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IBC - Case Laws
Showing 361 to 380 of 779 Records
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2023 (7) TMI 888
Condonation of delay of 38 Days in refiling of the Appeal against approval of Resolution plan - it was held by NCLAT that The delay in filing the Appeal is beyond 15 days and the Application itself mentions the delay of 29 days in filing the Appeal. Our jurisdiction is limited only to 15 days under Section 61(2) proviso of the IBC, 2016 hence we are unable to condone the delay in filing the Appeal.
HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and hence, the present appeals are dismissed.
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2023 (7) TMI 887
Validity of admission of application for initiation of CIRP - Prayer for intervention in the Appeal - One Time Settlement (OTS) proposal submitted by the Corporate Debtor before the UCO Bank on the basis of Expression of Interest received from Lemongrass was already under consideration when the order dated 28.10.2022 was passed admitting Section 7 Application - Applicant’s case is that the Applicant is ready and willing to propose a better offer to the Banks in the best interest of Respondent No.1 - HELD THAT:- In the present case, the Adjudicating Authority has noticed in the impugned order that there was admission on behalf of the Corporate Debtor of the debt of Rs.50 Crores, which was noticed in paragraphs 8.9 and 8.10 of the order. The present is a case where, there is no denial to the debt and default. On the date when Adjudicating Authority heard the matter and reserved the order, there was no OTS proposal under consideration before the UCO Bank, since according to the Appellant, the letter submitting OTS proposal of Rs.41 Crores was given on 26.10.2022, after it received the Expression of Interest from Lemongrass.
Thus, no error can be found in the order of the Adjudicating Authority, admitting Section 7 Application by its order dated 28.10.2022. We, however, cannot be oblivious to the facts and sequence of events, which took place during the pendency of the Appeal. This Tribunal in its order dated 21.11.2022 noticed several difficulties in the running of the Corporate Debtor. This Tribunal noticed that a strategic investor namely M/s. Lemon Grass Organic Tea Limited has entered into an Agreement with the Corporate Debtor to take over three Tea Gardens, which are charged with the UCO Bank subject to entering into and funding the OTS. By the order dated 21.11.2022, certain interim arrangements were made to enable the Corporate Debtor to run as a going concern. The difficulty of payments of wages to the workers, ration to be distributed by the Company to the worker, electricity dues and other dues were taken note of and for mitigating the difficulty in running of the Corporate Debtor, certain directions were issued. The Corporate Debtor is being run as per the said directions till date.
The impugned order dated 28.10.2022, admitting Section 7 Application was an order, which cannot be faulted in law - In event of a settlement accepted by the Bank, the Bank is permitted to file an application through IRP to close the CIRP.
Coming to the Application filed by the Indian Bank, in event any settlement is entered between the parties and CIRP terminated, the Indian Bank will be free to take its recourse to its rights, either by reviving the Section 7 Application filed earlier or to take up any proceedings in accordance with law.
Appeal disposed off.
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2023 (7) TMI 831
Recovery of outstanding electricity dues - Secured Creditor - attachment of properties - waterfall mechanism - classification of property in order of priority of dues prescribed under Section 53 of the IBC - HELD THAT:- The creation of a charge need not necessarily be based on an express provision of the 2003 Act or plenary legislation, but could be created by properly framed regulations authorized under the parent statute. In these circumstances, the argument of PVVNL that by virtue of Clause 4.3(f)(iv) of the Supply Code, read with the stipulations in the agreement between the parties, a charge was created on the assets of the corporate debtor, is merited. A careful reading of the impugned order of the NCLT also reveals that this position was accepted. This is evident from the order of the NCLAT which clarified that PVVNL also came under the definition of ‘secured operational creditor’ as per law. This finding was not disturbed, but rather affirmed by the impugned order. In these circumstances, the conclusion that PVVNL is a secured creditor cannot be disputed.
Rainbow Papers [2022 (9) TMI 317 - SUPREME COURT] did not notice the ‘waterfall mechanism’ under Section 53 – the provision had not been adverted to or extracted in the judgment. Furthermore, Rainbow Papers was in the context of a resolution process and not during liquidation. Section 53, as held earlier, enacts the waterfall mechanism providing for the hierarchy or priority of claims of various classes of creditors. The careful design of Section 53 locates amounts payable to secured creditors and workmen at the second place, after the costs and expenses of the liquidator payable during the liquidation proceedings. However, the dues payable to the government are placed much below those of secured creditors and even unsecured and operational creditors. This design was either not brought to the notice of the court in Rainbow Papers or was missed altogether. In any event, the judgment has not taken note of the provisions of the IBC which treat the dues payable to secured creditors at a higher footing than dues payable to Central or State Government.
The Gujarat Value Added Tax Act, 2003 no doubt creates a charge in respect of amounts due and payable or arrears. It would be possible to hold [in the absence of a specific enumeration of government dues as in the present case, in Section 53(1)(e)] that the State is to be treated as a ‘secured creditor’. However, the separate and distinct treatment of amounts payable to secured creditor on the one hand, and dues payable to the government on the other clearly signifies Parliament’s intention to treat the latter differently - and in the present case, having lower priority. As noticed earlier, this intention is also evident from a reading of the preamble to the Act itself.
Similarly, in DUNCANS INDUSTRIES LTD. VERSUS A.J. AGROCHEM [2019 (10) TMI 301 - SUPREME COURT], Section 16G of the Tea Act, 1953 which required prior consent of the Central Government (for initiation of winding up proceedings) was held to be overridden by the IBC. In a similar manner, it is held that Section 238 of the IBC overrides the provisions of the Electricity Act, 2003 despite the latter containing two specific provisions which open with non-obstante clauses (i.e., Section 173 and 174).
It is held that the reliance on Rainbow Papers is of no avail to the appellant. In this court’s view, that judgment has to be confined to the facts of that case alone.
Section 78 enacts, that when a company whose property is subject to charge, fails to register it, the charge holder (or the person entitled to the charge over the company’s assets) can seek its registration. Section 3 (31) of the IBC defines “security interest” in the widest terms. In this court’s opinion, the liquidator cannot urge this aspect at this stage, because of the concurrent findings of the NCLT and the NCLAT that PVVNL is a secured creditor.
The record further shows that after the NCLT passed its order, the appellant preferred its claim on 10.04.2018. Based on that application, the liquidator had filed an application before the NCLT for modification of its order dated 21.08.2018, and contended that PVVNL also came under the definition of ‘secured operational creditor’ in realization of its dues in the liquidation proceedings as per law. The application sought amendment of the list of stakeholders. The application was allowed. In view of these factual developments, this Court does not consider it appropriate to rule on the submissions of the liquidator vis-a-vis the fact of non-registration of charges under Section 77 of the Companies Act, 2013.
At the same time, the liquidator is directed to decide the claim exercised by PVVNL in the manner required by law. It shall complete the process within 10 weeks from the date of pronouncement of this decision, after providing such opportunity to the appellant, as is necessary under law - Appeal dismissed.
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2023 (7) TMI 830
Seeking dismissal of the application filed under Section 7 of the IBC - barred by limitation or not - review of the order directing liquidation as well as the order initiating Corporate Insolvency Resolution Process - It was contended that the application filed by respondent No. 2 under Section 7 of IBC was clearly barred by limitation and therefore, all proceedings and orders passed on the basis of such application were non est in the eye of law.
HELD THAT:- NCLT had passed the initial order dated 20.09.2019 after hearing both the financial creditor as well as the corporate debtor. Petitioner had filed reply to the application filed under Section 7 of IBC but did not raise any issue of limitation. What was urged before the NCLT was that it was because of the methodology adopted by the financial creditor that the corporate debtor ran into liquidity crunch which resulted in default in payment of outstanding dues. Be that as it may, if the petitioner was aggrieved by the order dated 20.09.2019, he had his remedy of filing appeal under Section 61 of the IBC. However, under sub-section (2) of Section 61, such appeal is required to be filed within thirty (30) days before NCLAT. As per the proviso, NCLAT has the discretion to allow an appeal to be filed after the expiry of the said period of thirty days if it is satisfied that there was sufficient cause for not filing the appeal but such period shall not exceed fifteen days. Thus, overall there is limitation of 45 days in filing appeal under Section 61. Petitioner did not file any such appeal. Long thereafter he filed an interlocutory application under Section 60(5)(c) of IBC for rejecting the application filed under Section 7 of IBC as being barred by limitation which we have seen above has been dismissed by NCLT vide the impugned order dated 30.03.2021.
NCLT shall have jurisdiction to entertain or dispose of any application or proceeding by or against the corporate debtor or corporate person; any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under IBC. It is under this provision that the related interlocutory application was filed by the petitioner. According to us, it has been rightly dismissed by the NCLT.
In Glaxo Smith Kline Consumer Health Care Limited [2020 (5) TMI 149 - SUPREME COURT], Supreme Court has held that ordinarily High Court should not entertain a petition under Article 226of the Constitution of India after exhaustion of the limitation period provided by the statute for availing the remedy thereunder.
Extension of limitation in proceedings under IBC - HELD THAT:- Adverting to Section 18 of the Limitation Act, 1963, Supreme Court in Chandra Prakash Jain [2021 (10) TMI 144 - SUPREME COURT] held that the said provision is applicable to applications filed under Section 7 of IBC. In case the application under Section 7 of IBC is filed beyond the period of limitation of three years from the date of default and the financial creditor furnishes the required information relating to acknowledgement of debt in writing by the corporate debtor before the adjudicating authority, with such acknowledgement having taken place within the initial period of three years from the date of default, a fresh period of limitation commences and the application can be entertained if filed within this extended period.
In the instant case, the date of declaration of the loan account as NPA. It is 31.05.2011. Demand notice was issued by respondent No. 2 to the corporate debtor under Section 13(2) of the SARFAESI Act on 22.06.2011, followed by possession notice dated 15.09.2021. While proceeding under the SARFAESI Act was going on, a proposal for rescheduling of the loan account was mooted by the parties on 19.03.2012. Corporate debtor had also executed balance confirmations on 04.07.2013. Thereafter, corporate debtor had submitted proposal by way of e-mail communications dated 22.12.2015 and 23.12.2015 showing its readiness and willingness to settle outstanding dues at Rs. 16.00 crores. A meeting was held thereafter between the corporate debtor and the financial creditor on 08.01.2016 - Following further communications between the parties, respondent No. 2 agreed for settlement of its dues under OTS vide letter dated 22.04.2016. It was thereafter that application under Section 7 of IBC was filed before NCLT in the year 2018, to be precise on 29.10.2018, which ultimately led to the order dated 20.09.2019. Therefore, it cannot be said that the application under Section 7 of IBC is barred by limitation.
The present writ petition is thoroughly misconceived and is liable to be dismissed - Petition dismissed.
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2023 (7) TMI 773
Maintainability of objection to execution of the arbitral award referrable to section 47 of the CPC - arbitral award itself was a nullity and hence non-executable - arbitral award not challenged under Section 34 of Arbitration Act, 1996 - HELD THAT:- This court is of the considered view that having not challenged the arbitral award under section 34 of the Act of 1996, the law does not contemplate second opportunity to challenge the award particularly when the Act of 1996 is a self-contained code which prescribes the specific grounds and specific mode of challenge to an arbitral award. This would be the position except under the circumstances, where the award cannot be termed as an award in the eyes of law and therefore it is required to be rendered void ab initio /nullity and consequently required to be declared non-est in the eyes of law. This can be done pursuant to such objection raised under section 47 of CPC at the stage of execution of the award. Award which suffers from inherent lack of jurisdiction in the eyes of law, cannot be said to be award and therefore would fall outside the provision of Arbitration and Conciliation Act, 1996 and can certainly be declared as a nullity in an appropriate proceeding including under section 47 of CPC at the stage of execution of the award.
The plea of nullity with regard to the arbitral award can be taken under section 47 of the CPC , but in a very narrow campus.
Whether the arbitral award in the present case could be assailed as a nullity and hence non-executable within the permissible grounds of raising such a plea? - HELD THAT:- This Court is of the considered view that the point as to whether the realisable value with respect to one or the other creditor was nil or otherwise certainly require close examination of the resolution plan read with the orders passed by NCLT/NCLAT/Supreme Court which itself is a debatable issue on facts as well as on law. In view of the aforesaid situation and in the light of the facts and circumstances of this case, the arbitral proceedings culminating in the award involved in this case, cannot be said to be suffering from inherent lack of jurisdiction.
Upon perusal of the proceedings of the facilitation council, this court finds that the petitioner had submitted before the facilitating council that the order of the facilitation council on the point of jurisdiction which was decided against the petitioner was challenged before the District Court at Alipore but the petitioner never produced the ad-interim order before the Facilitation Council. Otherwise also, the order of stay passed by the District Court at Alipore has no impact due to the interim order as well as the final order passed by Hon’ble Calcutta High Court in the civil revision application. The interim order passed by the District Court is also not available before this court, which was never produced before the Facilitation Council also to ascertain the nature and extent of the interim order. Such issues are not the issues relating to patent or inherent lack of jurisdiction of the facilitation council so as to render the award a nullity in the eyes of law.
The argument of the learned counsel for the petitioner, that the award suffers from patent or inherent lack of jurisdiction/ nullity and therefore the objection to the execution of the award could have been taken at the stage of execution without challenging the award under Section 34 of the Act of 1996, is hereby rejected - Issue decided against the petitioner and in favour of the respondent.
Irrespective of maintainability of the objection to arbitral award under section 47 of the CPC, Whether on facts, the Facilitation Council lost its jurisdiction to proceed and pronounce the arbitral award in view of insolvency resolution plan of the petitioner which was duly approved under section 31 of the IBC? - HELD THAT:- This issue requires consideration of the point as to whether the amount claimed by the respondent and pending for adjudication in the arbitral proceedings much prior to insolvency commencement date, was ever declared to be nil in terms of the insolvency resolution plan of the petitioner read with various orders passed by NCLT, Kolkata / NCLAT, New Delhi/Supreme court. This would require examination of the approved insolvency resolution plan. It is not in dispute that the approved insolvency resolution plan was never interfered by the NCLT, Kolkata / NCLAT, New Delhi and Hon’ble Supreme Court.
The argument of the petitioner that the dues of the petitioner with respect to the pending arbitral proceedings in the instant case before the West Bengal facilitation council was determined to be nil, does not find support from the approved resolution plan placed on record by the petitioner themselves. In such circumstances, there was no occasion for the respondent to challenge the resolution plan. Admittedly, some of the creditors (operational/financial) had challenged the resolution plan with respect to their claim and provisions made in the resolution plan but all such objections /challenges were dismissed and there has been no interference in the approved resolution plan at any stage.
Irrespective of maintainability of the objection to arbitral award under section 47 of the CPC, on facts, the Facilitation Council did not lose its jurisdiction to proceed and pronounce the arbitral award on account of approval of the insolvency resolution plan of the petitioner under section 31 of the IBC. This is on account of the reason that the arbitral proceedings were initiated prior to insolvency resolution date, suspended during the moratorium period, resumed upon expiry of the moratorium period and the approved resolution plan did not determine the claim of the respondent as nil whose pending litigation before the west Bengal facilitation council was taken note of in the resolution plan - issue decided against the petitioner and in favour of the respondent.
No need to enter into the issue as to whether MSME Act will prevail order the IBC - HELD THAT:- In the facts of this case, there is no conflict between the proceedings/ final award passed by the facilitation council on the one hand and the manner of dealing with the claim of the respondent under IBC/ approved resolution plan on the other hand. The only impact was that the arbitral proceedings before the facilitation council remained suspended during the period of moratorium declared under IBC and such suspension of proceedings was in terms of section 14 of the IBC. Moreover, the scope of the present proceedings is very limited and it primarily relates to the issue as to whether the award could be assailed as a nullity in the execution proceedings even when it has not been challenged under section 34 of the Arbitration and Conciliation Act of 1996 and as to whether the award could be said to be suffering from patent lack of jurisdiction.
This court is of the considered view that the points raised by the petitioner objecting to the execution of the arbitral award were not fit to be entertained at the stage of execution. The grounds do not fit in the very narrow scope of assailing the award as nullity. The scope of such ground has been dealt in details under point no. (a) with findings at para 32 to 35 above. The points raised to assail the award as nullity required deliberations on fact and law and was certainly beyond the scope of examination at the stage of execution of the arbitral award by the executing court.
The impugned order does not call for any interference - Petition dismissed.
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2023 (7) TMI 772
Undervalued Transactions - avoidable transactions or not - Debtor of the Coporate Debtors - Discounts given by the Corporate Debtor for the benefit of the Appellant in the ordinary course of business or otherwise - HELD THAT:- From a perusal of the ledger account submitted by the Liquidator, who has access to the records of the Corporate Debtor, the Corporate Debtor appears to have given a discount of Rs.6,19,273.00 for C/Y sale, Rs. 13,76,320.00 for poor quality of raw material, Rs. 10,00,960.00 for labour and other charges due to material problem and Rs. 7,15,430.00 for rate difference - the ledger account maintained by the Corporate Debtor correctly depicts that amounts of discounts given to the Appellant and the amount due and payable by the Appellant to the Corporate Debtor, since the Corporate Debtor would not have any ostensible reason not to record the entries relating to Appellant incorrectly and further no reason has been given by the Appellant why this Corporate Debtor’s Ledger Account should not be relied on.
Whether the abovementioned discounts were given by the Corporate Debtor for the benefit of the Appellant in the ordinary course of business? - HELD THAT:- The Appellant has not produced any document apart from the minutes of meetings dated 03.04.2018 to show that he had raised issue about poor quality and other issues for claiming discount with the Corporate Debtor at the time of supply of the raw material, but he is now claiming these discounts on the basis of meeting held on 03.04.2018 which took place barely ten days before the passing of the CIRP initiation order - the Appellant has not produced any other document apart from the minutes of the meeting dated 3.4.2018 to buttress his claim that the said discounts were given in the ordinary course of business and why these discounts were admitted after a lapse of many months after the supply of raw material. Moreover, it is found that such benefit of discounts were given to the Appellant within the look-back period of one year, and therefore in the absence of cogent explanation regarding these discounts it clearly infringes Section 45(2)(b) and fall in the relevant period for ‘avoidable transactions’ as laid down stipulated in Section 46(1)(i) of the IBC.
The Adjudicating Authority has not committed any error in holding that the balance as on 31.03.2018 (before discount) in respect of material supply to Technico Industries Ltd. (Appellant) is Rs. 31,00,475.00, which is the balance shown in paragraph 26 of the Impugned Order - the unambiguous view is upheld that the Adjudicating Authority has not committed any error in passing the Impugned Order.
The Appeal is devoid of merit and is dismissed.
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2023 (7) TMI 771
Grant of Incentive Fee to Resolution Professional - It is submitted that when the Resolution Professional was able to maximize the value of Corporate Debtor he was entitled to performance linked incentive fee - HELD THAT:- The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provided for payment of Resolution Professional cost which included fee to be paid to the Resolution Professional.
From the facts which have been brought on record and the Order of the Adjudicating Authority it is clear that the claim of incentive fee of the Appellant came to be considered by the CoC in its meeting dated 01.12.2022 and was not approved with 91.55% voting.
The decision of the CoC dated 01.12.2022 as noted above is a business decision of the CoC while approving the Resolution Plan including the payments which have to be made to the various creditors, stakeholders as well as to the Insolvency Professional Cost, which have to be deliberated and voted upon by the Committee of Creditors. The payment of Performance Linked Incentive Fee in event it is paid to the Resolution Professional shall be part of the Insolvency Resolution Cost which affects the entitlement of stakeholders when the Insolvency Resolution Cost is increased by adding performance linked incentive fee it is bound to reduce the payment which is to be received by the various stakeholders under the Resolution Plan, since the amount which is proposed in the Resolution Plan is a fixed amount - The law is well settled that the commercial decision of the CoC has to be given due credence and the Adjudicating Authority or the Appellate Authority is not to interfere in the commercial decision of the CoC unless it does not fulfill the requirement of Section 30 of the Code.
Hon’ble Supreme Court again in KALPRAJ DHARAMSHI & ANR. VERSUS KOTAK INVESTMENT ADVISORS LTD. & ANR. [2021 (3) TMI 496 - SUPREME COURT] reiterated that limited judicial review which is available to the Adjudicating Authority and Appellate Authority can in no circumstances entitle to review the business decision arrived at by the majority of the CoC.
The decision taken by the CoC in not approving the payment of performance linked incentive fee to the Appellant thus cannot be faulted and is in accord with the discretionary power vested with the CoC under Regulation 34B. Appellant at best was entitled for consideration of his claim under statutory scheme. When claim is considered and not approved, Appellant has no right to claim that he was mandatorily entitled for payment of performance linked incentive fee.
Thus, Appellant had no right to claim performance linked incentive fee and his claim having been considered and rejected by the Committee of Creditors with 91.55% vote share cannot be faulted nor it can be interfered with by the Adjudicating Authority or Appellate Authority in exercise of its jurisdiction - appeal dismissed.
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2023 (7) TMI 637
Initiation of CIRP - sufficient cause for the Adjudicating Authority to return the application of the Financial Creditor instead of adjudicating on the Company petition - HELD THAT:- Present is a case where it is an undisputed fact that the Appellant in its capacity as NBFC had sanctioned three loans to the Respondent totaling an amount of Rs.5,95,00,000/-. The three sanction letters are placed at pages 158, 161 and 164 of the Appeal Paper Book (“APB” in short). It is also an admitted fact that the loan amounts had actually been disbursed by the Appellant and had been credited to the accounts of the Corporate Debtor. The Corporate Debtor has also admitted taking the said loan amount before the Adjudicating Authority. As per the respective loan sanction letters, the tenure of each of the three loans was 36 months. The sanction letters also clearly provided that the loan was repayable on demand.
The first loan was for an amount of Rs.25,00,000/- sanctioned on 20.05.2015 with an interest of 10% per annum. The second loan amount for Rs.4,70,00,000/- was sanctioned on 22.05.2017 with 12% interest per annum while the third loan was for Rs.1,00,00,000/- with 10% per annum which was sanctioned on 15.02.2018 - It is noticed that the first tranche of loan which had been disbursed on 26.05.2015 (as placed at page 167 of APB) had already become due having crossed the 36 months tenure.
Section 5(8) of the IBC which is relevant for the present case defines financial debt to mean a debt along with interest which is disbursed against the consideration for the time value of money. Further, clauses (a) to (i) of Section 5(8) delineates the nature of transactions which are included in the definition of financial debt which includes money borrowed against payment of interest - In the facts of the present case, the Appellant has issued a demand notice which contained cumulative demand of all the three loan amounts. In the given factual matrix, the Adjudicating Authority is required to notice as to whether the application is complete or not and if there is a debt and the Corporate Debtor has defaulted in the payment, whether the amount so defaulted is more than the threshold limit of Rs. 1 lakh.
The corpus of facts and documents are sufficiently adequate to consider a Section 7 application - there are no cogent basis for the Adjudicating Authority to have returned the application of the Financial Creditor. The appeal is allowed.
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2023 (7) TMI 587
Permission to applicant to intervene - direction to RP to serve a copy of the Resolution Plan - whether copy of the Resolution Plan, which has been approved by the CoC but awaits the approval of the Adjudicating authority, can be given to the Appellant who is neither a Claimant, nor a Creditor or a participant? - whether there is any provision in the Code for the purpose of giving a copy of the Resolution Plan to the Appellant who is neither a Claimant, nor a Creditor or a participant, even before the approval of Resolution Plan by the Adjudicating Authority? - HELD THAT:- The answer to this question is no more res integra as it has already been answered by this Tribunal in Association Jet Airways [2022 (2) TMI 17 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] and by the Hon’ble Supreme Court in the case of Vijay Kumar Jain [2019 (2) TMI 97 - SUPREME COURT] - In the case of Association of Jet Airways, this court categorically observed that “The above scheme of the Code also indicates that after Resolution Plan is submitted to the Adjudicating Authority and it is approved by the Adjudicating Authority, it no longer remains a confidential document, so as to preclude Regulator and other persons from access the said document.”
In the case of Vijay Kumar Jain, it has also held that “Last but not least, a resolution plan which has been approved or rejected by an order of the Adjudicating Authority, has to be sent to “participants” which would include members of the erstwhile Board of Directors – vide Regulation 39(5) of the CIRP Regulations. Obviously, such copy can only be sent to participants because they are vitally interested in the outcome of such resolution plan, and may, as persons aggrieved, file an appeal from the Adjudicating Authority’s order to the Appellate Tribunal under Section 61 of the Code. Quite apart from this, Section 60(5)(c) is also very wide, and a member of the erstwhile Board of Directors also has an independent right to approach the Adjudicating Authority, which must then hear such person before it is satisfied that such resolution plan can pass muster under Section 31 of the Code.”
None of the judgments, cited at the instance of the Appellant, either of this Tribunal or the Hon’ble Supreme Court has held that the copy of the Resolution Plan, which is still in the process of approval or rejection by the Adjudicating Authority, be given to a party who is neither a Claimant nor a Creditor or a participant - Therefore, there are no error on the part of the Adjudicating Authority in rejecting the application of the Appellant by way of the impugned order.
Appeal dismissed.
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2023 (7) TMI 547
Seeking Condonation of Delay of 14 days in filing of the Appeal - It is also averred in the Application that the delay has been caused as the Applicant had to collect relevant papers from various Regional Offices - HELD THAT:- In the present case, the Appellant, a Government agency, allegedly not a party to the litigation, came to know about the Impugned Order on the very next date i.e., 04.02.2023 and was having about 28 days for the purpose of collecting the relevant information to file the Appeal in terms of Section 61(2) but the Appeal was not filed within that statutory period rather 14 more days were spent in filing the Appeal and the same has been filed on the last day provided in the proviso to Section 61(2) and a request thus has been made for Condonation of Delay - No doubt, that this Tribunal has the jurisdiction to Condone the Delay but the said jurisdiction has to be exercised only if it is satisfied that there was a sufficient cause for not filing the Appeal in time.
It is really strange that the agency of the Government failed to seek the required information within the period of 30 days which is otherwise available now on the website of each Department but the Appellant has shown total laxity in pursuing this matter in time and had allowed the statutory period of 30 days to expire and filed the Application for Condonation of Delay along with the Appeal on the 15th day which is the last day provided in terms of Section 61(2) proviso - There are no sufficient cause for the purpose of Condonation of Delay of 14 days in filing the Appeal and hence the Application is hereby dismissed.
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2023 (7) TMI 485
CIRP - Leased Aircrafts - The notice of default and termination sent by the Petitioners to Respondent/Go Air - Failure to deregister their Aircraft(s) in contravention of Sub-Rule (7) of Rule 30 of the Aircraft Rules, 1937 - seeking also to facilitate the export and physical possession of these Aircrafts.
HELD THAT:- The provisions of the Aircraft Act, 1934 and the Aircraft Rules inter-alia provide that no person shall use and operate an Aircraft unless it is in accordance with the Aircraft Rules - Rule 5 of the Aircraft Rules provides for the registration etc. of an Aircraft and states that unless an Aircraft has been registered and it bears its nationality and registration marks on the Aircraft, it shall not be flown.
Once an event of default has occurred and the Petitioners’ have terminated the Lease Agreement(s) and commenced the process of de-registration of the Aircraft, such Aircraft cannot be flown.
The purport of Rule 30 (7) of the Aircraft Rules has been dealt with by a Coordinate Bench of this Court in the AWAS 39423 IRELAND LTD., WILMINGTON TRUST SP SERVICES (DUBLIN) LIMITED VERSUS DIRECTORATE GENERAL OF CIVIL AVIATION & ANR. [2015 (3) TMI 1427 - DELHI HIGH COURT] wherein after analysis of the provisions of the Aircraft Rules, this Court held that the Respondent/DGCA has to proceed in accordance with Rule 30 (7) of the Aircraft Rules and the Court cannot interfere even on grounds of equity; keeping in mind, the protection of private business transaction law in India, international conventions such as Cape Town Convention must be followed; the disputes qua validity of the termination of the lease are not relevant for the purposes of deregistration and the contention that public interest will be impinged if the deregistration is granted is not a valid ground for refusal.
The argument which is raised by the Respondents qua adjudication of the disputes before the NCLT and that this Court under its inherent powers in Article 226 of the Constitution of India, 1950, should not interfere with the CIRP process, cannot be sustained. The Petitioners before the Court seek a writ of mandamus against the Respondent/DGCA for breaching its duty as prescribed in the Aircraft Act and are well within their rights to do so. The scope and ambit of the powers of this High Court under Article 226 has been the subject matter of a catena of judgments.
The provisions qua registration/deregistration of an Aircraft are inter-alia subject matter of the Aircraft Act and Aircraft Rules framed thereunder and the Petitioners have approached this Court alleging on a failure of the Respondent/DGCA to comply with these provisions and are well within their rights to do so - The NCLT and the NCLAT are statutory bodies constituted under the provisions of Sections 408 and 410 respectively of the Companies Act, 2013 and have the powers to adjudicate upon matters which relate to the IBC - prima facie, the IRP is not required to take control of the same under the provisions of the IBC.
The Petitioners have made out a strong prima facie case in view of the provisions of the Aircrafts Rules as discussed herein. The balance of convenience is also in favor of the Petitioners. The Petitioners are suffering irreparable losses as the value of these Aircrafts are diminishing on a daily basis - There can also be no denial of the fact that the Aircrafts of the Petitioners are extremely valuable and highly sophisticated equipment and require regular maintenance for their preservation.
The Petitioners, their employees, agents, officers and/or representatives shall be permitted by the Respondent/DGCA and the appropriate Airport Authorities to access the Airport(s) where the 30 Aircrafts are parked [details of the Aircraft(s) is reproduced in the table in paragraph 3.2 herein] inter alia to inspect their respective Aircrafts, within the next 3 days - Application disposed off.
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2023 (7) TMI 484
Application for initiation of CIRP - barred by time limitation or not - abatement of proceedings of sick units - exclusion of period during reference under Section 15 r/w Section 16 of SICA - entries in the balance sheets tantamount to acknowledgments of debt for purpose of extending the limitation or not - reliability on letter of of UTL/ Uniworth Group as an admission of acknowledgment of alleged dues - HELD THAT:- the Adjudicating Authority has discussed applicability of Section 14(1) of the Limitation Act, 1963, according to which the Financial Creditor had to prove that reference to BIFR by the Corporate Debtor was a wrong forum. The Adjudicating Authority held that BIFR was a correct forum and therefore, Section 14(1) and 14(2) of the Limitation Act, 1963 are not satisfied which would entitle the Appellant herein, to exclude the period of limitation. The Adjudicating Authority also referred to Judgment of ‘Jignesh Shah’ [2019 (9) TMI 1121 - SUPREME COURT] wherein it was held that a suit for recovery based upon a cause of action that is within limitation cannot in any manner impact the separate and independent remedy and the time can be extended in the manner only as provided in the Limitation Act. The Adjudicating Authority held that the time started in the present case from 20.11.2007 and time taken before the BIFR and DRT could not stop the time to run in this case - it is noted from Section 14 (1) of the Limitation Act, 1963 that in computing the period of limitation for any suit during which the plaintiff having prosecuting him in the court in good faith with due diligence against the defendant (the Respondent herein/ Corporate Debtor) shall be excluded.
Whether filing a Petition by the Corporate Debtor before BIFR and subsequently order of AAIFR would be considered as appropriate forum or not and its subsequent impact on Limitation period? - HELD THAT:- It was the Corporate Debtor and not the Appellant herein, who moved the petition before the BIFR in 2004. There is no dispute that the Code came into existence only in 2016, hence the only forum available for the aggrieved party was BIFR initially and AAIFR as Appellant forum later. The Corporate Debtor moved the petition in 2004 and the same was dismissed by AAIFR vide order dated 22.05.2013 - it is already noted that AAIFR in its order categorically mentioned that the appeal No. 176/11 filed by the Corporate Debtor along with all proceedings relating to the reference of the Corporate Debtor pending before the BIFR stand abated.
It is pertinent to note that in terms of Section 22 (5) of SICA, in computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement therefore remains suspended under the Section shall be excluded. By virtue of Section 22 of the SICA, sick industrial units get protection with respect to suspension of those legal proceedings.
It is therefore, clear that the period of petition before BIFR and AAIFR, once abated by the competent Judicial Forum (AAIFR in present case) such period ought to have been excluded by the Adjudicating Authority. Based on this analysis the period up to the order by AAIFR dated 22.05.2013 should be excluded from counting the relevant period under Limitation Act, 1963.
Whether the mere entry in the Balance Sheet of the amount of the outstanding debt should be taken as acknowledgment or only debt without any stigma or adverse note denying the liability should be taken as acknowledgment? - HELD THAT:- Mere entry in the Balance Sheet cannot be taken as unqualified acknowledgment of the debt. However, it may also not be correct to take every note or caveat regarding entries made in the Balance Sheet as ground to denying acknowledgement of debt in order not to extend the limitation period from such acknowledgment period. It is therefore desirable that while looking such entries of debt amounting to acknowledgment, one has to consider the overall scenario which may be evident from Director’s Report, Auditor’s Report, notes to the accounts etc. - It may also be relevant to consider the entire series of events starting from such loans/ debts to the filing of application under section 7 of the Code, to gauge the true intent of such entries and caveats, if any, which impact the intended acknowledgements or genuine denial of liability on part of the Corporate Debtor. While doing this examination, it may be worthwhile to look into the overall eco system of such transactions which may help in understanding the impact on limitation period based on such acknowledgements.
From the entries in the Balance Sheet of 2016-17 and Director’s Report it is clear that the debt indeed finds place in the Balance Sheet with admission as a Corporate Debtor that they are in process of negotiation with the term lenders for rescheduling/ restructuring. This establishes that the loan/ debt has been taken and acknowledged by the Corporate Debtor - On the face of these facts and recording by the management, it cannot be straight away considered as clear unconditional acknowledgement of debt. Therefore, this Appellate Tribunal would like to go into further records connected with the same debt i.e., pre 2016-17 Balance Sheet and post 2016-17 Balance Sheet with a view to understand whether such dispute has been recorded by the management from day one or can be construed as single/ few/ stray/ isolated caveats.
On a quick perusal of perusal of various Balance Sheets from 2006-07 to Balance Sheets of 2013-14, this Appellate Tribunal do not find any apparent denial of debts by the Corporate Debtor - this Appellate Tribunal has to consider that there were acknowledgements of due in the Balance Sheets and the acknowledgement letter of the Corporate Debtor which would extend the limitation period, in terms of Section 18 of Limitation Act, 1963.
The Adjudicating Authority erred in rejecting the application filed under Section 7 of the Code by the Appellant on the ground of limitation - case is remanded back to the Adjudicating Authority for decision on the merit of the application in accordance with the law - Appeal allowed.
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2023 (7) TMI 315
Maintainability of SLP - CIRP - question of unjust enrichment left open - Demand / Refund of Tax dues and assessment - no final adjudication/determination had taken place on unjust enrichment - HELD THAT:- The present special leave petitions are not entertained at this stage.
However, as and when any issue/question of unjust enrichment is raised, it goes without saying that it may be open for the petitioner to defend/oppose the same and all the defences which may be available to the petitioner are left open and which may be considered and dealt with in accordance with law and on its own merits - SLP dismissed.
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2023 (7) TMI 314
Admission of application - CIRP initiated - existence of financial debt not established.
Case of appellant is that the financial creditor though has failed to establish financial debt of any written agreement, learned Adjudicating Authority incorrectly admitted the application and initiated CIRP.
HELD THAT:- The learned Adjudicating Authority has rightly passed the impugned order which requires no interference. It is true that on the record there is no written agreement regarding claim of sanctioning loan to the corporate debtor. However, there are number of circumstances which in unequivocal term shows that financial creditor had been approached by the appellant for a loan of Rs.1,01,00,000/- and the loan was given to the corporate debtor in two tranches. 1st tranche was paid through cheque for an amount of Rs.51 lakh on 26.05.2017 and second amount i.e. Rs.50 lakh was given to the corporate debtor by financial creditor through RTGS and through RTGS it was paid on 03.06.2017 which has not been disputed by the either side. However, since there was no written agreement for sanctioning loan with interest the appellant has taken a futile stand that in absence of any written agreement it cannot be said that there was a financial debt. The circumstances and documents which have been brought on record suggest that impliedly there was an agreement for providing loan to the corporate debtor for time value and also with interest.
In view of the provisions for the admission of a petition under Section 7 of the IBC there are certain relevant criteria. There must be debt and default. If an application fulfils the said criteria, the Adjudicating Authority is to admit such application. However, proviso 1st to Section 7 (5) speaks that only for rejection of an application reasons are required to be assigned. Meaning thereby if an application fulfils certain criteria, the Adjudicating Authority is to admit the said application and while admitting there is no requirement for assigning detailed reasons. However, if the Adjudicating Authority is going to dismiss the application as per provisions contained Section 7 of the IBC reasons are mandatory.
Accordingly it is evident that admission of an application under Section 7, if fulfils certain criteria is a rule, however, rejection of such application is an exception.
The Learned Adjudicating Authority has not committed any error in passing the impugned order. There is no reason to interfere with the impugned order - Appeal dismissed.
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2023 (7) TMI 313
Liquidation of Corporate debtor - Rejection of application seeking extension of timeline as mentioned in the “Invitation for Submission of Scheme” - case of appellant is that Appellant has finalised a scheme of arrangement, but did not submit it since he had not been able to obtain an extension of the deadline - HELD THAT:- Admittedly, the order for liquidation of the corporate debtor was passed by the Adjudicating Authority on 7.10.2022. It is also noted that section 230 of the Companies Act, 2013 allows a scheme of compromise or arrangement to be proposed in respect of a corporate debtor under liquidation to achieve its revival as a going concern. Further Regulation 2-B of the Liquidation Process Regulations, 2016 stipulates a time period of ninety days for submission and final consideration of such a scheme of compromise or arrangement.
The possibility of revival of a corporate debtor under liquidation has been considered as a valid mode of revival and during liquidation process, a scheme of compromise or arrangement in terms of section 230 of The Companies Act, 2013 is a distinct and clear possibility. It is also observed in para 68 of the Arun Kumar Jagatramka [2021 (3) TMI 611 - SUPREME COURT] judgment that an amendment was made on 25.7.2019 to the Liquidation Process Regulations, 2016 by the Insolvency and Bankruptcy Board of India to refer and include a process envisaged under section 230 of the Companies Act, 2013 as a valid method of revival of the corporate debtor during liquidation.
As the various actions of the Appellant show, it is noted that by 4.1.2023, the Appellant had neither proposed a scheme of compromise and arrangement to the Liquidator or Stakeholders Consultation Committee or the secured creditors of the corporate debtor, and even after it was allowed to access the VDR on 19.1.2023 it did not show any concrete evidence for formulation such a scheme and its presentation to the Liquidator. The reasons given by the Appellant that it was waiting for a decision in IA No. 122/2023, which was filed for seeking extension of the deadline given in public notice dated 26.10.2022 to propose such a scheme are not convincing as merely filing of IA 122/2013 in no way stopped it from proposing a clear scheme of arrangement - there are no reason or logic as to why the Appellant did not approach the secured creditors to obtain their consent of the 75% threshold as required under section 230(2)(b) of The Companies Act if it was in possession of such a scheme. It is not clear as to why he did not propose a scheme to the Liquidator or the Stakeholders Consultation Committee.
The Appellant has not shown any proof of a scheme of compromise and arrangement that is formulated and ready, and proposed for consideration nor has the Appellant obtained the consent of 75% of the secured creditors of the corporate debtor in support of such a scheme. Merely seeking an extension of the timeline without showing any evidence of sincere and serious efforts in preparation and formulation of such a scheme clearly shows that the request for extension of timeline is not supported by concrete action. In view of the fact that the 90 days’ timeline prescribed under the Regulation 2-B of the Liquidation Process Regulations, 2016 had expired on 4.1.2023 and no evidence about readiness of the scheme was shown, it is opined that the Adjudicating Authority has not committed any error in passing the Impugned Order.
Appeal dismissed.
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2023 (7) TMI 312
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - privity of contract - HELD THAT:- In Form 3, Demand Notice / Invoice, demanding payment, under I & B Code, 2016, as per Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, dated 30.07.2021, addressed to the Vantage Machine Tools Private Limited, represented by Mr. Pothluru Mohana Murali Krishna, Krishna District, under Particulars of Operational Debt, the Total Debt, as on 22.07.2021, was mentioned as Rs.3,04,76,004/-, and the Principal Outstanding, was mentioned as Rs.1,53,16,611/-. The interest outstanding, as on 22.07.2021, was Rs.1,51,59,393/-, and that the total Outstanding as on 22.07.2021, was Rs.3,04,76,004/-.
The Corporate Debtor, in its Counter, before the Adjudicating Authority, had averred that the alleged Principal Amount, claimed by the 1st Respondent / Operational Creditor / Petitioner, and Interest, claimed thereon, as consequential damages, is completely arbitrary and baseless, which cannot be relied upon in the absence of adjudication, and further that the alleged Claim, was not adjudicated, by any Competent Authority, in Law, and therefore, such a Claim, cannot be described as Operational Debt.
The Corporate Debtor, before the Adjudicating Authority / Tribunal, took a stand that the alleged Claim, of the 1st Respondent / Operational Creditor / Petitioner, was based on misconstruction of facts, devoid of merits, and as such, the Company Petition, was not maintainable in Law, and the same was liable to be dismissed.
It is to be remembered that the Proceedings, under the I & B Code, 2016, are Summary in Character, and that an Adjudicating Authority, not being a Recovery Fora or Court, (no elaborate enquiry is conducted like that of a Regular Trial of a Civil case, and also, it does not determine, a Money Claim or Civil Suit, this Tribunal, is of the earnest opinion, that the Controversy / Dispute / Claim, in respect of Interest, based on Privity of Contract or otherwise, has no relevance / significance, if the Debt, payable is more than the threshold limit of Section 4 of the I & B Code, 2016, considering the fact that the Principal Outstanding, as mentioned in Form 3 of the Demand Notice dated 30.07.2021, was Rs.1,53,16,611/- (which is more than Rs.1 Crore), to be paid by the Corporate Debtor / M/s. Vantage Machine Tools Private Limited.
In Law, once the Debt, shown as Due, it is for the Corporate Debtor, to establish that, there are no Outstanding Dues, to be paid to an Operational Creditor.
This Tribunal, points out that the aspect of determining a Claim, which may include the interest by an Adjudicating Authority / Tribunal, does not arise for the purpose of triggering the Corporate Insolvency Resolution Process, because of the fact that an initiation of Corporate Insolvency Resolution Process, under Section 7 or 9 of the I & B Code, 2016, will not amount to a Recovery Proceeding - It cannot be lost sight off that it is incumbent upon the Corporate Debtor, to show that its Liability, is in Dispute, as to the Debt, and not a just demand, made by it, to satisfy certain obligations, on the part of the 1st Respondent / Operational Creditor / Petitioner.
In the instant case on hand, this Tribunal, considering the contentions advanced on the respective sides, taking into account of the Part Payments, made by the Corporate Debtor, under Invoices, and keeping in mind of the Email dated 02.11.2017, whereby the Debt confirmation, was made by the Corporate Debtor, and the same being received by the 1st Respondent / Operational Creditor / Petitioner, on 03.11.2017, considering the fact that the Part Payment of Rs.10,00,000/- and another payment for Rs.20,00,000/-, by the Corporate Debtor, was made, one day earlier, on to the mail dated 03.10.2017, and keeping in mind of the facts and circumstances of the instant case, in an encircling manner, comes to a consequent conclusion that the Debt and Default, committed by the Corporate Debtor, were established, by the 1st Respondent / Operational Creditor / Petitioner, and hence, the Outstanding Debt, is due and payable in Law, by the Corporate Debtor, to the 1st Respondent / Operational Creditor / Petitioner, and that the Admission of the CP(IB) No.51 / 9 / AMR / 2021, by the Adjudicating Authority (National Company Law Tribunal, Amaravati Bench), is a just, Valid and Proper one, in the eye of Law.
Appeal dismissed.
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2023 (7) TMI 311
Approval of Resolution Plan - Appellant submits that the Appellant having security interest in the immovable asset of the Corporate Debtor, the said land cannot be sold extinguishing the security interest of the Appellant by the Resolution Plan - HELD THAT:- The Resolution Professional did not accept the claim of Appellant as Financial Creditor rightly. Law in this context is well settled. Reference made to judgment of Hon’ble Supreme Court in Anuj Jain, Interim Resolution Professional for PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VERSUS AXIS BANK LIMITED ETC. ETC. [2020 (2) TMI 1259 - SUPREME COURT] where the Hon’ble Supreme Court had occasion to consider the role and status of Financial Creditor and a Creditor who has only security interest.
A Financial Creditor who is part of the CoC has important role to play in the reorganisation and insolvency resolution of the Corporate Debtor. The Creditor who has only security interest is only interested in his security interest and have no interest in revival of the Corporate Debtor - On looking into the Scheme of I&B Code, after moratorium is declared, there is prohibition on enforcement of any security interest created by the Corporate Debtor in respect of its property. The prohibition from enforcement of any security interest by one or other creditor including Secured Financial Creditor or third party Secured Creditor is for a purpose and object. Unless the prohibition is imposed, all assets of the Corporate Debtor shall not be available for revival and maximisation of the value of the Corporate Debtor, which is principal/primary objective of the I&B Code. Financial Creditor who is part of the CoC is prohibited from enforcing any security interest. A third-party security holder like Appellant is equally bound by the provision of Section 14(1)(c) and cannot claim any enforcement of security interest in the CIRP.
The Hon’ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA & OTHERS [2019 (11) TMI 731 - SUPREME COURT] while considering the provisions of Section 30, 50, 52 and 53 of the Code has held that provision of Section 53 cannot be applicable in the insolvency resolution process and the said provision is applicable only during liquidation.
The argument of the Appellant that security interest contained by the Appellant in the asset of the Corporate Debtor cannot be dealt with in the plan is clearly contrary to the scheme delineated under Regulation 37. Further, Sub-clause (d) permit the resolution plan to contain provision for satisfaction or modification of any security interest. Thus, as per scheme of Regulation 37, security interest in assets of the Corporate Debtor can be dealt with, modified, satisfied and there is no exclusion to the resolution plan with regard to dealing of the security interest - When the security interest of Financial Creditor can be dealt with in the resolution plan in any manner, it is not found that how a third party having security interest in the assets of the Corporate Debtor can claim any higher status or different status from the Financial Creditor.
When any asset including security interest in the asset is part of the CIRP process, there is no constraint or prohibition in I&B Code or Regulations to deal with the said asset including a security interest - A third-party security interest holder is entitled to retain the security proceeds on the land of security interest under Section 52 of the Code. Section 52 and 53 becomes applicable only in Liquidation Proceeding and reference of Section 53 under Section 30(2) is for the purpose of computing the payment to Operational Creditors and dissenting Financial Creditors to which they may be entitled under Section 53.
There are no error in the impugned orders passed by the Adjudicating Authority. There are no merit in both the Appeals. Both the Appeals are dismissed.
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2023 (7) TMI 310
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - demand notice and application was barred by 10A of IBC - total claim is more than Rs.1 Crore which include the Principal Amount of Rs.56,63,061/- and interest - HELD THAT:- The emails which have been sent by the Operational Creditor, which have been brought on the record along with the Reply filed in this Appeal, indicate that the claim contains Principal Amount as well as interest as was due on the date when email was sent.
The Corporate Debtor chose not to file reply and filed an I.A. for dismissing the application under Section 9. I.A. which was filed by the Appellant was dismissed for non-prosecution. We may also look into the grounds taken in the I.A. for dismissing the Company Petition. In the I.A. the ground taken was that the interest component cannot be added in the Operational Debt. Further Section 10A of the Code was relied referring to Demand Notice dated 21.12.2020.
Learned counsel for the Operational Creditor has rightly relied on judgment of this Tribunal in Prashant Agarwal vs. Vikash Parasrampuria & Anr [2022 (7) TMI 835 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH], where three Member Bench of this Tribunal held that the total amount for maintainability of claim will include both principal debt amount as well as interest on delayed payment which is stipulated in the invoice has to be added - the above judgment of “Prashant Agarwal” clearly supports the submission of learned counsel for the Respondent that for calculating the amount for maintainability of the claim, for threshold purpose, both Principal Amount and Interest has to be calculated when the interest is stipulated between the parties.
The ground taken in the I.A. under 10A is clearly misconstrued since the default is being claimed by the Operational Creditor w.e.f. 26.07.2018 which was much before the 10A period. The mere fact that the Demand Notice was dated 21.12.2020 shall not has any effect on the maintainability of the application under Section 9 when default is committed on 26.07.2018 and admitted thereafter.
In the facts of the present case, the Adjudicating Authority did not commit any error in admitting Section 9 application which clearly fulfils the threshold. The Corporate Debtor despite having been allowed time, failed to file reply and did not appear on the date when matter was fixed for hearing. The Adjudicating Authority rightly proceeded ex-parte against the Corporate Debtor when he chose not to file reply and failed to appear on the date fixed. No error has been committed by the Adjudicating Authority in admitting Section 9 application. There is no merit in the Appeal - appeal dismissed.
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2023 (7) TMI 309
Initiation of CIRP - Purchase of litigation by the applicant - Financial Debt or not - NCLT dismissed the application - non-speaking order which does not deal with contentions raised by the Appellant - closure of the arbitration proceedings which have been relied by Ld. Adjudicating Authority has a bearing on the claim of the Appellant or not - neither the Appellant nor its assignor and nor Corporate Debtor were parties to the arbitration proceedings - debt in question was assigned to the Appellant in the year 2017 by which time Arbitration Proceeding has not even come to an end.
HELD THAT:- IFS was entered into between Members of Jayaswal Family. The assets and properties including CIAL and JNIL were distributed among the two groups i.e. BLS Group and MKJ Group. CIAL was allocated to MKJ Group whereas JNIL was given to BLS Group. Strip Mill Division of CIAL was to be demerged from CIAL and was to be merged with JNIL. IFS provided for payment of lease rental by JNIL and payment towards loan and interest was from out of lease rental. IFS further clearly contemplated that after units are merged with JNIL, the liability for payment of the balance loans and interest shall be on JNIL.
In the arbitration proceedings MKJ Group filed an Application under Section 31(6) of the Arbitration and Conciliation Act claiming for an Interim Award for an amount of Rs. 102,26,78,728/- which amount according to the MKJ Group was admitted in the balance sheet of Corporate Debtor JNIL. The Application praying for Interim Award for aforesaid amount by MKJ Group was dismissed by Sole Arbitrator on 26th November, 2014 which order was not challenged. It is clear that in the arbitration proceedings which was between two groups i.e. BLS and MKJ Groups. MKJ Group claimed the amount paid by CIAL towards installments to the lenders and claim of Rs. 102,26,78,728/- was made which claim was repelled in the arbitration proceedings thus the claim of assignor of the Appellant was very much raised as a counter claim.
It is admitted fact that after approval of the scheme of arrangement by the High Court on 13th April, 2013, payment of servicing of the loan is being done by the JNIL for which there is no dispute - there are no error in the finding of the Adjudicating Authority that there is no financial debt owed by JNIL to the CIAL on basis of which an Application under Section 7 to be filed either by CIAL or its assignee. From the sequence of events as noted above it is clear that assignor had assigned its debt of Rs. 104 Crores to the Appellant on 24th March, 2017 when it failed to obtain an Interim Award from the sole arbitrator by filing an application under Section 31(6) of the Arbitration and Conciliation Act which was rejected on 23rd September, 2016.
Entries in balance sheets of the Corporate Debtor. Annual Report of 2013-14 contains an entry of unsecured loan to CIAL of Rs. 10432.79/- Lakhs - HELD THAT:- When at the relevant time i.e. Annual Year 2014, it is immediately after demerger, dispute arose with regard to payments made by CIAL to Lenders of the Strip Mill Division which CIAL claimed from the Corporate Debtor which liability were denied by the Corporate Debtor, the claim of the Appellant that JNIL has acknowledged its debt in the balance sheet cannot be accepted as admission of any liability by JNIL. The record indicates that from the year 2015-16 till 2020-21 in the financial statements of the Corporate Debtor there was categorical note denying the liability of 102,26,78,728/- as claimed, financial statement thus cannot be read as acknowledgement of the debt by Corporate Debtor.
The submission of Appellant that there is acknowledgement of debt by Corporate Debtor towards CIAL i.e. assignor of Appellant, cannot be accepted. The claim of amount of Rs. 104,43,67,347.94/- was throughout disputed by the BLS Group/Corporate Debtor which sequence of the events we have noticed above. The sequence of events and facts noticed above clearly indicate that MKJ Group who did not succeed in any proceedings to establish the claim of Rs. 104,43,67,347.94/- against the Corporate Debtor assigned its debt to the Appellant to further litigate and involve the corporate debtor in proceedings. MKJ Group despite raising the claim in the arbitration proceedings by means of counter claim and despite their application for Interim Award for an amount of Rs. 102,26,78,728/- having been dismissed in the year 2016 assigned the debt to Appellant, Appellant by means of assignment only purchased the litigation.
Thus, no error has been committed by the Adjudicating Authority in allowing I.A. filed by the Corporate Debtor for dismissing the Section 7 Application - appeal dismissed.
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2023 (7) TMI 308
Maintainability of Recall Application - whether the present Recall Application which is review in disguise cannot be entertained? - HELD THAT:- In another judgment of Budhia Swain & Ors. Vs. Gopinath Deb & Ors. [1999 (5) TMI 596 - SUPREME COURT], the Hon’ble Supreme Court has dealt with poser to recall. The Hon’ble Supreme Court held in the said case that power of recall cannot have been exercised and order of the Collector could be sustained only if supportable by the power to recall - The above judgment of the Hon’ble Supreme Court clearly laid down that when a judgment is rendered in ignorance of the fact that a necessary party had not been served at all or heard, the power to recall can be used.
The subsequent judgment of Rajendra Mulchand Varma & Ors VS K.L.J Resources Ltd & Anr. [2022 (10) TMI 383 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] heavily rely on judgment of this Tribunal in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited & Anr. [2021 (10) TMI 1039 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI]. This Tribunal held that in the absence of any power of review or recall, order of this Appellate Tribunal or the Adjudicating Authority cannot be reviewed or recalled.
Thus, it is clear that although this Tribunal dealt with both the concepts of review and recall but distinction between review and recall has not been noticed. There is no dispute to the preposition that no power of review is vested in this Tribunal but power to recall judgment can very well be exercised under Rule 11 in an appropriate case - Recall can be asked only as procedural infirmity like order passed without necessary party/service to the necessary party or affected party not being heard by the Court.
Thus, it is felt appropriate that the issue which has arisen in the present application need to be referred to a larger bench to decide following questions:
I. Whether this Tribunal not being vested with any power to review the judgment can entertain an application for recall of judgment on sufficient grounds?
II. Whether judgment of this Tribunal in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited & Anr [2021 (10) TMI 1039 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], Rajendra Mulchand Varma & Ors Vs K.L.J Resources Ltd & Anr. [2022 (10) TMI 383 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] can be read to mean that there is no power vested in this Tribunal to recall a judgment?
III. (In the above two judgments this Tribunal has held that this Tribunal cannot recall its judgment in exercise of its inherent jurisdiction) Whether the judgment of this Tribunal in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited & Anr. and Rajendra Mulchand Varma & Ors Vs K.L.J Resources Ltd. & Anr. lays down the correct law?
Let the papers be placed before Hon’ble Chairperson, NCLAT for constituting a larger bench for considering the above questions.
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