMI 180
Seeking police protection and assistance to the Applicant and/or person(s) working under the Applicant in order to commence the process of auction and also the process of delivery of the Assets to the respective buyer - seeking necessary support and assistance to the Applicant and/or person(s) working under the Applicant to commence the process of auction - HELD THAT:- The Applicant states that, in order to commence the procedure of auction of Assets and to stop the Owner from creating obstruction, he addressed an email dated 11th March 2021 to Superintendent of Police and the in-charge of the Respondent No 1, additional Superintendent of Police and District Magistrate of Betul stating that the local vendors may create disturbance on site at the time of delivery of the assets and therefore requested for assistance to ensure smooth flow of sale process and delivery of the assets - Further the Applicant states that, he has not received any reply nor assistance from the local Authorities and he is still not able to commence the process of auction of the Assets.
Respondent Nos. 1 & 2 shall provide police protection to the Applicant immediately and assist him from any untoward incident taking place, to carry out his job as per directions of this Cour - Application disposed off.
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2021 (7) TMI 147
Liquidation of the Corporate Debtor - section 33(2) of Insolvency and Bankruptcy Code - HELD THAT:- Section 33(2) of the Code enjoins the Adjudicating Authority to pass an order for liquidation of the Corporate Debtor where the resolution professional, at any time during the CIRP but before confirmation of the resolution plan, intimates the Adjudicating Authority of the decision of the CoC approved by not less than sixty-six percent of the voting share, to liquidate the Corporate Debtor. In the present case, the CoC has resolved by 100% voting share to liquidate the Corporate Debtor.
The Corporate Debtor is ordered to be liquidated in terms of section 33(2) of the Code read with sub-section (1) thereof - Application allowed.
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2021 (7) TMI 144
Seeking approval of resolution plan - section 30(6) of Insolvency and Bankruptcy Code, 2016 read with Regulation 39(4) of Insolvency 8B Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, r/w. rule 11 of NCLT rules - HELD THAT:- In K. Sashidhar v. 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. On receipt of such proposal, the Adjudicating Authority (NCLT) is required to satisfy itself that the resolution plan as approved by CoC meets the requirements specified in Section 30(2). No more and no less.
Hon'ble Supreme Court in Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors. [2019 (11) TMI 731 - SUPREME COURT] "the limited judicial review available to AA has to be within the four corners of section 30(2) of the Code. Such review can in no circumstance trespass upon a business decision of the majority of the CoC. As such the Adjudicating Authority would not have power to modify the Resolution Plan which the CoC in their commercial wisdom have approved as held in para 42 of the said judgment.
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 resolution plan is approved - moratorium shall cease to have effect - application allowed.
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2021 (7) TMI 135
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - Applicant has filed this petition under Section 9 of I & B Code after 2 years of the Resolution Plan approved and Plan is under implementation - HELD THAT:- Reliance placed in the Judgment of the Hon'ble Supreme Court in the cases of GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS. [2021 (4) TMI 613 - SUPREME COURT], the present petition needs to be rejected as the Law is settled that once the Resolution Plan is approved by the Adjudicating Authority becomes binding on all stakeholders and all claims not dealt stand extinguished.
There are no merit in the contention of the Petitioner that it could not know about the initiation of CIRP within 90 days from the date of initiation when the notice inviting claims was published by the IRP in the Newspapers and the Petitioner has been perusing the Civil Suit filed by it against the Respondent in the year 2014.
Petition dismissed.
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2021 (7) TMI 109
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT:- Corporate Debtor has not shown anywhere that if the project was not completed or abandoned, any notice was sent to the Operational Creditor, before Operational Creditor sent Demand Notice u/s 8 of IBC. The Document Annexure R-1 filed by Respondent No.1 (Dy. No.25468) shows that even till August, 2016 bills were being paid. Thus, time was not essence of the contract. No dispute can be presumed merely by non-completion of the project in the fixed time or for the reason that the it was the contractor’s fault, when the contract shows responsibilities on both the sides. If Operational Creditor had to continue construction, Corporate Debtor also had to continue paying RA Bills. Thus it cannot be agreed with the argument to make a presumption that there was pre-existing dispute or that the responsibility of non-completion fell on the Operational Creditor.
It is concluded that there was no pre-existing dispute regarding the construction works that were undertaken by the Operational Creditor for the Corporate Debtor. Since there was no pre-existing dispute, all the other issues/disputes that relate to the various clauses of the contract agreement such as joint measurements, lack of completion certificate and inadequate and inappropriate certification of the bills become irrelevant insofar as adjudication of Respondent No. 1’s application under Section 9 is concerned.
The appeal is dismissed.
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2021 (7) TMI 99
Permission of withdrawal of application of CIRP of the ‘Operational Creditor’ - Section 12A of the Insolvency and Bankruptcy Code, read with Section 60(5) of the Code read with Regulation 30(a) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons Regulations, 2016) - HELD THAT:- It is pertinently pointed out that the Applicant/Interim Resolution Professional had preferred an application IA/232(CHE)/2021 in IBA/81/2020 as a result of settlement arrived at between the ‘Operational Creditor’ and the ‘Corporate Debtor’. In reality, the ‘Operational Creditor’ had filed Form FA under Regulation 30A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulation, 2016.
It is brought to the fore that the Applicant/Interim Resolution Professional received the aforesaid Form FA from the ‘Operational Creditor’ on 10.03.2021 for withdrawal of the main Company Petition, pursuant to Regulation 30A(2) sub section (a). The Applicant was in receipt of a cheque for ₹ 13,36,590/- in respect of the estimated expenses, etc. To put it precisely, IA/232(CHE)/2021 in IBA/81/2020 was filed pursuant to the ingredients of Regulation 30A(3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons).
Application filed by the Applicants/Proposed Respondents No.3 and 4 seeking permission of this ‘Tribunal’ to get themselves impleaded in the instant Company Appeal as Respondents No.3 and 4, to avoid plurality/multiplicity of litigation is not entertained - appeal dismissed.
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2021 (7) TMI 60
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - intent of Resolution of Insolvency - malicious intent, or malafides? - Is Application filed collusively - correctness of rejection of application relying on Section 65 of the Code - Doctrine of Corporate Veil - HELD THAT:- The Learned Counsel for the Appellant submits that the Adjudicating Authority had no discretion except to admit the Application filed under Section 7 of the Code. It is emphasised that Section 7 (5) of the Code leaves no discretion to the Court where other ingredients of Section 7 are fulfilled. Section 7 (5) of the Code provides that "where the Adjudicating Authority is satisfied that in default has occurred and the Application under Sub-section (2) is complete, and there is no disciplinary proceedings pending against the proposed Resolution Professional, it may, by order, admit such Application."
Discretion of Adjudicating Authority in relying on section 65 of IBC - HELD THAT:- The use of the phrase 'it may' under Sub-section (5) of section 7 itself leaves the scope of discretion exercised by the Adjudicating Authority in admitting or rejecting the Application. Section 7 (5) (a) lays down parameters about general conditions to admit an Application. However, in the given situation where it appears that Application is filed collusively not with the purpose of Insolvency Resolution but otherwise, then despite fulfilling all the conditions of Section 7(5) of the Code, the Adjudicating Authority can exercise its discretion in rejecting the Application relying on Section 65 of the Code.
Based on the law laid down by Hon'ble Supreme Court in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT], it is clear that even if the Application filed under Section 7 meets all the requirements, then also the Adjudicating Authority has exercise discretion carefully to prevent and protect the Corporate Debtor from being dragged into the Corporate Insolvency Resolution Process mala fide.
Thus, the Code prescribes penalties under Section 65 and 75. Furthermore, Section 65 explicitly says that if any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for resolution of Insolvency or liquidation, as the case may, the Adjudicating Authority may impose a penalty - it is clear that the Adjudicating Authority should be very cautious in admitting the Application so that Corporate Debtor cannot be dragged into Corporate Insolvency Resolution Process with mala fide for any purpose other than the resolution of the Insolvency. Therefore, to protect the Corporate Debtor from the mala fide Initiation of CIRP, the law has provided a penalty under sections 65 and 75 of the Code. Before admitting the Application, every precaution is necessary to be exercised so that the insolvency process is not misused for any other purposes other than the resolution of Insolvency.
Doctrine of Corporate Veil - HELD THAT:- The doctrine of "piercing the corporate veil" stands as an exception to the principle that the Company is a legal entity separate and distinct from a shareholder with its own legal rights and obligations. It seems to disregard the separate personality of Company and attribute the acts of the Company to those who are allegedly in direct control of its operation - The concept of the corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the Court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned.
Even if the petition complies with all requirements of Section 7 of the Insolvency and Bankruptcy Code, 2016, it is filed collusively, not with the intention of Resolution of Insolvency but otherwise. Therefore, it is not mandatory to admit the Application to save the Corporate Debtor from being dragged into Corporate Insolvency Resolution Process with mala fide - thus, the Adjudicating Authority decided that the petition is filed in collusion with the Corporate Debtor and thereby rejected the Petition filed U/S 7 of the Code.
Appeal dismissed.
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2021 (7) TMI 59
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - applicability or nonapplicability of Section 18 of the Limitation Act, 1963 - Corporate Debtor put up a defence that under Section 238A of the ‘I&B Code’ read with Article 137 of the Limitation Act, 1963, the period of limitation was three years and the account having been declared NPA on 15th March, 2016, the Application filed in 2019 was time barred - HELD THAT:- The question with regard to applicability or nonapplicability of Section 18 of the Limitation Act, 1963 is now settled by the Hon’ble Supreme Court in recent judgments such as in the matter of SESH NATH SINGH & ANR. VERSUS BAIDYABATI SHEORAPHULI CO-OPERATIVE BANK LTD AND ANR. [2021 (3) TMI 1183 - SUPREME COURT] and then in Judgement in the matter of LAXMI PAT SURANA VERSUS UNION BANK OF INDIA & ANR. [2021 (3) TMI 1179 - SUPREME COURT] and in ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED VERSUS BISHAL JAISWAL & ANR. [2021 (4) TMI 753 - SUPREME COURT]. The Hon’ble Supreme Court has dealt with its earlier judgments, and now it is quite clear that Sections 18 & 19 of the Limitation Act, 1963 and the other provisions of the Limitation Act, as far as may be apply to the proceedings under the ‘I&B Code’ - Thus, Section 18 of the Limitation Act, 1963 applies.
The reply filed by the Corporate Debtor which was filed before the Adjudicating Authority clearly shows that the Corporate Debtor had specifically raised issue with regard to limitation and made reference to Section 348A as well as judgments on which the Appellant wants to rely and the issues were specifically raised and the Adjudicating Authority in impugned order considered the issue with regard to limitation and recorded finding as in para 8. Thus, it is not the case where foundation has not been laid. There were pleadings before the Adjudicating Authority. The format has been prescribed by the statute and the Bank had clearly while filing details pointed out even the acknowledgment and had attached the documents. When all this is there, there is no substance in the arguments raised before us that the matter should be remanded back to the NCLT and there should be amendment of pleadings. The pleadings are already there. The issues were dealt with and have been decided.
Term loan granted on 17th March, 2011 and other financial services were referred to the Corporate Debtor as per other agreements referred - When the account become NPA on 15th March, 2016 and there was default, the Corporate Debtor acknowledged liability on 10th July, 2018 as per the document at page 309 and thus, the application filed in 2019 could not be said to be time barred.
Appeal dismissed - decided against appellant.
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2021 (7) TMI 55
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - service of notice - existence of debt and dispute or not - HELD THAT:- The case was listed for admission on various dates viz., 19.06.2020, 06.07.2020, 14.08.2020, 02.09.2020, 25.09.2021, 18.01.2021, 28.01.2021, 03.02.2021 and on 04.03.2021. Accordingly, the Adjudicating Authority ordered notice on 19.06.2020 and re-issued notice on 14.08.2020. Further, the Petitioner has served the notice on the Respondent and filed the proof of service. Even then none appeared for the Respondent and no reply has been filed. Further, I.A. No. 28 of 2021 was filed to carry out substituted service of notice on the Corporate Debtor through Paper Publication of the notice in the 'Hindu' and 'Udayavani' newspapers. This IA was disposed of by observing that the service on the Respondent is deemed to have been validly effected, and no further notice is required to be given. The Registry was directed to post the CP for admission. However, on that date also none appeared nor any objections were filed to oppose the claim of the Petitioner.
The Respondent Corporate Debtor is deliberately not entering appearance and has no defense to offer on the case made out by the Petitioner in the instant Petition. The debt and default as mentioned in the Petition remain undisputed - The instant Petition is filed in accordance with the extant provisions of the Code and the Rules made thereunder.
Petition admitted - moratorium declared.
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2021 (7) TMI 51
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Non-Performing Assets and time limitation - Financial Creditors or not - existence of debt and dispute or not - Principles of natural justice - HELD THAT:- It appears that United Bank of India treated Loan Account of the Corporate Debtor as NPA on 31st March, 2018 and the Punjab National Bank treated the Loan Account of the Corporate Debtor as NPA on 6th April, 2019. There are various documents which are in the nature of acknowledgment of the debt outstanding. The Adjudicating Authority has already mentioned that the debt due and outstanding is above ₹ 1/- Lakh. The Appellant is making contradictory submissions claiming that the account of Corporate Debtor stood defaulted with effect from 30th June, 2016 and also claims that there was no debt due and no default.
It is clear that in Application under Section 7 of I&B Code what Adjudicating Authority has to consider is as observed above and defence available to Corporate Debtor is to show that default has not occurred in the sense that debt is not due. Debt may not be due if it is not payable in law (like a debt may be time barred, for example) as it is not due in fact. Even if debt is disputed, so long as it is due from Corporate Debtor and payable, the application must be admitted. The Adjudicating Authority is required to pass orders regarding to admission or otherwise of the application filed under Section 7 of the I&B Code within 14 days. It appears that the Adjudicating Authority did not deny principles of natural justice. Many opportunities were given but the Appellant chose not to take benefit of the same and relied on technicalities.
When the Adjudicating Authority was considering application under Section 7 of I&B Code, the Appellant appears to have failed to show that the debt was not due or that the debt was not in default. When the debt due was more than ₹ 1/- Lakh and there was default, the Adjudicating Authority was bound to admit the application - there is no substance in the claim made in the appeal that the Banks could have relied on when the account of Corporate Debtor was treated as NPA and the period of limitation should be calculated from a different date, as the accounts were in default since beginning.
There is no substance in claim of the Appellant in “M/s Megha Granules Pvt. Ltd. vs. Punjab National Bank” that order to vacate stay dated 7th January, 2019 was obtained by Respondent No. 2 – United Bank of India and so benefit cannot be taken by Respondent No. 1 – Punjab National Bank. The order was not vacated specific to United Bank of India - appeal dismissed.
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