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TMI Blog2023 (7) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... g Authority after hearing the Learned Counsel for the Applicants as well as Learned Counsel for the Respondents held I.A. No. 2691 of 2022 maintainable under Section 60(5)(c) of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "The Code"). By subsequent order dated 31st August, 2022, the Adjudicating Authority directed that the copy of the Application may be given to Learned Sr. Counsel for the State Bank of India and the matter was adjourned to 20th September, 2022. The Appellant State Bank of India aggrieved by both the orders, has filed these Appeals. 2. Brief facts of the case leading to filing I.A. No. 2691 of 2022 needs to be noted : - i. The Khagaria Purnea Highway Project Limited entered into Concession Agreement dated 08th April, 2011 with National Highways Authority of India for construction, operation and maintenance of Khagaria Purnea Section of NH-31 in the State of Bihar. Respondent No. 1 hereinafter referred to as "Khagaria" entered into Facility Agreement with the Appellant-State Bank of India for an amount of Rs. 586 Crores. As contemplated under the Facility Agreement, the Appellant, Respondent No. 2-Punj Lloyd Infrastructure Limited and Respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter dated 10.05.2022 issued by Respondent No. 1 to the office of Respondent No. 2; (c) Direct the Respondent No. 1 & 2 to not to take any steps towards substitution of any new concessionaire till the pendency of the present Application; (d) Direct the Respondent No. 1 & 2 to maintain status quo with respect to any steps taken for substitution of the new concessionaire and not to take any further steps for attaining finality in this regard; (e) Pass such further and other direction as this Hon'ble Tribunal may deem fit and expedient." v. I.A. No. 2691 of 2022 came for consideration before the Adjudicating Authority on 08th June, 2022. The Application was filed by following three applicants viz. (i) Khagaria Purnea Highway Project- Applicant No. 1, (ii) Punj Lloyd Infrastructure Limited-Applicant No. 2 and Punj Llyod Limited through Ashwani Mehra, Liquidator-Applicant No. 3. The Application was opposed by Learned Sr. Counsel for the State Bank of India. It was contended before the Adjudicating Authority on behalf of Learned Counsel appearing for the State Bank of India that Application is not maintainable under Section 60(5)(c) of the Code. It was contended that Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor can be very well made subject matter of an Application under Section 60(5)(c) of the Code. It is submitted that there is no financial debt on the Respondent quo the loan account of the Appellant Bank. Installments are paid on time before and during the pendency of the present dispute. The Khagaria is not an NPA of the Appellant-Bank. CIRP of the Corporate Debtor is a sole ground to seek substitution of the Khagaria. It is submitted that Application is fully maintainable before the Adjudicating Authority and need to be heard on merits. It is submitted that since the only question in this Appeal is regarding maintainability of the Application, no submission are being advanced on the merits of the I.A. No. 2691 of 2022. 6. We have considered the submissions of Learned Counsel for the parties and have perused the record. 7. The only question which has arisen for consideration in the present Appeal is as to whether I.A. No. 2691 of 2022 filed by Respondent Nos. 1 to 3 before the Adjudicating Authority in CP(IB) No. 731-PB/2018 is maintainable under Section 60(5) of the Code? 8. The filing of the Application I.A. No. 2691 of 2022 was founded on the notice dated 08th March, 2022 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sor ("Sponsor") (and therefore obligor, as per the definition of "Obligor" under the facility agreements) and two sponsor support agreements were executed inter alia by PLL on 30 September 2011, each in relation to the Senior Debt Facility and the Sub-Debt Facility. PLL has been admitted into insolvency resolution process pursuant to the order of the Hon'ble National Company Law Tribunal (NCLT) dated 08 March 2019 and we further understand that the PLL is admitted into insolvency and the liquidation application before NCLT has already been filed. Clause 28 of the Facility Agreements prescribes certain specified events, which are termed as "Event of Default" under the Facility Agreements and one of the specified Event of Default being Clause 28.10 (b) provides as follows: "28.10(b) If an involuntary proceeding against an obligor has been commenced under any applicable bankruptcy, insolvency, winding up or other similar law now or hereafter in effect, or in any case, proceeding or other action for the appointment of a trustee, receiver, liquidator, assignee (or similar official) for any part of its assets and/or property, or for the winding up or liquidator of its affairs, or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was issued on 08th April, 2022 and 10th May, 2022 leading to filing of the Application I.A. No. 2691 of 2022 by the Applicants. As noted above, the Application was filed by three applicants that is Respondent Nos. 1 to 3 in the Present Appeal. The contention which has been advanced by Learned Sr. Counsel for the Appellant is that Application was not maintainable under Section 60(5)(c), the Khagaria being step down subsidiary of the corporate debtor and Khagaria's assets can not form the liquidation estate of the Corporate Debtor. The Appellant was exercising its right under the facility agreement and the substitution agreement quo the Respondent No. 1-Khagaria which can not be made subject matter of dispute before the Adjudicating Authority under Section 60(5)(c) of the Code. Section 60(5) of the Code provides as follows: "(5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of- (a)....... (c) any question or priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UVNL. Appeal was dismissed by the Appellate Tribunal against which the GUVNL filed an Appeal. In reference to the above case, the Hon'ble Supreme Court has occasion to consider the expression "arising out of or in relation to". The Hon'ble Supreme Court noticed earlier judgments of the Supreme Court where expression "arising out of or related to" were explained. It was noted that word 'arising out of and relating to' have been given expansive interpretation by the Supreme Court. Hon'ble Supreme Court however observed that it is necessary to bear in mind the context in which the phrases have been used. In paragraph 53 of the Judgment, following was observed: "53. While the phrases ―arising out of" and "relating to" have been given an expansive interpretation in the above cases, words can have different meanings depending on the subject or context. Words are after all, a vehicle for communicating ideas, thoughts and concepts. A one-size-fits-all analogy may not always hold good when we construe similar words in entirely distinct settings. Justice G.P. Singh in his authoritative commentary on the interpretation of statutes, Principles of Statutory Interpretation, has noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications or proceedings". Therefore, considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. However, in doing do, we issue a note of caution to the NCLT and NCLAT to ensure that they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor. The nexus with the insolvency of the Corporate Debtor must exist." 15. Before the Hon'ble Supreme Court in GUVNL, Submission was also made on behalf of Appellant relying on Section 25(2)(b) and 18(1)(f). The said arguments were noted in paragraph 72 and 73 which are to the following effect: "72. Ms Ramachandran and Mr Diwan have contended that CA 1956, PIA and BRA do not contain any provisions equivalent to Sections 25(2)(b) and 18(f)(vi) of the IBC which empower the RP to exercise rights for the benefit of the Corporate Debtor in certain adjudicatory proceedings. They submit that Section 60(5)(c) of the IBC must be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The State Bank of India initiated action against the Respondent No. 1 on strength of Insolvency Process of the Corporate Debtor which is clearly mentioned in the notice dated 08th March, 2022 as extracted above. The notice thus stemmed from initiation of Insolvency Process against the Corporate Debtor. The application filed by Applicants I.A. No. 2691 of 2022 thus can very well be said to be arising out of or in relation to Insolvency Resolution Process or Liquidation Proceeding of the Corporate Debtor. 17. We thus are of the view that the Adjudicating Authority did not commit any error in holding that Application is maintainable under Section 60(5)(c) of the Code. We however make it clear that we have not entered into the merits of the Application I.A. No. 2691 of 2022 nor considered the respective arguments of Learned Counsel for the parties in the above regard. It is the Adjudicating Authority who is to examine the merits of the Application I.A. No. 2691 of 2022 without being influenced by any observations made in this order after hearing both the parties. 18. We thus do not find any error in both the Orders of the Adjudicating Authority dated 08th June, 2022 and 31st Augus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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