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Insolvency and Bankruptcy - Case Laws
Showing 41 to 60 of 133 Records
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2021 (9) TMI 1206
Permission for exclusion of a period of 146 days pursuant to the stay granted by the Hon’ble NCLAT - stay was granted on the constitution of CoC so that it could finalise the settlement - HELD THAT:- There aredirections for keeping the Corporate Debtor as a ‘going concern’. Therefore, there are no strength in the argument of the Ld. Counsel of Appellant that the orders/directors are only contained in this paragraph which is reproduced above and it does not contain reference to stay for constitution of CoC.
Respondent No. 1 (Resolution Professional) has submitted that the IRP received the order dated 23.7.2020 of Hon’ble NCLAT on 27.7.2020 from ICICI Bank, which is member of the CoC. Thereafter, as per directions contained in this order, the IRP constituted the CoC on 29.7.2020 - the order passed by the Adjudicating Authority regarding exclusion of period from 4.3.2020 till 27.7.2020 (146 days) pursuant to the stay imposed by Hon’ble NCLAT is in accordance with law and requires no intervention.
Appeal dismissed.
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2021 (9) TMI 1195
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:- The Applicant has established the existence of debt and default on the part of the Respondent and the Respondent has not availed the opportunities provided by this Tribunal to defend the arguments made by the Applicant. This Tribunal admits this petition and initiates CIRP on the Respondent with immediate effect.
Application allowed - moratorium declared.
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2021 (9) TMI 1194
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - time limitation - service of demand notice - HELD THAT:- The Applicant filed the present Application under section 9 of IBC, 2016 and served the copy of this application via speed post to the registered office, site office and the addresses of directors of corporate debtor which was returned undelivered. The petition was also served at the registered email address of the corporate debtor as per the master data which was duly delivered to the corporate debtor as it dint bounce back. The service affidavits have been duly filed. Considering that notice was sent at the registered address of the company as reflected on the MCA website and the same was returned with the remark "Addressee left without instructions", shall be considered served, because the same can be manipulated by the corporate debtor - The service of Section 9 is complete. Moreover, the email service is complete. The corporate debtor in spite of service did not appear, neither any reply filed. Hence, the corporate debtor has been proceeded ex-parte vide order dated 19.01.2020 of the Hon'ble Bench, NCLT.
As per Form V, the total debt outstanding is ₹ 4,66,285/-, which includes the principal amount of ₹ 4,01,970/- along with interest @ 24% per annum of ₹ 64,315/- till date of filling of application which is due and payable by the corporate debtor to the applicant - The date of default is 12.09.2019 and the present application is filed on 28.02.2020. Hence the application is not time barred and filed within the period of limitation - The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application.
The Applicant has filed an affidavit in compliance of section 9(3)(b).The present application is filed on the Performa prescribed under Rule 6 of the Insolvency and Bankruptcy Code, 2016 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 r/w Section 9 of the code and is complete - the applicant is entitled to claim its dues, establishing the default in payment of the operational debt. Moreover, the contentions of the applicant have remained uncontroverted and undisputed by the corporate debtor proving the debt becoming due. Hence, the application is admitted.
Application admitted - moratorium declared.
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2021 (9) TMI 1156
Condonation of delay of 44 days (beyond a total period of 45 days) in preferring the appeal - powers to the Appellate Tribunal to condone the delay, which is only 15 more days - Section 61(2) of the IB Code - HELD THAT:- The appeal preferred before the NCLAT was under Section 61(2) of the IB Code. As per Section 61(2) of the IB Code, the appeal was required to be preferred within a period of thirty days. Therefore, the limitation period prescribed to prefer an appeal was 30 days. However, as per the proviso to Section 61(2) of the Code, the Appellate Tribunal may allow an appeal to be filed after the expiry of the said period of 30 days if it is satisfied that there was sufficient cause for not filing the appeal, but such period shall not exceed 15 days. Therefore, the Appellate Tribunal has no jurisdiction at all to condone the delay exceeding 15 days from the period of 30 days, as contemplated under Section 61(2) of the IB Code.
In the present case, even the appellant applied for the certified copy of the order passed by the adjudicating authority on 8.4.2019, i.e., after a delay of 34 days. Therefore, even the certified copy of the order passed by the adjudicating authority was applied beyond the prescribed period of limitation, i.e., beyond 30 days. The certified copy of the order was received by the appellant on 11.04.2019 and the appeal before the NCLAT was preferred on 24.06.2019, i.e., after a delay of 44 days. As the Appellate Tribunal can condone the delay up to a period of 15 days only, the Appellate Tribunal refused to condone the delay which was beyond 15 days from completion of 30 days - it cannot be said that the learned Appellate Tribunal committed any error in not condoning the delay of 44 days, which was beyond the delay of 15 days which cannot be condoned as per Section 61(2) of the IB Code.
An identical question came to be considered by a Constitution Bench of this Court in the case of NEW INDIA ASSURANCE CO. LTD. VERSUS HILLI MULTIPURPOSE COLD STORAGE PVT. LTD. [2020 (3) TMI 1368 - SUPREME COURT], where the Constitution Bench has ultimately concluded that “the District Forum has no jurisdiction and/or power to extend the time for filing of response to the complaint beyond the period of 15 days, in addition to 30 days, as envisaged under Section 13(2)(a) of the Consumer Protection Act.
Considering the statutory provisions which provide that delay beyond 15 days in preferring the appeal is uncondonable, the same cannot be condoned even in exercise of powers under Article 142 of the Constitution.
In view of the settled proposition of law and even considering the fact that even the certified copy of the order passed by the adjudicating authority was applied beyond the period of 30 days and as there was a delay of 44 days in preferring the appeal which was beyond the period of 15 days which maximum could have been condoned and in view of specific statutory provision contained in Section 61(2) of the IB Code, it cannot be said that the NCLAT has committed any error in dismissing the appeal on the ground of limitation by observing that it has no jurisdiction and/or power to condone the delay exceeding 15 days.
Appeal dismissed.
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2021 (9) TMI 1121
Validity of decision of IRP/RP holding that the claimant/ Applicant is a Financial Creditor but is not eligible to be a part of CoC - related party in terms of Section 5(24)(m) & 5(24) (i) of the Insolvency and Bankruptcy Code 2016 - HELD THAT:- The Respondent No. 1 had a share in the profits of the Corporate Debtor Company and cannot be said to be a person acting solely on account of the conversion of debt. In the instant case, the Corporate Debtor had issued non-convertible debentures to Respondent No. 1, which SEBI does not regulate. The SEBI only regulates the issue of debentures relating to “convertible securities” - In the present case, it was not a case of a convertible security. Appellant has annexed the xerox copy of the debenture certificate, which states that “debentures is not convertible but redeemable on maturity” - It is also evident that 2nd proviso to Section 21 (2) of the Code applies where instruments convertible into equity shares were converted prior to the insolvency commencement date. Therefore, 2nd proviso to Section 21(2) is not applicable in the present case and does not enure the benefit to Respondent No 1 ‘ASK’.
It is evident that ASK has a substantial interest in the operations of the Corporate Debtor. Moreover, the intent is to increase the same is clear from their stake to claim a considerable ownership interest in the Corporate Debtor Company, i.e. 89.9%. Their significant involvement in the operations and day-to-day decision-making of the Corporate Debtor is substantiated - 'ASK' is, in effect, an insider of the Corporate Debtor having substantial interest in the ownership of the Corporate Debtor. Hence 'ASK' being a related party, and their claim with the IRP concerning the mentioned CIRP should be rejected, and they are not entitled to participate in the CoC.
The Hon’ble Supreme Court, in Municipal Corporation of Greater Mumbai v Abhilash Lal [2019 (11) TMI 844 - SUPREME COURT], has affirmed the principles that “if any statute requires a thing to be done in a particular manner, it should be done in that in that manner or not at all” and that “there can be no estoppel against the express provisions of law.” Therefore, the mere fact that the improperly constituted Committee of Creditors has approved a Resolution Plan during the pendency of the present Appeal can have no bearing on the merits of the Appeal.
Respondent No. 1 ASK Investment Managers Ltd is a related party to the Corporate Debtor; therefore, it cannot be made part of COC with voting rights - Appeal allowed.
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2021 (9) TMI 1117
Maintainability of CIRP - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditor - providing e-advertisement campaigning services to the corporate debtor - existence of debt and dispute or not - HELD THAT:- The validation of the data generated after completion of services were sent every month before issuance of invoices by corporate debtor to applicant, which indicates that there was a consensus between the parties for raising invoices. The corporate debtor has not placed any document on record in order to show that any invoice raised by applicant was ever disputed by it after issuance, in fact part payment was also made during April, 2019 to the applicant after receiving invoice.
It is clearly established that the default in payment of the operational debt has occurred by the corporate debtor. Though the corporate debtor has raised dispute with regards the defective services, but has not placed on record any document which proves the invoices were disputed even after validation of the data. There is no merit in the so-called dispute raised by the corporate debtor as mere reply filed by the corporate debtor to the present application, is unable to establish any pre-existing dispute of genuine nature. Moreover, there are data for leads generated which was validated vide emails and only thereafter invoice was raised.
Thus, it can be concluded that the applicant has established its claim which is due and payable by the corporate debtor - Application admitted - moratorium declared.
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2021 (9) TMI 1115
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - corporate guarantor in respect of loan given by Financial Creditor to the principal borrower - existence of debt and dispute or not - HELD THAT:- There is a debt which is due and payable, both in law and in fact, and default has occurred, hence, prima-facie, the application filed by the Applicant/Financial Creditor appears to be maintainable.
As far as various legal aspects relating to the liability of corporate guarantor, being independent of default by the principal borrower and recovery from corporate guarantor either simultaneously or independently, are concerned the principles as settled now state that approval of resolution plan per se does not extinguish the liability of corporate guarantor. The only requirement which is to be seen that the amount recovered under resolution plan should not be recovered again from the corporate guarantor - It has specifically been stated by the Applicant/Financial Creditor that in the present case, the Financial Creditor is not seeking the recovery of the amount which has already been recovered under resolution plan and this fact has remained un-controverted.
There are no merit in any of the allegations made by the Corporate Debtor as regard to malicious initiation of CIRP against the Corporate Debtor in filing of application under Section 7 of IBC, 2016 - application admitted - moratorium declared.
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2021 (9) TMI 1028
Legality of action of the RP in including the claim under an expired bank guarantee by the financial creditor - seeking to declare that the claim of the financial creditor under the bank guarantee which is the subject matter of dispute pending, as inadmissible - seeking to declare the entire meeting conducted by the Committee of Creditors - validity of meetings conducted by the Resolution Professional - discharge of dues under the term loan - seeking to recall the order of liquidation - seeking release of refund of excess tax remitted - HELD THAT:- The Corporate Insolvency Resolution Process stood completed by the decision of CoC to liquidate the Corporate Debtor and the liquidation is in progress. Liquidator was promptly filing the progress reports in the Liquidation process before this Tribunal. At this stage, the applicant cannot turn around and question the process adopted by the IRP/RP or the Liquidator. From the verification of the earlier proceedings of this matter, it is seen that the Suspended Directors are not at all co-operating in the CIR Process and they were only on the lookout of creating hurdle to the continuation of CIR Process. Moreover, the applicant herein is a shareholder of the Company and as rightly pointed out by the Respondent No.2 he is not entitled to claim any relief against the CoC or the conduct of the CIRP.
Without attending the meeting conducted by the IRP/RP, they are making bald allegations against the conduct of the CoC meetings. Their challenge to the order of admission of the application before the Hon’ble NCLAT and the appeal against the order before the Hon’ble Supreme Court was failed.
Application dismissed.
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2021 (9) TMI 1027
Seeking removal of attachment order - Attachment of bank accounts - accounts of the Corporate Debtor attached was subsequent to the admission of Application under Section 7 and initiation of CIRP - Deputy Collector inspite of service of notice did not respond and remained ex parte - applicability of Section 32A of IBC - HELD THAT:- Although Section 14 of the MPID Act (which is an Act earlier to IBC) has effect notwithstanding anything inconsistent with any other law, the said Section 14 would be subject to the subsequent Code promulgated by the Government of India which has amended laws related to insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner - there are no force in the argument of the Appellants that the Resolution Professional and later Liquidator could not have moved the Adjudicating Authority for orders to tide over the attachment.
Applicability of Section 32A - HELD THAT:- In the present matter, the argument that unless liquidation takes place, protection of Section 32A cannot be invoked is not well founded. Unless property becomes available and is subjected to the Liquidation Process under Chapter III Part II of the IBC, the applicability or inapplicability of Section 32A cannot be claimed. As per Chapter III, the Liquidator is duty bound under Section 35 to take into custody or control all the assets, property, effects and actionable claims of the Corporate Debtor. Explanation below sub-section (2) of Section 32A makes it clear that no action shall be taken against the property of the Corporate Debtor in relation to an offence committed prior to the commencement of CIRP and the action includes the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the Corporate Debtor. If in liquidation, there is a change of control of Corporate Debtor to a person who was not a promoter or in management or in control of the Corporate Debtor or a related party of such person, the person will be protected. Thus, beforehand it cannot be claimed that protection of Section 32A is not available.
The seizure or attachment of accounts of Corporate Debtor cannot stand as obstruction when the Corporate Debtor is at the stage of liquidation under IBC - MPID aims to protect interest of Depositors. IBC is broader and aims to consolidate and amend laws relating to re-organisation and insolvency resolution of corporate persons and partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons. The scheme aims at balancing interest of all stakeholders. This will include interest of Depositors. Thus, IBC has broader contours. Letting one set of creditors march over others is not permissible.
In the present matter also, if the MPID Act is seen, Section 7(5) makes it clear that when dealing with the attachment of property, the procedure to be followed by the designated court is as per the Code of Civil Procedure. In the subsequent part of the Act while dealing with offence (as per Section 3 of the PMLA), the procedure for taking cognizance of offence is given in Section 13 and provisions of CrPC as applicable for warrant trial cases is applied. There is similarity on these broad aspects between PMLA and MPID. Thus, for attachment under the MPID Act, Section 14 of the IBC dealing with Moratorium would apply and the provisions dealing with powers of IRP, RP and duty to take into custody and control the assets of the Corporate Debtor would be enforceable.
In para 7 of the Application, the Resolution Professional had clearly mentioned that certain properties owned by the Directors/ promoters were also attached and filed the notification dated 31.03.2017. Action against personal properties of owners/ promoters may continue under MPID. In IBC concern is with property of Corporate Debtor. The correspondence impugned before the Adjudicating Authority was the letter dated 22.10.2018 (Annexure-7; Page 109) sent by the Deputy Collector ordering attachment of the Bank Accounts of the Corporate Debtor in the State Bank of India, Anantpura and Rania - Adjudicating Authority wrongly in the impugned order read this order dated 22.10.2018 with notification dated 31.03.2017.
Appeal allowed in part.
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2021 (9) TMI 1019
Liquidation of the Corporate Applicant - Section 33(2) of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- This Tribunal in the circumstances taking into consideration the provisions of law as well as on facts is hereby orders for liquidation of the corporate debtor and in the circumstances the corporate debtor is put under Liquidation and the incidence of liquidation to follow, on and from the date of this order in terms of the provisions of IBC, 2016 and more particularly as given in Chapter - III of IBC, 2016 and also in terms of Insolvency and Bankruptcy (Liquidation Process) Regulations, 2017.
Mr. Punit Handa, Resolution Professional, has given consent to act as the Liquidator vide written communication dated 18.08.2021 and is, therefore, appointed as Liquidator under section 34 of the Insolvency and Bankruptcy code, 2016 read with Regulation 3 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - the corporate debtor is ordered to be liquidated - application allowed.
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2021 (9) TMI 1016
Sanction of Scheme of Amalgamation - Sections 230-232 and other applicable provisions of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Taking into consideration the joint Application and the documents filed therewith showing compliance of various provisions of the Companies Act, 2013 and the Rules framed thereunder, this Tribunal issues the directions with respect to convening and holding of the meetings of the Equity and Preference Shareholders, Secured and Unsecured Creditors of the Applicant Companies or dispensing with the same.
The scheme is sanctioned - application allowed.
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2021 (9) TMI 997
Seeking directions to Appellants to file their written claims before the Respondent - Financial Creditors/homebuyers - HELD THAT:- The Appellants are hereby directed to file their claims in terms of the aforesaid provisions before the Resolution Professional/ Respondents within two weeks from today - Learned Counsel for the Resolution Professional/ Respondent is hereby directed to verify the claims in terms of the various provisions and forward the genuine claims of the Learned Counsel for the Appellants to Adjudicating Authority.
The timeline provided by the IB Code, with the aforesaid directions - Appeal is hereby disposed of
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2021 (9) TMI 993
Liquidation of the Corporate Debtor - non-implementation of the Resolution Plan - whether the prayer of the Appellant with regard to liquidating the Corporate Debtor ought to have considered or not? - HELD THAT:- The Ld. Adjudicating Authority observed that the ‘Tribunal’ (NCLT) cannot either order Liquidation or to direct the refund of the EMD, as the Tribunal has become Functus Officio after approval of the Resolution Plan with the consent of both the parties.
Admittedly the CIRP was initiated on 20th September 2019. 270 days completed on 23rd August 2020 and 330 days completed by the end of October 2020. The Application filed by the Appellant bearing MA No.186/KOB/2020 in the month of November 2020 i.e., after completion of 330 days - The fact is that the 330 days have been completed and the Respondent did not implement the plan and filed an Application before the Ld. Adjudicating Authority bearing IA No. 16/2021 praying the ‘Tribunal’ to permit the Respondent/Applicant in IA No. 16/2021 to withdraw the Resolution Plan and set aside the Order of the Ld. Adjudicating Authority dated 10th September 2020 whereby the plan of the Respondent/Applicant was approved.
Having observed by the Ld. Adjudicating Authority that it cannot recall the Order of approval of the Resolution Plan and cannot direct the refund of the EMD and having rejected the Application filed by the Respondent bearing IA No. 16/2021, the Ld. Adjudicating Authority ought to have considered the prayer as made by the Appellant with regard the passing of Liquidation Order in view of non-implementation of the Resolution Plan by the Resolution Applicant and completion of 330 days. If 330 days completes and the Resolution Applicant failed to implement the plan, the Adjudicating Authority ought to have passed the Order of Liquidation as per the provision of the I & B Code, 2016 - This ‘Tribunal’ is not going into the aspect with regard to the forfeiture of the performance security and withdrawal of the plan.
This ‘Tribunal’ comes to a conclusion that 330 days have expired and upon non-implementation of the plan by the Resolution Applicant, the Adjudicating Authority ought to have passed the Order of Liquidation of the Corporate Debtor - Appeal allowed.
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2021 (9) TMI 991
Seeking for removal of the Appellant (APSTC/TSTPC) from the ‘CoC’ - Promotion of trade from the State and create logistics infrastructure in the state and to carry out its existing business of manufacture and sale of notebooks for students - ‘related party’ as construed under Section 24(5) of the ‘I&B’ Code, 2016 - submission of appellant is that there is no participation in policy making of the First Respondent/ Company nor there is interchange of managerial personnel between the Appellant and the First Respondent/ Company - HELD THAT:- It must be borne in mind that the expression ‘control’ in Section 29A(c) of the ‘I&B’ Code symbolizes only the positive control i.e. that the mere power to block special resolutions of a Company cannot amount to control. In reality, the word ‘control’ juxtaposed with the term ‘management’ means ‘De facto control of actual management or policy decisions that may be or are in reality taken - this Tribunal points out that, the Appellant’s Managing Director was also a Director of the first Respondent Company. Moreover, the Director nominated by the Appellant, in fact, advises the Appellant / Company in matters relating to the first Respondent / Company.
The part played by the two nominee Directors clearly point out that the first Respondent / Company acts on the advice, direction and instructions of the Appellant in its normal business affairs relating to the first Respondent. As such, this Tribunal is of the earnest opinion that the Appellant ‘squarely comes within the ambit of related party as per clause (f) of Sub Section 24 of section 5 of the Code.
The other important fact that cannot be brushed aside is that that the First Respondent had reported the transactions between the Appellant and it, in their ‘Annual Reports’ and ‘Audited Financial Statements’. Besides this, as perceived from the ‘Articles of Association’ and the requisite majority needed for taking important business decisions, the conduct of the business of the First Respondent, the establishment of First Respondent Company, all considered in an integral and cumulative manner will exhibit the noteworthy influence of the Appellant in issues concerning the First Respondent. In this manner also, the First Respondent is treating the Appellant as ‘Related Party’.
The Appellant / Company has a control in regard to the arrangement of ‘Board of Directors’ of the First Respondent / Company and on this score also, the Appellant comes within the purview of ‘related party’ as per clause L of sub section 24 of 5 of the ‘I&B’ Code, as opined by this Tribunal - It is to be pointed out that the ‘Articles of Association’ point out that action relating to significant matters ought to be taken only by affirmative vote of three or more Directors and in the qualified majority, minimum one Director is to be nominated for inclusion by the APTPCL.
Considering the facts and circumstances of the instant case in a conspectus fashion and keeping in mind the ingredients of the ‘Articles of Association’ to the effect that the nominee Directors have a vital influence in regard to the working of the ‘Corporate Debtor’, this Tribunal unhesitatingly comes to a consequent conclusion that the Appellant is a ‘related party’ and the view arrived at by the ‘Resolution Professional’ to include the Appellant/TSTPCL as member of the ‘Committee of Creditors’ is clearly unsustainable in the eye of law.
This Tribunal concurs with a view arrived at by the ‘Adjudicating Authority’ in the ‘impugned order’ that the Appellant is a ‘related party’ - Appeal dismissed.
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2021 (9) TMI 986
Condonation of delay of 12 days in filing appeal - seeking extension of limitation period prescribed under law - Section 61 of the IBC - HELD THAT:- The impugned order is pronounced on 03.02.2020. In view of the provisions under Section 61 of the IBC as per prescribed period the Appeal was required to be filed within 30 days till 04.03.2020. However, the Appeal was filed on 29.12.2020 i.e. after a delay of 299 days. As per proviso to sub-Section (2) of Section 61 of the IBC, this Tribunal may condone the delay for a period not exceeding 15 days. Ld. Counsel for the Appellant has taken shelter of the order passed by the Hon’ble Supreme court in India in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [2020 (5) TMI 418 - SC ORDER] extended the limitation period prescribed under law.
Admittedly, the MOU which alleged to be forged and fabricated document did not form the basis of any adjudication. Therefore, Ld. Adjudicating Authority has rightly held that the provisions of Section 340 of the Cr.P.C are not attracted in the facts of this case - there are no flaw in this finding.
The Appeal is dismissed as barred by limitation as well as on merits.
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2021 (9) TMI 984
Approval of Resolution Plan - seeking success fees to the Resolution Professional - grievance raised is that the approval of the success fees was a commercial decision of the CoC and the Adjudicating Authority could not have interfered with the same while approving the Resolution Plan and directing distribution of the amount set apart for success fees - HELD THAT:- The provisions as appearing in IBC and as can be seen from Regulations read with the Code of Conduct all indicate that although quantum of fees have not been fixed that the Code and Regulations do intend to control the manner in which Resolution Professional charged fees and according to Learned Amicus Curiae, the quantum of fees payable is a subject which is justiciable before the Adjudicating Authority if it is found to be unreasonable and if the manner, method of payment is inconsistent with the Regulations. The quantum of fees can be fixed by the CoC but it would be subject to scrutiny by the Adjudicating Authority as what is reasonable fee is context specific and it is not part of the commercial decision of the CoC. The CoC exercised commercial decision with regard to Resolution Plan which is required to be approved and although CIRP Costs are required to be paid on priority, the reasonableness of fees is not part of commercial decision.
The IBBI has power to take disciplinary action in the event of misconduct or breach by Insolvency Professional. In the absence of such power with Adjudicating Authority, the matter of fees would be completely unchecked and devoid of scrutiny. Para 30 of the Written Submissions filed by the Learned Amicus Curiae may be reproduced.
Reference to term “success fee” in Annexure-B of the Circular dated 12.06.2018 which was view of the ‘Society for Insolvency Practitioners of India’ is a term which is unguided. Rather even the said society has a caveat to it when it mentions that the success and contingency fee is only to the extent that it is consistent with the requirements of integrity and independence of Insolvency Professionals. In our view, if the Resolution Professional seeks to have success fee at the initial stage of CIRP, it would interfere with independence of Resolution Professional which can be at the cost of Corporate Debtor. If success fee is claimed when the Resolution Plan is going through or after the Resolution Plan is approved, it would be in the nature of gift or reward. “Success fee”- term is contrary to what IBBI provided in its Circular dated 16.01.2018 that Insolvency Professional shall render services for a fee which is a reasonable reflection of his work.
The ‘success fees’ which is more in the nature of contingency and speculative is not part of the provisions of the IBC and the Regulations and the same is not chargeable. Apart from this, even if it is to be said that it is chargeable, it is found that in the present matter, the manner in which, it was last minute pushed at the time of approval of the Resolution Plan and the quantum are both improper and incorrect - argument that the Adjudicating Authority should have sent the matter back to the CoC if it was not approving the success fee deserves to be discarded as the Adjudicating Authority while not accepting the success fee merely asked proportionate distribution which would even otherwise have happened if “success fee” was set aside as the money would become available improving percentage of other creditors’ dues.
There is no substance in the Appeal - appeal dismissed.
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2021 (9) TMI 983
Withdrawal of resolution plan post approval of the same by the COC - jurisdiction of the Ld. Adjudicating Authority to approve or reject resolution plan - parameters/requirements prescribed under Section 30(2) of the Code fulfilled or not - can resolution applicant can unilaterally seek to withdraw an approved Resolution Plan - process note as mandated under Section 25(2)(h) of the Code - HELD THAT:- It is quite clear that the SRA could not have been allowed to withdraw the Resolution Plan after it had been approved by the CoC. The Adjudicating Authority had no jurisdiction to rely on residuary powers of Section 60(5)(c) to entertain the application of SRA. The grounds raised by SRA of delay also are clearly untenable.
In the matter of ‘Ebix Singapore’ [2021 (9) TMI 672 - SUPREME COURT], Hon’ble Supreme Court has referred to Section 12 of IBC which stipulates the timeline within which the CIRP is to be completed. Regulation 40A of the CIRP Regulations provides a detailed model timeline for CIRP which accounts for all the procedural eventualities that are permitted by the statute and the Regulations - As observed by the Hon’ble Supreme Court, the Resolution Applicant is deemed to be aware of the IBC and its mechanisms. The Resolution Applicant, after obtaining the financial information of the Corporate Debtor through the informational utilities and perusing the IM, is assumed to have analysed the risks in the business of the Corporate Debtor and submitted a considered proposal. After the plan has been approved, the SRA could not be heard making the complaints regarding incomplete information (which here is even otherwise not established) to withdraw from the Resolution Plan. The grievance appears to be made just to raise a petit ground.
The judgment in the matter of ‘Ebix Singapore’ [2021 (9) TMI 672 - SUPREME COURT] has been passed by the Hon’ble Supreme Court on 13th September, 2021, after the arguments in these Appeals were over. The Hon’ble Supreme Court has taken conspectus of the complete law on the subject and although the Learned Counsel for parties have made various submissions whether or not the power under Section 60 of IBC could have been exercised; whether or not the SRA had a good ground to withdraw; whether or not there was mis-information in Information Memorandum, we need not go into these details to burden this judgment with those details as the law is now clear on the issues as involved in the present Appeals.
The matter is remitted back to the Adjudicating Authority. Adjudicating Authority is directed to consider the application filed by the Resolution Professional under Section 30/31 of IBC urgently and decide the same within one month - appeal disposed off.
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2021 (9) TMI 948
CIRP in process - default to give possession of flats to homebuyers - grievance raised in this petition is that the application filed for the initiation of corporate insolvency against the first respondent was merely to stall the refund of the amount due to the homebuyers - resolution plan pending approval - HELD THAT:- The conspectus of facts before this Court reveals that the petitioners have participated in the proceedings before the RP and later, the CoC. The Resolution Plan which has been submitted by the consortium of home buyers stands approved by the CoC and the proceedings are now pending before the Adjudicating Authority, awaiting its approval under Section 31(1) of the under the IBC. If the petitioners have any objections to the Resolution Plan, they are to submit them before the Adjudicating Authority. We direct the NCLT to ensure that the application for approval is disposed of expeditiously and preferably within a period of six weeks form the date of receipt of a certified copy of this order.
The Resolution Plan is still to be approved by the Adjudicating Authority under the provisions of Section 31(1) of the IBC. Hence, at this stage, when the Resolution Plan awaits approval, it would not be appropriate for this Court to issue a direction of that nature. After the Resolution Plan is approved under the provisions of Section 31(1), consequences emanating from the statutory provision would ensue to the benefit of the home buyers. Hence, it is already directed that the NCLT shall dispose of the approval application filed on 21 August 2021, within a period of six weeks from the date of receipt of a certified copy of this order - Further, since the moratorium declared in respect of the first respondent Corporate Debtor continues to operate under Section 14 of the IBC, no new proceedings can be undertaken or pending ones continued against the Corporate Debtor.
Application disposed off.
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2021 (9) TMI 932
Asset of the ‘Corporate Debtor’ - Revocation of performance guarantee - Seeking to refund the amount and deposit the same in the Account of the ‘Corporate Debtor’ with interest as it forms part an Asset of the ‘Corporate Debtor’ - whether the ‘Corporate Debtor’ has any right with respect to money received from reversal of invocation of a Performance Bank Guarantee (which had been invoked prior to the initiation of CIRP), specifically when the margin money was also not deposited by the ‘Corporate Debtor’? - Can the said refund amount be construed as an asset belonging to the ‘Corporate Debtor’?
HELD THAT:- The definition of ‘security interest’ under the Code includes an interest that has been created in favour of the Secured Creditor by a transaction which secures payment or performance of an obligation, but though it includes performance obligations, the Legislature decided to exclude performance based Guarantees from the definition. The Legislature by carving out an exception for Performance Guarantee under Section 3(31) intended invocation of Performance Bank Guarantee during the Moratorium period. The observations of the Insolvency Law Committee Report, 2018 specify 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 asset of third party like sureties’. A simple interpretation would mean that the contractual principles of the guarantee are required to be respected even during the Moratorium period and any alternate interpretation could not have been the intention of the Code as is clear from a plain reading of Section 14.
The intent of the Code was not to terminate Agreements that have created legal rights in favor of third parties without adhering to due process of Law. Such a termination of legally binding Agreements would be in violation of the provisions of Section 30(2)(e).
In the instant case, the issue pertains to amounts refunded by reversal of invocation of Performance Bank Guarantee where even the margin money was paid by the Bank and not by the ‘Corporate Debtor’ - the liabilities under a Performance Bank Guarantee cannot be terminated by action of a third party. A Bank which gives a Performance Guarantee must honour the guarantee according to its terms.
Thus, the amount refunded on reversal of the invocation by the Indian Navy cannot be said to be an asset of the ‘Corporate Debtor’, under IBC, Performance Guarantees are to be dealt with specifically keeping in view the provisions and exclusions under Section 14(3)(b) and Section 3(31) of the Code - there is no violation of Section 14 of the Code as the money appropriated by the Bank is not the asset of the ‘Corporate Debtor’ - appeal allowed.
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2021 (9) TMI 931
Suit for eviction for non-payment of rent (of alternate premises) - appellant claims to be allottee of the Corporate Debtor - appellant claims that she could not be evicted from the alternate premises till the flat allotted to her is provided to her and the liability to pay the rent is also of Mr. Vidur Bhardwaj-Respondent No. 3 - HELD THAT:- The dispute in the present matter is centering around the rent agreement dated 27th November, 2018 (Annexure A-6, Page 88). This agreement dated 27th November, 2018 is between the Respondent No. 2-Ms. Aarti Saraf and the Appellant-Ms. Indrani Brahmachari. Respondent No. 2 is referred as Landlady/First Party and the Appellant is referred as Tenant/Second Party. It relates to Flat No. 1101, Tower No. 30 situated at Lotus Panache Island, Sector – 110 Noida. The Document states that the landlord has agreed to let out the premises to the tenant on rent for 24 months.
Parties have not brought on record anything to show that all the allottees of the Corporate Debtor in CIRP are being given any such preferential treatment. In the facts of the matter, the prayers of the Appellant in I.A. 2468 of 2020 could not be granted. It would not be in consonance with the scheme of IBC. Under the scheme of IBC, the allottee can be dealt with under Resolution Plan or if the Corporate Debtor goes into Liquidation, the allottees would get treatment as per provisions but the same would have to be similar to all. Even if the veil is lifted, what appears is that one of the directors of the holding company gave some preferential benefit to the Appellant. However, when CIRP has been initiated, the Corporate Debtor with whom no prior contractual arrangement is proved, cannot be forced to continue with the same treatment.
Appeal disposed off.
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