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TMI Blog2019 (6) TMI 1332X X X X Extracts X X X X X X X X Extracts X X X X ..... ommon Order. 1.1 The Corporate Insolvency Resolution Process of Dishnet Wireless Limited (the 'Corporate Debtor') began on 19.03.2018, pursuant to Admission of Section 10 of IBC application (CP 302/I&BP/NCLT/MB/2018). 1.2 Likewise, Corporate Insolvency Resolution Process commenced in the case of Aircel Ltd. (the 'Corporate Debtor') vide an Order dated 12.03.2018 pursuant to Admission of the Petition filed u/s. 10 of IBC (CP. (IB)-298/MB/2018). 2. The present Miscellaneous Applications in hand are filed by the 'Operational Creditors' M/s. Bharti Airtel Ltd. and M/s. Bharti Hexacom Ltd. (collectively Airtel entities), which entered into 'Spectrum Trading Agreements' with Aircel Ltd. and Dishnet Wireless Ltd. (collectively Aircel Entities) for the transfer of right to use the Spectrum in the 2300 MHz band in favour of 'Airtel Entities'. This Application is filed for a direction to the Resolution Professional (RP) to honour the legal and equitable right of 'Airtel entities' to apply set off on account of mutual dealings for an amount of approximately INR 112 Crores during the Corporate Insolvency Resolution Process. (A) Brief Backgrou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectrum dated 12.10.2015 ('Trading Guidelines') 2. Spectrum Trading Agreement dated 08.04.2016 in respect of the License Service Area of Andhra Pradesh ("Agreement") 3. Joint Trading Intimation date 06.06.2016 4. DoT Letter No. 1000/21/2016-WR dated 22nd June, 2016 Dear Sir, This is in reference to above referred letter referred to in SI. No.4 ('DoT Letter') sent by the Hon'ble Department of Telecommunications ('DoT') on the captioned subject inter alia calling upon the Seller for payment of the provisional dues as noted therein. In line with the DoT Letters, the Seller are directed to pay a sum of Rs. 575547354/- towards total outstanding License Fee and Rs. 1,08,19,419/- towards total outstanding SUC. In this regard, as agreed we as Buyer on your behalf would be: 1. Paying the said Rs. 18,21,49,187/- towards principle License Fees dues vide Pay Order; 2. furnishing a Bank Guarantee in respect of the said Rs. 39,33,98,168/- towards interest, penalty and interest on penalty pertaining to the Licensee Fee dues vide Bank Guarantee; and 3. paying the said Rs. 1,08,19,419/- towards SUC dues vide Pay Order. It is agreed and understood tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Bharti Hexacom Limited - Dishnet Wireless Limited 7,51,17,655 Total (Approximately) 139.34 Crores. 7. The Aircel Entities (Seller/Corporate Debtor) also owed an amount of INR 5.85 Crores to Telenor, which was merged with Bharti Airtel Ltd. vide order dated 08.03.2018 passed by the Hon'ble NCLT, Principal Bench, New Delhi, effective from 14.05.2018. Therefore, the total amount owed by Aircel Entities (Seller) to the Airtel entities (Buyer) was approx. INR 145.20 Crores (i.e. INR 139.34 Crores owed to the Airtel Entities + INR 5.85 Crores owed to Telenor). To summarise, the Aircel Entities (Seller) is to pay a sum of Rs. 139.34 Crores to Airtel Entities (Buyer) in respect of Unpaid-Invoices which were in the nature of Operational Debt being related to services provided and inter-connection agreements executed between the parties. Under the Insolvency Code, the Airtel Entities (Buyer) have to be treated as 'Operational Creditor' in respect of Operational Debt of Rs. 139.34 Crores to be paid by the Corporate Debtor, Aircel Entities (Seller). 7.1 In view of the above admitted factual position that the Aircel Entities (Corporate Debtor) had to make a total payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Creditor) communicated their willingness to pay the BG amounts immediately upon the return of the BGs by the DoT and the release of their credit lines by Axis Bank, subject to their right to claim set off of the net undisputed principal amounts owed by the Aircel Entities (Corporate Debtor) to the Airtel Entities (Operational Creditor) i.e. approx. 112 Crores. The Hon'ble TDSAT's order dated 09.01.2018 regarding release of bank guarantees was upheld by the Hon'ble Supreme Court on 28.11.2018 and then on 08.01.2019. 9. The Airtel Entities (Buyer/Operational Creditor), acting in compliance with the Hon'ble Supreme Court's order, released the withheld amount of approximately INR 453.73 Crores in the following manner: i. Payment of INR 341.80 Crores (i.e. 75% of the withheld amount) to Aircel Entities on 10.01.2019; and ii. Application of the balance amount (i.e. approx. INR 112 Crores) for set off against the dues of approx. INR 145.20 Crores owed by Aircel Entities to Airtel Entities. 9.1 To understand the transaction it is appropriate to put the figures on record hence it is clarified that out of the withheld amount of Rs. 453.73 Crores wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set-off of the retained amount cannot be subjected to Moratorium. ii. Claim Form B under the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016: This form was submitted as a lodgement of claim wherein set-off of mutual credits or mutual debits are to be informed and accordingly to be claimed during Corporate Insolvency Resolution Proceedings. Relevant portion of the claim form is referred as under:- "Entry 8": DETAILS OF ANY MUTUAL CREDIT, MUTUAL DEBTS, OR OTHER MUTUAL DEALINGS BETWEEN THE CORPORATE PERSON AND THE OPERATIONAL CREDITOR WHICH MAY BE SET-OFF AGAINST THE CLAIM Declaration: [Please state details of any mutual credit, mutual debts, or other mutual dealings between the corporate person and the operational creditor which may be set-off against the claim.] iii. According to the arguments the meaning of "Debt" as defined under Section 3(11) of The Code has an inbuilt provision of set-off because of the terminology "Claim" and "Due" is used. The arguments can be summarised as under:- "(A) Meaning and concept of Debt: (i) The term 'debt' is defined in the IBC in section 3(11), as reproduced below: "3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual dealings between the corporate debtor and another party, the sums due from one party shall be set off against the sums due from the other to arrive at the net amount payable to the corporate debtor or to the other party.' Illustration: X owes Rs. 100 to the corporate debtor. The corporate debtor owes Rs. 70 to X. After set off, Rs. 30 is payable by X to the corporate debtor. The reason for placing reliance on this Regulation is that a mutual set-off is mandated in the Insolvency Code, therefore, the Airtel Entities have rightly claimed for set-off which was a legal entitlement duly approved by the aforementioned Regulation. vi. Further to buttress their arguments, certain comparisons have been referred to establish that in such circumstances, the claim of set-off is otherwise admissible as well as acceptable under various other enactments. For e.g. UNCITRAL Legislative Guide vide a specific chapter on 'rights of set off has made a provision as under: - ".....In the majority of jurisdictions, set-off rights are not affected by the stay in insolvency and may be exercised after the commencement of insolvency proceedings, irrespective of whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the company (in liquidation) in respect of its claims and the set off is pleaded by the company's debtor in respect of amounts due from the company to it. In the present circumstances, obviously, had the Bank demanded for payment of sum due to it under overdraft, the company, (in liquidation) was entitled to claim set off against the amount due under the FDRs notwithstanding that the same were not hypothecated as security for discharge of the debts due. If that could be done we see no reason, why the bank could not claim the set off because the company (in liquidation) has taken the initiative to call upon the bank to pay the amount due under the FDRs. " 15. In the matter of Gokul Chit Funds and Trades (P.) Ltd. v. Thoundasseri Kochu Ouseph Vareed (MANU/KE/0023/1977) decided on 25.08.1976 it was held : "The 'mutual dealings' referred to in the section may consist of several distinct or independent transactions entered into between the same parties functioning the same right or capacity. It is not, therefore, necessary that the debts or claims sought to be set off against each other should have arisen out of the one and the same transactions. As observed by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cannot sue the principal debtor for an amount of the debt which the creditor has already received from a guarantor. This is subject, however, to one point, which has been called "the charge point" to which I now turn.". 18. That in addition to the case laws referred above, from the side of the Applicant few more case laws have also been referred from where relevant portions also read during the course of hearing, however, keeping brevity in mind those paragraphs not reproduced but citations quoted are as hereunder:- Case Laws referred:- (1) Ex parte BARNETT, In re 1874 Jan. 16. (2) Bankers v. Jarvis 1908 Jan. 28 (3) Paschal Nazereth v. Denis Lobo AIR 1958 Mys. 126. (4) Andhra Paper Mills Co. Ltd. v. Anand Bros AIR 1951 Mad 783. (5) Supreme court of India Civil Original/Appellate jurisdiction Writ Petition (civil) No. 99 of 2018 [Swiss Ribbons Pvt. Ltd. & Anr. Versus Union of India And Ors. order dated 25.01.2019.. (6) Official Liquidator of High Court of Karnataka v. Smt. V. Lakshmikutty [1981] 3 SCC 32. (7) Gopal L. Raheja v. Vijay B. Raheja [Cross Appeal (L) No. 4 of 2005, dated 25-4-2007]. (8) Queens Bench Division. Sovereign Life Assurance Co. v. DODD [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a form of security. Instead of having to prove with other creditors for the whole of his debt in the bankruptcy, he can set off pound for pound what he owes the bankrupt and prove for or pay only the balance. In Foster v. Wilson (1843 12 M. & W. 191, 204, Parke B. said that the purpose of insolvency set off was "to do substantial justice between the parties". Although it is also often said that the justice of the rules is obvious, it is worth noticing that it is by no means universal. Wood on English and International Set Off (1989), PP 1165 21169, Paras 24-49 to 224-56). It has however been part of the English law bankruptcy since at least the time off the first queen Elizabeth :........." 19.1 In the light of the types of set off explained by Learned Mr. Janak Dwarkadas he has narrated the facts revolving claim of set-off. Bharti Airtel Limited and Bharti Hexacom Limited ("Airtel Entities") had entered into a Spectrum Trading Agreement in April, 2016 for buying right to use spectrum in 8 circles in the 2300 Mhz band from Aircel Limited and Dishnet Wireless Limited ("Aircel Entities"). The total consideration payable to the Aircel Entities was Rs. 4022.75 Crore. At the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claims, it would not entitle Airtel Entities to any priority over the other creditors as Airtel will remain as an Operational Creditor for the aggregate amount of the admitted claims. As particularly set out hereinafter, Airtel Entities are not entitled to claim legal or equitable set-off as attempted to the extent of Rs. 112 Crore, therefore, by doing so, the Airtel Entities put themselves in an advantageous position, over and above rest of the financial and operational creditors, by recovering its debt, argued by the Ld. Advocate. 19.4 Vide orders dated 28.11.2018 the Hon'ble Supreme Court has given the direction as under:- "ORDER IA 113342/2018 & IA 98556/2018: Having heard learned counsel for all parties, we are of the view that, at this interim stage, the order of the Appellate Tribunal dated 09.01.2018, as far as the Bank Guarantees are concerned, will operate. Insofar as the refund of the principal amount of licence fees is concerned, we are of the view that a sum of Rs. 298,00,00,000/- (Rupees Two Hundred and Ninety Eight Crores) which is claimed as refund of the principal of the licence fees that has been paid by Dishnet Wireless Limited and Aircel Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed in the following terms: All parties including Axis bank and Bharti Airtel Ltd.) to proceed on the basis that the three bank guarantees referred to in the opening paragraph of this Court's order dated 28.11.2018 and in the TDSAT order dated 16.07.2018 (particulars at page 18 of I.A. No. 180450 of 2018) stands cancelled and shall no longer be used for any purpose whatsoever. Needless to add, this order will be subject to what happens ultimately in the appeal." 19.6 So, it is informed that on 10.01.2019, 'Airtel Entities' released an amount of Rs. 341.80 Crore from the total of Rs. 453 Crore and withheld Rs. 112 Crore claiming set-off towards the undisputed amount owed to it, an admitted position of fact. Thereafter, on 14.01.2019, it filed an application before the NCLT, which is now under consideration. 19.7 On the other hand, the 'Aircel Entities' had also filed an application before the Supreme Court seeking release of the balance amount of Rs. 112 Crore, wherein owing to the pendency of the present application, the Supreme Court vide order dated 12.02.2019 directed the NCLT to decide the application within 3 weeks, reproduced below:- "UPON hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction; (e) both the parties must fill the same character in respect of the two claims sought to be set-off or adjusted. 19.10 On this issue reliance was placed on the following decisions:- (i) Jitendra Kumar Khan v. Peerless General Finance & Investment Co. (P.) Ltd. 2013 SCC Online SC 710 (ii) Union of India v. Karam Chand Thapar & Bros. (Coal Sales) Ltd. [2004] 3 SCC 504 (iii) Lakshmichand & Balchand v. State of AP AIR 1987 SC 20 (iv) Maharashtra State Farming Corpn. v. Belapur Sugar & Allied Industries Ltd. [2004] 52 SCL 389 (Bom.) 19.11 Learned Counsel has emphasized in respect of "mutual dealings" that the Courts have held that there must be transactions creating independent obligations on each side, and not merely transactions which create obligations on one side, those on the other being merely complete or partial discharges of such obligations. This has been recognized in the context of Article I of the Schedule to Limitation Act, 1963 for ascertaining time period to seek recovery of balance dues from mutual transactions. Referred : Kesharichand Jaisukhalal v. Shillong Banking Corpn. Ltd. AIR 1965 SC 1711. A mutual accountability between the parties is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded his arguments. (D) Submissions by the Resolution professional: 20. Representing Resolution Professional Ld. Senior Advocate Mr. Ravi Kadam, at the outset submitted that this application has been filed by the 'Airtel Entities' with a mala fide intention to breach the orders of the Hon'ble Supreme Court and the Hon'ble TDSAT. It is submitted that this application is pursuant to the Hon'ble Supreme Court's Order dated 08.01.2019 (as supra para 19.5) wherein it was clearly directed that the money towards all three BGs ought to be paid to the 'Aircel Entities'. Therefore, this application is nothing but an afterthought, filed in order to unlawfully withhold the money duly payable to the Aircel Entities. 20.1 The Learned Counsel of RP states that the 'Airtel Entities' do not have a right of set-off at this stage of the CIRP Proceedings and if the same is allowed, it would violate the core objective of the IBC. Before The Hon'ble Supreme Court in Innoventive Industries (supra) one of the argument was that the primary objective of the IBC was to overhaul the existing provisions related to winding up in the Companies Act and replace it with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments reliance was placed on following judgments:- (a) Indian Overseas Bank (supra). (b) Karam Chand Thapar & Bros. (supra) (c) K. Sashidhar Vs. Indian Overseas Bank And Ors. Civil Appeal No. 10653 of 2018, Order dated 05-02-2019 passed by Hon'ble Supreme Court of India. (d) K. Sashidhar v. Indian Overseas Bank 152 SCL 312 (SC) (e) kalipada Banerjee Versus Sree Bank Ltd. (In Liquidation) 1959 SCC Online Cal 105: (1959-60) 64 CWN 207 : AIR 1960 Cal 285 Order dated 27.11.1959 (f) Lakshmichand & Balchand v. State of Andhra Pradesh [1987] 1 SCC 19 (g) Kesharichand Jaisukhal (supra). (E) FINDINGS: 21. Learned Representatives of both the sides have been heard at some length. Both the sides have submitted respectively few case-laws, those were carefully perused in the light of the facts of the case. Since the time this Code was introduced w.e.f. December, 2016, number of issues are daily cropping-up revolving around accountancy principles, banking laws, laws of CPC, Real Estate laws, Companies Act, Contract Act, Law of Evidence, Law of Limitation etc. etc. along with number of allied laws. Those complex issues have not only been discussed but also resolved, alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amount from Airtel Entity (Applicant/Operational Creditor). The Hon'ble Courts (TDSAT and Supreme Court) have ordered accordingly and in compliance Airtel made the payment of Rs. 341.73 Crores on 10.01.2019, but only after deducting its Operational Debt of Rs. 112/- Crores. 21.3 For my understanding I have put the position of account in the following manner:- (a) Total consideration mutually settled for transfer of Spectrum in 2300 MHz Band by Aircel to Airtel as per the terms of Spectrum Trading Agreement and in lieu amount payable by 'Airtel Entities' to 'Aircel Entities' Rs. 4,022/- Cr. (b) For transfer of Spectrum DoT demanded Bank Guarantee stated to be License dues from Aircel, but in the absence of funds under the directions of TDSAT it was opted by Airtel to submit Bank Guarantee on behalf of Aircel, adjustable against the Consideration amount (-) Rs. 453.73/- (c) Balance to be paid by Airtel to Aircel out of Consideration Rs. 3,568.27 /-Cr. (d) Since the amount at (b) was retained by Airtel therefore it was directed to pay the same to Aircel. However it was paid after deduction of an amount stated to be un-paid invoices due to be paid by A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing the Airtel Entity was a Purchaser of Spectrum hence to make payment to seller Aircel Entities. Juxtapose, Airtel is a service provider hence to receive payment for the services provided from Aircel Entity. There can be numerous such instances of mutual dealing where it is demanded by the parties to set-off the accounts by squaring up the Debits with the Credits. 21.7 The term 'set-off is also a very well recognised as also acceptable mode for settling of accounts. Rather without providing this facility or option of 'set-off, no account can get finalised if there is a cross dealing. As discussed above 'set-off as well is a technique applied between parties having mutual rights and liabilities, replacing gross position with net position. It permits the rights to be used to discharge the liabilities where cross claims exist between a Debtor and a Creditor. There is nothing new about this age old principle of accountancy. In number of precedents there were in depth decision on this subject. 21.8 On this subject English law is available, as referred from the side of the Applicant, but keeping succinctness mainly concentrating on certain direct decisions, needless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a Creditor of the Company must rest the counter claims by fraction of the Debt amount. 21.10 The legitimacy of doctrine of set-off has as well been discussed in a latest decision of Hon'ble S.C. pronounced in the case of Swiss Ribbon (P.) Ltd. (supra), wherein vide para. 35 made an observation that, quote "35. Insofar as set-off and counterclaim is concerned, a set-off of amounts due from financial creditors is a rarity. Usually, financial debts point only in one way - amounts lent had to be repaid. However, it is not as if a legitimate set-off is not to be considered at all. Such set-off may be considered at the stage of filing of proof of claims during the resolution process by the resolution professional, his decision being subject to challenge before the Adjudicating authority u/s. 60.".... unquote. 21.11 In one of the decisions in the case of Official Liquidator of High Court of Karnataka (supra) the entire controversy of set-off, although in Liquidation process, has been dealt that mutual credit and mutual debt in a mutual dealing a sum is to be set-off and only the balance of the amount ought to claimed and that set-off is not merely permissive but a direct statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e observations of Sir Ernest Pollock, M.R. in R City Life Assurance Company. Ltd. where the learned Master of the Rolls after referring to Section 207 of the Companies Act, 1908 (Section 317 of the Companies Act, 1948) which corresponds to Section 529 of Companies Act, 1956 and Section 31 of the Bankruptcy Act, 1914 which corresponds to Section 46 of the Provincial Insolvency Act, says: It is to be observed that Section 31 of Bankruptcy Act, 1914, is definite in its terms that where there is mutual credit, mutual debt or other mutual dealings, the sums are to be set off and the balance of the account and no more shall be claimed or paid on either side respectively. It is not merely permissive, it is a direct statutory enactment that the balance only is to be claimed in bankruptcy. We are in agreement with these observations and affirm the view taken by the Karnataka High Court in the Judgment sought to be appealed against. We accordingly dismiss the special leave petition on merits after condoning the delay in filing it." 21.12 Queens Bench Division Sovereign Life Assurance Co. (supra). "The first point which we have to consider is, what will destroy the right of set-off; when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off' the observation was as below :- "Bankruptcy set-off, on the other hand, affects the substantive rights of the parties by enabling the bankrupt's creditor to use his indebtedness to the bankrupt as a form of security. Instead of having to prove with other creditors for the whole of his debt in the bankruptcy, he can set off pound for pound what he owes the bankrupt and prove for or pay only the balance. So in Forster v. Wilson (1843) 12 M. & W. 191, 204, Parke B. said that the purpose of insolvency set-off was "to do substantial justice between the parties." Although it is often said that the justice of the rule is obvious, it is worth noticing that it is by no means universal. (Wood on English and International Set-Off (1989), pp. 1165-1169, paras 24-49 to 24-56.) It has however been part of the English law of bankruptcy since at least the time of the first Queen Elizabeth:...." The law related to 'Legal-set-off' was narrated as below:- "Legal set-off is confined to debts which at the time when the defence of set-off is filed were due and payable and either liquidated or in sums capable of ascertainment without valuation or estimation. Bankruptcy set-off h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but Mr. Dodd went on paying the premiums until they became payable. The Court of Appeal held that the account required by bankruptcy set-off should set off the full matured value of the policies against the loan." Therefore at this juncture prima facie in my opinion although in Legal set-off the substantive rights of the parties, both have respective cause of action, are to be merged in a judgment of the Court, but the procedure of adjustment in any case shall remain identical that the cross-claims to be tried together instead of having to be subject to separate action or suit and thereafter a cash-flow statement to be prepared so as to relieve the Debtor from the burden of payment of entire debt due to Insolvent, but to make arrangement of cash of the balance payment after due adjustment of cross-claims. 21.14 It is worth to take help of one more decision of House of Lords pronounced by Lord Nicholls, Lord Hoffman, Lord Hope of Craighead, Lord Philips of Worth Matravers and Lord Brown of Eaton-under-Heywood in the case of Secretary of State for Trade and Industry (supra) wherein a company was going into Liquidation and having claim against Customs & Excise for overpaid VAT and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured and unsecured debts were set -off. (b) The account was taken at the date of the winding up order (being an application of the wider principle that the realisation and distribution of assets are treated as notionally taking place simultaneously with the date of the order) ('the retroactivity principle'). Dillon L J noted that this rule supplanted an earlier rule that the set-off took place at the date of presentation of the petition (ibid at p. 446G). (c) In taking the account the court has regard to events which have occurred since the date of the winding up ('the hindsight principle'). In Stein v. Blake (199611 AC 243 at 252E Lord Hoffman explained that this required the Court to take into account everything that had actually happened between the insolvency date and the moment when it becomes necessary to ascertain what, on that date, was the state of account between the creditor and the insolvent. In that same case at 251E Lord Hoffman drew attention to three further features of insolvency set-off. (d) Unlike legal set-off insolvency set-off affects the substantive rights of the parties, enabling the creditor to set-off pound-for-pound what he owes the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same parties it is fair and reasonable to allow for netting off or set-off of the mutual debts and credits with each other so as to arrive at a net figure for settlement of accounts. In the light of this background it is now pertinent to examine the provisions of Insolvency Code to determine whether an embargo has been imposed under The Code. 22.1 From the side of the Respondent to this Application/Corporate Debtor as well as on behalf of the Resolution Professional, a legal question has been raised that once on commencement of Insolvency Proceedings Section 14 of IBC came into operation by declaring 'Moratorium" in respect of certain transactions, therefore, the impugned transaction of set-off is prohibited. To buttress this argument reliance was placed on Section 14 (1) (d) of The Code for the legal proposition that the Adjudicating Authority shall prohibit the recovery of any property by an owner where such property is occupied or in the possession of the Corporate Debtor. In this regard, my attention was drawn on the definition of "Property" as defined under Section 3(27) of The Code means money, actionable claim, goods, land etc. So it is submitted that the impugned set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Code. 22.2 The above view is also to be examined in the light of few other provisions of The Code which are in operation during Corporate Insolvency Resolution Process. One of such Section is 18(l)(f) of The Insolvency Code wherein it is prescribed the duties of IRP and one of them is to take control and custody of any asset over which the Corporate Debtor has ownership rights as recorded in the Balance Sheet of the Corporate Debtor, whether that asset may or may not be in possession of the Corporate Debtor. So the general rule is that the IRP is supposed to take control over all the assets of a Corporate Debtor having ownership rights. This is only one part of the coin and naturally the other part of the coin ought not to be ignored. Both the facets of a coin are equally important. Rather, one face coin is of no value. Likewise, a Balance Sheet is incomplete if not demonstrating assets as well as liabilities. Likewise, an account cannot be settled without accounting the credit entry as well as the debit entry. Therefore, an exception is carved out in Section 18(l)(f) that certain assets shall not be included while taking action u/s. l8(l)(f) of The Code. The Explanation below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the Resolution Professional, who has denied to return the said stock back to the claimant on the ground of commencement of "Moratorium" but the NCLT Bench, Chandigarh has taken a view that an adjustment has to be allowed because the said stock was under 'contractual arrangement' in possession of the Corporate Debtor, therefore, out of the ambits of 'Moratorium' so that the said stock be returned to its actual owner. Therefore, a conclusion can be drawn that even during CIRP a question of set-off or netting off or adjustment can be raised either by the Creditor or by the Debtor which is permissible and to be adjudicated upon. 23. A serious argument has been raised that by allowing set-off a preferential treatment is given to an Operational Creditor i.e. Airtel Entities. It is elaborated that by way of set-off, this Operational Creditor is in fact recovering its Debt by jumping the queue of other Creditors. The Operational Creditor therefore be treated a preferred creditor over the claims of other creditors. In this connection what is to be seen is the correct position of law as well as the accurate position of accounts. This argument is nothing but an innov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument of the Respondents (Aircel) that set off is the subject matter at the stage of Liquidation and not at this stage, is not sustainable. This argument is required to be turned down because of the simple reason that even at the CIRP stage a resolution plan is to be examined keeping in mind the provisions of section 53 i.e. Distribution of assets on Liquidation. At that stage of Liquidation the Ld. Counsel of Aircel entities are in agreement that netting off is permissible. If that be so, that the Aircel entities are in agreement that under Liquidation process only net amount is to be squared up, then a Resolution Applicant while submitting a Resolution Plan is duly authorised to keep in mind the net values for which a provision is to be made as prescribed u/s. 30(2)(b) of The Code, while submitting a Resolution Plan. Therefore, my humble opinion, whatever is the stage, either CIRP or Liquidation, a true and correct position of account should emerge from the records of both the sides. I am also of the strong view that if there is no restriction or prohibition in the statute, then a fair and reasonable approach is always is to be adopted. There is no specific bar or barrier in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eph Vareed and Others (supra), it was made clear that several distinct or independent transactions entered into between the same parties are enough to permit adjustment so as to arrive at a net figure of payment, either to the Creditor or to the Debtor. It is not necessary that set off is permissible in respect of same nature of transaction. This conservative or strict condition has a limited scope of its application, such as Income Tax laws where set off of Loss is allowed against the same nature of transaction. In my humble opinion, the terminology "mutual dealings" is a conscious Legislation. While deciding such disputes revolving around claim or counter claim or set off, it is expected to give due regards to this term "mutual dealings". The scope of this terminology is wide, which must not be applied in restrictive manner. 27. Before I part with, it is necessary to place an important feature as appearing in Form B which is meant for submission of claim by operational creditor wherein as per clause 8 of the Form "the details of mutual credit, mutual debit between the Corporate Debtor and creditor are required to be informed which may be arrived by set off against the claim. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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