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IBC - Case Laws
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2023 (7) TMI 267
Maintainability of application - initiation of CIRP - financial creditor and the corporate debtor are related parties and family owned companies or not - existence of debt and dispute or not - Appellant is entitled for an opportunity by the Adjudicating Authority especially in view of the fact that MoU dated 27.09.2017 could not be brought on record before the Adjudicating Authority or not? - HELD THAT:- The Corporate Debtor having not filed any Reply in spite of ample opportunity being granted by the Adjudicating Authority and the Application to recall the order proceeding ex-parte having also been dismissed, Appellant cannot be allowed to contend that one more opportunity be given to the Appellant - It is relevant to notice that amounts which was advanced by the Financial Creditor to the Corporate Debtor were amounts advanced from the year December, 2013 to December, 2017. The reasons by the Corporate Debtor not filing the Reply and placing any reliance on the MoU before the Adjudicating Authority are not forthcoming.
Whether the Adjudicating Authority committed any error in accepting the Financial Debt and Default on the part of the Corporate Debtor? - HELD THAT:- The Adjudicating Authority has rightly placed reliance on the financial statement of the Corporate Debtor as well as those of Respondent No. 1 both reflecting the amount as short term loan. When balance sheet and financial statement as on 31st March, 2017 and 31st March, 2018 was filed along with Section 7 Application which statements were prepared in due course and are not subject of any dispute, we are of the view that acknowledgment as contained in the Financial Statements cannot be wished away by the Appellant relying on unregistered MoU dated 27.09.2017 which was never brought on record before the Adjudicating Authority.
It is well settled preposition that balance sheets and financial statement of the Corporate Debtor can be looked into for finding any acknowledgement - This Tribunal in Shailesh Sangani v. Joel Cardso, [2019 (3) TMI 1192 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] laid down that when promoter, director or shareholder of the Corporate Debtor as a stakeholder to improve financial health of the company and to boost its economic prospects, advance an amount, the same would have the commercial effect of borrowing on the part of the corporate debtor notwithstanding the fact that no provision is made for interest thereon.
The findings recorded by the Adjudicating Authority that financial debt and default is proved is supported by the financial statements and balance sheets of the Corporate Debtor and Financial Creditor which were brought on record along with Section 7 Application. There is no infirmity in the findings of the Adjudicating Authority that debt and default is proved.
The Liquidator filed Section 7 Application after obtaining order by the Adjudicating Authority permitting the Liquidator to file Section 7 Application. Section 7 Application was filed by the Respondent No. 1 and the Corporate Debtor failed to discharge its financial debt due to the Financial Creditor. The allegations of the Appellant that in collusion with current stakeholders, Section 7 Application was filed by Respondent No. 1/Liquidator is rejected.
Thus, Adjudicating Authority has rightly come to the conclusion that financial creditor has successfully proved the financial debt and default on the part of the Corporate Debtor in initiation of Section 7 Application - there are no error in the order impugned passed by the Adjudicating Authority admitting Section 7 Application, there is no merit in the Appeal, the Appeal is dismissed.
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2023 (7) TMI 266
Difficulty faced by the Successful Auction Purchaser of Corporate Debtor as Going Concern - Scope of E-Auction documents, conditions and agreements - Discharge of past statutory dues and liabilities including tax dues - Liquidation of Corporate Debtor - HELD THAT:- When the process document clearly contemplated such consequences the said consequences shall ensue on sale as going concern and if any roadblocks come into ways of successful resolution applicant, necessary directions, clarifications can very well be issued by the Adjudicating Authority on an Application filed under Section 60(5)(c) of the Code - Further the process document clearly contemplated that transfer of ownership of the corporate debtor shall take place by way of writing off entire existing shareholding of the corporate debtor and issuance of fresh equity shares to the successful bidder. The share shall be included in the name of Successful Bidder and will not be issued in any other name.
In view of the subsequent facts and notices brought on record by the Appellant and other terms and conditions of the process document as extracted, the ends of justice will be served in granting liberty to file an Application before the Adjudicating Authority claiming reliefs/concessions/directions which may be necessary for operationalisation of the Corporate Debtor as per terms and conditions of the process document.
While granting such liberty to the Appellant it is observed that law is well settled, a successful bidder who is declared as successful bidder of sale as going concern can seek access of the Adjudicating Authority and may pray for necessary directions in accord with and in consonance with the process document in the liquidation proceedings. In result, appeal partly allowed and it is held that applicant’s prayers i.e. relief/concessions/directions needs consideration by the Adjudicating Authority for which liberty granted to the Applicant to make a fresh Application containing prayers which may be commensurate and in accord with terms and conditions of the process document of e-auction process document.
Appeal disposed off.
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2023 (7) TMI 265
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - service of demand notice or not - existence of debt and dispute or not.
Demand Notice not served on the Corporate Debtor - HELD THAT:- When in the Section 9 Application, the Operational Creditor has filed the original postal receipt for dispatch of Notice and service of Notice from the website of Postal Department and there being no challenge to the service report downloaded from the website of the Postal Department, there is no infirmity in the finding of the Adjudicating Authority that Demand Notice was served. It is further relevant to notice that in the Settlement Agreement, which was entered between the Operational Creditor and the Corporate Debtor on 27.09.2021, the Settlement Agreement also referred to Demand Notice dated 15.10.2018 sent on 18.10.2018 - there are no merit in submission of the learned Counsel for the Appellant that Demand Notice was not served on the Corporate Debtor.
The Operational Creditor is at liberty to submit Demand Notice either in Form-3 or Form-4. When Notice is issued in Form-4, copy of the Invoice is required to be attached with the Notice. The Demand Notice issued by the Operational Creditor was in Form-3, hence, no infirmity can be found in the Demand Notice, if invoices were not attached. In the Application, which was filed under Section 9 Demand Notice dated 15.10.2018 clearly mentions that debt of 92,70,000/- is due and payable on the basis of supply, installation, testing and commission Agreement dated 05.02.2013 - the basis of the Demand Notice was Supply Agreement and acknowledgement letter issued by the Corporate Debtor. No invoices were referred to in the Demand Notice. Hence, submission of the Appellant that Demand Notice should have been accompanied with the invoices cannot be accepted.
The present is a case where the Demand Notice issued by the Operational Creditor on the basis of supply and installation Agreement and the acknowledgement letter issued by the Corporate Debtor. In the facts of the present case, Notice having not been issued in Form-4, cannot be faulted with. There can be no defect and infirmity in Demand Notice issued in Form-3 in the facts of the present case. Thus, the submission of learned Counsel for the Appellant that Demand Notice is defective, cannot be accepted.
Whether the operational debt was due and not paid by the Corporate Debtor? - HELD THAT:- The Demand Notice was issued for an amount of Rs.92,70,000/- for which amount Section 9 Application was filed. The Corporate Debtor and Operational Creditor entered into a Settlement Agreement on 27.09.2021, which Agreement was also brought on the record. The Settlement Agreement between the parties acknowledged the liability of Corporate Debtor for an amount of Rs.92,70,000/-
It is further relevant to notice that although Corporate Debtor agreed to pay sum of Rs.60,00,000/-, but an amount of only Rs.25 lakhs was paid and the second installment of Rs.20 lakhs to be paid on or before 15.12.2021 and third installment of Rs.15 lakhs on or before 15.03.2022 were not paid. Thus, there was clear default on the part of the Corporate Debtor of acknowledged debt and on the date when Section 9 Application was heard on 25.01.2023, the operational debt remained unpaid. The Adjudicating Authority after considering all materials on record returned a finding that Operational Creditor has proved the debt and default, which is more than Rs.1 lakh.
Challenge in the present appeal is to the admission order passed by the Adjudicating Authority in Section 9 Application filed by the Operational Creditor. The Assignment Deed in favour of Respondent No.3 on 03.02.2023 was not the subject matter of any issue between the parties in Section 9 Application. On the basis of the Assignment, Respondent No.3 has only prayed to be impleaded in this Appeal to support the impugned order. Respondent No.3 was impleaded in this Appeal by order dated 20.03.2023 - the Assignment in favour of Respondent No.3 is not subject matter of any dispute in the present Appeal, except that Respondent No.3 has been impleaded to advance submission on behalf of it to support the impugned order - thus for the purpose of this case, various arguments made by the Appellant regarding Assignment dated 03.02.2023, needs no consideration.
There are no grounds made out to interfere with the impugned order passed by the Adjudicating Authority admitting Section 9 Application. In result, the Appeal is dismissed.
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2023 (7) TMI 264
Applicability of principles of res-judicata - admission of belated claim filed by individual homebuyers as well as the Appellant - HELD THAT:- A three Member Bench of this Appellate Tribunal had also occasion to consider the question as to whether a decision which has also been final between the parties can be retrospective on the strength of overruling of an earlier judgment. The three Member Bench of this Tribunal inRaghavendra G. Kundangar & Ors. vs. Shashi Agarwal & Anr. [2022 (8) TMI 1157 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], where it was held that the principle of resjudicata, though a part of CPC, it would be applicable to the proceeding of this Tribunal and IBC. Only to prevent the abuse of process of law and give a finality to any proceeding, or orders, and to avoid an endless litigation to frustrate the very object of enacting IBC, the claim of appellants is liable to be rejected.”
Thus, substantial prayer made by the Appellant to admit the claim of the Appellant having been finally rejected upto the Hon’ble Supreme Court, could not have been entertained and deserve to be rejected.
The present is a case where although Appellant has not filed any claim but the booking amount of the 50 flats as is claimed by the Appellant is reflected in the Resolution Plan itself which indicate that the said was part of the Information Memorandum - The present is a case where Appellant could not have prayed for any direction on the basis of orders of this Tribunal in Puneet Kaur vs. K.V. Developers Pvt. Ltd. & Ors. [2022 (6) TMI 108 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] because the Resolution Plan notice the claim of the Appellant of booking of 50 units. It is noted that in so far as 9 units which according to the Appellant are in his possession, Resolution Professional has submitted that necessary transfer documents shall be executed in event the Appellant complies the necessary terms and conditions. Hence, the said prayer needs no consideration.
The Adjudicating Authority did not commit any error in rejecting I.A. No. 3640 of 2022 filed by the Appellant. There is no merit in the Appeal - Appeal dismissed.
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2023 (7) TMI 263
Initiation of CIRP - Period of limitation - Date of default - breach of guarantee - Penalty on tax liability discharged under reverse charge on legal services - Application filed u/s 7 of IBC, debarred by law of limitation or not - liability of the ‘Corporate Debtor’ based on the tripartite agreement and Deed of continuing Guarantee.
Time Limitation - HELD THAT:- It is seen from the tripartite agreement that certain warranties were given by the ‘Corporate Debtor’ and the same also contained general conditions of the contract. As per Sub-clause 5 of the tripartite agreement it is responsibility of the ‘Corporate Debtor’ for making payment in case of default by the farmer - It is therefore clear that the ‘Corporate Debtor’ was obliged for collection and deduction of principal and interest of the farmers loan and make payment to the ‘Respondent No. 1’.
The Deed of Guarantee is continuing one and is to remain in force till such time the borrowers repay the loans. It is also observed that monthly MIS have been provided by the Respondent No. 1 to the ‘Corporate Debtor’ on regular basis relating to outstanding debts from the farmer – borrowers. Subsequently on the default by farmer- borrowers, the ‘Financial Creditors’ invoked the Deed of Guarantee dated 03.10.2013 for repayment of outstanding dues through legal notice dated 07.04.2021 which has been replied by the ‘Corporate Debtor’ on 16.04.2021 denying outstanding dues. The application under Section 7 was filed by the ‘Respondent No. 1’ on the basis of breach of guarantee and inability of the ‘Corporate Debtor’ to repay the outstanding dues and therefore breach of guarantee date becomes the cause of action as well as the date of default as indicated in Part IV of the Application under Section 7 was 15.04.2021, whereas the Respondent No. 1 filed the application under Section 7 on 24.04.2021 which is fully covered under Limitation Act, 1963. Hence, averments of the ‘Appellant’ that the application was barred by limitation does not succeed.
Liability of the ‘Corporate Debtor’ is based on the tripartite agreement and Deed of continuing Guarantee, both documents signed on 03.10.2013 - HELD THAT:- In the present case, as required in the agreement, the Respondent No. 1, sent from time to time the list of outstanding debts from the farmer- borrowers to the Corporate Debtor’ in form of the monthly MIS. It is also undisputed fact that from time to time the Financial Creditor has received the payment of dues and only on the default, the legal notice was issued and based on the continuing Deed of Guarantee and the ‘Corporate Debtor’ was called upon to settle outstanding dues on account of farmer- borrowers loans within seven days and due to non-payment of such loans, amounting to Rs. 5,41,34,813/-, the date of default was treated as 15.04.2021.
Thus, it is evident that there was clear liability on the part of the ‘Corporate Debtor’ to make the payment on demand on breach/ default by farmer- borrowers and hence, the ‘Adjudicating Authority’ has passed correctly the ‘impugned order’ treating outstanding money as a financial debt of more than Rs. 1 Crore for which default took place on 15.04.2021 and therefore, rightly approved initiation of the CIRP against the ‘Corporate Debtor’.
The other issue raised by the Appellant regarding the applicability of Vidarbha Industries Power Limited [2022 (7) TMI 581 - SUPREME COURT] is not directly relevant, looking into the various facts and circumstances as brought out in the present appeal.
Appeal dismissed.
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2023 (7) TMI 215
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - investment in equity of the Corporate Debtor as per informal understanding between the parties - Financial Creditors or not.
Whether money contributed by the Respondent No. 1 along with her nominees was in nature of financial debt or investment by way of equity in the Corporate Debtor?
HELD THAT:- From the perusal of the record especially part IV of the application filed by the ‘Respondent No. 1’ before the ‘Adjudicating Authority’, it is seen that Rs. 4,41,25,000/- was disbursed to the ‘Corporate Debtor’ from time to time starting from 05.12.2012 to 03.12.2018 and total amount claimed to be in default as on 30.06.2021 was Rs. 7,57,56,215/-, which included the interest from 01.04.2016 @ 12% p.a. We also note that the ‘Respondent No. 1’ is a shareholder of the ‘Corporate Debtor’ holding 24.63% of equity capital.
Admittedly by the ‘Appellant’ and evidently from the records made available before us, the ‘Corporate Debtor’ paid interest @ 9% to the ‘Respondent No. 1’ for the Financial Year 2016-17 and for the Financial Year 2017-18 the ‘Corporate Debtor’ paid interest @ 12% to the Respondent No. 1 and a statement of confirmation of account was also issued accordingly by the ‘Corporate Debtor’ to the ‘Respondent No. 1’. It is evident that on failure to receive due money on time, the Respondent No. 1 wrote a letter on 19.09.2020 to the ‘Corporate Debtor’ calling upon to return the outstanding principal amount along with interest and the same was replied by the ‘Corporate Debtor’ on 27.10.2020 denying the liability and stating that payment was made towards share premium.
This ‘Appellate Tribunal’ observe that the Code no where prescribes that there should be a written agreement between the parties to prove the loan and its disbursement to be treated as financial debts. It is also observed that if there are acknowledgments by the ‘Corporate Debtor’ and where the statements of accounts of the Corporate Debtor are in position to proof disbursement of loan and payment of interest, the absence of formal written agreement would not bar the Financial Creditor (the Respondent No. 1 herein) from initiating the CIRP.
There have been clear acknowledgments which have been issued by the Corporate Debtor for the money received from the Respondent No. 1 which also mentioned the quantum of interest payment to be made by the Corporate Debtor to the Respondent No. 1. Similarly, we also take into account the fact that TDS was deducted regarding interest paid and the name of the Appellant as deductor and the name of the Respondent No. 1 as deductee is clearly evident. This does not give any scope for benefits of the Appellant - there was clear financial debt in form of loan given by the Respondent No. 1 to the Corporate Debtor and this could not have been treated in any way as equity infusion/ share premium in Corporate Debtor.
Appeal dismissed.
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2023 (7) TMI 214
Maintainability of application under Section 60(5)(c) of IBC - Liquidation estate - Khagaria Respondent No. 1, a step down subsidiary of the Corporate Debtor - whether its asset can form part of the liquidation estate of the Corporate Debtor in terms of Explanation (d) to sub-section 4 of Section 36 of the Code or not? - HELD THAT:- Section 60(5) began with non-obstante clause. Sub-Section 5(c) which is relied provides “any question or priorities or any question of law of facts, arising out of or in relation to the Insolvency Resolution or Liquidation Proceedings of the Corporate Debtor” the key words under Section 60(5)(c) are “ARISING OUT OF OR IN RELATION TO THE INSOLVENCY RESOLUTION OR LIQUIDATION PROCEEDINGs OF THE CORPORATE DEBTOR.” What is the meaning of expression “arising out of or in relation to” has to be examined to find out as to whether Application I.A. No. 2691 of 2022 is maintainable or not.
The Hon’ble Supreme Court had occasion to consider Section 60(5)(c) in GUJARAT URJA VIKAS NIGAM LIMITED VERSUS MR. AMIT GUPTA AND ORS. [2021 (3) TMI 340 - SUPREME COURT]. In the above case, power purchase agreement was entered between the Corporate Debtor and GUVNL. GUVNL issued notices alleging that event of default has occurred, Corporate Debtor was called upon to remedy his default failing which the power purchase agreement was to be terminated. The Corporate Debtor filed an Application under Section 60(5) with regard to notice issued by GUVNL where an Interim Order was passed on 31st May, 2019 restraining the Appellant from terminating PPA till the next date of hearing. The Adjudicating Authority allowed the Application setting aside the notice issued by the GUVNL. Appeal was dismissed by the Appellate Tribunal against which the GUVNL filed an Appeal - The Hon’ble Supreme Court noticed earlier judgments of the Supreme Court where expression “arising out of or related to” were explained. It was noted that word ‘arising out of and relating to’ have been given expansive interpretation by the Supreme Court. Hon’ble Supreme Court however observed that it is necessary to bear in mind the context in which the phrases have been used - It was held by Hon’ble Supreme Court that NCLT has jurisdiction to adjudicate dispute which arises only from or which relates to the Insolvency of the Corporate Debtor.
Thus, the Adjudicating Authority did not commit any error in holding that Application is maintainable under Section 60(5)(c) of the Code - appeal dismissed.
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2023 (7) TMI 213
Approval of Resolution Plan - allegation is that Resolution plan is discriminative in the distribution of the proposed amount to the Operational Creditor vis-à-vis Financial Creditor - appellant submits that the Resolution Plan approved by the Adjudicating Authority is not in consonance with the provision of I&B Code, 2016 - Whether Appellants can claim discrimination in payment qua the financial creditors in these Appeals?
HELD THAT:- Financial Creditor and Operational Creditor are at different ladder in Section 53 of the Code. Financial Creditor under Section 53(i)(b) are entitled to receive payment equal to those workmen dues. The Operational Creditor can not claim payment equal to the Financial Creditor which is law well settled - reference made to Judgement of 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] where the Hon’ble Supreme Court has laid down that equality in the payment under the Resolution Plan has to be under some class of creditors.
The principle of equality is applicable only in same class of creditors.
This Tribunal in a case arising out of similar facts in DAMODAR VALLEY CORPORATION VERSUS DIMENSION STEEL AND ALLOYS PRIVATE LIMITED, BIJOY MURMURIA, RESOLUTION PROFESSIONAL OF THE CORPORATE DEBTOR, C/O SUMEDHA MANAGEMENT SOLUTION PRIVATE LIMITED, C.P. ISPAT PRIVATE LIMITED [2022 (5) TMI 1365 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] where Electricity Dues were unpaid by the Corporate Debtor, Resolution Plan was approved where operational creditors of the Damodar Valley Corporation were provided less than 1% - This tribunal had noticed about the meagre payment to Operational Creditor in most of the Resolution Plan. Tribunal has made observations in the said judgment drawing attention to the fact of the legislative scheme and to consider as to whether any changes are required or not and held that In the present case, the Operational Creditors have been given only miniscule of their admitted claim to the extent of only 0.19%. As the law stand today, no exception can be taken to such Plans, which provide payment to Operational Creditor in accordance with Section 30(2)(b) of the Code. However, the time has come when it should be examined by the Government and the Board to find out as to whether there are any grounds for considering change in the legislative scheme towards the payment to the Operational Creditors, which also consist of Government dues and other statutory dues. We make it clear that our observation is only to facilitate the Government and other competent Authority to consider this issue and take decision, so as to the objective of equitable and fair distribution can be fulfilled with clear parameters to guide the all concerned to arrive at the fair and equitable distribution.
Regulation 17(vi) also does not in any manner affect the distribution as contemplated by Section 53 of the Code.
The approval of the Resolution Plan cannot be faulted on the grounds as contended by the Learned Counsel for the Appellant in these Appeals - appeal dismissed.
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2023 (7) TMI 212
Validity of Resolution Plan - allowing the implementation of Resolution Plan without considering the Appellant’s case for settlement under Section 12A of I&B Code - HELD THAT:- Regulation 40C was inserted in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2020, in view of lockdown. According to the said provision, the period of lockdown was not to be counted for the purpose of timelines, for any activity that could not be completed due to such lockdown. The central government issued notification declaring total lockdown period to be extended. The Respondent No.1, on the instructions of Committee of creditors filed an application dated 28.05.2020 under Section 12(2) of the code vide which resolution professional sought an extension of 90 days for the CIRP process and further sought the exclusion of lockdown period as per Regulation 40 C. The Adjudicating Authority granted extension of 90 days beyond 180 days of CIRP and further granted exemption of lockdown period w.e.f. 25.03.2020. The order dated 03.06.2020, although did not specify the number of days that stood exempted, but granted exemption in terms of Section 40-C.
Whether the Resolution Applicant was barred under Section 29A of the Code or not? - HELD THAT:- It is the case of the Appellant is that Mr. Rahoul Subberwal was Managing Director of three companies which were liquidated in UK and being undischarged insolvent was not eligible and adversely effected eligibility of the M/s Sirius Foods Pvt. Ltd./ Respondent No. 2 as Mr. Subberwal is a shareholder of Respondent No. 2. In this connection, it is noted that the term ‘undischarged insolvent’ has not been defined in the Code. Moreover, such orders for declaring are required to be issued by the Court. We also take note of the detailed averments of the Respondents that Mr. Subberwal has not been disqualified under Section 6 or Section 7 of the UK Company Directors Disqualification Act, 1986 and he continuous to serve as director in other UK based company in M/s Spice Trail Ltd. and he would not have been allowed to continue in this company, had he remained ineligible as per UK Laws.
Non consideration of the settlement offer made by him to the CoC - the Resolution offer of the M/s Sirius Foods Pvt. Ltd. / Respondent No. 2 / Resolution Applicant is lower than the liquidation value as well as the settlement offer amount of the Appellant or not - HELD THAT:- The total Resolution Plan amounts to Rs. 27.27 Crores which is much more than both the liquidation value of Rs. 17.88 Crores and the settlement offer of the Appellant is Rs. 19.63 Crores. The averments of the Respondents is agreed upon that the Code do not stipulate that the Resolution Plans size is required to be more than the liquidation value which was also supported by the Hon’ble Supreme Court of India in the matter of Maharashtra Seamless [2020 (1) TMI 903 - SUPREME COURT] - there are no error in the Impugned Order on this aspect.
There are no error in the challenged both Impugned Orders. The Appeal being devoid of any merit is dismissed.
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2023 (7) TMI 211
E-auction of the sole property of the corporate debtor - correct procedure was followed in the E-auction or not - whether auction was conducted in haste without giving adequate opportunity to all to participate? - principles of natural justice - HELD THAT:- It is observed that the Liquidator issued a notice for sale of assets on 02.04.2022 and date of E-auction was mentioned in the said notice was 08.04.2022 from 2 pm to 4 pm. In the said notice, 4th and 7th April, 2022 were stipulated as last dates for submission of KYC and EMD respectively. The notice also erroneously stated last date and time for submission of EoI by interested bidder as 15.04.2022 (5pm) with last date and time for payment of EMD as 16.04.2022 (5pm). These clear conflicting dates are sufficient to cause confusion and therefore can not be treated as mere typographical error as claimed by the Liquidator.
Apparently no time frame was given for any inspection of the premise by the prospective bidder, which is not very rightful thing to do on behalf of the Liquidator - It is also observed that the corrigendum for rectification of error in the notice for sale of assets was given in newspapers and IBBI website which was after the E-auction was completed, rendering these to be futile and at best paper exercise on post facto basis.
There are no error in the Impugned Order dated 02.03.2023, wherein the E-auction was set aside and it was held that the Liquidator must bear all expenses incurred for the auction - appeal dismissed.
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2023 (7) TMI 210
Overriding effect of IBC on all proceedings after initiation of Section 7 Application - SEBI can auction the property of the Corporate Debtor or not - HELD THAT:- Section 7 Application has been filed by Respondent Nos 3 to 102 who are investors in the Corporate Debtor who have not been refunded their money in spite of Order dated 29.02.2016 passed by SEBI. The sequence of events as noted above indicates that Appellant-SEBI after the Order dated 29.02.2016, has issued a recovery certificate and has attached the properties of the Corporate Debtor, its directors, its associate Companies and has also conducted auction of 15 properties by which amount of Rs. 104 Crores have been received.
It is well settled that proceedings by Financial Creditors under Section 7 can be initiated despite pendency of any other proceedings relating to the Corporate Debtor. Right given to a Financial Creditor under IBC can be invoked by Financial Creditor despite any proceeding pending with regard to Corporate Debtor in any other forum.
The present is a case where Creditors of the Corporate Debtor have initiated Section 7 Application since the amount invested by them was not being refunded by the Corporate Debtor in spite of order passed by the SEBI Dated 29.02.2016. The Hon’ble Supreme Court in Indian Overseas Bank Vs. RCM Infrastructure Limited [2022 (5) TMI 926 - SUPREME COURT] have categorically held that after moratorium under Section 14(1)(c) comes into operation, no proceeding to recover against the Corporate Debtor can be continued.
Law is well settled that when moratorium comes into operation, no other proceedings for recovery against the Corporate Debtor can be continued. The Resolution Professional has also appeared before the High Court in the Writ Petition where Interim Order was passed on 09.01.2019 before the initiation of proceedings under Section 7 - there are no doubt that RP shall obtain necessary clarification and modification from the High Court to proceed further in the CIRP Process before finalisation of CIRP Process.
There are no grounds have been made out in this Appeal to interfere with the Impugned Order passed by the Adjudicating Authority admitting Section 7 Application. Present is a case where debt and default has been admitted and does not even a case of the Appellant that there is no debt and default at the instance of the corporate debtor. Appellant itself has initiated proceeding against the Corporate Debtor for recovery. Resolution Professional has also appeared in Writ Petition where appropriate clarification/modification has been sought for.
There are no error in the order of the Adjudicating Authority warranting any interference in this Appeal, there is no merit in the Appeal, the Appeal is dismissed.
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2023 (7) TMI 209
Power of Tribunal to review the judgment versus Power to re-call its order - Larger Bench (5 Members) decision - power to entertain an application for recall of judgment on sufficient grounds - perusal of decision 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] and Rajendra Mulchand Varma & Ors Vs K.L.J Resources Ltd & Anr. [2022 (10) TMI 383 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] which can be read to mean that there is no power vested in this Tribunal to recall a judgment or not - this Tribunal cannot recall its judgment in exercise of its inherent jurisdiction or not.
HELD THAT:- It is to be noticed that Rule 11 is akin to Section 151 of the Code of Civil Procedure. The Court as well as Tribunals exercise juridical power of the State while performing adjudicatory functions. The Hon’ble Supreme court has held in Harinagar Sugar Mills Ltd. vs. Shyam Sunder Jhunjhunwala & Ors. [1961 (4) TMI 23 - SUPREME COURT] that procedures of Court and Tribunal may differ but the functions are not essentially different.
The inherent power of the Courts and that of the Tribunals are the powers which are not conferred to it but those powers are inherent in the Courts and Tribunals by strength of duty to do justice to parties before it - Inherent power by a Court or Tribunal can be exercised to do justice between the parties, which exercise, however, in no manner should contravene any express provision of the statute.
The first judgment which has been relied by learned counsel for the Applicant is judgment of Hon’ble Supreme Court in A. R. Antulay vs. R.S. Nayak & Another [1988 (4) TMI 432 - SUPREME COURT]. In the above case, before the Hon’ble Supreme Court question arose as to whether the Hon’ble Supreme Court in exercise of its powers can set aside a direction given by earlier judgment - Hon’ble Supreme Court in the above judgment has clearly held that where a party has had no notice and decree is made against him, he can approach the court for setting-aside the decision.
The judgments of the Hon’ble Supreme Court clearly lays down that there is a distinction between review and recall. The power to review is not conferred upon this Tribunal but power to recall its judgment is inherent in this Tribunal since inherent power of the Tribunal are preserved, powers which are inherent in the Tribunal as has been declared by Rule 11 of the NCLAT Rules, 2016. Power of recall is not power of the Tribunal to rehear the case to find out any apparent error in the judgment which is the scope of a review of a judgment. Power of recall of a judgment can be exercised by this Tribunal when any procedural error is committed in delivering the earlier judgment; for example; necessary party has not been served or necessary party was not before the Tribunal when judgment was delivered adverse to a party. There may be other grounds for recall of a judgment.
Now two three-member bench judgments of this Tribunal which have been noted and referred to in the order are perused, which are Agarwal Coal Corporation Private Limited vs. Sun Paper Mill Limited & Anr. and Rajendra Mulchand Varma & Ors vs. K.L.J Resources Ltd & Anr. Agarwal Coal Corporation Private Limited was a case where an I.A. was filed in decided Company Appeal seeking to place on record fraudulent acts of the Respondent and prayed for exercise of inherent power in allowing the application. Appellate Tribunal in the above case vide its judgment dated 16.10.2019, refused to interfere in the order of the Adjudicating Authority while dismissing the Appeal. A three-member bench had occasion to consider the ambit of review and power of recall. This Tribunal held that power of review is not inherent power, with which there can be no quarrel.
Tribunal has observed that order passed by Adjudicating Authority or Appellate Tribunal cannot be either reviewed or recalled. From reasons given in the judgment, it is clear that against the order of the Tribunal dismissing the appeal on 16.10.2019 an appeal was filed under Section 62 of the I&B Code before the Hon’ble Supreme Court, which appeal was dismissed as not pressed. Three-member bench held that the judgment of this Tribunal dated 16.10.2019 has become final between the parties - the reason for rejecting the application are contained in Para 29 and 30, however, observations in Para 27 were made in wide terms that Adjudicating Authority and Appellate Tribunal has no power to review or recall. The above judgment of This Tribunal holding that there is no power to recall a judgment cannot be held to be laying down a correct law. Power to recall a judgment is an inherent power which is in the Tribunal as has been so declared by Rule 11.
The Tribunal has inherent power to recall its judgment on appropriate grounds, the three-member bench judgment in Agarwal Coal Corporation Private Limited and K.L.J Resources Ltd. & Anr. observing that the Tribunal does not have power to recall cannot be approved. The three-member bench judgments of this Tribunal insofar as observation that this Tribunal has no power to review, no exception can be taken to that part of the judgment.
This Tribunal is not vested with any power to review the judgment, however, in exercise of its inherent jurisdiction this Tribunal can entertain an application for recall of judgment on sufficient grounds - 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.” observing that this Tribunal cannot recall its judgment does not lay down the correct law.
Let this order be placed before the appropriate bench for consideration.
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2023 (7) TMI 208
Initiation of CIRP u/s 7 of IBC - NCLT admitted the application - basic requisites of Debt and Default, that are required to be examined and proven, prior to the admission of Petition, seeking to initiate Insolvency Process, was not established - Non-application of mind by Adjudicating Authority - HELD THAT:- In the instant case, there is no dispute, in regard to the sanction of Loans, amounting to Rs.355.40 Crores, by the 1st Respondent / Bank, to and in favor of the Corporate Debtor, beginning from the Year 2010. Furthermore, more than Rs.3,000 Crores, were advanced by the 12 Financial Institutions, together with the 1st Respondent / Bank, amounting to over and above Rs.3,000 Crores, in part financing the costs for setting up of 540 MW Coal Fired Thermal Power Plant, in Taran Tarn, Punjab, and for ease of convenience, the Lenders, has referred to supra or termed as Senior Lenders.
Admittedly, a Loan Recall Notice, dated 17.12.2019, was issued by the 1st Respondent / Bank / Petitioner / Financial Creditor, because of the Default, committed by the Corporate Debtor, in making payments, as per Master Amendment Agreement dated 21.07.2017. In reality, the Corporate Debtor / GVK Power (Goindwal Sahib) Ltd., had availed the Credit Facilities, but, failed and neglected to operate the same, in accordance with the agreed Terms and Conditions. The Account, was classified, as Non Performing Asset, from 29.11.2017.
It is pointed out that from the Information Utility i.e., National E-governance Services Limited, a record of Default, was produced, before the Adjudicating Authority, on behalf of the 1st Respondent / Bank / Financial Creditor - Be it noted that, the Inter Creditor Agreement, was executed by some Consortium Lenders of the Corporate Debtor (including the 1st Respondent / Bank / Financial Creditor), pursuant to the Reserve Bank of India’s Directions 2019. In reality, the Inter Creditor Agreement, dated 06.07.2019, was executed to afford a scaffold, for a possible Resolution.
No wonder, there is no Fetter in Law, much less in the Reserve Bank of India’s Directions 2019, for the Lenders, to resort to the Summary I & B Code Proceedings. The Right of the 1st Respondent / Bank, especially, under the I & B Code, 2016, cannot be taken away or overridden, by any Reserve Bank of India’s Rule, etc.
It is to be remembered that the Corporate Debtor, cannot seek an umbrage, under the Inter Creditor Agreement, with a view to avoid, evade, circumvent and supplant its obligation(s), in terms of the ‘Loan Facility Agreement’. Continuing further, the I & B Code, 2016 (vide Section 238 of the I & B Code, 2016), will have an overriding effect, in regard to anything inconsistent therewith contained in any other Law, for the time being in force.
In the present case, the Corporate Debtor has not furnished any material evidence to suggest that, it will be in a position to repay the amounts, owed to the Lenders. It cannot be forgotten that no endeavour was made to accomplish a Resolution Plan, although many deliberations and meetings, had taken place. Besides these, the Corporate Debtor, inspite of request made by the Lenders, had not opted to Improve and Revise, the One Time Proposal, which is an unfavourable circumstance, as opined by this Tribunal.
Keeping in mind of the fact that the Defaults, had taken place in the year 2017, the huge Public Monies, are entangled, and the main Company Petition, was preferred, before the Adjudicating Authority / Tribunal, on 20.12.2019, with a view to prevent, diminishing Value of the Assets of the Corporate Debtor, to protect the Creditors’ interests, and considering the totality of the integral facts and circumstances of the case on hand, in a conspectus manner, comes to a resultant conclusion that the view, arrived at by the Adjudicating Authority / Tribunal, by exercising its Judicial Discretion, ofcourse, in admitting the Section 7 Application, does not suffer from any Material Irregularity, or Patent Illegality, in the eye of Law.
Accordingly, the Appeal fails - Appeal dismissed.
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2023 (7) TMI 157
Initiation of CIRP - Financial Debt or not - Creditors were providing factoring services - Loan against Bill of exchange - amount which is subject matter of Section 7 Application is a Financial Debt within the meaning of Section 5(8)(e) of I&B Code, or not - HELD THAT:- The client as per Factoring Agreement is Arcons Infrastructures and Constructions Pvt. Ltd. The clause 12 in the definition of recourse clearly indicates that agreement between the parties was not any agreement which may be called as agreement of non recourse basis. Thus, the Financial Debt which is covered by Factoring Agreement is clearly covered within meaning of Section 5(8)(e) of the Code and the Financial Creditor was entitled to being recourse - there are no substance in the submission of Learned Counsel for the Appellant that Factoring Agreement was non-recourse agreement.
The amount of Rs. 4,52,13,711/- was amount as due on 28.01.2019. The Adjudicating Authority found the said amount due and payable, there are no reason to take any different view - Financial Creditor will be entitled for payment of debt due along with interest at least till the insolvency commencement date i.e. 11.11.2022.
The amount of Rs. 4,52,13,711.60/- under order of this Tribunal dated 07.12.2022 deposited, be paid to Respondent No. 1 - In addition to aforesaid payment of Rs. 4,52,13,711.60/-, the Appellant shall also make payment of simple interest at the rate of 14.50% p.a. till insolvency commencement date i.e. 11.11.2022 which payments shall be made to Respondent No. 1 within a period of 3 months from today.
Appeal disposed off.
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2023 (7) TMI 156
Seeking to release the attachment of the tiles relating to the Corporate Debtor - Attachment of goods by the GST department before initiation of CIRP - whether RP was entitled for a direction from the Adjudicating Authority for release of the goods, which were under attachment of Respondent since 02.02.2018?
HELD THAT:- The Respondent has filed a reply to the Appeal, where it has been stated that Respondent has auctioned the attached tiles, but it has to refund the money received from the auction purchaser under the orders of High Court, which amount has been refunded to auction purchaser and the end result is that the attachment by the Respondent for recovery of its excise dues still continues. The attachment was for the purposes of recovering the excise dues. After commencement of the CIRP, by virtue of Section 14 of the Code, no action to recover against the Corporate Debtor by any of the creditors can be undertaken.
The Respondent has also filed their claim in Form-B, which has been accepted by the RP and revised claim has also been filed by the Respondent in Form-C, relying on judgment of the Hon’ble Supreme Court in State Tax officer vs. Rainbow Paper Limited, which revised claim has not been accepted by the RP and an Application filed by Respondent with regard to revised claim is pending consideration before the Adjudicating Authority - In the present Appeal, we are not required to answer any question regarding nature of the claim of the Respondent.
Only question which needs to be answered is that whether the Adjudicating Authority required to direct the Respondent to release the attachment so that assets of the Corporate Debtor can be used for the benefits of the creditors - In view of the Circular dated 23.03.2020 issued by Central Board of Excise and Customs, the Department itself has understood that when CIRP has been initiated for recovering any amount, the claim has to be filed and no recovery can be made since moratorium has been imposed under the Code. The Respondent after imposition of moratorium with effect from 27.04.2022 could not have recovered its dues. The attachment of the goods of the Corporate Debtor were made before initiation of CIRP. The assets, which were attached were still the assets of the Corporate Debtor, which were in the ‘supurdagi’ of the Corporate Debtor. Respondent being unable to recover the amount from the attached assets, the RP has rightly filed the Application seeking a direction for release of the attachment, so that assets can be included in the assets of the Corporate Debtor for payment to the creditors.
The Adjudicating Authority has committed error in rejecting Application filed by RP, by holding that Adjudicating Authority has no jurisdiction to issue direction to the State Authority, when the IRP is duty bound to take custody and control of the assets belonging to the Corporate Debtor, Application under Section 60, sub-section (5), sub-clause (c) was clearly maintainable and the Adjudicating Authority had ample jurisdiction to issue necessary direction.
The order dated 07.02.2023 passed by the Adjudicating Authority - the Respondent are directed to release the attachment in question - appeal allowed.
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2023 (7) TMI 155
Status of the appellant - Shareholder or Credit of the Corporate Debtor - Transfer of shares or not - collation of claims - whether the Adjudicating Authority was justified in observing that the Appellant herein is a ‘Shareholder’ of the Corporate Debtor Company? - HELD THAT:- This Tribunal is of the view that the ledger account is to be read with the statements in the balance sheets and the Financial Statements, together with the Auditor’s Report filed with the RoC. It is settled Law that these aforenoted Financial Statements filed with the RoC have greater evidentiary value than that of a ledger statement which is an internal document.
As regarding the Submission of the Learned Company Secretary that the RP had adjudicated the Claim, this Tribunal is of the considered view that in the facts of the present case, the RP has rightly rejected the claim of the Appellant based on the documentary evidence on hand. The duty of the RP is to collect and collate the claims and a mere rejection of the Claim by the RP cannot be construed to be an Adjudicatory function, keeping in view Regulation 13 of the CIRP Regulations 2016 - The Loan Agreement dated 27/12/2019 is also on the same date as that of the MoU which is said to have been revoked/cancelled by the Appellant. It is significant to mention that this Loan Agreement is silent about the MoU dated 02/08/2019. There is no evidence on record in terms of Statements of Accounts or Auditor’s Report that the claim amount of Rs. 15,72,18,489/- has been disbursed pursuant to this Loan Agreement.
The contention of the Learned Company Secretary appearing for the Appellant that the Register of Members was never produced before the Adjudicating Authority and therefore no steps could have been taken under Section 59 of the Act, is untenable as they themselves are relying on the letter dated 22/02/2020 in support of their argument that they had come to know that their amount was converted into Equity despite not having signed any Share Transfer Deed, then there are no substantial reasons for not having taken any effective steps under Section 59 of the Act.
This Tribunal is of the earnest view that there are no substantial grounds to interfere with the order of the ‘Adjudicating Authority’ - Appeal dismissed.
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2023 (7) TMI 66
Initiation of CIRP - NCLT admitted the application - 1st Respondent / Bank, has made substantial recoveries, during the pendency of Legal Proceedings - Dues or Outstandings, payable by the Corporate Debtor, to the 1st Respondent / Bank / Financial Creditor or not.
The stand of the 2nd Respondent / Corporate Debtor, before the Adjudicating Authority / Tribunal was that ‘there were no Dues, payable by the Corporate Debtor to the Financial Creditor, for that the 2nd Respondent / Corporate, had repaid the Amounts, in excess of the Principal Amount borrowed, it is the Financial Creditor has to Repay, such overpaid monies to the Corporate Debtor.
HELD THAT:- This Tribunal, pertinently points out that in a Proceeding (Filed under Section 7 of the I & B Code, 2016, by a Petitioner / Financial Creditor), an Adjudicating Authority/ Tribunal, is not concerned with the Dispute/ Controversy, between the Respondent / Corporate Debtor and the Petitioner / Financial Creditor, as regards the quantum. Ofcourse, when a Claim is made, it is for the Resolution Professional, to quantify the Claim Sum, to be paid.
An Adjudicating Authority / Tribunal, under I & B Code, 2016, is necessarily to ascertain as to whether, there is any Default, and whether the Liability of the Respondent / Corporate Debtor, is more than the Limit, prescribed under the Section 4 of the Code - Although, the Debt, is Disputed, if the said Sum, is more than the Amount, specified under Section 4 of the I & B Code, 2016, an Adjudicating Authority / Tribunal, has to admit the Section 7 Application of the I & B Code, 2016, and the said Application, cannot be rejected, merely on technical grounds.
No wonder, an Adjudicating Authority/ Tribunal, is to exercise its Judicial Discretion, in dealing with an Application (Filed under I & B Code, 2016), in accordance with Law, and based on facts, evidence and circumstances of the given case.
In the case on hand, before this Tribunal, although, on the side of the Appellant, a reference is made to the Order in M/S. INMA INTERNATIONAL LTD., G. RATHINAVELU, G. SUNDARAVADIVELU VERSUS INDIAN OVERSEAS BANK [2019 (12) TMI 1649 - MADRAS HIGH COURT], whereby and whereunder, an Order of Ad-interim Injunction, as prayed for, till 21.01.2020, was granted, and it was made clear that till the Disposal of the Writ Petition, the Writ Petitioners, shall not create any Third Party Rights, in respect of the Properties, in question, this Tribunal, is of the earnest opinion that there was no embargo upon the Adjudicating Authority / Tribunal, in not Proceeding with the IBA/49/2019 (Filed by the 1st Respondent / Bank / Financial Creditor).
The prime fact to be taken note of in repelling the plea of the Appellant that the Liability, has not crystallised in a definite manner is that a Final Order, came to be passed by the Debt Recovery Appellate Tribunal, as per Section 19 (20) r/w. Section 22 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It cannot be gainsaid that the Order of a Court / Tribunal, determining the Default, is a cementing platform, evidencing Financial Debt, as opined by this Tribunal.
Considering the fact that the Due of the 2nd Respondent / Corporate Debtor, is more than the Threshold Limit of Rs.1 Lakh, under Section 4 of the I & B Code, 2016, and the same is to be paid, both in Law and in Fact, this Tribunal without any haziness, comes to a cocksure conclusion that the aspect of Debt and Default, committed by the 2nd Respondent / Corporate Debtor, is proved to its subjective satisfaction. Therefore, the 1st Respondent / Bank / Petitioner, has rightly initiated the Corporate Insolvency Resolution Process, before the Adjudicating Authority / Tribunal (under Section 7 of the I & B Code, 2016), and the same was rightly admitted, by the Adjudicating Authority (National Company Law Tribunal, Special Bench – II, Chennai), exercising its Judicial Discretion, based on the attendant facts and circumstances of the case, which is free from any legal infirmities.
Appeal dismissed.
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2023 (6) TMI 1251
Seeking to restrain the Respondents from proceeding with the Challenge Process - modification in the Resolution Plan more than once either by way of revision or by way of challenge mechanism - seeking direction to accept the Resolution Plan of the Appellant as submitted on 28/10/2022 - seeking restrain on 1st Respondent from considering any of the Resolution Plans submitted after 20/10/2022.
HELD THAT:- The insertion of Regulation 39(1A) was especially that a objection to maximise the value of the assets and to reduce any delay in timelines by several resubmissions or addendums which the Resolution Applicants seek to submit - The NCLAT, Principal Bench, New Delhi, in VISTRA ITCL (INDIA) LTD. VERSUS TORRENT INVESTMENTS PVT. LTD. & ORS. AND INDUSIND INTERNATIONAL HOLDINGS LTD. VERSUS TORRENT INVESTMENTS PVT. LTD. & ORS. [2023 (3) TMI 176 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] addressed to the question whether Regulation 39(1A) contains an implied prohibition on the jurisdiction of the CoC to enter into any further negotiation with the Resolution Applicant or to further ask the Resolution Applicant to increase its Resolution plan value, where it was held that The Adjudicating Authority further fell into error in coming to a conclusion that there is no power with the CoC to enter into negotiations with the Resolution Applicant, after the Challenge Mechanism and the exercise of the commercial wisdom is circumscribed by the framework for value maximization provided under the Code read with the Regulations.
In the instant Case, keeping in view the facts of the matter that the decision to conduct the Swiss challenge was approved by the CoC by majority of 99.18% during the 43rd Meeting held on 29/12/2022 that the decision of CoC to conduct the Challenge Process is supported by Causes 1.17, 1.18 and 7.2 of the RFRP that the voting window commenced on 06/01/2023 vest the Challenge Process conducted on 04/01/2023 and such voting window remained open upto 16/01/2023 and only after closing the voting lines, the CoC has approved the Resolution Plan of Respondent No. 3 by majority of 94.96%, does not find any violation of Regulation 39 (1A) of the CIRP Regulations or any other provisions of the Code.
There are no substantial reasons to interfere in the well considered Order of the Adjudicating Authority - appeal dismissed.
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2023 (6) TMI 1250
Locus Standi of shareholder of the Corporate Debtor to challenge the Resolution Plan - Seeking for forensic audit of the Books of Accounts of the Corporate Debtor, and not to approve the Resolution Plan till the disposal of the Application - CIRP proceedings (proceedings in rem) - HELD THAT:- In an Insolvency process, when an insolvency of Debtor is imminent, the fiduciary duty of the Directors and Managers, who are Agents of the Shareholders, shifts to the Creditors to preserve the value of the Enterprise for maximising the returns for Creditors. The Legislature in its wisdom, has curtailed the Rights of the Shareholders based on the established Principles of Creditors in the control framework. The Court provides the shareholders right to file a Claim only in the Liquidation Process as stakeholders and the advances of stakeholders as stated in Regulation 2(k) includes shareholders only because unlike CIRP, in Liquidation, distribution to stakeholders is in accordance with the waterfall mechanism. Shareholders are excluded from representation, participation or voting in the CoC and are represented in the CoC only through the Directors and can speak only through the Directors.
This Tribunal, is of the considered view that once the CIRP is triggered, the Management of the affairs of the Corporate Debtor lies with the Interim Resolution Professional and the shareholders do not have a Right to file any claim in the CIRP but can only do so in the Liquidation Process. It is seen from the provisions of the Code that the Shareholders are excluded from representation, participation or voting in the CoC and are represented in the CoC only through the Directors - The CIRP proceedings are proceedings in rem, to the extent that once a Petition filed by a Financial Creditor/ Operational Creditor against the Corporate Debtor is admitted, it becomes a collective Creditors Proceedings and all Creditors, pool their Security Interest, in a common manner and the same is distributed as provided for, under Section 30(4) of the Code, subsequent to the approval of the plan by the CoC. The Provisions of the Code does not provide for the shareholders to seek representation, participation, or otherwise and to agitate their views only through the Directors.
Keeping in view, the scope and intent of the Legislature, and that the I & B Code, 2016 is a distinct shift from Debtor in Possession to Creditor in Control Insolvency System, where the Shareholders have a limited role and are only confined to co-operate with the Resolution Professional as specified under Section 19 of the Code, are entitled to receive the Liquidation value of its equity, if any, in accordance with Section 53 of the Code, it is concluded that a Shareholder has no locus standi to challenge the Resolution Plan.
The Learned Counsel for the Appellant has strenuously argued that had the Transaction Audit been carried out, the Resolution Plan would not have been approved. It is not in dispute that the Appellant is one of the largest shareholders of the Corporate Debtor and not having raised these issues earlier, at the later stage, contends that other shareholders and Directors have indulged in Fraudulent Transactions - there are force in the Contention of the Learned Senior Counsel Mr. E. Om Prakash, that these issues were never raised earlier, no action was taken and that there are other remedies in Law for any of these grievances.
The discretion of the Tribunals, is circumscribed by Section 31 limited to scrutiny of the Resolution Plan, if it is in violation of Section 30 of the I&B Code, 2016.
The Hon’ble Apex Court, in the matter of EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED & ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED & ORS. [2021 (9) TMI 672 - SUPREME COURT] has clearly laid down that subsequent to the approval of the Resolution Plan of the CoC and before the approval by the Adjudicating Authority, no modifications / alterations can be called for as IBC is a time bound process.
This Tribunal finds no infirmity in the Order of the Learned Adjudicating Authority in the Approval of the Plan or in the rejection of application - appeal dismissed.
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2023 (6) TMI 1199
Constitution of CoC with a single Operational Creditor (can be done or not) - Seeking dismissal of the CIRP - the Company struck off for non-filing of the financial statements - HELD THAT:- This Tribunal is of the earnest view that there is no provision in the Code for the Corporate Debtor to constitute the CoC with a single Operational Creditor, when it is seen from the record that despite the public announcement being made inviting claims from its stakeholders, the Appellant has not received a single Claim from the date of initiation of the Corporate Debtor into CIRP. As the CoC itself is not constituted and in the light of the fact that not a single Claim was received by the IRP even after the public announcement, as well as the fact that the Corporate Debtor Company has been struck off from the Registrar of Companies, this Tribunal is of the considered view that the CIRP may be closed with respect to the subject company.
The order of the Adjudicating Authority is set aside and the Company is released from all rigors of CIRP - Appeal allowed.
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