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IBC - Case Laws
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2023 (9) TMI 573
Liquidation order - it is alleged that Resolution Professional have not considered all the requisites of the IBC - HELD THAT:- The present is a case where before expiry of CIRP period or the maximum period permitted for completion of the CIRP, no Resolution Plan was received. The CoC has passed a resolution to liquidate the Corporate Debtor by vote share of 100%. The statutory scheme indicates that in the eventualities mentioned in Section 33(1) & (2) initiation of liquidation proceedings can be made by the Adjudicating Authority. In the present case, extension granted by the Adjudicating Authority of 90 days by order dated 31.07.2020 was also coming to an end on 28.09.2020 on which date CoC in 11th meeting decided to liquidate the Corporate Debtor.
The decision of the CoC in 11th meeting of the CoC to liquidate the Corporate Debtor was taken with 100% vote share - It is noted that timeline for CIRP even after extension of 90 days was coming to an end on 28.09.2020 - When CIRP period was coming to an end on 28.09.2020, CoC, there being no Resolution Plan in the CIRP, had rightly passed a resolution to liquidate the Corporate Debtor with 100% vote share. The submission of the Appellant that Resolution Professional did not complete the various process including obtaining the Audit Report cannot be accepted.
The period of CIRP having coming to an end, CoC has no option but to take a decision of the liquidation of the Corporate Debtor. In the facts of the present case, there are no error in the decision of the Adjudicating Authority allowing the liquidation application - appeal dismissed.
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2023 (9) TMI 527
Initiation of CIRP - Dues towards stock exchange - Financial debts / Financial Service Provider - Validity of order of NCLT admitting the application of the Ex-Directors of the Corporate Debtors, for default in repayment of Loan - Prayer for clarification that a Trading Member of the Applicant registered as a Stock Broker with the SEBI being a Financial Service Provider is not a ‘corporate person’ and is not amenable to proceedings under the Code - Corporate Debtor is a Stock Broker, registered with the SEBI and is a Trading Member of the NSE - corporate person or not - HELD THAT:- The SEBI is Financial Sector Regulator. The Stock Brokers and Sub- Brokers under the SEBI (Stock-Brokers and Sub-Brokers) Regulations, 1992 are required to be compulsorily registered under Section 3. Regulation contains details of obligation and responsibilities of the Stock Brokers. Schedule-II Regulation, 1992 provides for ‘Code of Conduct for Stock Brokers’. The Stock Brokers under heading “B” – Duty to the Investor includes – Investment Advice in publicly accessible media. The Stock Brokers, who are covered by the Regulation 1992 are subject to various obligation and duties towards Investors and from the nature of activities as contained in the Memorandum of Association of both the Corporate Debtors, they clearly fall within the definition of ‘Financial Service Provider’.
It is noticed that SEBI and NSE have a mechanism for disposal of complaints by Investor - The NSE has also brought on record the Circulars issued by Securities and Exchange Board of India dated November 6, 2020 on the subject Investor Grievance Redressal Mechanism, which indicates that SEBI has its own mechanism for redressal of grievances, which arose regarding service-related complaint. In fact, a complaint was filed by Vipul H Raja against the Corporate Debtor as noted above for the very same amount, which was considered and rejected by complaint mechanism. The Financial Creditor – Respondent No.1 without being deterred by the said rejection has filed Section 7 Application, which was wholly incompatible.
Section 5(8)(g) has to be read harmoniously with Section 7 and Section 5(7) and 5(8). Section 5(8)(g) cannot be read in any manner that financial service providers are also covered under Section 5(8)(g). The Adjudicating Authority misconstrued the provisions of the Code and on finding that debt is payable by the Corporate Debtor, admitted Section 7 Application. The order of the Adjudicating Authority against the Corporate Debtor namely - Simandhar Broking Ltd., who being the Financial Service Provider was an entity against whom no proceedings under Section 7 could have been initiated. Initiation of Section 7 proceedings was itself nonmaintainable and Adjudicating Authority ought to have rejected the Application.
Both the Corporate Debtors, i.e. Simandhar Broking Ltd. and M/s. Astitva Capital Market Private Limited being registered Broker with SEBI and Trading Member of the NSE are providing services, which are ‘financial services’ within the meaning of definition of Section 3(16) of the Code and by virtue of Section 3(7) read with Section 3(8) and Section 227 of the Code, Section 7 Application filed by Corporate Debtors were not maintainable. The orders passed by Adjudicating Authority in both the Appeal(s) deserve to be set-aside.
Appeal allowed.
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2023 (9) TMI 516
CIRP - Belated claim pertaining to arbitral Award - appellant’s claim pertaining to an arbitral award, which is in appeal under Section 37 of IBC - to be included at a belated stage i.e. after the resolution plan has been approved by the COC or not - HELD THAT:- It is undisputed that the process followed by respondent no. 1 was not flawed in any manner, except to the extent of whether an endeavour should have been made by respondent no. 1 to locate the liabilities pertaining to the said award from the records of the Corporate Debtor
The appellant is a commercial entity. That they were litigating against the Corporate Debtor is an undoubted fact. We believe that the appellant ought to have been vigilant enough in the aforesaid circumstances to find out whether the Corporate Debtor was undergoing CIRP. The appellant has been deficient on this aspect. The result, of course, is that the appellant to an extent has been left high and dry.
Whether the delay in the filing of claim by the appellant ought to have been condoned by respondent no. 1? - HELD THAT:- Section 15 of the IBC and Regulation 6 of the IBBI Regulations mandate a public announcement of the CIRP through newspapers. This would constitute deemed knowledge on the appellant. In any case, their plea of not being aware of newspaper pronouncements is not one which should be available to a commercial party - the mere fact that the Adjudicating Authority has yet not approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process. This would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon.
Thus, it is concluded that the NCLAT’s impugned judgment cannot be faulted to reopen the chapter at the behest of the appellant - appeal dismissed.
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2023 (9) TMI 461
Interpretation of statute - Scope of the term "OR" - Regulation 39(1A) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - whether the word ‘or’ in the said sub-regulation should be read as ‘in addition to’ and not ‘to the exclusion of’? - HELD THAT:- NCLAT is right in observing that, the word ‘or’ in the said sub-regulation should be read as ‘in addition to’ and not ‘to the exclusion of’.
This means that the resolution professional may, if envisaged in the request of the resolution plan, can allow under the said sub-regulation, modification of the resolution plan received, albeit only once. However, this will not have any effect on and bar recourse to the challenge mechanism when adopted by the Committee of Creditors to enable resolution applicants to improve/better their plans.
Appeal dismissed.
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2023 (9) TMI 460
Condonation of delay of 200 days in preferring the present appeal - HELD THAT:- The delay is beyond the condonable period. Hence, the appeal is dismissed on the ground of delay.
The impugned judgment and the delay in filing of the appeal shows that the time lines prescribed under the Insolvency and Bankruptcy Code, 2016 are not being followed and adhered to by the State of Karnataka. Corrective steps must be taken in this regard.
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2023 (9) TMI 459
Direction to Resolution Professional to submit documents in a sealed cover without e-filing - whether there exists provisions in the Code in which the shareholders can ask for such documents from Resolution Professional? - HELD THAT:- Resolution Plan with regard to Corporate Debtor has already been approved by the Adjudicating Authority on 01st August, 2023 in which plan the Adjudicating Authority has already observed that it has looked into the documents and materials provided by the Resolution Professional.
In the facts of the present case where Resolution Plan has already been approved the Order which was passed by the Adjudicating Authority on 05th June, 2023 has outlived its purpose. The Adjudicating Authority is fully empowered to issue any direction to Resolution Professional or any other party to give any information or evidence. The Resolution Professional has complied the Order dated 05th June, 2023 and filed the relevant evidence. At this stage, where Resolution Plan has already been approved, the issues raised by the Appellant has become academic and needs no further consideration in this Appeal.
There are no reason to interfere with the Order dated 05th June, 2023 - appeal dismissed.
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2023 (9) TMI 414
E-auction of assets corporate debtors - who can participate - Scope of the term related party / relative - Sale of asset of the corporate debtorin favour of a related party of the corporate debtor - bar under Section 29A of I&B Code - HELD THAT:- The Liquidator virtually steps into the shoes of the management of the corporate debtor and oversees the liquidation process. In this process, he holds the liquidation estate of the corporate debtor as a fiduciary for the benefit of all the creditors. While overseeing the liquidation process, he has the mandate to sell all movable and immovable properties and actionable claims of the corporate debtor in liquidation by way of either public auction or by private contract, though he cannot sell such property or claims to any person who is not eligible to be a resolution applicant.
Furnishing of reasons presupposes application of mind to the relevant factors and consideration by the concerned authority before passing an order. Absence of reasons may be a good reason to draw inference that the decision making process was arbitrary. Therefore, what para 1(11A) has done is to give statutory recognition to the requirement for furnishing reasons, if the Liquidator wishes to reject the bid of the highest bidder. Furnishing of reasons, which is an integral facet of the principles of natural justice, is embedded in a provision or action, whereby the highest bid is rejected by the Liquidator. Thus, what para 1(11A) has done is to give statutory recognition to this well-established principle. It has made explicit what was implicit.
After a careful analysis, this Court opined that the expressions ‘related party’ and ‘relative’ contained in the definition sections must be read noscitur a sociis with the categories of person mentioned in Explanation I. So read, it would include only persons who are connected with the business activity of the resolution applicant. This Court further clarified that the expression ‘connected person’ would also cover a person who is in management or control of the business of the corporate debtor during the implementation of a resolution plan.
In PHOENIX ARC PRIVATE LIMITED VERSUS SPADE FINANCIAL SERVICES LIMITED & OTHERS [2021 (2) TMI 91 - SUPREME COURT], this Court noted that the expression ‘related party’ is defined in Section 5(24) in relation to a corporate debtor and Section 5(24A) provides a corresponding definition in relation to an individual. Thereafter, it has been observed An issue of interpretation in relation to the first proviso of Section 21(2) is whether the disqualification under the proviso would attach to a financial creditor only in praesenti, or if the disqualification also extends to those financial creditors who were related to the corporate debtor at the time of acquiring the debt.
Thus, the disqualification sought to be attached to the appellant is without any substance as the related party had ceased to be in the helm of affairs of the corporate debtor more than a decade ago. He was not in charge of the company or an influential member of the company i.e., the corporate debtor when the appellant had made its bid pursuant to the auction sale notice.
There are no hesitation in coming to the conclusion that Appellate Tribunal was not justified in setting aside the order of the Tribunal dated 12.08.2021 - appeal allowed.
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2023 (9) TMI 307
Maintainability of Section 9 application - pre-existing dispute - Respondent Company was a Commercially Solvent Company - HELD THAT:- The issue whether there was a pre-existing dispute between the Parties is to be adjudicated on the touch stone of the ratio laid down by the Hon’ble Apex Court in the matter of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd [2017 (9) TMI 1270 - SUPREME COURT] and in the matter of TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED VERSUS EQUIPMENT CONDUCTORS AND CABLES LIMITED [2018 (10) TMI 1337 - SUPREME COURT], wherein the Hon’ble Apex Court has held Existence of an undisputed debt is sine qua non of initiating CIRP. It also follows that the adjudicating authority shall satisfy itself that there is a debt payable and there is operational debt and the corporate debtor has not repaid the same.
In the instant case, admittedly 97 % of the amount due for the invoices raised by the Appellant was paid and 3 % of the Invoices amount was withheld by the Respondent Company. It is the case of the Appellant that despite service of Notice on the Respondent Company at the address ‘No. 11th, K.M. Hosur Road, Bommanahalli, No. 38/5/B Hyland, Industrial Estate, Bengaluru – 68’, there was no reply and hence, a pre-existing dispute cannot be raised subsequent to the filing of the Section 9 Petition - It is not denied by the Appellant that the postal code of the Respondent’s Registered Office Company is 560035. Be that as it may, in their Reply to this Section 9 Petition, the Respondent Company has raised a pre-existing dispute for having withheld the 3 % amount towards liquidated damages.
It is the consistent stand of the Respondent Company that 97% of the Amount was paid and the balance 3 % was kept on hold only on account of evaluating customer satisfaction and it was established that there was a delay of six weeks on behalf of the Appellant Company in executing the job assigned to them on account of which liquidated damages / Penalty of Rs. 40,56,539/- which is as per the terms of the Contract was levied. Therefore, this Tribunal is of the considered view that there is a pre-existing dispute which is not a spurious defence which is a mere bluster.
In the judgment of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., it is clearly held that the Court does not at this stage examine the merits of the dispute, but as long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the Adjudicating Authority has to reject the Application. This Tribunal is of the considered view that the aforenoted ratio is applicable to the facts of this case as we are satisfied that a ‘dispute’ truly existed for the Respondent Company to have withheld 3% of the total invoice amount.
Whether Section 9 Application can be entertained against a Solvent Company, the scope and objective of the Code has to be kept in mind before admission of such an Application? - HELD THAT:- The spirit of the Code is maximization of the assets and Resolution and not Recovery. The Hon’ble Supreme Court in the matter of ‘Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Anr.’ [2019 (1) TMI 1508 - SUPREME COURT] has held that ‘the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors.’
Appeal dismissed.
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2023 (9) TMI 306
Maintainability of Section 7 application - opportunity of filing reply not given - order passed ex-parte - principles of natural justice - HELD THAT:- In view of the fact that notice by registry was received and served on 04.11.2022 which fact is not disputed, Adjudicating Authority ought to have given one more opportunity to file a reply. Proceeding ex-parte and reserving order is not giving sufficient opportunity to the appellant as contemplated by Rule 37 Sub Rule 2 of the NCLT Rule, 2016.
Ends of justice be served in giving one opportunity to the appellant to file a reply before the Adjudicating Authority. Let the appellant filed reply within two weeks from today and appear on the next date fixed by Adjudicating Authority - The order dated 06.12.2022 is set aside - appeal disposed off.
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2023 (9) TMI 240
Initiation of CIRP - Threshold limit of default for admission of application - inclusion of interest for arriving at a claim - Financial debt or not - interest for the delay in registering the Sale Deed for the Mortgaged Plots - sale agreements do not provide for any interest - HELD THAT:- This Tribunal is of the considered view that the 1st Respondent is a ‘Financial Creditor’ and the amount paid by the Allottee is a ‘Financial Debt’ as defined under Section 5(8) of the Code and held by the Hon’ble Apex Court in the matter of Pioneer Urban Land and Infrastructure Limited and Ors. Vs. Union of India (UOI) and Ors. [2019 (8) TMI 532 - SUPREME COURT] where it was held that The Amendment Act to the Code does not infringe Articles 14, 19(1)(g) read with Article 19(6), or 300-A of the Constitution of India.
Further, interpreting the Explanation added to Section 5(8)(f) of the Code, the Court further held that allottees/homebuyers were included in the main provision, i.e. Section 5(8)(f) with effect from the inception of the Code. The advances given by Property buyers to real estate developer will be considered as a ‘borrowing’ and such amounts raised from allottees falls within the scope of Section 5(8)(f) of the Code - Contention of the Learned Senior Counsel that the allottee is a speculative investor is unsustainable keeping in view that the ‘interest’ payable as per Clause 3 of the Agreement of Sale is ‘conditional’ to not obtaining the approval of HMDA.
Whether the interest was rightly added to the 1st Respondent to the Claim amount to fall within the threshold amount of Rs. 1,00,00,000/-? - HELD THAT:- The amount mentioned in CMA 296/2021 cannot be equated to the Claim amount in the Section 7 Petition as the prayer in the Civil Suit was for specific performance, whereas, the amount claimed in the instant Petition is for the amounts due and payable to the 1st Respondent, as the amounts fall within the definition of ‘Financial Debt’, as defined under Section 5 (8) (f) of the Code. It is an admitted fact that the Final HMDA Approval was obtained only in January 2019 and till April 2019, neither were the plots registered nor the amounts refunded - the quantum of interest comes into play as per the clauses of the Agreement of Sale entered into between the Parties. Therefore, this Tribunal do not see any merit in the argument of the Learned Counsel for the Appellant that interest should not be added and that the amount does not meet the threshold limit.
This Tribunal is conscious of the fact that ‘Liquidation’ proceedings have been initiated against the Corporate Debtor. Further, this ‘Tribunal’ does not find any substantial grounds to challenge to the admission of the Section 7 Petition of the Code.
Appeal dismissed.
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2023 (9) TMI 239
Maintainability of section 9 application - NCLT rejected the application - Operational debit / creditor or not? - debt claimed is the debt owed for the supply of goods or rendering of services - breach of the Settlement Agreement - HELD THAT:- In AHLUWALIA CONTRACTS (INDIA) LTD. VERSUS LOGIX INFRATECH PVT. LTD. [2022 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], it was clearly held that Memorandum of Understanding entered between the parties was only with regard to mode and manner of payment and that too after final bill certificate which was duly signed by both the parties. It was held that Application under Section 9 ought not to have been rejected. Present is also a case where the operational debt arose out of contract awarded by the Corporate Debtor to the Operational Creditor, with regard to which RA Bill Nos.49 and 50 final bills were issued. Present is not a case that Corporate Debtor denied his liability to pay the bills rather during pendency of earlier Section 9 Application entered into settlement dated 16.12.2017 for payment of the amount. The above Judgment fully support the submissions of Appellant.
The judgment of this Tribunal in AMRIT KUMAR AGRAWAL VERSUS TEMPO APPLIANCES PVT. LTD. [2020 (11) TMI 993 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] was a case where this Tribunal was examining the Application on the issue whether it is financial debt. In the said background, it was held that Settlement Agreement subsequently entered between the Financial Creditor and the Corporate Guarantor does not contain any element of financial debt, hence, its breach was not financial debt. The judgment of this Tribunal in “Amrit Kumar Agrawal” was entirely on different facts and circumstances and has no application in the present case - In the present case the nature of the operational debt was payment of RA Bills submitted by Operational Creditor and Settlement Agreement was entered for payment but payment having not been made in pursuance of the Settlement Agreement, liability of the Corporate Debtor to make the payment continues and Operational Creditor was well within its right to file Section 9 Application.
The filing of claim in the CIRP of ‘VentaRealtech Pvt. Ltd.’ has no effect on maintainability of Section 9 Application. In the CIRP what amount Operational Creditor i.e. Appellant is entitled or receives are different issues, any amount received by the Appellant in CIRP of ‘VentaRealtech Pvt. Ltd.’ may be adjusted but that itself cannot be a ground to not proceed with Section 9 Application filed by the Operational Creditor - the Adjudicating Authority committed error in rejecting the Application of the Appellant on the ground that there is no operational debt. The issue is fully covered by judgment of this Tribunal in “Ahluwalia Contracts (India) Limited vs. Logix Infratech Pvt. Ltd.”.
The impugned order of the Adjudicating Authority is unsustainable - appeal allowed.
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2023 (9) TMI 193
Condonation of delay of 14 days in preferring appeal - Section 61(1) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- Admittedly in the instant case, the ‘Appeal’, came to be filed on 15.06.2023, through e-portal of the ‘Office of the Registry, National Company Law Appellate Tribunal, Chennai Bench’. To put it succinctly, the instant ‘Appeal’, came to be filed after delay of 30 days, but not acceding (30 + 15 = 45 days) and exactly it was filed on 44th day, which is well within the condonable period, as per Section 61(2) of the Insolvency and Bankruptcy Code, 2016.
In view of the fact that the ‘Petitioners’/‘Appellants’ have come out with reasons, to the effect, that the ‘Petitioners’/‘Appellants’ are in Kerala and it took some time for collating and preparing the documents and that apart, it took some time to procure the legible copy of the same etc., this ‘Tribunal’, by taking a pragmatic, purposeful and rational and meaningful approach and adopting a hyper-technical view, condones the `Delay of 14 days’, and furtherance to `Substantial Cause of Justice’. No costs.
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2023 (9) TMI 192
Seeking consolidation of the ‘Corporate Insolvency Resolution Process’ (CIRP) in relation to both the Companies (RISPL and RPPL).
Whether the appellant is an operational creditor under the IBC even though it was a ‘purchaser’? - HELD THAT:- The Hon’ble Apex Court in the Judgment Consolidated Construction Consortium Limited Vs. Hitro Energy Solutions Pvt. Ltd. [2022 (2) TMI 254 - SUPREME COURT] concluded that the Appellant is an ‘Operational Creditor’ under the IBC, since an ‘Operational Debt’ will include a debt arising from a Contract in relation to the supply of goods and services from the Corporate Debtor - In the instant case, it is an admitted fact that RPPL is a holding Company and RISPL is a Subsidiary Company providing Operation and Maintenance Services to the Wind Energy Turbines / Wind Energy Generators monitored and held by the Holding Company RPPL to its customers.
This Tribunal is of the earnest view that these Appellants fall within the ambit of the definition of ‘Operational Creditors’ as defined under Section 5 (20) of the Code and therefore, these Appeals are maintainable.
Whether the businesses of RPPL and RISPL are intertwined and integrated and whether the criteria required for ‘Consolidation’ of these two CIRPs is met? - HELD THAT:- A perusal of the material on record shows that there is no rebuttal by RPPL regarding the issues of ‘interlinked finances’, ‘common assets’, ‘common liabilities’ and ‘common directors’. This Tribunal is conscious of the fact that the Ministry of Renewable Energy has clearly specified in its Regulations that the manufacturer has to provide the O&M Services as well. The Resolution Professional of RISPL has submitted that all the O&M Equipment in possession of RISPL is actually owned by RPPL; that despite the O&M Agreement, RPPL continues to have obligation; that RISPL has received huge sums of ‘liquidated damages’ every year solely because RPPL has not refurbished the failed Wind Energy Generators on time; that RPPL has created another Subsidiary called ROMSL and there are some liabilities.
From the Report of the Mediator, it is clear that at the outset, ‘there was unanimity that the Resolution Plan must be a single one for both the Companies and the efforts must be to identify a single entity for purchase of both the Companies’. This unanimity was arrived at by the Mediator after prolonged sessions with the Resolution Professionals and the CoCs of both the Companies. It was also observed by the Mediator in the Report that attempts were made to formulate a course of action through appropriate Resolution Plans that could be submitted to the CoCs, but there were same reservations.
This Tribunal is of the considered view that the financial revival of one Company / Corporate Debtor will be closely linked to the Financial Health of the other Company if there is intricate Financial relationship between the two having the same set of Directors. Then it stands to reason that such ‘Units’ should be looked at jointly - since the Order of Admission is not under challenge before this Tribunal, this Appellate Tribunal is not adjudicating on this issue at this point of time.
This Tribunal is of the considered view that Consolidation of the CIRPs be allowed and the Impugned Order of the ‘Adjudicating Authority’ dated 01/11/2021 is set aside - Appeal disposed off.
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2023 (9) TMI 191
Rejection of claim - ambit and scope of Reconciliation of accounts - claim relating to Bank Guarantees issued by JAL invoked by the Lenders of JIL is the amount which need to be adjusted/deducted from the amount payable to JIL or not - Mutually settlement of claim.
What is the ambit and scope of Reconciliation of accounts between JAL & JIL as per directions of the Supreme Court in “Jaypee Kensington” Judgment [2021 (3) TMI 1143 - SUPREME COURT]? - HELD THAT:- The Adjudicating Authority rightly came to the conclusion that the determination was of the amount which was receivable by JIL/Homebuyers of JIL - a very wide submission made by Shri Krishnan Venugopal on behalf of the JAL that reconciliation required adjustment of claims of both JAL and JIL, cannot be accepted - the purpose was to refund Rs.750 Crores to JAL and from the said amount, the amount payable to JIL was to be retained. The Hon’ble Supreme Court has further confined the determination to “only the accounts concerning the amounts advanced to JAL by JIL towards construction contracts”. It is true that extent of liabilities discharged by JAL towards the above was also to be taken care of, for which purpose reconciliation was directed. Thus, the limited scope was with regard to advance given by JIL to JAL towards the construction contract. How much liabilities have been discharged by JAL was possible by reconciliation of the financial statements of both JIL and JAL which was done by ‘Grant Thornton’ appointed by the Adjudicating Authority.
Ambit and scope of reconciliation of account between JAL and JIL was concerning the amounts advanced to JAL by JIL towards construction contracts and extent of liabilities discharged by JAL. The reconciliation was not to find out what amount was payable to JAL by JIL.
Whether the claim of Rs.212 Crores relating to Bank Guarantees issued by JAL invoked by the Lenders of JIL is the amount which need to be adjusted/deducted from the amount payable to JIL? - HELD THAT:- It is clear that the amount of Rs.212 crores related to the Bank Guarantees invoked by the lenders of JIL was the amount not referable to any advance given by JIL to JAL for construction purpose. The amount of Rs.212 crores is already claimed by JAL in CIRP of JIL as is clear from the claim filed by JAL in Form B, as extracted above. When the JAL has already filed its claim in the CIRP process of JIL which includes Rs.212 crores towards invocation of Bank Guarantees, there is no occasion for deducting the said amount from the amount of Rs.750 crores deposited by JAL. The treatment of amount of Rs.212 crores has to be as per the IBC proceeding - the finding of the Adjudicating Authority that JAL is entitled to retain amount of Rs.212 crores out of Rs.750 crores is unsustainable. The amount of Rs.212 crores which is related to the invocation of Bank Guarantees cannot be subject matter of reconciliation process.
Whether RA Bill for construction amounting to Rs.49.63 Crores payable by JIL to JAL should have been deducted from amount payable to JIL? - Whether the Facility Management Bills raised by JAL on JIL of Rs.2.33 Crores ought to have been deducted from the amount to be paid to JIL? - Whether amount of Rs.1.19 Crores towards providing Hospitality Services ought to have been deducted from the amount payable to JIL? - HELD THAT:- While considering Point No.1 opined that reconciliation between accounts of JAL and JIL was not for purpose of finding out amount which is payable to JAL from JIL rather the determination was towards the amount which is receivable by JIL out of the advance given to the JAL regarding construction - RA Bill for construction amounting to Rs.49.63 Crores payable by JIL to JAL could not be deducted from amount payable to JIL - The Facility Management Bills raised by JAL on JIL of Rs.2.33 Crores could not be deducted from the amount to be paid to JIL - Amount of Rs.1.19 Crores towards providing Hospitality Services could not be deducted from the amount payable to JIL.
Whether the Adjudicating Authority on account of mutually settled amount totaling to Rs.12.26 Crores ought not to have added amount of Rs.6.13 Crores in the amount receivable by JIL? - HELD THAT:- The amount payable to JAL was not to be taken into consideration and amount payable to JIL was only to be taken into consideration. As per mutual resolution, Rs.6.13 crores was receivable by JIL. The said amount has rightly been included in the amount payable to JIL in Para 110 of the order of Adjudicating Authority. We do not find any merit in the submission of Appellant and no error is committed by the Adjudicating Authority in adding amount of Rs.6.13 crores in the amount receivable by JIL - Adjudicating Authority on account of mutually settled amount totalling to Rs.12.26 Crores has not committed any error in adding amount of Rs.6.13 Crores in the amount receivable by JIL.
Whether direction of the Adjudicating Authority in paragraph 111 directing for payment to JIL/Home-Buyers of JIL of Rs.649.52 Crores with proportionate interest is unsustainable? - HELD THAT:- It is not the case of the JIL that mobilization advance was given by JIL to JAL which carried any interest nor it is submission of JIL that Interest Free Maintenance Deposit carries interest. When the amount which was receivable by JIL as found by Adjudicating Authority did not carry any interest, direction by the Adjudicating Authority to pay said amount alongwith proportionate interest was uncalled for - the direction issued by the Adjudicating Authority in Para 111 for payment of proportionate interest is unsustainable.
Whether JIL is entitled for amount of Rs.70.89 Crores towards Land Swap Deal and the Adjudicating Authority has wrongly rejected the said claim? - HELD THAT:- Even though as per the financial statement of JIL, the amount of Rs.70.89 crore was payable as Trade Receivables the same cannot be part of the reconciliation process which is confined to the advance made by JIL to JAL towards construction contracts. Sub-lease Deeds were executed by JIL to discharge the liability of JAL to its lenders which transaction has rightly been treated by Grant Thornton to be outside the realm of reconciliation process - there are no error in the order of Adjudicating Authority rejecting claim of Rs.70.89 crore of JIL towards Land Swap Deals - JIL is not entitled for amount of Rs.70.89 Crores towards Land Swap Deal and the Adjudicating Authority has rightly rejected the said claim.
Appeal disposed off.
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2023 (9) TMI 190
Maintainability of application - initiation of CIRP - Operational Creditors - Pre-Existing Dispute or not - HELD THAT:- There are uncertain forces in the submissions on behalf of the Counsel for the Appellant that the Adjudicating Authority while passing the Impugned Order failed to consider the correspondences between the Appellant and Respondent No. 1 dated 17.06.2018 to 22.06.2018. Further, the Adjudicating Authority has also not considered paras 5 & 6 of the Reply Affidavit filed by the Respondent (Appellant herein) before the Adjudicating Authority in correct perspective.
The Corporate Debtor is released from the rigours of CIRP and is allowed to function independently through its Board of Directors with immediate effect. The Resolution Professional shall however be paid his fees/expenses by the Operational Creditor.
The Impugned Judgement passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Court-I) cannot be sustained in the eye of law - Appeal allowed.
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2023 (9) TMI 140
Admission of the Corporate Debtor into CIRP by the Adjudicating Authority - claim made by SHPL that they should be treated as Financial Creditor and the CIRP be started afresh with a newly constituted CoC is legally tenable? - affirmation of proposal of the CoC to liquidate the Corporate Debtor.
HELD THAT:- Respondent No.2 was not a signatory to the DA is therefore undisputed. There is no other agreement between Respondent No. 2 and SHPL either prior to or subsequent to the payment of Rs. 1.90 crore which has been placed on record. We notice that Respondent No.2 in Part IV had attached copies of their passbook of Canara Bank which clearly shows that there was a direct disbursal to the Corporate Debtor and there is no denial on that count by the Corporate Debtor.
It is trite law that under the IBC once a debt which becomes due or payable, in law and in fact, and if there is incidence of non-payment of the said debt in full or even part thereof, CIRP may be triggered by the financial creditor as long as the amount in default is above the threshold limit. It is also well accepted that debt means a liability in respect of a claim and claim means a right to payment even if it is disputed.
There is sufficient material on record to prove that there was disbursal of funds by Respondent No.2 to the Corporate Debtor in their account. Admittedly, the amount so disbursed is Rs.1.90 crore. The bank transaction details were made a part of Part IV before the Adjudicating Authority - the submission advanced that Corporate Debtor was not required to repay Respondent No.2 does not inspire our confidence as it is a mere assertion not supported by evidence.
Clearly the CoC had decided in the 3rd CoC meeting after considering all facts and circumstances that it was not feasible to keep the Corporate Debtor as a going concern and that there was no possibility for resolution plans in the present matter and hence with 100% voting had recommended that an application for liquidation of the corporate debtor be filed before the adjudicating authority - Once the CoC with 100% vote share had found that the company is not a running company and cannot be revived as there is no employee or any business activity, the decision of the CoC becomes a business decision of the majority of the CoC. Under such circumstances, the Resolution Professional had rightly placed the liquidation proposal before the Adjudicating Authority.
Whether there is force in the contention of SHPL that they should have been treated as Financial Creditor and that not having taken place, CIRP should be started afresh with a newly constituted CoC? - HELD THAT:- The publication in the newspapers not having been denied by SHPL is ample proof that wide publicity was caused to invite claims. SHPL was also sent a written email by the Resolution Professional to submit claims which has also not been controverted. Nothing prevented them from filing their claims but instead they chose to adopt a wait and watch strategy - having failed to file their claim in the appropriate format and in a timely manner due to their own negligence, they should be ready to suffer the consequences of late and improper filing.
SHPL cannot be accorded the status of Financial Creditor and therefore the prayer of SHPL to reconstitute the CoC does not merit consideration. Further, since the Adjudicating Authority has already approved the liquidation and allowed SHPL to file its claim, we are satisfied that the interests of SHPL have not been put to prejudice.
The second impugned order of 04.08.2022 approving the liquidation of the Corporate Debtor has subsumed the first impugned order dated 01.11.2021 which had admitted the Corporate Debtor into CIRP - there are no reasons which warrant any interference in the second impugned order of the Adjudicating Authority - appeal dismissed.
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2023 (9) TMI 139
CIRP - Consequence of the attachment on the assets of the property - Sales Tax Department can be held to be Secured Creditor or not - HELD THAT:- The Respondent Department cannot be treated as secured creditor of the Corporate Debtor - even when there is attachment of the assets, Sales Tax Department cannot be the owner of the assets and the asset continued to be owned by the Corporate Debtor and will be part of the Liquidation Estate.
The Adjudicating Authority committed error in rejecting the I.A. filed by the Liquidator relying on the Judgment of Hon’ble Supreme Court in M/s. Embassy Property Development Pvt. Ltd. [2019 (12) TMI 188 - SUPREME COURT] which judgment has no application in the facts of the present case - It was held in the case that NCLT and NCLAT would have jurisdiction to enquire into questions of fraud, they would not have jurisdiction to adjudicate upon disputes such as those arising under MMDR Act, 1957 and the rules issued thereunder, especially when the disputes revolve around decisions of statutory or quasijudicial authorities, which can be corrected only by way of judicial review of administrative action. Hence, the High Court was justified in entertaining the writ petition and we see no reason to interfere with the decision of the High Court.
The Order of the Adjudicating Authority in the Appeal cannot be sustained - Appeal allowed.
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2023 (9) TMI 85
Performance Bank Guarantees - Capital Investment’, till date made or not - Claim either for Invocation of Bank Guarantees or claim for Transmission Charges and or damages - scope of moratorium u/s 14 of IBC - HELD THAT:- Undoubtedly, Performance of Bank Guarantee, is excluded from the definition Section of 3 (31) of the I & B Code, 2016. Viewed in that perspective, this Tribunal, unhesitatingly holds in a cocksure manner that the Performance Bank Guarantee, does not fall under Moratorium, in terms of Section 14 of the I & B Code, 2016 - As far as the present case is concerned, in the various Joint Co-ordination Meetings, it was categorically observed that there was an Adverse Progress, as regards the Construction of Generating Station, by the Corporate Debtor, who was aware of the same.
The Transmission Agreement, dated 31.03.2016, entered into between the 1st Respondent / Power Grid Corporation of India Limited and M/s. Lanco Vidarbha Thermal Power Limited (vide Clause 1), unerringly points out that the Bank Guarantee, shall be encashed, by Powergrid, in case of Adverse Progress of Work, under the scope of LVTPL assessed, during the Joint Co-ordination Meeting, etc. As such, it is clear that in the event of Adverse Progress, encashment of Bank Guarantee, is a compulsory one, as per the Transmission Agreement, entered into between the Parties.
Thus, bearing in mind of the well settled legal principle that the Bank Guarantee, is neither an Asset nor a Liability of a Company, considering the surrounding facts and circumstances of the case in an integral manner, this Tribunal, especially, keeping in mind, of a primordial fact, that the Invocation of Eleven Performance Bank Guarantees, furnished by the Corporate Debtor to the 1st Respondent / Power Grid Corporation of India Limited, pursuant to the Transmission Agreement dated 31.03.2016, the Connectivity Regulations of the Central Commission and the detailed Procedure, notified thereunder, coupled with the Letters dated 17.12.2020, issued by the 1st Respondent, to the Respondent Nos. 2 to 7, are just valid and legally tenable, which cannot be found fault with.
Appeal dismissed.
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2023 (9) TMI 84
CIRP - NCLT admitted the application - whether the CIRP proceedings were fraudulently and maliciously initiated SBI declared the credit amount as NPA - Corporate Debtor failed to make repayment of its dues - assignment of debt - Twice Restructuring of the facilities granted by the Financial Creditor - time limitation - HELD THAT:- The Corporate Debtor having committed default, initiation of Section 7 proceeding by Assignee of the State Bank of India cannot be said to be malicious or fraudulent. The State Bank of India has assigned its debt to the Edelweiss Asset Reconstruction Company Ltd on 19.03.2014 and assignee on the strength of assignment has initiated the proceeding under Section 7.
The Adjudicating Authority in its order dated 25.04.2023 has also repelled the contention of the Appellant that Financial Creditor has played fraud and the Petitioner is acting malafide in filing the petition.
Thus, submission of the Appellant that Financial Creditor is acting malafide in filing the petition has been expressly rejected by the Adjudicating Authority, hence, the submission of the Appellant that said submission was not considered, cannot be accepted - There being debt and default on the part of the Corporate Debtors in these two Appeals, which is not in question, there are no error in the orders of the Adjudicating Authority admitting Section 7 applications.
Appeal dismissed.
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2023 (9) TMI 83
CIRP - Admission of application u/s 7 of IBC in an Ex-parte order - error in recording the finding that the Corporate Debtor failed to appear before the Adjudicating Authority on multiple occasions despite notice - No proper opportunity to defend was granted - violation of principles of natural justice - HELD THAT:-In the facts given in the earlier part of this order about the manner in which the ex-parte proceedings have been carried out by the Adjudicating Authority against the Corporate Debtor making observation in the impugned order that the Corporate Debtor failed to appear on multiple occasion despite notice. This fact is not borne out from the record because the notice for the first time was issued by the Adjudicating Authority on 11.10.2022 for 07.11.2022 and on 07.11.2022, the case was adjourned to 21.11.2022 in which the Adjudicating Authority was not sure about the service having been effected by the Financial Creditor on the Corporate Debtor, therefore, it asked the Financial Creditor to file an affidavit of service within a week of the Corporate Debtor. However, it is pertinent to mention that both in the order dated 11.10.2022 and 07.11.2022, in the column of appearance, absence of the Corporate Debtor has been mentioned which in fact is a wrong recording of fact of absence.
As an abundant caution, the Adjudicating Authority should have passed the order of proceeding against the Respondent ex-parte and should have listed the case for ex-parte hearing but the case was heard on the same day and the order was reserved - the observations made by the Adjudicating Authority in the impugned order that the Appellant (Corporate Debtor) remained absent on many occasions is patently erroneous and is not borne out from the record.
Nothing survives for the Respondent to recover in the application filed under Section 7 of the Code therein. The present appeal succeeds and the impugned order is hereby set aside - Appeal allowed.
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