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TMI Blog2022 (6) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IBC, 2016. In the present application, Mr. Ashok Oswal, Managing Director (Suspended) of Oswal Spinning and Weaving Mills Ltd. is the applicant, and Hemanshu Jetley (Liquidator) of Oswal Spinning and Weaving Mills Ltd. (Respondent No.1), State Bank of India through its Manager (Respondent No.2), IFCI Limited through its General Manager (Respondent No.3), Kotak Mahindra Bank Limited, through its Vice President (Respondent No.4), UCO Bank through its Attorney and Principal Officer (Respondent No.5) are the respondents. 2. In the present application, the applicant prays to quash the acceptance of the claim of Respondent Nos.2 to 5 by the Respondent No.1; and direct Respondent No.1 to await the final adjudication of the claims pending before the Hon'ble Debt Recovery Tribunal or the Hon'ble Punjab and Haryana High Court, or any other authority/Court/Tribunal as the case may be, before any claim for payment of financial dues on behalf of Respondent Nos.2 to 5 can be accepted and monies accordingly disbursed; direct the Respondent No.1, to effectively contest the claims made by the corporate debtor before various Courts/Tribunals, in order to discharge his legal obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to the corporate debtor as well as respondents No.2 to 5. Based on such facts, the applicant has assailed the issue of whether the Respondent No.1-Liquidator is competent to determine and admit a specific amount of money as payable to a particular creditor, when there is pending litigation that the company is contesting before the appropriate forum, such as the Hon'ble Debt Recovery Tribunal. 4. The Respondent No.1-Liquidator by its reply filed by Diary No.00019/5 dated 02.11.2020 has stated that he has collated the claims of the financial creditors based on the records. Two meetings of the Stakeholders Consultation Committee (SCC) have been held by the Respondent No.1-Liquidator on 05.02.2020 and 23.06.2020 and the Respondent No.1-Liquidator has published a sale notice on 13.07.2020 at the suggestions of the SCC inviting interested bidders to participate in the e-auction on 14.08.2020. However, Respondent No.1-Liquidator has been restrained by this Adjudicating Authority's order dated 09.09.2020 from distribution of the funds so realised among financial creditors. In its reply, Respondent No.1-Liquidator has set out a brief history of the transactions between the corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded Interest Term Loan (FITL) by the corporate debtor. The Corporate Debtor failed to make payment of Rs.3.60 Crores by 31.03.2008 as agreed to under the terms of the OTS and CRPS Agreement dated 24.10.2007 and thereafter, vide letter dated 27.03.2008, requested IFCI not to present the post dated cheques amounting to Rs.3.60 Crores issued as security by the Company/Corporate Debtor, to IFCI for encashment. Thereafter, IFCI vide letter dated 02.12.2010 revoked the OTS and demanded repayment of the entire outstanding amount from the Corporate Debtor. It is further stated that as per the Claim Form-D submitted by IFCI to the Liquidator, total claim of IFCI is Rs.93.03 Crores as on 13.12.2019. Thus, the Liquidator has admitted the claim of IFCI to the extent of Rs.75.67 Crores as against its initial claim of Rs. 93.03 Crores. The amount admitted by the Liquidator excludes the amounts claimed by IFCI towards cost of litigation, cost of investment in equity, liquidated damages and interest on liquidated damages. 4.3 As regards Respondent No.4-Kotak Mahindra Bank Limited, Respondent No.1-Liquidator states that in 2007, one-time settlement (OTS) and restructuring was undertaken by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble High Court of Punjab and Haryana or the Hon'ble DRT while admitting the claim of Kotak Bank. Admission of Kotak's claim by the Liquidator does in no manner affect the Corporate Debtor's ability to settle with UCO bank in terms of the liberty granted by the Hon'ble NCLAT. Further, admission of claim by the Liquidator does not amount to overruling the decision of any court, as alleged by the Applicant. It is reiterated that proceedings before the Hon'ble High Court and DRT have no bearing on the performance of functions by Liquidator as per the provisions of IBC. It is further asserted that the Applicant has made absolutely bogus and baseless allegations against the legitimate actions of the Liquidator. 5. The Respondent No.2-State Bank of India by its reply filed by Diary No.00019/12 dated 22.02.2021 justified the claims that are lodged by it before the respondent No.1-Liquidator and also states that the proceedings before the learned DRT have no bearing on the decision of the claims by the IRP or Liquidator and the petitioner is intentionally ignoring Section 14 of the Code which operates moratorium on all the other proceedings on the commenceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de does not put a bar on the Liquidator to check the authenticity and correctness of documents filed by a party before any legal forum. 9. Rejoinder has also been filed by the Applicant to the reply of Respondent No.4-Kotak Mahindra Bank Ltd. and Respondent No.5-UCO Bank by Diary No.00794/3 dated 22.02.2021 and Diary No.00794/8 dated 22.10.2021 respectively mostly repealing the contentions made earlier. 10. Subsequently, the Applicant has filed written submission by Diary No.00794/12 dated 18.04.2022, reiterating that instead of contesting the claims on behalf of the company, so as to maximise the value for all stakeholders, the Liquidator has decided to arbitrarily side with the banks with the result that the amounts which would otherwise become available to the remaining stakeholders would either get severely diminished or be reduced to zero. It is also stated that this Adjudicating Authority cannot, in effect, exercise the powers already bestowed on other Courts of law/Tribunals as they are already exercising jurisdiction on related issues before them. It is further stated that the scope of Section 238 of the IBC, 2016 which provides for a overriding effect of the IBC, will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal against the decision of liquidation. d) Section 53 -Distribution of assets. e) Section 238 -Provisions of this Code to override other laws. f) Regulation 16 of IBBI (Liquidation Process) Regulations 2016- Submission of claim. g) Regulation 18 of IBBI (Liquidation Process) Regulations 2016- Claims by Financial Creditors. h) Regulation 30 of IBBI (Liquidation Process) Regulations, 2016- Verification of Claims. i) Regulation 31 of IBBI (Liquidation Process) Regulations, 2016- List of Stakeholders i) Regulation 44 of the IBBI (Liquidation Process) Regulations, 2016- Completion of liquidation k) Regulation 47 of IBBI (Liquidation Process) Regulations 2016- Model Time-line for liquidation process. 11.1 It is also stated that the claims and counter claims filed before the various Courts including DRT are not crystallized as on the date of the liquidation commencement date. Therefore the liquidator has correctly verified the claims under Regulation 16(2) of the IBBI (Liquidation Process) Regulations, 2016 which states that "A person shall prove its claim for debt or dues to him, including interest, if any, as on the liquidation commencement date". It is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Liquidator has duly acted within the scope of IBC. It is further submitted that Liquidator has verified the claim on the basis of Form D submitted by FC along-with documents filed along-with Form D and on the basis of available records and financial statements. No where liquidator has said in his reply that he has adjudicated the claim. v. RP, now Liquidator, has already filed application u/s 19(2) for the non co-cooperation of the promoter director including applicant of 368/2020 for not providing the books and documents with an ulterior motive to conceal the factual position in the accounts Application is still pending CA 143/2019. 11.3 After submitting the detailed reasons for admitting the claims with reference to documents and correspondences before him, the respondent No.1-Liquidator has also clarified that the Liquidator in no way adjudicated the claims of any stakeholder. Claims have been admitted after the verification in terms of the Section 38 and 39 of the Code, 2016 and Regulations 16, 18, 30 & 31 of IBBI (Liquidation Process) Regulations, 2016. The Liquidator, in accordance to the aforementioned regulations, has simply verified the claims of the stakeholders b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... One such counter claim filed by the corporate debtor against UCO Bank has already been rejected by the learned DRT, Chandigarh and the same is recorded in the order dated 15.05.2019 passed by Hon'ble NCLAT. It also highlights the decision of the Hon'ble Punjab & Haryana High Court in its order dated 11.04.2016 passed in "CWP 13888 of 2015, M/s Oswal Spinning & Weaving Mills Ltd vs. Reserve Bank of India and others'' has rejected the contention of the Applicant that mere payment of the amount due under EPC account, the Applicant account would no longer be NPA and thus liable to be classified as standard account. 13.1 Further the factum of debt due can also be corroborated from the order dated 23.04.2021 passed in CWP #18174 of 2017 "Kotak Mahindra Bank Ltd. vs. The District Magistrate, Ludhiana and Another" dated 23.04.2021, wherein para #15 @Pg #16 of the said order it has been recorded that the account of CD is declared as NPA, notices under Section 13(2) of the SARFAESI Act have been issued, the objections filed by the CD having been rejected - is an admitted fact. 13.2 It is submitted that the prayer that the Liquidator be directed to await the final adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r disbursal of amounts due and payable. 14. We have gone through the arguments along with their submissions filed by all the parties and have perused the records carefully. 15. To put the discussion in the proper context, we feel it necessary to mention certain observations by the Hon'ble Supreme Court and the Hon'ble NCLAT on the issues related to the case in hand. On an appeal filed by Kotak Mahindra Bank Limited-Respondent No.4 in the present case, the Hon'ble Supreme Court noticing the proceedings taken on IA No.368/2020 (present application) and IA No.555/2020 and the orders of the Hon'ble NCLAT passed on 19.01.2021 and 10.08.2021, by order dated 26.11.2021 disposed of the appeal and made interalia the following observations:- "16. ............ the submissions before us on behalf of the respondent No.1(applicant) are to the effect that there ought not to be "tearing hurry" in deciding those applications. Such a proposition on the part of the applicant cannot be countenanced, particularly looking to the previous orders passed in the matter, as noticed hereinabove. ......." 15.1 Subsequently, the Hon'ble NCLAT in its order dated 04.04.2022 in Company Appeal (AT) (In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claim under this section within fourteen days of its submission. Section 39: Verification of claims. 39. (1) The liquidator shall verify the claims submitted under section 38 within such time as specified by the Board. (2) The liquidator may require any creditor or the corporate debtor or any other person to produce any other document or evidence which he thinks necessary for the purpose of verifying the whole or any part of the claim. 16. Submission of claim. (1) A person, who claims to be a stakeholder, shall submit its claim, or update its claim submitted during the corporate insolvency resolution process, including interest, if any, on or before the last date mentioned in the public announcement. (2) A person shall prove its claim for debt or dues to him, including interest, if any, as on the liquidation commencement date. 18. Claims by Financial Creditors. (1) A person claiming to be a financial creditor of the corporate debtor shall submit proof of claim to the liquidator in electronic means in Form D of Schedule II. (2) The existence of debt due to the financial creditor may be proved on the basis of- (a) the records available in an informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dator is mandated to discharge his duties strictly as per the provisions quoted above while verifying/admitting the claims. On a careful perusal of these provisions, it is clear that the Liquidator is required to verify the claims with reference to the date of liquidation and if there is no crystallization of a debt through a decree on that date, the Code does not direct the Liquidator to wait for the same. As regards the admission of the claims, we have carefully gone through the voluminous evidence including correspondences etc. produced in the course of proceedings and also the grounds on which the claims have been admitted in the cases of Respondent Nos.2 to 5 by the Liquidator with reference to. Prima facie, the Liquidator has verified the claims on the basis of Form-D submitted by the Financial Creditors along with documents, records and financial statements filed with the same. It is also noted that the Liquidator has accepted only partial amounts of the total claims made by the financial creditors and have sought legal opinion upon some of the issues before reaching a conclusion. The issues have also been discussed in the meetings of the Stakeholders Consultation Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple of construction in a circumstance where two special Acts are in conflict with each other is that, the Act made later should prevail vide the maxim "leges posteriores priores abrogant". The DRT was constituted under Recovery of Debts Due to Banks & Financial Institutions Act, 1993, much prior to the I&B Code, 2016. In view of Section 238 of the I&B Code, 2016 steps taken under the Code by the authority would have precedence over other authorities in parallel proceedings. Thus, the provisions of I&B Code, 2016 should prevail in case of any conflict. Furthermore, this contention of the Applicant does not hold much water in view of the a catena of judgements of the Hon'ble NCLAT in the following matter of Bimal Kumar Manubhai Savalia vs. Bank of India and Ors. Company Appeal (AT) (Insolvency) No. 1166 of 2019 wherein it has been inter-alia held as follows: (Para No. 9; page 07): "We are of the view that the SARFAESI and DRT proceedings are independent and as per Section 238 of IBC, the Insolvency and Bankruptcy Code is a complete code and will have an overriding effect on other laws. Therefore, the proceedings imitated (initiated) or pending in DRT, either initiated under SARF ..... X X X X Extracts X X X X X X X X Extracts X X X X
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