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IBC - Case Laws
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2025 (4) TMI 519
Reversal of sale transactions of the properties - Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - whether the relationship in respect of first property between the CD and the R1 came to end on the day when the notice for e-auction was issued in terms of amended provision of Section 13(8) of the Act? - HELD THAT:- Hon’ble Supreme Court in the case of Celir LLP [2023 (10) TMI 48 - SUPREME COURT] has held that “in view of the aforesaid discussion, we hold that as per the amended section 13(8) of the Act, once the borrower fails to tender the entire amount of dues with all costs and charges to the secured creditor before the publication of auction notice, his right of redemption of mortgage shall stand extinguished / waived on the date of publication of the auction notice in the newspaper in accordance with Rule 8 of the 2002 Rules.”
In the presence of direct decision of the Hon’ble Supreme Court interpreting Section 13(8) of the Act, the decision relied upon by the Appellant in the case of Indian Overseas Bank [2022 (5) TMI 926 - SUPREME COURT] which has only interpreted Section 14(1) of the Code does not apply because Section 13(8) was not brought to the notice of the Hon’ble Court.
In respect of the second property, the first public notice was issued on 03.01.2019. By that time the Appellant did not move to redeem the property by making the payment of the Bank. However, the first sale could not take place, therefore, the public notice was again published scheduling the sale of the properties on 28.01.2019. In that sale, the Bank itself purchased the property which is permitted under Section 13(5A) & 13(5B) of the Act and adjusted the amount which it had to recover from the CD.
The jural relationship between the parties in respect of second property also came to an end on 03.01.2019 or 28.01.2019 which was much earlier than the date of commencement of CIRP on 01.02.2019. In this case, even the letter of confirmation was issued on 28.01.2019 and sale certificate was issued on 30.01.2019 much before the date of commencement of the CIRP on 01.02.2019. The Hon’ble Supreme Court has held in the case if Celir LLP while interpreting Section 13(8) that the relationship between the parties i.e. mortgager and mortgagee, for the purpose of redemption exists till the date of issuance of notice of sale, if the property is being sold under Section 13(8) of the Act then in that situation also the Appellant has no right to the property for the purpose of raising the dispute.
The contention of the Appellant that non-deposit of the sale consideration in the estate of the CD effects the right of the secured creditor is of no avail.
Conclusion - The right of redemption is extinguished upon the issuance of the e-auction notice as per the amended Section 13(8) of the SARFAESI Act. The validity of the sales conducted under the SARFAESI Act upheld.
Appeal dismissed.
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2025 (4) TMI 518
Liquidation of the Corporate Debtor - Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- There is no dispute to the fact that RBL Bank is the sole member of the CoC with 100% voting right. It is also not in dispute that there were three resolution plans before the CoC in which one of the resolution plan was submitted by the Appellant and the sole member of the CoC abstained from voting. The CIRP Regulations provides for different modes of voting. As per the regulations, the members of the CoC may either vote in favour, against or abstain from voting. In the present case, it is alleged that sole member of the CoC abstained from voting, therefore, the resolution plan submitted by the Appellant was not rejected but the very fact that the sole member of the CoC did not vote in favour of the resolution plan submitted by the Appellant, therefore, it had exercised its commercial wisdom and chose to abstain from voting as has been held by the Hon’ble Supreme Court in the case of K. Sashidhar [2019 (2) TMI 1043 - SUPREME COURT] that commercial wisdom of the CoC is paramount, therefore, the reason cannot be questioned by the Appellant.
In so far as, the application for liquidation, having been filed without consent of the CoC is concerned, argument of the Appellant is not tenable because in the 6th CoC meeting, there was discussion regarding the possibility of the liquidation and in the course of said discussion, the CoC sought recommendation for the nomination of liquidator. In this regard, erstwhile RP sent email to the CoC seeking its consent to file the liquidation application and the nomination of liquidator to which the sole member of the CoC gave consent by returning email on the same.
It is also a fact to be noticed that when the case was listed for hearing on 31.05.2024 before this Court, it was brought to the notice of this court that e-auction notice was issued on 23.05.2024 scheduling the e-auction of the CD as a going concern on 21.06.2024 at the reserve price of Rs. 20.61 Cr. Instead of granting stay, this court clearly said that the Appellant shall have the right to participate but it had failed to participate whereas in the auction, Respondent No. 4 to 7 were held to be successful as they gave the bid of Rs. 20.63 Cr. which was over and above the reserve price. The said amount has already been paid by R4 to 7 and the sale certificate has been issued in their favour whereas the Appellant had only offered a sum of Rs. 8 Cr. to take over the CD as a going concern.
Conclusion - The CoC's decision upheld, emphasizing the primacy of its commercial wisdom. The legality of the liquidation process and subsequent auction confirmed.
Appeal dismissed.
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2025 (4) TMI 517
Admission of Section 95(1) application filed by the financial creditor against the personal guarantor - whether 10 days period provided to the RP for submitting a report under Section 99 is mandatory and whether report which is submitted after period of 10 days cannot be taken on record by adjudicating authority or looked into for passing an order under Section 100? - HELD THAT:- The scheme of Section 99 clearly indicates that although Section 99(1) provides that RP shall examine the application referred to Section 94 or Section 95 within 10 days of his appointment and submit his report. But subsequent provisions, i.e., sub-Section (4) of Section 99 empowers the RP to seek such other information or explanation in connection with the application and by virtue of sub-Section (5) of Section 99, the person who has been asked for information is required to submit information within seven days from receipt of the request.
On looking into the scheme as delineated by Section 99(1), (4), (5), (6) & (7) as noticed above, it is clear that submission of report within 10 days from appointment of the RP is only directory and cannot be held to be mandatory. When the RP after examining the application, if come to the conclusion that certain further information or explanation are required, he may ask for the information from the debtor or the creditor or any other person. The person from whom information is asked for is required to give information within seven days of the receipt of the request and under sub- Section (6) the RP has to again examine the information received from under sub-Section (4) and thereafter submit his recommendation and sub-Section (7) of Section 99. The above legislative scheme clearly indicates that legislature never intended that period of 10 days for submitting a report for appointment of RP is mandatory. The use of expression “shall” although generally indicate mandatory nature of provision but use of “shall” is always not conclusive and whether expression “shall” cast a mandatory duty or only directory depends on the scheme of the statute.
The present is a case where necessity of submitting amended report arose because of receipt of the information from financial creditor subsequent to the submission of first report on 02.02.2024. Reports were brought on record by a supplementary affidavit, which were taken on the record. There was no such undue delay in submission of the report on 02.02.2024 or submission of the amended report on 14.02.2024, that the said report were required to be ignored and rejected by the adjudicating authority.
There are no substance in the submission of the appellant that report 02.02.2024 which was filed beyond 10 days from date of appointment of the RP on 16.01.2024 could not have been taken on the record or relied by the adjudicating authority. Adjudicating Authority has rightly relied on the report dated 02.02.2024 as well as amended report dated 14.02.2024. Reason for submitting amended report was also explained by the RP before the adjudicating authority, which has been noticed by adjudicating authority.
Conclusion - There are no merit in the appellant's arguments regarding the mandatory nature of the 10-day timeline and the need for condonation of delay. The adjudicating authority's decision to accept the RP's reports is affirmed and Section 95 application admitted.
There is no merit in the appeal. Appeal dismissed.
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2025 (4) TMI 516
Continuation of CIRP despite the issuance of a SCN by the Insolvency and Bankruptcy Board of India (IBBI) and the subsequent suspension of the Authorization for Assignment (AFA) - HELD THAT:- The issuance of show cause notice dated 30.01.2025 in no manner prohibit the RP to continue with the assignment. In any view of the matter, the Hon'ble Supreme Court in order dated 29.01.2025 [2025 (2) TMI 19 - SUPREME COURT] has directed for consideration of Resolution Plan of the Appellant by the CoC and RP submitted as on 28.10.2022.
Admittedly, Intervention Petitions and other Applications are still pending and have still not been finally decided. When the Hon'ble Supreme Court had directed the CoC to reconsider the Resolution Plan of the Appellant as on 28.10.2022, the Resolution Plan Application along with all objections regarding continuance of the RP in the CIRP, need to be finally decided by the Adjudicating Authority. Stopping the process will further delay the resolution of the CD. It is already noticed that IA 269/KB/2025 has already been filed by the RP for extension of timeline of the CIRP. The Hon'ble Supreme Court having directed for consideration of Resolution Plan of the Appellant, the Adjudicating Authority has to consider and pass an appropriate order on the said Application, which Application is also now pending for adjudication.
The present is a case where CIRP has commenced as early as on 21.10.2021 and the process has not reached to its culmination. In view of the order of the Hon'ble Supreme Court, the Adjudicating Authority need to proceed with the consideration of all pending Applications, including Plan approval Application and Application.
Conclusion - The RP could continue with the existing CIRP despite the show cause notice and suspension of AFA, as it did not prohibit ongoing assignments.
Appeal disposed off.
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2025 (4) TMI 515
Dismissal of application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 - application filed under Section 9 was beyond the period of limitation and below the threshold of Rs. 1 Cr. excluding the amount of interest - HELD THAT:- The Appellant has been non-suited by the Tribunal on the issue of limitation and that the petition is being hit by Section 4 of the Code.
The Appellant, in order to cross the threshold, has added the component of interest making it an amount of Rs. 1,41,57,817/- alleging that the interest is provided in the invoice which can be charged by the Appellant in case the payment is not made within the required time but the Appellant has failed to show that the said invoice has been signed by the CD.
Thus, the question arises as to whether the interest mentioned in the invoice which is not signed by the CD is a unilateral document and cannot be recovered. In this regard, this Tribunal in the case of S.S Polymers Vs. Kanodia Technoplast Ltd. [2019 (11) TMI 1428 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] has held that 'Admittedly, before the admission of an application under Section 9 of the I&B Code, the ‘Corporate Debtor’ paid the total debt. The application was pursued for realisation of the interest amount, which, according to us is against the principle of the I&B Code, as it should be treated to be an application pursued by the Applicant with malicious intent (to realise only Interest) for any purpose other than for the Resolution of Insolvency, or Liquidation of the ‘Corporate Debtor’ and which is barred in view of Section 65 of the I&B Code.'
Similarly, the Hon’ble Karnataka High Court in the case of Jyothi Limited Vs. Boving Fouress Limited [2000 (12) TMI 817 - HIGH COURT OF KARNATAKA] regarding winding up of company has observed that the invoice having not been signed by the both parties is an unilateral document and interest cannot be claimed.
Thus, in view of the fact that the component interest cannot be added to be principal amount, on the basis of the entry and endorsement in the invoice which is not signed by the CD, the Appellant was entitled only to the principal amount which is less than Rs. 1 Cr., therefore, the Appellant has failed to prove that it has crossed the threshold of Rs. 1 Cr. for maintaining the application under Section 9.
Conclusion - Since the Appellant has failed to cross the threshold for maintaining the petition under Section 9, it is not required to go into the issue of limitation and the present appeal is without any substance and hence, the same is hereby dismissed.
Appeal dismissed.
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2025 (4) TMI 514
Restoration of Electricity Connection at the auctioned property - jurisdiction of National Company Law Tribunal (NCLT) to direct the restoration of an electricity connection at the auctioned property as part of the liquidation proceedings - HELD THAT:- There is no dispute that the respondent became the Successful Auction Purchaser in the liquidation proceeding of the Corporate Debtor. The appellant has already filed a claim in the liquidation proceeding and his claim has been dealt with in the liquidation proceedings. The submission which has been pressed by the Appellant is that the Adjudicating Authority has no jurisdiction to consider the application filed by the Successful Purchaser.
Reliance has been placed in Gujarat Urja Vikas Nigam [2021 (3) TMI 340 - SUPREME COURT]. There cannot be any dispute to the preposition laid down by the Hon’ble Supreme Court that the ‘adjudication of dispute that arise dehors the insolvency of corporate debtor cannot be entertained.’ The present is a case where application arose of auction purchase arising out of the liquidation proceeding, hence is fully covered by the Section 60(5)(c) of the Insolvency and Bankruptcy Code.
Conclusion - The disputes arising from the liquidation proceedings, including those related to auction purchases, fall within the jurisdiction of the NCLT under Section 60(5)(c) of the IBC.
Appeal dismissed.
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2025 (4) TMI 513
Liquidation of the Corporate Debtor - Section 33(2) of I & B Code - HELD THAT:- The fact of completion of the process of liquidation is not a fact which has been disputed by the Learned Counsel for the Appellant in his notes of submission - in the instant case, the process of liquidation is complete, the sale of assets have been confirmed and the assets have been handed over.
Apart from it, if the impugned order dated 27.01.2021, as rendered by the Learned Adjudicating Authority is taken into consideration, it has been a logical outcome of the resolution which was passed in the 9th CoC meeting which recommended liquidation of the Corporate Debtor and based on such resolution of CoC and the written of consent of the Resolution Professional dated 18.06.2020 to function as liquidator, Learned Adjudicating Authority had ordered the Corporate Debtor to be put to liquidation, which is not established or argued to be in contravention to any of the provisions of law, as contemplated under the I & B Code.
Since now much water has been flown after passing of the order of the appointment of the liquidator, the appeal deserves to be dismissed, as now third-party interest has been created subject to the confirmation of the sale made by the liquidator. The consequential effect would be that the so-called claim of the right of indemnification comes to an end, as over the assets as detailed above, with the Auction Purchaser already been placed in possession.
Conclusion - The liquidation order is valid and in accordance with Section 33(2) of the I & B Code.
Appeal dismissed.
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2025 (4) TMI 459
Admission of Section 7 Application - default in repayment of the principal loan amount fell within the Section 10A period or not - HELD THAT:- The present case is founded on the basis that even after end of 10A period, the CD defaulted in its obligation to pay monthly interest and liability of interest from 26.03.2021 to 31.05.2021 was more than Rs.9.38 crores.
The Adjudicating Authority having returned a finding that Section 7 Application was entertainable on the basis of default of interest, which is subsequent to the end of 10A period, i.e. with effect from 26.03.2021 to 31.05.2021, there are no error in the order admitting Section 7 Application. The question as to what should be the amount of claim of the Financial Creditor is not to be determined at the time of admission of Section 7 Application and that is the subject matter of collation and verification by the RP in the CIRP.
It is made clear that while upholding the decision of the Adjudicating Authority admitting Section 7 Application, no opinion expressed on the amount of claim of the Financial Creditor, which need to be determined in the CIRP in accordance with relevant statutory provisions.
Appeal dismissed.
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2025 (4) TMI 458
Admission of section 7 application filed by the Bank of Baroda (BoB) - order admitting Section 7 application passed without service of notice on the appellant - HELD THAT:- In Rule 38(1), the expression "at the email address as provided in the petition or application or in the reply”. It clearly refers to petition which was filed by the financial creditor under Section 7 and email address as provided in Section 7 is the address on which process can be served on the corporate debtor. Thus, it is not persuaded to accept the submission of the appellant that in the present case service under Rule 38(1) was not possible, the corporate debtor having not been filed any petition, application or reply. The authorised representatives of the bank also physically visited the premises who have submitted a report.
Thus, the service of the notice was duly made to the appellant and the adjudicating authority proceeded to hear the matter only after service was duly affected on corporate debtor. It is relevant to notice that the appellant during his submissions has not even questioned the debt and default on the part of the corporate debtor. The debt and default was fully proved by the financial creditor. The copy of CIBIL Reports and statements of account were also filed by the financial creditor. The corporate debtor was well aware of the several proceedings initiated by the financial creditor against the corporate debtor.
Conclusion - No good ground has been made to interfere with the impugned order admitting Section 7 application.
Appeal dismissed.
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2025 (4) TMI 457
Entitlement of Appellants, as homebuyers, to voting rights in the Committee of Creditors (CoC) - Dismissal of application on the grounds that the Appellants held only a minuscule voting share - Appellants contended that their claims were not considered, despite having valid Builder Buyer Agreements, allotment letters, and receipts - HELD THAT:- The CoC had already approved the Resolution Plan of the Successful Resolution Applicant and based on which the Respondent No. 1 moved an IA bearing CA No. 485/ND.2019 under Section 30(6) r/w Section 31(1) of the Code before the Adjudicating Authority for approval of the Resolution Plan which has already been approved by the Adjudicating Authority vide order dated 12.09.2022.
It is also pertinent to mention that the Respondent No. 1 submitted the Resolution Plan Order dated 12.09.2022, passed by the Adjudicating Authority, stands reaffirmed by this Appellate Tribunal in Merina Commotrade Pvt. Ltd. v. Anand Sonbhadra, Resolution Professional for Shubhkamna Buildtech Pvt. Ltd. & Ors. [2024 (10) TMI 1466 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI] and Shubhkamna City Welfare Association & Anr. v. Shubhkamna Buildtech Pvt. Ltd. Through Resolution Professional & Anr., [2024 (5) TMI 14 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI]. In these judgments, this Appellate Tribunal had already upheld the commercial wisdom of the CoC, declining to interfere with the approved Resolution Plan.
Conclusion - Since the Resolution Plan has already stand approved long time back in the year of 2022 which was further confirmed by this Appellate tribunal again in the year 2022, we do not fine any merit in the present appeal.
Since the Resolution Plan already stand approved not only by the Adjudicating Authority but also confirmed by this Appellate Tribunal, the present appeal of the Appellants has become infructuous and therefore, stand rejected.
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2025 (4) TMI 456
Time limitation for filing company petition - whether the company petition was filed by the Respondent No. 1 i.e., Rajasthan Financial Corporate before the Adjudicating Authority in time or was hit by limitation? - HELD THAT:- This Appellate Tribunal gave four specific opportunities to the Appellant to file the rejoinder affidavit, however, the Appellant did not file any rejoinder. On next occasion, the Appellant requested for an adjournment. Thus, despite of several opportunities, the Appellant did not give any contrary facts through his reply affidavit contesting submissions made by the Respondent No. 1 before us. Thus, the fact mentioned by the Respondent No. 1 regarding OTS letters and the issue of extension of limitation from time to time, taken into consideration, including last OTS dated 16.05.2017 extending limitation period upto 15.05.2020 and the Apex Court, suo moto order [2022 (1) TMI 385 - SC ORDER] passed in Writ Petition (c) No. 03 of 2020 which extended limitation period from 15.03.2020 to 28.02.2022. The Respondent No. 1 filed the Company Petition on 12.08.2021 which was within limitation period available in the present case. Thus, Company Petition was covered under limitation period as discussed in preceding discussion.
It is also noted that in catena of judgments including by the Hon’ble Supreme Court of India, it has been held that limitation is a matter of both facts and law and it can be invoked at any stage by any of the party or any court even at an appeal stage.
Reliance placed in Pathapati Subba Reddy v. LAO [2024 (5) TMI 1319 - SUPREME COURT] where it was held that the Special Leave Petition challenging the High Court's refusal to condone a delay of 5659 days in filing an appeal against the dismissal of a land acquisition compensation reference, was dismissed - The present case of the Respondent No. 1 gets benefits from the above judgment.
Conclusion - Thus, the Company Petition was filed by the Respondent No. 1 within limitation period before the Adjudicating Authority and was not hit by limitation as alleged by the Appellant. Since, this is the only issue involved in the present appeal, hence there are no merit in the appeal.
Appeal dismissed.
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2025 (4) TMI 455
Valid service of notice - Rejection of application u/s 95 filed by the State Bank of India - failure to satisfy the mandatory pre-requisite for issuing a legally valid demand notice under Rule 7(1) for filing such application - Whether the Demand Notice issued under Rule 7(1) of the 2019 Rules can be considered as Notice for invocation of guarantee for the purposes of filing Section 95 Application by a Creditor?
HELD THAT:- The requirement of date, when the default occurred, itself contemplate the default by Guarantor, when Application is filed against Guarantor. Obviously, the default has to be of the Guarantor and mentioning of date when the default occurred, itself contemplate default on the part of Guarantor, i.e. invocation of guarantee as per Deed of Guarantee. Thus, non-mention of requirement of whether guarantee has been invoked and proof thereof, is inconsequential, since the date when default occurred is specifically asked for.
This Tribunal in Archana Deepak Wani vs. Indian Bank [2023 (4) TMI 1081 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI] has held that liability of the Guarantor must be determined strictly in terms of the Deed of Guarantee.
Another judgment, which has been relied by learned Counsel for the Respondent is judgment of this Tribunal in Pooja Ramesh Singh vs. State Bank of India [2023 (5) TMI 17 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], where it was held that default in the guarantee arises only when after the guarantee has been invoked.
Thus, default shall arise on the part of Guarantor only when Demand Notice is issued, as contemplated in the Deed of Guarantee.
The submission of the Appellant that Notice under Rule 7 (1) issued in Form-B to the Guarantor, demanding repayment of the default amount, has to be treated as Notice for invoking guarantee, cannot be accepted. Default before issuance of Notice under Rule 7(1), must exist on the part of the Guarantor. Hence, the submission of the Appellant that Notice under Rule 7, sub-rule (1) is a Notice, invoking the guarantee, is rejected.
Conclusion - The application under Section 95 is not maintainable due to the failure to invoke the guarantee as required by the contractual terms and the statutory framework.
There is no error in the order of the Adjudicating Authority, rejecting Section 95 Application filed by the SBI. There is no merit in the Appeal. The Appeal is dismissed.
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2025 (4) TMI 380
Liquidation of Corporate Debtor - applicability and interpretation of Regulation 32 and 32A of the Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations, 2016 - HELD THAT:- The present is a case where the CIRP against the CD commenced on an Application filed under Section 10 by the CD itself. The RP continued the CIRP by inviting Resolution Plans. In response to the invitation of EoI, only three entities have submitted the EoIs, out of which one was M/s. Busy Bee in Consortium. Only two Resolution Plans were received by the RP and both Resolution Plans, which were received, were not found compliant.
It is clear that there was no compliant Resolution Plan received in the CIRP. The CIRP has run its full course, giving enough opportunity to the RP to revive the CD and it was only on 23.07.2024, after more than 14 months of initiation of CIRP, a Resolution was passed by the CoC to liquidate the CD.
The present is a case where no Resolution Plan was considered or approved and a decision was taken by the CoC with 100% vote share to liquidate the CD. The Adjudicating Authority in the impugned order has referred to the judgment of this Tribunal in Sreedhar Tripathy vs. Gujarat State Financial Corporation and Ors. [2022 (10) TMI 1143 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], where this Tribunal considering scope, ambit and power of CoC has held that 'We are not convinced with the submission of learned counsel for the Appellant that the CoC's decision is an arbitrary decision. CoC is empowered to take decision under the statutory scheme and when in the present case the decision of the CoC for liquidation has been approved by the Adjudicating Authority, we see not good ground to interfere at the instance of the Appellant.'
With respect to going concern sale, the CoC was of the view that the Liquidator may sell assets on a standalone basis; assets in a slump sale; a set of assets collectively; and the assets in parcels and not wait for selling the CD or its business as a whole. The CoC has further observed “However, in the event a suo-moto proposal is received from any person by the Liquidator for taking the company or its business as a whole the same can be explored in discussions with the Stakeholders Consultation Committee” - the CoC has adverted to the provisions of 39C and has taken a decision as noted above. Regarding the submission of the Appellant that CoC ought to have taken a decision for sale as a going concern, the CoC was well aware of all details of the assets and facts and the decision taken by the CoC is based on the commercial wisdom of the CoC, which needs no interference in exercise of appellate jurisdiction.
The Hon'ble Supreme Court in Arun Kumar Jagatramka vs. Jindal Steel and Power Ltd. and Ors. [2021 (3) TMI 611 - SUPREME COURT] has noticed the amendment made in Section 230 of the Companies Act, which provides for compromise and arrangement, which can be proposed by the Liquidator appointed under the IBC. Regulation 2B in the Liquidation Process Regulation added subsequently provided for submission of scheme of compromise and arrangement to the Liquidator. The Hon'ble Supreme Court in the above case has also noticed the third eventuality, when a revival is contemplated through the modalities provided in Section 230 of the Companies Act. There can be no quarrel to the proposition laid down by the Hon'ble Supreme Court in the above case, which provides that revival of the CD can also be done by mode of compromise and arrangement.
Conclusion - The CoC in the Legislative Scheme has been empowered to take decision to liquidate the Corporate Debtor, any time after its constitution and before confirmation of the resolution plan.
There are no error in the order of the Adjudicating Authority - appeal dismissed.
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2025 (4) TMI 379
Admission of Section 7 petition - debt and default above the threshold level - Section 7 application was maintainable for the original amount of debt prior to the GSA or not.
Whether there was a debt and default by the Corporate Debtor qua ARC which had arisen on account of the breach of the GSA? - HELD THAT:- The ARC has in clear and unambiguous terms stated that NDCs have been issued for those companies whose settlement amount has been paid while the amounts payable by Uniworth Textiles Ltd of Rs. 21.40 crore as per terms of GSA had still not been paid. The letter also clearly stated that if payments were not made by 23.11.2018, ARC would proceed with legal action for recovery of the outstanding dues against the Corporate Debtor.
The Corporate Debtor had only adverted attention to the fact that the ARC had already given NDC in respect of Indoworth India Ltd. and Uniworth International Ltd. besides requesting for issue of NDC for Uniworth Ltd. for which substantial payment had been made. However, there is no objection made whatsoever to the outstanding settlement amount claimed by the ARC as payable in respect of the Corporate Debtor-Uniworth Textiles and the resultant default. In such a situation where the Corporate Debtor did not make the payments as contemplated in the GSA allowing them to take a stance that the ARC cannot claim revocation of GSA is an illogical and absurd argument - The tone and tenor of the response does not indicate even a muted objection to the revocation of the GSA thus betraying undertone of implicit acceptance. In these circumstances, it is inclined to agree with the Adjudicating Authority the Corporate Debtor had acknowledged that the settlement was revoked by the ARC.
Perusal of the Section 7 application makes it clear that it is not based on the default of the GSA but founded on the original financial debt which was extended by the ICICI and IFCI to the Corporate Debtor which had been subsequently assigned to the ARC.
The Respondent cannot be held to be precluded in any manner from being entitled to initiate a Section 7 application against the Corporate Debtor in the facts of the present case. The nature of debt which has been claimed under Section 7 application is a financial debt. Simply because an GSA was entered into between the parties which GSA suffered breach, the nature of debt shall not get changed - The right of the financial creditor would not be wiped out nor the nature and character of the financial debt would change by the mere fact of entering into the GSA and any contrary interpretation would provide undue advantage to the Corporate Debtor and frustrate the objective of IBC.
Whether there was debt which was due and payable and default in the payment thereof? - HELD THAT:- It is an admitted fact that the GSA entered into both parties provided for a settlement amount of Rs 75 Cr. of which the amount paid by the Corporate Debtor was only Rs 51.10 Cr. Only part payment had been made towards satisfaction of the full and final claim of the financial creditor in terms of the settlement agreement. The ARC in their letter of 22.11.2018 as at para 13 supra had clearly pointed out that the amounts payable by the Corporate Debtor was Rs. 21.40 cr. There has been no specific denial that this amount was not due nor has any proof been submitted of payments to the tune of Rs. 21.40 cr. having been made - the DRT decree clearly establishes debt and default. Even though the order of DRT has been appealed against, the order of the DRT has not been stayed by the DRAT. This does not in any way obliterate the fact that debt qua the ARC subsists. More significantly, when the DRT decree passed on 04.12.2018 has been noticed also by the highest court of the land in Civil Appeal No.6175/2023, it does not lie in the mouth of the Appellant to state that this decree has not been referred to by the Adjudicating Authority in coming to the decision of debt and default.
Under the ambit of Section 7 of the IBC, the Adjudicating Authority is to only determine whether a default has occurred and whether the debt, which even if disputed, remains due and unpaid. The moment the Adjudicating Authority is satisfied that a default has occurred, the Section 7 application is to be admitted unless it is incomplete. In the present matter, the Adjudicating Authority has rightly concluded that it was satisfied that a debt had arisen qua ARC; that a default on the part of the Financial Creditor-Appellant has occurred and the default is above the threshold limit of Rs. 1 crore. Since debt and default is clearly established, there is no infirmity in the impugned order admitting the Section 7 application.
Conclusion - The debt and default are established, and the application is maintainable.
There are no good reasons to interfere with the impugned order - appeal dismissed.
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2025 (4) TMI 378
Liquidation Estate of the Corporate Debtor or not - Amount deposited with Punjab National Bank (PNB) by the guarantors - waterfall mechanism - HELD THAT:- From the perusal of the balance sheet of the Corporate Debtor and other materials on record, we find that certain payments have been received by the company in liquidation and the same has been paid by Respondent No. 2 and 3 to Respondent No. 1. It is also found that the Respondent No. 1 filed its claim for an amount of ₹ 18,17,55,581/- which has been admitted by the Liquidator. Also in terms of Section 52(1) of Code vide letter dated 17.12.2018 Respondent No.1 – PNB has already relinquished its security interest to the liquidation estate. The amount has been realized from the assets under Liquidation estate of the CD in Liquidation and distributed in preference to one of the creditors Respondent No.1 – PNB without intimation to the Liquidator, which should have been distributed by the Liquidator as per Section 53 of the IBC,2016 i.e waterfall mechanism. Further Respondent No.1 – PNB has not placed any evidence or document to demonstrate that the amount which has been reduced in the Balance sheet of the Corporate Debtor is not an asset of the Corporate Debtor and without considering that no document was filed by the Respondent No. 1.
Section 36 (1) of the Code provides that for the purposes of liquidation, the liquidator shall form an estate of the assets mentioned in sub-section (3) which will be called the liquidation estate in relation to the Corporate Debtor. Further, Section 36 (2) provides that the Liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors. Any amount reflected in the balance sheet of the Corporate Debtor is admittedly an asset of the Corporate Debtor and, therefore, the Adjudicating Authority ought to have considered the balance sheet of the Corporate Debtor which reflects a reduction of short-term borrowing during the Liquidation process - Respondent No. 1 has no right to recover any amount being an asset of the Company in liquidation during the liquidation process as Respondent No.1 – PNB will receive the proceeds from Liquidation Estate in the manner provided under Section 53 of the Code. Respondent No.1 – PNB had already filed its claim for an amount of ₹ 18,17,55,581/-, which has been admitted by the Liquidator and in terms of Section 52 (1) (a) of the Code has vide its letter dated 17.12.2018 already relinquished its security interest to the Liquidation Estate and have agreed to receive the proceeds from the sale of assets by the Liquidator in the manner specified and, therefore, the Respondent No.1 – PNB cannot recover any amount being part of the Liquidation Estate.
Respondent No. 1-PNB has not been able to justify that the dues to the tune of INR 4,50,44,500/-, so satisfied are not made out of assets of the Corporate Debtor. It can be, safely concluded that it is none other than Trade Receivables and Trade Payments of the Corporate Debtor which has been used to pay ₹4,50,44,500/-.
Conclusion - The amount deposited by the guarantors is part of the Liquidation Estate and should be refunded to the Liquidation account of the Corporate Debtor.
Apeal allowed.
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2025 (4) TMI 377
Admission of Section 95 application filed by the Indian Bank - existence of relevant record or evidence of default or not - time limitation - HELD THAT:- The law is well settled by the Hon’ble Supreme Court in Dilip B. Jiwrajka Vs. Union of India & Ors. [2024 (1) TMI 33 - SUPREME COURT] that adjudicatory functions of the adjudicating Authority commences under Section 100 after the submission of the Report. It was further held that adjudicating authority has to conduct an independent assessment not solely relying on the RP’s Report to decide the fate of application. In the present case, adjudicating authority has not carried any assessment which is clear from the order of the adjudicating authority.
The adjudicating authority has adverted to the issue of limitation in paragraph 14 and has observed in paragraph 15, that when default is committed by principal borrower surety are jointly and severally liable to creditor. In the present case, it was admitted fact that under SARFAESI bank has already realised ₹5,92,92,750/- from the sale of the assets and by email on behalf of the personal guarantor, it was communicated that one property which is in possession of the bank is sufficient to liquidate the entire debt. The above relevant issue which was raised on behalf of the personal guarantors was neither adverted by the RP in its report nor adverted by the adjudicating authority in the impugned order. There is a difference between the scheme and under Section 7 of the IBC and Section 100.
In view of the law laid down by the Hon’ble Supreme Court in Dilip B. Jiwrajka, adjudicating authority has to apply its mind and not to mechanically follow the Report of the IRP. Observation of the Hon’ble Supreme Court are “in essence, the adjudicating authority conducts an independent assessment, not solely relying on the RP's report to decide the fate of application under Section 94 & 95 of the IBC”. Present is a case where adjudicating authority has not adverted to any adjudicatory issue, has not adjudicated on any of the issues which was raised before the RP and as reflected in the Report of the RP itself. It was submitted on behalf of the personal guarantor that amount of ₹6 Crore has already been realised, and the assets of the corporate debtor are already with the bank amounting to ₹1.66 Crore which are sufficient to meet out the bank dues. These factors are required to be adverted to by the adjudicating authority before admitting the application.
A fresh opportunity be given to the personal guarantors to file an objection to the Report within 30 days from today and the adjudicating authority after considering all relevant material, including the Report and the objection, pass a fresh order under Section 100.
Conclusion - The adjudicating authority's order admitting the Section 95 application is unsustainable due to its failure to independently assess the evidence and facts, particularly regarding the realization of assets under SARFAESI and the previous Section 7 application. The personal guarantors be given an opportunity to file objections to the RP's report, and the adjudicating authority must consider all relevant materials before passing a fresh order under Section 100.
Applications under Section 95(1) are revived before the adjudicating authority for afresh consideration in accordance with law - appeal allowed.
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2025 (4) TMI 376
Oppression and mismanagement - Waiver of eligibility criteria under Section 244(1)(b) of the Companies Act, 2013 - HELD THAT:- The Ld. NCLT has recognised that there are differences between the members of the Respondent Club, which was established with the principal objective to promote and encourage various sports and also carries good reputation, and therefore it is in the public interest that these differences are addressed in right earnest. Further it is nobody’s case that these allegations were made earlier in any proceedings and stand decided/concluded. Thus, the requirements prescribed in sub clauses (i), (ii) and (iii) of para 151 of the judgment of Cyrus Investments Pvt. Ltd. & Anr. [2017 (9) TMI 1500 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] are fulfilled. The only issue left is whether the Ld. NCLT was satisfied about the exceptional circumstances made out to grant waiver or not.
The Ld. NCLT has noted the allegations of oppression and mismanagement, and differences between the members, and has noted the public interest involved in the Section 8 company promoting sports - The issue of waiver has been considered and allowed in various judgements.
In Brookefiled Technologies Pvt. Ltd., Represented by Director, Mr. Pawan Kumar Jain and Another v. Shylaja Iyer and Others [2020 (12) TMI 1176 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] this Tribunal had granted waiver holding that 'The First Respondent/Petitioner has 9% of the total share capital even after a shareholding was reduced from 45%, by means of 'Rights Issue' which is a subject matter of the main company petition. The Tribunal, has exercised its discretion and opined that a meritorious litigation cannot be thrown at threshold without examining the merits of the case and further observed that the First Respondent/Petitioner had made out a prima facie case to entertain the main company petition for its final adjudication.'
It is noted that besides the company petition by 4 members, 90 members of the Respondent/Club have raised various issues of mismanagement in their letter to Club Management dated 22.08.2023. The Ld. NCLT has noted the allegations of ‘oppression and mismanagement’ in the petition before exercising its discretion to allow waiver. A decision on merits of the allegation was not warranted at this stage, as Ld. NCLT will have to consider it while deciding the main petition under Section 241 read with Section 242 of the Companies Act, 2013.
Conclusion - In the conspectus of this case, where petition under Section 241 read with Section 242 of Companies Act, 2013 is filed by four members of the Section 8 company alleging acts of oppression and mismanagement, and the issue of mismanagement is also raised by 90 other members in their signed letter to Club Management, and considering the nature of activities of the company involving public interest, and that similar allegations were not considered or decided earlier, there are no reason to interfere in the discretion exercised by Ld. NCLT in allowing waiver under Section 244 of the Companies Act, 2013.
Appeal dismissed.
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2025 (4) TMI 319
Dismissal of appeal as a consequence of dismissal of the applications of condonation of delay on the even date - Section 61 of the IBC - HELD THAT:- The facts are not in dispute and therefore are not being repeated. As is apparent, first appeal was preferred along with the free certified copy which was made ready and available after the pronouncement of the Order of 20th July 2023 on 01.08.2023. It is an admitted position on facts that in the second appeal, no certified copy was appended. Rather, an application for exemption from filing of the certified copy was filed with an assertion that the certified copy had been applied for. In the absence of any certified copy having been applied for, the period of limitation would start from the very next day of pronouncement of the order i.e., 21.07.2023 as the date of pronouncement of the Order stands excluded as per Section 61 of the IBC.
Statutory time limit of 30 days within which an appeal can be preferred has been provided for in sub-section (2) of Section 61 of IBC. Proviso thereto allows an additional period of 15 days to file an appeal only on the satisfaction of NCLAT that there was sufficient cause for not filing the appeal earlier within the initial period of 30 days. The restrictions with regard to allowing extension in the provisions stipulated is cloaked in such a manner that the provisions have to be strictly followed. The first aspect is that the period is extendable by 15 days and not beyond that - The cumulative reading of the proviso would therefore entail that the extension of period so provided for has to be strictly construed and has not to be exercised in a liberal manner which highlights the legislative intent which has to be given effect to.
The litigant has to file its appeal under Section 61(2) within 30 days which can be extended up to a period of 15 days, and no more, upon showing sufficient cause. A slate of interpretation of procedural rules cannot be used to defeat the substantive objective of legislation which is prescribed in a time frame. As a result, thereof, the period of limitation for filing the appeal having been laid down and proviso thereto limiting the exercise up to a distance for condoning the delay mandatorily has to be adhered to.
The application of condonation of delay in the first appeal, disclosing no reasons whatsoever in filing the appeal, the Appellate Tribunal was justified in dismissing the application for condonation of delay. The satisfaction has to be of the Appellate Tribunal and that too on justifiable grounds, which, as is apparent, from the perusal of the application there is none pleaded which can be said to be projecting sufficient cause for not approaching the Appellate Tribunal within the time stipulated under Section 61(2) of the IBC - The other reasons as has been assigned by the Appellate Tribunal for rejecting the application for condonation is clearly borne out from the pleading and the facts which do not call for any interference in the present appeals.
Conclusion - The denial of the applications for condonation of delay affirmed, due to the absence of sufficient cause and procedural compliance.
Appeal dismissed.
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2025 (4) TMI 318
Dismissal of Section 9 application filed by the Operational Creditor - pre-existing dispute - date of default fell within the Section 10A period - HELD THAT:- On perusal of Part IV of Form 5 as annexed in the Section 9 petition, it is found that the dates of default have been clearly shown as 03.05.2020, 15.08.2020 and 01.01.2021 in respect of the outstanding operational debt claimed by the Operational Creditor. The same dates of default have also been mentioned in Form 3 of the Demand Notice dated 27.01.2022 as is seen at page 170 of APB.
Whether these three dates of default mentioned in Section 8 Demand Notice and Section 9 application fall within the purview of the prohibited period prescribed under Section 10A and consequentially hit by the bar imposed by Section 10A of the IBC? - HELD THAT:- The ambit and scope of Section 10A has been well settled in the landmark judgment of the Hon’ble Supreme Court in Ramesh Kymal Vs Siemens Gamesha Renewable Power Pvt. Ltd. [2021 (2) TMI 394 - SUPREME COURT] wherein it was held that no application for initiation of CIRP under Section 9 can be initiated for default which is committed during the Section 10A period - In the present case, the dates of default of the claims, basis which the Section 9 application has been filed, the dates indisputably fall during the prohibited period of Section 10A of IBC. The dates of default in the present facts of the case fell between 03.05.2020 and 01.01.2021 which dates were hit by Section 10A of the IBC. In terms of the statutory provision of Section 10A and as held by the Hon’ble Supreme Court in Ramesh Kymal judgment, no default falling within this period can form the basis for initiating CIRP since the default which occur during the Section 10A period cannot be included in the calculation of debt and default for initiating CIRP.
No liability can be fastened on the Corporate Debtor for default committed during Section 10A period. The Adjudicating Authority has therefore not committed any error in holding the Section 9 application as non-maintainable. There are no error in the impugned order holding that since the date of default falls within the Section 10A period, Section 9 proceedings under IBC cannot be initiated at the instance of Operational Creditor.
The contention of the Appellant that the Adjudicating Authority should have modified the date of default after examining the records is an absurd proposition. If the date of default required any change or modification, the onus was on the Appellant to have sought leave of the Adjudicating Authority to file an amendment application. To expect the Adjudicating Authority to have amended the date of default without any amendment application or specific pleading made for such a modification would tantamount to the Adjudicating Authority exceeding its jurisdiction which cannot be countenanced.
Conclusion - The Section 9 application is non-maintainable due to the dates of default falling within the Section 10A period.The Adjudicating Authority correctly dismissed the application without amending the dates of default.
There are no merit in the Appeal. The Appeal is dismissed.
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2025 (4) TMI 252
Provisional Attachment Order - challenge to attachment on the ground that it is affecting the rights of financial institutions to recover the amount borrowed by the defaulters whose account was declared Non-Performing Assets (NPA) - HELD THAT:- It has been admitted that the Resolution Plan against one company has been approved and even final order has been passed by the NCLT. The other Company is under liquidation. In the changed scenario, so far as the financial institutions are concerned, they cannot maintain their claim to the extent it was claimed to release the mortgaged property having settled their amount in the Resolution Plan before NCLT at a lower amount, as admitted and otherwise the order of the NCLT has a consequence. The Counsel appearing for the financial institutions even made a reference to Section 32A of IBC with all consequences.
There may be inter-se dispute on the claim of the financial institutions which cannot be determined by this Tribunal having limited jurisdiction, which otherwise can be settled, in a given case by Special Court, if a case is made out. The cases may be of nature where borrower may have no objection to the claim of the financial institution and for release of property. However, in the present case since much water has flown after the attachment of the property, it would be appropriate to relegate the financial institutions to take remedies, as appropriate now after the order of the NCLT and remedy aforesaid would be obviously as provided under the statutes.
The Counsel for the appellants referred Section 32A of IBC and otherwise, this Tribunal has made a reference to Section 8(7) of the Act of 2002. Thereby in the present case, it would be appropriate to dispose of all the appeals preferred by the financial institutions to take recourse of the remedy now appropriate for them in the background that the NCLT has passed a final order and the provisions of IBC would have its own consequences. The financial institutions are accordingly given liberty to press their claim as is suitable to them.
Conclusion - i) Financial institutions could not justify the release of attached properties beyond the amounts settled in the Resolution Plan approved by the NCLT. ii) The Tribunal lacked jurisdiction to resolve inter-se disputes between financial institutions and borrowers, which could be addressed by a Special Court under Section 8(7) of the Act of 2002.
These appeals are disposed of with a liberty to take appropriate remedy, as are now permissible.
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