TMI Blog2021 (11) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 20 of the Code and is expected to manage the operations of the corporate debtor as a going concern. As a part of such management, he is to make every endeavour to protect and preserve the value of the property of the corporate debtor - In the present case, the RP endeavours to auction the asset and secure the proceeds of such sale to the credit of the debtor and the benefit of the insolvency proceedings. In order to preserve the property either by way of auction or otherwise, the pre-condition under Section 20 is that what is stated to be preserved would be the property of the corporate debtor . This is on the one side. It is thus clear that the intention of the Code is never to address those assets over which a debtor has no title. Such assets, infact, stand specifically excluded from the liquidation process, being assets where the debtor might hold some right, but is not the owner to title of the asset. A pre-condition set out is the inclusion of the asset in question in the inventory of the debtor - The facts and circumstances that arose in those writ petitions are different and distinct from those that present themselves in the matter under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent under the CMA, Mr.Amin (in short agent ) is said to be supervising the safety of the asset. 5. According to both the petitioner and R5, the latter had applied for and obtained an approval under the Advance Authorisation Scheme (in short AA Scheme ) issued by R2, i.e., Additional Director General of Foreign Trade (ADGFT) and implemented by R3 and R4, i.e., Commissioner of Customs, Tiruchirappalli/R3 Commissioner of Customs, Chennai II/R4, thus entitling the import of the sugar without the payment of customs duty. 6. The eligibility of the consignment to the AA Scheme is not the concern of this Court and the Court is only concerned with the adjudication of the plea put forth on behalf of the petitioner that, the petitioner being the owner of the asset holding full title to it, should be permitted to take custody of the asset from the bonded warehouse, where it presently lies, and re-export the same. 7. The reason for the request for re-export is that R5 is presently before the National Company Law Tribunal (NCLT) where an Insolvency Petition has been filed by the Punjab National Bank, as Financial Creditor in terms of the Insolvency and Bankruptcy Code, 2016 (in short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould draw my attention to contract dated 20.10.2016, wherein the first sentence states as follows: We write to confirm the terms of a contract concluded between you and Czanrnikow Group Limited on 25th October 2016 under in terms set out below. 12. Though the date of contract is 20.10.2016, the parties state in the sentence extracted aforesaid that the contract is dated 25.10.2016. This, according to him, is the first serious discrepancy. The second discrepancy pointed out is that the contract at internal page 4 is not signed by the buyer, R5. The third discrepancy pointed out is that addendum No.9 attached to the contract states that payment has not been made by SAS for an outstanding balance of 16847.50 MT whereas the petitioner, in its pleadings, at paragraph 8, page 4 of the affidavit filed in support of the Writ Petition, would state that the balance of the sugar in custody is quantified at 19537.60 MT. 13. In response, Mr.Sivanandaraj, learned counsel appearing for Mr.Adeesh Anto, learned counsel on record for the petitioner explains away the first discrepancy as a mere typographical error pointing out that there was nothing in the voluminous pleadings to esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02/02/2017 Cash SAS $ 200,000.00 11/05/2017 Cash SAS $ 100,000.00 31/05/2017 Cash SAS $ 750,000.00 30/06/2017 Cash SAS $ 2,850,000.00 18/07/2017 Cash SAS $ 1,570,000.00 23/08/2017 Cash Both learned counsel before me concur upon the position that the amounts as set out above match the remittances from R5 as evidenced by bank statements supplied by R5. 18. In my view, there is no dispute on facts and the question of i) error in the contract heading, ii) inadvertent absence of the signature of R5 in the copy of the contract placed in the typed set, iii) quantification of the asset supplied and paid for being 9899 MT and the remaining being 19537.50 MT stand categorically explained. Thus, the so-called factual discrepancies will not frustrate the maintainability of this writ petition. 19. Mr.Jain then d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning and Manufacturing Company Ltd. Anr V. The Ulhasangar Municipal Council Anr . (1970 (1) SCC 582) 4. K.I.Shephard Others V. Union of India Ors . (1987 (4) SCC 431) 5. ABL International Ltd Anr v. Export Credit Guarantee Corporation of India Limited Ors . ((2004) 3 SCC 553 6. V.C.Banaras Hindu University Ors v. Shrikant ((2006) 11 SCC 42) 7. PopatraoVyankatrao Patil v. State of Maharashtra Ors (2020 SCC Online SC 291) 8. Canon India Pvt Ltd. Vs. Commissioner of Customs (2021 SCC Online SC 200) 9. Union of India v. Sampat Raj Dugar : (1991) 56 ELT 739 (Bom HC)) 10. Union of India v. Sampat Raj Dugar ((1992) 2 SCC 66) 11. Judgment dated 09.08.2021 in Czarnikow Group Ltd. V. The Additional Director General of Foreign Trade and Ors in W.P. No.11441 of 2020 12. Leo Edibles Fats Limited v. The Tax Recovery Officer , W.P. No.8560 of 2018, Division Bench of Hon ble High Court of Telangana and Andhra Pradesh 13. Pr. Director General of Income Tax (Admin TPS) Vs. Synergies DoorayAutomative Ltd. Company Appeal (AT) (Insolvency) 205 of 2017, National Company Law Appellate Tribunal Respondent No.5: 1. The State of Orissa v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction of this court under Section 62. It is in this context that the action of the State of Karnataka in bypassing the remedy of appeal to NCLAT and the act of the High Court in entertaining the writ petition against the order of the NCLT are being questioned.. 25. The jurisdiction and powers of the High Court under Article 226 were then delved into and after noticing the ratio of several cases, they state at paragraph 28 as follows: 28. Therefore as rightly contended by the learned Attorney General, the decision of the Government of Karnataka to refuse the benefit of deemed extension of lease, is in the public law domain and hence the correctness of the said decision can be called into question only in a superior court which is vested with the power of judicial review over administrative action. The NCLT, being a creature of a special statute to discharge certain specific functions, cannot be elevated to the status of a superior court having the power of judicial review over administrative action. Judicial review, as observed by this court in Sub-Committee on Judicial Accountability vs. Union of India,24 flows from the concept of a higher law, namely the Constitution. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Bench held that both the NCLT and National Company Law Appellate Tribunal (NCLAT) would hold such jurisdiction, but neither forum would have the jurisdiction to adjudicate upon disputes arising under other enactments, in that case, the Mines and Minerals (Development Regulation) Act, 1957 and the Rules issued thereunder. If the NCLT and NCLAT did venture into such alien territories, it would constitute a jurisdictional error that could be corrected by way of judicial review of administrative action. 28. In the course of answering both the questions, the Court has made important observations in regard to the nature of disputes that the NCLT is equipped to handle and in respect of which it has been vested with the power to adjudicate. One of the arguments advanced was that an RP was duty bound under Section 20(1) to preserve the value of the property of the Corporate Debtor and that the word property , as interpreted in Section 3(27) excluded even actionable claims and interest of every description, be it present, future, vested or contingent interest arising out of, or incidental to property and that the RP was thus entitled to move the NCLT for appropriate orders for protec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word assets , while Section 20(1) uses the word property together with the word value . Sections 18 and 25 do not use the expression property . Another important aspect is that under Section 25 (2) (b) of IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasijudicial and arbitration proceedings. Section 25(1) and 25(2)(b) reads as follows: 25. Duties of resolution professional (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of subsection (1), the resolution professional shall undertake the following actions: (a) . (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the question of title/ownership of the goods rests upon a determination as to whether the said goods/asset are recorded in the balance sheet of the corporate debtor, the RP was directed to produce the relevant balance sheets and has so produced the balance sheets accompanied by the schedules for the relevant period, being years ending 31.03.2017 and 31.03.2018. 36. A perusal of the annual reports of R5 for financial years 2016-17 and 2017-18 reveals that inventories that have been referred to as part of commercial assets in the balance sheet for the year ending 31.03.2018 and described in detail in Note 6 of the schedule are comprised of (a) raw materials (b) work-in-progress (c) finished goods (d) stores and spares and (e) others. Clauses (b) to (e) are irrelevant to the facts of this case and what might be relevant is clause (a), being raw materials. 37. The assets comprising sugar would constitute raw materials in the business of R5 and as such it become relevant to determine whether the schedules to the entries in the balance sheet reveal the appropriate quantum of sugar as imported by the petitioner. For the purposes of quantification of the raw materials, one need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led in support of the Writ Petition. Thus the quantification of the asset is not in dispute. 42. The contents of paragraph 5 of the application extracted above also confirm the statement of the petitioner that the asset is presently under lock and key, both at the instance of R5 and the petitioner. Though R5 refers to the lock placed by the petitioner as that of a third party , the petitioner would confirm the position that it is his agent, who has secured the warehouse in the interests of the petitioner. 43. Moreover, the report of the Bankruptcy Law Reforms Committee discusses in detail the issue of availability of assets of a debtor for realization in liquidation and how they are to be determined. Clause 5.5.5 entitled Establishing assets in Liquidation reads as follows: 5.5.5 Establishing assets in Liquidation The Committee debated what assets of the entity must be available for realisation in liquidation. Not all assets that are present within the entity, from the start of the IRP, can be considered for Liquidation. The Committee agrees that the following sets of assets must be kept out of the liquidation process: a. Assetsheldbytheentityintrust(suchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the liquidation process, being assets where the debtor might hold some right, but is not the owner to title of the asset. A pre-condition set out is the inclusion of the asset in question in the inventory of the debtor. 45. The case law relied upon by R5 touches upon the aspect of maintainability and in light of the view that I have taken in the paragraphs above, do not come to its aid. The facts and circumstances that arose in those writ petitions are different and distinct from those that present themselves in the matter under consideration now. Reliance upon those decisions is thus to no avail. 46. In these circumstances, I answer the question in regard to maintainability in favour of the petitioner. The contract at clause 20 thereof, confirms the position that title to the goods would not pass until the buyer, i.e., R5 has made payment for the entirety of the goods. In my considered view, the petitioner thus assumes the status of an unpaid seller who continues to hold title/ownership to the asset imported. 47. Coming to the prayer for re-export, this is a question that is best left to the official respondents to decide. The petitioner would bring to my notice a re ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
