TMI Blog2019 (4) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... laim coming under a particular class/category. The RP is assigned a duty to constitute the CoC and to convene and to attend meetings thereof, as per the Section 25 of the I B Code. That apart, to prepare the memorandum of information in conformity with the other provisions and scheme of the Code. In addition to the above, the CoC is equally expected to go through the same and to form its opinion on such agenda placed before it, so that the RP can take appropriate action on the subject or can approach this Adjudicating Authority for issuance of some directions, if necessary. Principles of Natural Justice are applicable in all administrative action as a rule and deviation therefrom is only exception and, therefore, such principles are equally applicable to a CIRP, because the Resolution Professional as well as Committee of Creditors are creature of the I B Code and their duties are like public servant/public institution. Application allowed. - I A NOS. 259 AND 413 OF 2018, CP (IB) 48/7/NCLT/AHM/2017 - - - Dated:- 13-2-2019 - SHRI HARIHAR PRAKASH CHATURVEDI, JUDICIAL MEMBER For The Appearing Parties : Sudhir Nanavati, Sr. Counsel, Suman Khare, Akshat Khare, Ms. Pooja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Petroleum and Natural Gas, Government of India. 3. It is submitted that this Adjudicating Authority, vide its order dated 18.07.2017, admitted the Company Petition (CP (IB) 48 of 2017). Pursuant thereto a moratorium was declared, under Sections 13 and 14 of the Code, in respect of the Corporate Debtor company. Thereafter, the present applicant filed its claim on 23.11.2017, under the statutory format of Form B prescribed under the Code, before the respondent Resolution Professional. Copy of such claim dated 23.11.2017 has also been annexed to the present application as Annexure-E. 4. It is contended by the applicant that despite continuous follow up with the respondent RP for consideration of its claim to be treated and classified as an Operational Creditor, the same was not considered positively and has been rejected by the RP, vide its communication dated 23.08.2018, by taking such plea that the claim of GAIL was with regard to bills raised under the GSA towards Take or Pay Obligations (TOP) and as per the respondent, such pay obligation cannot be considered to be an operational debt under the provisions of Section 5(21) of the Code because, as per the RP, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the applicant's claim for unpaid contractual dues for 2014 to 2016 have already been admitted and acknowledged by the Corporate Debtor company, but the same have not been considered fairly and equitably by the RP by not treating the applicant as operational creditor and its debt as operational debt in terms of Section 5(21) of the Code. 9. The applicant, in this application, has produced the relevant extract of the statements showing dues from the Corporate Debtor company as well as the Corporate Debtor admitting the applicant's claim/dues. For the sake of convenience, the same are being reproduced herein below; Statement showing Dues from Alok Industries Limited Sl. No. Customer Code Customer Name Description Amount Rs. 1 11131 Alok Industries Limited ALOK IND-11131 PROV FOR TAKE OR PAY FOR 2014 70,69,72,947 2 11131 Alok Industries Limited ALOK IND-11131 PROV FOR TAKE OR PAY FOR 2015 2,23,66,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, it is noted that the amounts of ₹ 95.41 crores claimed by GAIL from January 2018 to June 2018, and the Claim of ₹ 506.42 crores as set out under Form B submitted GAIL ( Total Amounts ), are claimed pursuant to the Take or Pay Obligation enumerated under the aforementioned gas sales agreement ( ToP Obligation ), in this relation, please note that, to the best of my knowledge, the Total Amount claimed by GAIL pursuant to Your Letters is not in relation to any actual purchase of gas by the Company in the relevant period and only relates to the ToP Obligation. As per Section 5(21) of the code, the term operational debt refers to, inter alia, a claim in respect of provisions of goods and services. It is settled law, that the term goods and services used in the definition of operational debt must relate to direct input to the output produced or supplied. by the corporate debtor and/or for the running of the company. Accordingly, in the opinion of the RP, the said amounts do not fall within the definition of 'operational debt' under the Code and hence have not been admitted by me in terms of the Code. I would also like to bring to your attention that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebsite of the Corporate Debtor. The information, in relation to the claim, was updated on the website of the Corporate Debtor on 8th February 2018 as a Claim not admitted by the RP and, thereafter, on 23rd February 2018 as Not considered as an operational creditor by the Resolution Professional . Notwithstanding the same and in response to letter dated 13th August 2018 addressed by the Applicant, the Respondent reiterated the rejection of the said claim of the Applicant vide its letter dated 23rd August, 2018. It is accordingly submitted that in the light of the claim of the Applicant not qualifying as an 'operational debt' of the Corporate Debtor, the Applicant has no locus to intervene in the Corporate Insolvency Resolution Process, and the present Interlocutory Application is, accordingly, not maintainable and is liable to be dismissed. c) Without prejudice to the generality of the foregoing, it is submitted that in order to satisfy as an 'operational debt' in terms of Section 5(21) of the Code, the claim should only arise in respect of (i) provision of goods; (ii) provision of services; (iii) employment; or (iv) any law for the time being in force and paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g) In the light of the above, it is submitted that the said claim purportedly arising under Clause 14 of the GSA would not qualify as an operational debt in terms of the Code and judicial precedent on the issue, and the decision of the Respondent in rejecting the same is accordingly good in law and in conformity with the Respondent's obligations under the Code. I also say that as required in terms of the Code, the due disclosure of all pending claims, including the claim made by the Applicant, was made to the resolution applicants and as is the case for any claim/debt, the resolution applicants have taken the same into consideration while preparing and submitting their resolution plan. h) Without prejudice to anything stated hereinabove, it is submitted that the Interlocutory Application has been filed at an extremely belated stage in the present corporate insolvency resolution process, regardless of the Respondent having intimated the status of the claim filed by the Applicant on the website of the Corporate Debtor in February 2018. Further, the Applicant made no efforts at following up with the Respondent with regard to its purported claim until 13th August 2018. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his obligations under the Code and submitted that the Respondent has undertaken the present corporate insolvency resolution process in strict accordance with the Code and the regulations framed thereunder. It is denied that the resolution plan dated 12th April 2018 is non-compliance for any reason whatsoever. It is further denied that the decision of the Respondent in rejecting the claim of the Applicant is against the principles of natural justice and against the public policy of India. k) It is denied that the Respondent has made any effort at changing the terms of the GAS, or recusing the Corporate Debtor from any admitted obligation under the GSA. It is denied that the decision of the Respondent in not admitting the claim of the Applicant is bad in law. It is denied that the Applicant has a strong prima facie case or that the balance of convenience is in favour of the Applicant. It is denied that the interpretation of the provisions of Section 5(21) of the Code by the Respondent is illusory or otherwise misplaced in any manner whatsoever. It is submitted that the Applicant has failed to make out any case whatsoever to justify the grant of the reliefs claimed in the Interloc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is for the first time revealed from para no.5 of the reply that the Resolution Professional has taken a decision on the claim of the applicant way back on 08.02.2018. But the said decision was never communicated to the applicant and instead it was communicated to the applicant for the first time only by his letter dated 23.08.2018. So, when the respondent has acted beyond his jurisdiction in rejecting the claim of the applicant and also by not communicating its adverse decision to applicant, then there cannot be any question on the locus standi of the applicant to approach this Tribunal against the decision/action of the respondent. c) The applicant respectfully submitted that the Hon'ble Supreme Court in Arcelormittal India (P.) Ltd. v. Satish Kumar Gupta and Ors. in Civil Appeal Nos. 9402-9405 of 2018 in para No. 77 has categorically confirmed that the role of a Resolution Professional is only to examine and to verify that resolution plan is in accordance with Section 30(2) of the Code. Therefore, the action of the respondent Resolution Professional for deciding the nature of applicant's claim is beyond his powers described in the code as well as the position of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw and required to be quashed by this Tribunal. g) The applicant respectfully submits that the respondent in Para Nos. 6 and 7 of the reply has mainly contended that the definition of the Operational Creditor in Section 5(21) of Code has been interpreted by the Hon'ble NCLT, New Delhi in Pramod Yadav (supra) wherein the Hon'ble Tribunal has been pleased to hold that for an operational debt the goods and services used must have direct relation to input and output produced by the Corporate Debtor. It is submitted that the case before the Hon'ble NCLT, New Delhi, was whether a due lease rent over an immovable property can said to be an operational debt or not. While considering the said legal issue, the Hon'ble NCLT, New Delhi has discussed the definition of default in Section 3(12) of the Code, the definition of debts in Section 3(11) of the Code, the definition of claim in Section 3(6) of the Code, the definition of transfer in Section 3(33) of the Code, the definition of operational debt in Section 5(21) of the Code, the definition of operational creditor in Section 5(20) of the Code and the definition of Creditor in Section 3(10) of the Code. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operational debt has also referred to Regulation 32 of the Regulations, 2016 which defines only essential goods and services as because under the moratorium period under Section 14(2) of the Code, the essential goods and services are required to be continued during the CIRP period. It is further submitted that as per Regulation 32 of the Regulations, 2016, electricity, water, telecommunication services and information technology services to the extent that these are not direct input to the output produced by the Corporate Debtor would be considered as essential goods and services . In other words, as per said Regulation 32 of the Regulations 2016 only electricity, water, telecommunication services and information technology which is not being consumed during the manufacturing process of the Corporate Debtor can be considered as essential goods and services. Thereby meaning all other input are to be considered as an operational raw material/requirement and if they satisfy the filtration process envisaged by the NCLT, New Delhi then such claims can be considered as operational debt . The said aspect also gets strength from the illustration given in the regulation 32 and en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code, the RP has not been vested with adjudicatory power. He is legally expected to collate and verify the claim submitted before him and to place the same before the CoC for its proper consideration under the provision of Section 21 of the Code. In case there arise some need for clarification/direction to be sought for, then he can approach this Adjudicating Authority, under the relevant provision of the Code. The relevant provisions of Section 21 of the Code reads as under; 21. Committee of Creditors-(1) The interim resolution professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. (2) The committee of creditors shall comprise all financial creditors of the corporate debtor. 24. Meeting of committee of creditors-(l) The members of the committee of creditor may meet in person or by such electronic means as may be specified. (2) All meetings of the committee of creditors shall be conducted by the resolution professional (3) The resolution professional shall give notice of each meeting of the committee of creditors to- (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... containing such relevant information as may be specified by the Board for formulating a resolution plan. (2) The resolution professional shall provide to the resolution applicant access to all relevant information in physical and electronic form, provided such resolution applicant undertakes- (a) to comply with provisions of law for the time being in force relating to confidentiality and insider trading; (b) to protect any intellectual property of the corporate debtor it may have access to; and (c) not to share relevant information with third parties unless clauses (a) and (b) of this sub-section are complied with. Explanation .-For the purposes of this section, relevant information means the information required by the resolution applicant to make the resolution plan for the corporate debtor, which shall include the financial position of the corporate debtor, all information related to disputes by or against the corporate debtor and any other matter pertaining to the corporate debtor as may be specified 17. A plain reading of above stated statutory provisions gives such impression that nowhere the RP has been conferred with such adjudicatory po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as below; 6. On 19.4.2018, the Adjudicating Authority, being the NCLT, passed its order in all the I.A.S, in which it first held: Since, there is difference in the legal opinions among the Learned Luminaries and law firms and more than one views are possible in the present case to be acted upon then, it cannot be said that there is patently illegality in the conclusion of the RP or it acted arbitrarily or mala fidely in rejecting the resolution plan by relying on the legal opinion received and believed to be true by him and which were placed before the CoC. Moreover, the RP under the provision of the Code it is expected to make scrutiny of a resolution plan in conformity with the law of the land and to take such a prudent decision which a common man in normal course may arrive and think just and proper. This court being the Adjudicating Authority under the Code is not 9 expected to substitute its view upon the discretion and wisdom of the RP and CoC to opt for only which a particular view until and unless it is the case of patent illegality or arbitrariness. Therefore, for the aforesaid reason in our prima facie view we do not find any patent illegality in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional creditor. In the above stated CoC, following banks are common with the present CoC. (1) State Bank of India (2) Canara Bank (3) Punjab National Bank (4) Union Bank of India (5) Corporation Bank (6) UCO Bank (7) Central Bank of India (8) Allahabad Bank (9) Bank of Baroda (10) Indian Overseas Bank 22. Therefore, in the light of above stated illustration of other CIRP and the stand taken by the respective RPs in that CoC, the Learned Counsel has alleged that not treating the applicant as an operational creditor, amounts to a discriminatory practice. He further pointed out that both the Corporate Debtor companies are falling under the same regional jurisdiction of this Bench of NCLT. Hence, it would lead to an unsettled position as the applicant is not being provided similar status of operational creditor on very same footing of its claim in other CIRP. This amounts to disparity and needs to remove by this Adjudicating Authority, by settling the legal position in this respect. 23. Notwithstanding the above, Shri Mihir Thakore, Ld. Counsel, appearing for the CoC, has fairly stated that even the claim of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te order without going into the detail of the controversy involved in the matter, by directing to the RP and CoC to reconsider their respective stand/decision and to treat the EXIM Bank as one of the Financial Creditors as per prevailing norms and in the light of stand taken by other CoCs. It is a matter of record that pursuant to above stated direction, the RP and CoC of the GODPL duly reconsidered their stand and treated the EXIM bank as one of the Financial Creditors by including it in as members of the CoC. Thus, the NCLT, Allahabad could be able to maintain consistency in the CIRP, being conducted by two different Resolution Professionals, falling under its jurisdiction as Adjudicating Authority. For the sake of convenience, the relevant portion of order dated 10.10.2017 of NCLT, Allahabad, in the matter of Axis Bank (supra), is being reproduced herein below; As this is being a debatable issue, whether the claim of the Axis Bank falls under the category of Financial debt or contingent liability or claim of the other Stakeholder and keeping in mind, the theme and object of the present I B Code, because the time is essence of the Code and without expressing our view in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im does not fall within purview of operational debts, because such claim pertains to unutilized/unconsumed quantity of gas by the Corporate Debtor company and at the best, the applicant could claim such amount as a liquidated damage on breach of the terms of the GSA. Therefore, such claim of liquidated damage does not fall within the purview of the operational debt, because there is no such component of input and output. It is also matter of record that in support of above stated contention, the Ld. Counsel for both parties have placed reliance on same decision of the Hon'ble NCLT, Principal Bench, New Delhi, in the matter of Pramod Yadav (supra). 28. It is also matter of record that the present applicant also in its rejoinder affidavit by placing reliance on the same Judgment i.e. Pramod Yadav (supra) has contended that its claim can be categorized well as an operational debt and it can be treated as operational creditor. It is contended that as per the terms of GSA, as soon as the gas is released by the applicant, in the pipeline, it amounts to have been sold and its price become due and payable irrespective of the facts that such gas has not been utilized or remains uncon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the case of the patent illegality committed by the RP. 32. Notwithstanding the above, the RP was equally expected to follow the principles of natural justice by affording the reasonable opportunity to the present applicant to be heard and to substantiate its stand as operational creditor before taking his conclusive decision, by placing a reliance on the Hon'ble Supreme Court's decision in the matter of Ramana Dayaram Shetty v. International Airport Authority of India AIR 1979 SC 1628 and also in the matter of Mohinder Singh Gill v. Chief Election Commissioner AIR 1978 SC 851. Their Lordships, in the matter of Ramana Dayaram Shetty (supra), on the principle of Natural Justice, in Administrative Action, have been pleased to observe and hold as such; This rule also flows directly from the doctrine of equality embodied in Art. 14. It is now well settled as a result of the decisions of this Court hi E.P. Rayappa v. State of Tamil Nadu (l) and Maneka Gandhi v. Union of lndia (2) that Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. It requires that State action must not be arbitrary but must be based on some rationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application of natural justice to administrative proceedings. The rules of natural justice are rooted in allegal systems, and are not any 'new theology They are manifested in the twin principles of nemo index in sua causa and audi alteram partem. It has been pointed out that the aim of natural justice is to secure justice, or, to put it negatively to prevent miscarriage of justice. These rights can operate only in areas not covered by any law validly made; they do not supplant the law of the land but supplement it The rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the frame work of the law under which the inquiry is held and the constitution of the tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice has been contravened, the court has to decide whether the observation of that rule was necessary for a just decision on the facts of that case. Further, even if a power is given to a body without Specifying that rules of natural justice should be obser ..... 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