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Insolvency and Bankruptcy - Case Laws
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2024 (4) TMI 238 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
CIRP - denial of rights to be heard to protect the Financial Interest of Hundreds of Home Buyers / Allottees - Applicability of Threshold - Requirement of joint filing by either 100 allottees or 10% of the total number of allottees of the same real estate project, whichever is less for application u/s 7 - Violation of principles of natural justice - denial of rights to be heard to protect the Financial Interest of Hundreds of Home Buyers / Allottees - appellant submits that the impugned order holding that the Section 7 Petition, filed under I & B Code, 2016, is not maintainable, since the Allottees, belong to different Projects, and the Impugned Order, was passed without, considering the facts, placed on record - wrongful interpretation of explanation (ii) of Section 5 (8) of the I & B Code, 2016.
HELD THAT:- In the instant case, the Appellant / Petitioner, takes a stand that in the Order dated 09.05.2022 of the National Consumer Disputes Redressal Commission (vide Consumer Complaint No. 1951 of 2016), the plea of the Respondent / Corporate Debtor ascribing reasons, in regard to the delay, relating to the time, when the Respondent / Corporate Debtor, accepted the bookings from the Allottees, and regularly raised demands and accepted amounts, from the Allottees, were rejected, a clear adverse circumstance, against the Respondent / Corporate Debtor, all the more, when the outbreak of Pandemic – Covid-19, came after a decade.
The emphatic stand of the Respondent / Corporate Debtor is that Sushant Megapolis Township, comprise of Multiple Commercial Real Estate Projects, all the sub-projects are independent of each other, and were being developed and sold as separate Projects, within the Township. Moreover, they were Registered, under RERA Act, 2016, with different RERA Registration Numbers. As a matter of fact, each Project, is further divided into Multiple phases, with different complete Schedules - Indeed, as per definition Section 5(8)(f) explanation (ii) of the I & B Code, 2016, the expressions 'allottee' and 'real estate project' shall have the meanings respectively assigned to them in clauses (d) and (zn) of Section 2 of the Real Estate (Regulation and Development) Act, 2016, (16 of 2016).
Section 7 of the I & B Code, 2016, provides for an initiation of Corporate Insolvency Resolution Process, by Financial Creditor. The two essential features of an Admission of an Application, under Section 7 of the Code’are (a) Existence of Debt and (b) Default - In fact, an Adjudicating Authority / Tribunal’s jurisdiction is restricted to determine, whether the Application is complete and whether, there is any Debt and Default, as per decision in Dr. H.N. Nagaraj vs. Edelweiss Asset Reconstruction Company Ltd. [2018 (7) TMI 968 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI].
The proceedings, under the I & B Code, 2016, are not a Litigation, to be decided by a Court of Law. It is not the Property, which is at the base of the Code. It is the Liquidity, which is the foundation for triggering the Corporate Insolvency Resolution Process.
In the instant case, the Respondent / Corporate Debtor, had executed, at least Three kinds of Agreements, with the Petitioners (before the Adjudicating Authority / Tribunal) (a) Plot Allottee Agreement (b) Builtup Unit Allottee Agreement and (c) Apartment Allottee Agreement - One cannot ignore an important fact, that the second proviso to Section 7(1) of the I & B Code, 2016, mentions that for ‘financial creditors’, who are ‘allottees’, under a ‘real estate project’, an application, for initiating Corporate Insolvency Resolution Process, against the Corporate Debtor, shall be filed jointly by not less than one hundred of such allottees, under the same real estate project or not less than ten percent of the total number of such allottees under the same real estate project, whichever is less.
In the present case, the Appellant / Petitioner and other Petitioners, who filed CP (IB) No. 596 (PB) / 2021, under Section 7 of the I & B Code, 2016, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, before the Adjudicating Authority / Tribunal, for initiating Corporate Insolvency Resolution Process, against the Respondent / Corporate Debtor, are from different numerous projects, and they have not established their case, as Creditors of a class, concerning any particular project, registered with The Real Estate (Regulation & Development) Act, 2016 (16 of 2016), with a view to fulfil the requirement of ‘10% or 100 Allottees’, as envisaged, as per Section 7 (1) of the I & B Code, 2016.
This Tribunal, on a careful consideration of divergent contentions, advanced on either side, considering the facts and circumstances of the instant case, comes to an irresistible and consequent conclusion that the CP (IB) No. 596 (PB) / 2021, filed by the Appellant / Petitioner and other Petitioners, before the Adjudicating Authority / NCLT, Principal Bench, New Delhi, is prima facie not maintainable in the eye of Law. Further, this Tribunal, on going through the Impugned Order, dated 06.01.2023 in CP (IB) No. 596 (PB) / 2021, passed by the Adjudicating Authority / Tribunal, the views expressed in dismissing the CP (IB) No. 596 (PB) / 2021, is free from any legal flaws.
Appeal dismissed.
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2024 (4) TMI 175 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Dismissal of Section 9 application - Appellant and Respondent are having relationship of Corporate Debtor and Operational Creditor or not - pre-existing dispute between the parties which will disallow initiation of CIRP proceedings or not.
Whether in the instant case, the Appellant and Respondent are having any relationship of Corporate Debtor and Operational Creditor? - HELD THAT:- The facts of the case clearly bring out that the Appellant was acting on the referral instructions of the Respondent and was issuing the air tickets on the basis of the credit card the customers details provided by the Respondent. The Respondent had also given the undertaking that if any debit note comes against those tickets, then they will be responsible. The plea of the Respondent that they are not having any debt and the Appellant is not an Operational Creditor as they were not supplying any goods or services to the Respondent is not tenable. It is concluded that there is a relationship of operational creditor and corporate debtor between the Appellant and Respondent.
Whether there is any pre-existing dispute between the parties which will disallow initiation of CIRP proceedings? - HELD THAT:- Respondent was undertaking the responsibility for issuance of the debit notes and when ADMs were issued by the airlines, a debt arises and the unconditional undertakings will act as an acknowledgment of debt towards the Appellant - When the demand notice was issued under Section 8 of the IBC, 2016 on 22.08.2018, it was disputed in its reply by the Respondent vide letter dated 08.09.2018. There are police complaints also on record. It had become a criminal case. Thus it had become a dispute and is not a spurious, hypothetical or illusory dispute.
From the correspondence on record, it can be clearly made out that there is a pre-existing dispute. The Adjudicating Authority has gone into the circumstances of their business dealings and have come to the conclusion that the dispute raised by the respondent is plausible and not a patently feeble legal argument. Thus, when the Appellant received the reply to Section 8 demand notice raising a dispute, the Section 9 petition could not have been proceeded under I&B Code against the respondent.
For CIRP under Section 9 of IBC, 2016 to be initiated, the Appellant is required to prove that the debt is due, it has not been paid and the debt is an undisputed debt. In this particular case, there is no record to suggest that there is any contract entered into between the parties but there is a evidence of pre-existing dispute. The ingredients laid down under Section 9 read with the requirements laid down by the judicial pronouncement are not fulfilled. Therefore, in the present case owing to the pre-existing dispute between the parties, the Adjudicating Authority has rightly rejected the Section 9 Application.
There are no error in the orders of the Adjudicating Authority - appeal dismissed.
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2024 (4) TMI 119 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Seeking restoration of petition, which was dismissed for non prosecution - seeking substitution of the Appellant in place of the Bank of Baroda in the main company petition, after dismissal of the main company petition - whether the Appellant had taken appropriate steps to substitute itself in place of the original applicant, Bank of Baroda? - HELD THAT:- It is the case of the Appellant that their counsel was present during the hearing of the main company petition who informed the Adjudicating Authority that pursuant to the assignment agreement they had already filed an I.A. with the NCLT Registry seeking substitution of the Appellant in place of Bank of Baroda in the main company petition but the said IA was yet to be numbered and notified for hearing.
The Appellant was diligent and vigilant in pursuing the main company application and had taken steps to file the substitution application. Want of diligence or wilful inaction is attributable only when something that is required to be done is not done at all or not done in a timely manner - there are no delay or negligence on the part of the Appellant to deprive him of his statutory and legitimate right to prosecute the main company petition.
The Adjudicating Authority in the impugned order, on the one hand, has held that the Appellant had stepped into the shoes of the Bank of Baroda and had the same right against the Corporate Debtor as that of Bank of Baroda including all rights exercisable under the IBC - Appellant cannot be treated as the original applicant of the main company petition and hence the said petition cannot be restored by the Appellant. The Adjudicating Authority further held that in terms of Rule 48 of NCLT rules, 2016, only the original applicant can approach or file an application before the Adjudicating Authority for restoration of the application. The original application has been dismissed on ground of non-appearance of the Bank of Baroda and since in this application, the Appellant was not a party, it could not have filed the restoration application.
Coming to the definition of the word “applicant” in the NCLT Rules, 2016 we find that Rule 2(4) defines “applicant” to mean a petitioner or an appellant or any other person or entity capable of making an application including an interlocutory application or a petition or an appeal under the IBC. Tested against this definition of an “applicant”, let us now see whether the Appellant fits into this definition of an “applicant” - The Adjudicating Authority has also expressly acknowledged this position by stating that following the assignment agreement, the Appellant had stepped into the shoes of the original applicant, Bank of Baroda. The Adjudicating Authority has further opined in the impugned order that the Appellant enjoyed the same right against the Corporate Debtor as that of Bank of Baroda. It also held that the Appellant as an assignee was entitled to all rights exercisable under the IBC. That being the case, the Appellant clearly qualifies to be an “applicant” under the NCLT Rules and therefore enjoys the locus to file the restoration application before the Adjudicating Authority.
When an application which is dismissed for non-appearance of the petitioner can be restored on satisfying the Tribunal that he was prevented by some sufficient cause from appearing before the Tribunal, likewise, in the present facts of the case, opportunity ought not to be denied to the Appellant from seeking restoration of the main company petition which has been dismissed for non-prosecution by the original applicant. It is not in the interest of justice to deny a person the opportunity to file an application for restoration for no ostensible lapses.
The Adjudicating Authority was not correct in dismissing the application for restoration - the impugned order is set aside - Appeal allowed.
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2024 (4) TMI 118 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Admission of section 7 application - financial debt or not - financial creditor or not - default or not in the re-payment of the loan by the Corporate Debtor which entitled the Respondent No. 1 to file a Section 7 application in the capacity of a Financial Creditor qua the Corporate Debtor - when a debt is to be treated as a financial debt in the context of IBC? - HELD THAT:- In PIONEER URBAN LAND AND INFRASTRUCTURE LIMITED & ANOTHER VERSUS UNION OF INDIA & OTHERS [2019 (8) TMI 532 - SUPREME COURT], it has been held that any debt to be treated as financial debt, there must happen disbursal of money and the disbursal must be against consideration for time value of money. The concept of time value of money has been further explained to also include a transaction which does not necessarily culminate into money being returned to the lender or interest being paid in respect of money that has been borrowed. Holding Section 5(8) to be a residuary provision which has a catch-all nature, it held that it can include anything which is equivalent to the money that has been loaned as long as commercial effect of borrowing or profit as the aim is discernible.
The Hon’ble Supreme Court while dilating on this subject in the matter of PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VERSUS AXIS BANK LIMITED ETC. ETC. [2020 (2) TMI 1259 - SUPREME COURT] propounded that in terms of Section 5(8) of the IBC, the essential condition of financial debt is disbursement against the consideration for time value of money.
Having taken cognizance of the statutory provisions of IBC and the reigning judgements of the Hon’ble Apex Court, it can be safely concluded that it is settled law that for any debt to be treated as financial debt, the pre-requisite is disbursal of money to the borrower for utilization by the borrower and that the disbursal must be against consideration for time value of money even if it is not interest bearing.
When a Financial Creditor who has disbursed money to a Corporate Debtor against consideration for time value of money can trigger the insolvency resolution process against the Corporate Debtor? - HELD THAT:- As per the scheme of IBC, that stage arises when a default takes place, in the sense that a debt which has become due, in fact and in law, but has not been paid. “Default” as defined in Section 3(12) of IBC means non-payment of a debt once it becomes due and payable, and non-payment could be of the whole amount or even part thereof. This has been elaborately discussed by the Hon’ble Supreme Court in the case of SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT] holding that What is important is that at this stage, if an application is filed before the adjudicating authority for initiating the corporate insolvency resolution process, the corporate debtor can prove that the debt is disputed. When the debt is so disputed, such application would be rejected.
In the present case, it is an undisputed fact that a sum of Rs. 5 crore was transferred to the account of Corporate Debtor and the disbursal of this amount took place on 01.01.2014. Sufficient material has been placed on record by the Respondent No. 1 to prove that money was actually disbursed to the Corporate Debtor - Neither has any claim been made that any part of this sum was repaid by the Corporate Debtor. Respondent No. 1 has thus produced incontrovertible and unimpeachable evidence to prove the existence of debt liability on the part of the Corporate Debtor.
The IBC does not provide for any prescriptive requirement for the Financial Creditor to place on record formal written agreements/documents between the parties to establish that the disbursal made was in the form of loan with interest. Given this background we therefore find that the Adjudicating Authority committed no error in holding that there was a financial debt owed by the Corporate Debtor to Respondent No. 1.
The essential ingredients of financial debt in the context of IBC consists of disbursal accompanied by consideration for time value of money. We now proceed to examine whether in the present case, disbursement of money took place against the consideration for time value of money and whether commercial effect of borrowing is found to underpin the transaction. The concept of time value of money has nowhere been defined in the IBC. Time value of money is not only a regular or timely return received for the duration for which the amount is disbursed as an amount in addition to the principal, but also covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration - Once the Adjudicating Authority is subjectively satisfied that there is a debt and a default has been committed by the Corporate Debtor and the Section 7 application is complete in all respects, the Adjudicating Authority in the exercise of summary jurisdiction has to admit the Section 7 application - this is a case where all the pre-requisites for filing a Section 7 stood fulfilled and the Adjudicating Authority cannot be held to have committed an error in admitting the Corporate Debtor into CIRP for having defaulted in repaying a financial debt which was above the threshold limit.
The Adjudicating Authority has rightly come to the conclusion that the Respondent No.1 has successfully proved the financial debt and default on part of the Corporate Debtor in admitting the Section 7 application and initiating the CIRP process - there are no reason to interfere in the impugned order passed by the Adjudicating Authority - appeal dismissed.
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2024 (4) TMI 40 - SC ORDER
Modification in the Resolution Plan - HELD THAT:- The National Company Law Appellate Tribunal (NCLAT), has clarified that the clauses in the resolution plan permitting alteration of the layout and building plan including height, location and common area in future are permissive, albeit any change will require approval of the competent authority, that is, Real Estate Regulatory Authority (RERA), Maharashtra. Therefore, the resolution applicant cannot alter the layout and modify the plan on its own without approval.
In view of the aforesaid clarifications given by the resolution applicant – Ashdan Properties Private Limited, by which they are bound, no further order or direction is required to be passed - appeal disposed off.
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2024 (4) TMI 39 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Approval of Resolution Plan - whether the Resolution Plan submitted, which was approved by the Adjudicating Authority, is in compliance of provisions of Section 30, subsection (2) of IBC - HELD THAT:- The extent of judicial review of Resolution Plan approved by the CoC in its commercial wisdom are very limited. The Hon’ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA & OTHERS [2019 (11) TMI 731 - SUPREME COURT] as well as in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK & OTHERS [2019 (2) TMI 1043 - SUPREME COURT] has laid down that commercial wisdom of the CoC has to be given paramount importance and limited jurisdiction provided to interfere in the approval of the Plan by the Adjudicating Authority or the Appellate Tribunal, i.e., only when the Plan is not in compliance with statutory provisions of Section 30, sub-section (2).
The law is thus well settled that commercial wisdom of the CoC approving the Plan cannot be interfered and it can be interfered only when there is statutory non-compliance, i.e., non-compliance of Section 30, subsection (2). Thus, we need to answer the question as to whether there is statutory non-compliance in the present case - the Hon’ble Supreme Court in JAYPEE KENSINGTON BOULEVARD APARTMENTS WELFARE ASSOCIATION & ORS. VERSUS NBCC (INDIA) LTD. & ORS. [2021 (3) TMI 1143 - SUPREME COURT], held that Operational Creditors are to be paid in priority over the Financial Creditors only by cash and not by issuing of equity.
The distribution of the amount to the Operational Creditor (other than Government Departments) is clearly contrary to provisions of Section 30 (2)(b)(ii). The Adjudicating Authority has failed to advert to Section 30, sub-section (2) (b) (ii) and failed to notice that amount proposed to the Operational Creditor is clearly contrary to Section 30(2)(b)(ii) - order of Adjudicating Authority approving the Resolution Plan cannot be sustained.
The order passed by Adjudicating Authority dated 09.11.2023 requires to be modified. No other part of the Resolution Plan being under challenge, ends of justice will be served in modifying the order of the Adjudicating Authority only with respect to distribution to the Operational Creditor. It was obligatory for the Resolution Plan to comply with the provisions of Section 30(2)(b)(ii) in the facts of the present case. Hence, the order is modified to make it in compliance of the provisions of Section 30, sub-section (2) (b)(ii).
The order of Adjudicating Authority dated 09.11.2023 is modified to the extent of approving the distribution to the Operational Creditors, including the Appellant. Rest of the order is affirmed - appeal disposed off.
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2024 (4) TMI 13 - SC ORDER
Condonation of delay in filing appeal - it was held by NCLAT that Auction having already completed on 04.04.2022, there was no occasion to stay the auction. Further process of Sale was to be undertaken as per the Liquidation Regulations - HELD THAT:- Admittedly, the delay in filing the appeal is beyond the maximum period which can be condoned under Section 62 of the Insolvency and Bankruptcy Code 2016.
The appeal is hence dismissed on the ground of limitation.
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2024 (3) TMI 1317 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Doctrine of subrogation - Allowing recourse to the Financial Creditors against the Personal Guarantors of Asian Colour Coated Ispat Limited - Resolution Plan approved - whether the Financial Creditor can proceed against the Personal Guarantors in absence of any debt after extinguishment of such debts upon assignment in terms of the RBI Prudential Framework for Resolution of Stressed Assets dated 07.06.2019 and as stipulated in the approved Resolution Plan? - HELD THAT:- As a general rule, the doctrine of subrogation is an absolute right of the guarantor, however, the issue becomes different, if it falls within the domain of the Code in the context of CIRP proceedings. We note that as per notification dated 15.11.2019, the Personal Guarantors became liable under the Code and therefore, the treatment of Personal Guarantors under the Code are to be treated differently vis-à-vis under the contract of guarantees under the Indian Contract Act, 1872.
The denial of right of subrogation is no more res-judicata and has been decided in catena of the judgments by the Hon’ble Supreme Court of India.
Hon’ble Supreme Court of India in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA & OTHERS [2019 (11) TMI 731 - SUPREME COURT] noted that the Financial Creditors can pursue their claims against the Personal Guarantors to the Corporate Debtor and right of subrogation gets extinguished, although the apex Court decided not to express conclusive opinion which might have affected them pending litigations on account of invocation of such guarantees.
It is now well settled law, in light of the Essar Case that rights of subrogation that may arise against the Corporate Debtor can be extinguished under the Resolution Plan and therefore the arguments of the Appellant on issue of rights of subrogation’s are not convincing. If the rights of subrogation are allowed to continue against the Corporate Debtor under the management of the new SRA, the same would have the effect of putting the SRA and the Corporate Debtor in the same position as prior to its insolvency resolution. The allegation of the Appellant pertaining to differential treatment due to extinguishing their rights of subrogation under the approved Resolution Plan against the Corporate Debtor is unfounded, which is only to ensure that the SRA takes control of the Corporate Debtor on a clean slate without carrying any previous liability baggage.
The extinguishment of Personal Guarantors right of subrogation is unavoidable and inaccessible fact in insolvency cases and it requires to be respected by all stakeholders and any departure from such principles will have adverse impact on revival of the Corporate Debtors, interest of the Financial Creditors and overall negative impact on the national economy.
The financial creditors have reserved the rights to proceed against the personal guarantors like the Appellant herein in terms of the “Excluded Rights” in approved Resolution Plan. There is no question of transfer of a “mere right to sue” and in such circumstances, we feel that it is a structured financial deal in form of Resolution Plan exercised based on the commercial wisdom, with aim of resolution of a corporate debtor, as well as to ensure that financial creditors are able to recover their outstanding debts as guaranteed by the Personal Guarantors, the Appellants herein.
Alleged non existing of debts in the books of the Financial Creditors and regarding treatment in the books of the financial creditors with respect to such continuing rights of the financial creditors against the personal guarantors of the Corporate Debtor after the approval of the Resolution Plan - HELD THAT:- The treatment in the Books of the Financial Creditors is based on RBI Prudential norms which were issued with several purposes, including and not limited to, discouraging the Financial Creditors to resort to ever greening of loans. We feel that such RBI guidelines do not intent to give undue benefits to the Personal Guarantors of the Corporate Debtors or debar the Financial Creditors in pursuing their legal rights to recover their outstanding debts from the Personal Guarantors to the Corporate Debtor. After all, it cannot be anyone’s case to write off public money by such circuitous route or hypothetical legal assumption.
The Hon'ble Supreme Court, in SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [2019 (1) TMI 1508 - SUPREME COURT], has categorically recognised the concept of preserving the corporate debtor as a going concern while ensuring maximum recovery for all creditors to be the intent of the Code.
Thus, commercial wisdom of the CoC has been given supremacy and no grounds exist for the Adjudicating Authority or Appellate Tribunal to interfere.
There are no error in the Impugned Order - appeal dismissed.
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2024 (3) TMI 1294 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI
Admission of section 9 application - Operational Creditors - debt payable or not - prior existence of the dispute between the parties or the pendency of other proceedings filed elsewhere - effect upon the liability of Corporate Debtor in respect of the unpaid operational debt.
Whether based on the documentary evidence which were furnished by the Corporate Debtor whether any debt was payable at all and what is the basis on which it has been claimed to have been paid? - HELD THAT:- A careful scrutiny of the contract agreement dated 03.09.2012 particularly in the context, to its contents provided in clause I.10 and I.40, dealing with the schedule of payment agreed to show that it does not envisage the payment by the Corporate Debtor to the Operational Creditor, would be depending only upon the receipts of amount made from M/s. GVK Coal (M/s. Tokisud Company Pvt. Ltd.). Hence, as far as the purchase order and the contract agreement are concerned, they will have to read only for the contract purposes and not to the liability of payment of the dues to the Operational Creditor. Thus, it could be rightly inferred that prior dues left unpaid by the Corporate Debtor to the Operational Creditor which necessitated invocation of Section 9 of the Insolvency and Bankruptcy Code, 2016, was justified in the eyes of law.
Whether there is a prior existence of the dispute between the parties or the pendency of other proceedings filed elsewhere? - whether such will at all have any effect upon the liability of Corporate Debtor in respect of the unpaid operational debt? - HELD THAT:- The said issue has been dealt with by the Hon’ble Apex Court in matters of Mobilox Innovations Private Ltd. vs Kirusa Software Pvt. Ltd. [2017 (9) TMI 1270 - SUPREME COURT], wherein it was ultimately held that the Adjudicating Authority at the stage when it is examining an application under Section 9, will only have confine itself to determine whether there happens to be an operational debt, exceeding amount prescribed under the Code and further the only precaution which is required to be taken is that based on documents on rigour as furnished, the aspects of liability of dues stand established and that if any of the ingredients as aforesaid exists, the application under Section 9 would be sustainable.
As per the records, there is nothing on record to otherwise that the Corporate Debtor had any intention to pay the amount due prior to the date the Demand Notice was issued by the Operational Creditor and that there was existence of any dispute with Operational Creditor by the Corporate Debtor prior to the receipt of demand notice served as a mandatory notice in terms of Section 7 of the Insolvency and Bankruptcy Code, 2016. Hence, since despite the demand notice the amount therein was not paid by the Corporate Debtor in all to the Respondent/Operational Creditor. the existence of amount due to be paid becomes an admitted fact, more so in the light of the aforesaid fact that the Corporate Debtor has not raised any dispute as per terms of the purchase order - the Adjudicating Authority while admitting the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 and dealing with the aspect of moratorium under Section 14 of the Code had not committed any legal error of law and fact in relation to the guidelines for the purpose of arrears or claim raised under Section 9 of the Code.
The act of the Adjudicating Authority in declaring the moratorium for the purpose of Section 14 of the Code, in the light of provisions contained under Section 9 dealing with the aspect of remittance of the dues claimed, does not appear to suffer from any apparent error of law or a fact on record which could call for acceptance of the defence taken by the Corporate Debtor or questioning the existence of the dues to be paid and/or admitting the existence of any prior dispute regarding the amount due remaining unpaid.
The admission of proceedings by the Adjudicating Authority under Section 9 of the Insolvency and Bankruptcy Code do not suffer from any apparent error of fact and law, calling for any interference while exercising Appellate jurisdiction under Section 61 of the Insolvency and Bankruptcy Code, 2016 - Appeal dismissed.
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2024 (3) TMI 1293 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI - LB
Seeking grant of Interim Stay of the Sale Notice - sale of assets of the Corporate Debtor and the property of one Mr. S. Srinivasan (Guarantor) - HELD THAT:- This Tribunal, pertinently points out, that obviously, the Learned Counsel for the Appellant/Petitioner, is not desirous of assailing the subsequent E-auction Notice dated 15.02.2024, (being the later development, after the earlier Auction Notice dated 16.09.2023) and in the absence of any challenge to the subsequent E-auction Notice dated 15.02.2024, then in law, it amounts to waiver, Acquiescence and also Estoppel By Conduct, of the Appellant/Petitioner.
The instant Comp. Appeal filed by the Appellant, is only an exercise in futility/otiose one, in the considered opinion of this Tribunal. As such, this Tribunal is not inclined to entertain the instant Comp. Appeal and Dismisses the same, at the Admission stage, without traversing, or delving deep into the subject matter in issue.
Company appeal dismissed.
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2024 (3) TMI 1292 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI
Ownership of leasehold rights over the subject plot - demand for enhanced land cost was raised much before initiation of CIRP - Applicability of clean slate principle - Seeking quashing of demand notice - direction to to issue ‘No Objection Certificate’ (NOC) for the subject plot - whether in the factual matrix of this case, the successful resolution applicant can be granted ownership of leasehold rights over the subject plot without payment of dues to the respondent?
HELD THAT:- Hon’ble Supreme Court in the MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM) VERSUS ABHILASH LAL & ORS. [2019 (11) TMI 844 - SUPREME COURT] has held that the provisions of Section 238 of IBC, 2016 do not override the rights of Municipal Corporation of Greater Mumbai (MCGM) to control and regulate how its properties are to be dealt with. It is public duty of MCGM to control and regulate how its properties are dealt with. The provisions of Section 238 could be of importance when the properties and assets are of debtor and not when a third party like MCGM are involved and therefore in the absence of approval in the terms of Sections 92 and 92-A of the Mumbai Municipal Corporation Act, 1880 (MMC), the Adjudicating Authority under IBC, 2016 cannot create a fresh interest in respect of MCGM’s property and lands.
From the perusal of the aforesaid judgment, it follows that the rights of the Public Sector/ State Land Development Authorities on assets owned by them cannot be overridden by provisions of IBC, 2016 and any transfer to the successful Auction Purchaser or Successful Resolution Applicant has to be in accordance with the terms and conditions of the original allotment or lease deed or policy of the Authority.
The demand for enhanced land cost was raised much before initiation of CIRP and evidently, it was not brought to the notice of the IRP or the CoC. Even the pending litigation before Civil Judge (Senior Division), Ludhiana regarding the subject plot was not brought to the notice of the CoC and the successful Resolution Applicant.
The protective umbrella of IBC, 2016 for CIRP cannot be extended to an extent that public authorities are asked to part with their assets without full payment of their dues or without compliance to terms and conditions of the sale or lease deed or their transfer policy. The ‘clean slate principle’ will not apply to the factual matrix of the present case, where there was prior demand from public sector land authority which was also not disclosed during CIRP to the IRP or the CoC.
The Adjudicating Authority in the impugned order has rightly noted that the payment demanded by the respondent is to clear the defect in the title of the land itself, and is not linked to the CIRP proceedings.
There are no reason to interfere in the order of the Adjudicating Authority - appeal dismissed.
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2024 (3) TMI 1291 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Approval of the Resolution Plan - Requirement of liability of PF and ESI dues to be paid in Full - Claim u/s 7A, 7Q, and 14B of the Employees' Provident Funds & Miscellaneous Provisions Act 1952 - Approval of Resolution Plan in which only amount proposed was amount u/s 7A - HELD THAT:- Similar issue decided in REGIONAL PROVIDENT FUND COMMISSIONER, VATWA, EMPLOYEES PROVIDENT FUND ORGANIZATION VERSUS SHRI MANISH KUMAR BHAGAT, (RESOLUTION PROFESSIONAL OF M/S. PERFECT BORING PVT. LTD.) , M/S. N.A. ROTA MACHINES & MOULDS INDIA [2023 (10) TMI 535 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI]. One of the claims which was not paid by the Resolution Plan in the said case was also claim under Section 14B of the Employees Provident Fund Miscellaneous Provisions Act, 1952. This Tribunal taking note of the claim under Section 14B took the view that the Central Board is empowered to waive the damages under Section 14B as per the scheme under the 1952 Act. It was observed that Section 14B referred to recommendation by Board under the 1952 Act. The said Act having been repealed and now repealed by the IBC Code, the power of recommendation can be exercised by NCLT.
This Tribunal ultimate directions in paragraph 18(i) (c) permitted the SRA to make an application to Central Board for waiver of 100 per cent damages along with the copy of the order. In the facts of the present case, we are inclined to grant liberty to SRA to make an application to the Central Board for waiver of the amount of damages under Section 14B as provided in Section 14B of the 1952 Act.
Now coming to another part of the claim which was admitted in the CIRP i.e. amount under Section 7Q amounting to Rs.75,62,576/- - the said amount is required to be paid by SRA to the Appellant.
The SRA- Respondent No.3 is directed to make payment of amount of Rs.75,62,576/- within the period of two months from today to the Appellant which was admitted claim under Section 7Q - With regard to amount admitted under Section 14B of Rs.1,05,63,927/-, liberty granted to the SRA to make an application to the Central Board to waive 100% damages levelled under Section 14B.
The impugned order passed by the Adjudicating Authority is affirmed.
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2024 (3) TMI 1290 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI – LB
Rejection of Section 7 application - rejection on the ground that there is non-compliance of order dated 11.08.2022 and 05.12.2022 - direction for publication of notice in two leading newspapers not complied with - issuance of fresh notice to the Respondents and directing the Appellant to serve notice along with copy of petition to the Respondent by all modes and file proof of service.
HELD THAT:- From the order dated 11.08.2022, it is noted that notices were issued and direction was to issue notice by paper publication in two leading newspapers. On 16.09.2022, the Respondent have appeared before the Adjudicating Authority through counsel and time was allowed to them to file vakalatnama and counter affidavit and thereafter again on 05.12.2022 fresh notices were directed to be issued. Affidavit of service was already filed by the Appellant on 08.08.2022, however, thereafter order for publication was issued. The Appearance of counsel on behalf of the Corporate Debtor on 16.09.2022 clearly indicates that the Corporate Debtor was well aware of the proceedings.
In the present appeal, inspite of issuance of notice and publication in newspapers, no one appeared for the Corporate Debtor - the Adjudicating Authority committed error in rejecting the Section 7 application due to non-compliance of order dated 11.08.2022 and 05.12.2022. The Corporate Debtor having appeared before the Adjudicating Authority through counsel who took time for filing vakalatnama and counter affidavit, the Adjudicating Authority ought to have dismissed the application for non-compliance.
The order dated 02.02.2023 set aside - Section 7 application is revived before the Adjudicating Authority to be heard and decided in accordance with law - appeal disposed off.
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2024 (3) TMI 1239 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
CIRP - Appellant seeks to modify the project completion date from 03.12.2023 to 03.12.2024, as stated in the subsequent certificate issued by the Real Estate Regulatory Authority (RERA) - correction of error in exercise of inherent jurisdiction of this Tribunal - HELD THAT:- There can be no dispute to the preposition that this Tribunal has inherent power to correct mistake or slip occurred in the order that such power is preserved in the Rule 11 of the NCLAT Rules, 2016 but the power cannot be exercised when there is no mistake or slip in the order or decree. Present is not a case where any mistake or slip occurred in the order passed by this Tribunal. The date 03.12.2023 was a date which was noticed by the Adjudicating Authority in the impugned order and which date is reflected in the order while dismissing the appeal.
This is not a fit case to exercise any inherent jurisdiction to correct any error in the judgment - Application is rejected.
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2024 (3) TMI 1238 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Admission of Section 7 application under IBC - CIRP initiated against the Corporate Debtor, Personal Guarantor and the Corporate Guarantors - OTS proposal has been accepted by the Bank - HELD THAT:- The settlement agreement is taken on record and the CIRP proceedings against the Corporate Debtor, Corporate Guarantors as well as proceedings under Section 95 against the Personal Guarantors is closed. The orders impugned in these appeals dated 04.07.2023, 08.12.2023 and 06.12.2023 are set aside. CIRP is closed and Corporate Debtor, Corporate Guarantors and Personal Guarantors are freed from CIRP. Liberty is reserved to the Bank to make an application.
Learned counsel for the Bank submits that with regard to the Appeals of the Personal Guarantors amount of Rs.2 Lakhs each has been paid to the IRP - In view of the aforesaid amount having been paid, no further amount have to be paid to the IRP. Amount of Rs.5 Lakhs as required to be paid, if not already paid, shall be paid by the Appellant within two weeks.
Amount deposited by the Appellant in Company Appeal shall now be handed over to the Bank of India as per the Settlement Terms - appeal disposed off.
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2024 (3) TMI 1237 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Admission of Section 7 application - It is the case of the Appellant that after restructuring the debt was not due on alleged default dates claimed by the Respondent, as such the admission of Section 7 application by the Adjudicating Authority was illegal and perverse - HELD THAT:- The Corporate Debtor requested for restructuring benefit being MSME and the Respondent sanctioned the same vide sanction letter dated 30.03.2019 as per their guidelines dated 15.01.2019 applicable to all MSME including the Corporate Debtor. We have taken into consideration the pleadings of the parties and note that for restructured Funded Interest Terms Loan (FITL) and Working Capital Term Loan (WCTL), moratorium was indeed allowed, however the said moratorium was only for principal amounts and not for interests whereas the Appellant has taken the plea that the moratorium was blanket for both principal amount as well as for the interest component and therefore, the moratorium was absolute.
As regard, the different date of default as alleged by the Appellant, both the parties during the pleadings, brought out that the Adjudicating Authority had asked the Respondent to file a supplemental affidavit which was filed on 16.04.2019 where the Respondent elaborated that the Corporate Debtor committed first default in 2018 the loan accounts of the Corporate Debtor were classified as NPA on 30.04.2018, however, on payment of over due amount the account of the Corporate Debtor were upgraded to the standard category.
The Corporate Debtor, having not deposited the interest from time to time, defaulted and outstanding balance remained continuously in excess of sanction limit, entitling the Respondent bank to classify the loan accounts of the Corporate Debtor as NPA - there are no strength in the arguments of the Appellant regarding alleged wrong date of defaults which has been consciously elaborated in the Impugned Order.
Thus, the grounds of the Appellant that there was no default whatsoever is not found to be true in view of various loans agreements, restructuring approvals letters, supplemental terms loan agreements, various statement of accounts provided by the banks w.r.t to the Corporate Debtor. There was clear default on the part of the Corporate Debtor to the Respondent Bank - there are no error in the Impugned Order which has gone into details of all the facts and came to the clear conclusion that there has been default on the part of the Corporate Debtor.
Appeal dismissed.
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2024 (3) TMI 1236 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
CIRP - Delay in making claim by the Homebuyers - Condonation of delay of 544 days in submitting the claim FORM -CA - seeking a direction to the Resolution Professional/ Respondent to accept the claim of the Applicant as Financial Creditor - HELD THAT:- The very fact that effected party in this case has given a concession in so many words that it has no objection if the claim of the Appellant is also entertained and the delay in filing the claim is condoned, therefore, it is not required to go into the merits of this case and decide the appeal only on the basis of concession made by the Mr. Ritesh Jain.
The present appeal succeeds and the Impugned Order is set aside. The Respondent/ Resolution Professional shall now accordingly include the claim of the Appellant and submit the updated claim to the Adjudicating Authority - Appeal allowed.
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2024 (3) TMI 1235 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
CIRP - Completion of Real estate project during the Proceedings - Appellant filed an application seeking permission for unsecured and secured financial creditors to vote on the Project Completion Proposal - HELD THAT:- The Corporate Debtor is allowed to complete the project under the guidance of the IRP, in terms of the affidavit filed on 24.08.2023, 04.09.2023 and 23.12.2023 and also on the principles of reverse CIRP which has been propounded by this Tribunal in the case of FLAT BUYERS ASSOCIATION WINTER HILLS – 77, GURGAON VERSUS UMANG REALTECH PVT. LTD THROUGH IRP & ORS. [2020 (2) TMI 1409 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI].
The request has been made by the appellant is hereby accepted and as a result thereof, the present appeal is hereby disposed of.
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2024 (3) TMI 1234 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Entitlement to the percentage of fee in respect of the sales effected by appellant (liquidator) - The appellant, who served as the liquidator for over a year, contends that his fee should be based on the total amount realized from asset sales during the liquidation period. The main contention revolves around the interpretation of Regulation 4 of the IBBI (Liquidation Process) Regulation, 2016, and a circular issued by the IBBI clarifying the term "amount realized." - HELD THAT:- There is an error in the approach of the Tribunal while rejecting the application filed by the appellant which deserves to be reconsidered in terms of the order being passed herein. The issue in the present case is that the appellant effected various sales during the period he remained the liquidator of the Corporate Debtor which has been set up by the appellant in the claim application filed before the present Liquidator in which it is shown that total amount of sale is Rs. 78,47,31,778/- and the appellant is accordingly entitled to the percentage of fee in respect of the sales effected in the first six months, next 6 months, next one year and thereafter etc.
However, this aspect of the matter has not been taken into consideration either by the present Liquidator or by the Ld. Tribunal whereas it is very much clear not only from Regulation 4 (3) (unamended provision) that the amount realized is to be considered but also from Circular dated 28.09.2023 by which the term “amount realized” has been further clarified.
The impugned order is hereby set aside whereby the application filed by the appellant has been dismissed. The matter is remanded back to the Learned Tribunal which restoring the application - Appeal allowed by way of remand.
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2024 (3) TMI 1182 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Liquidation of the Corporate Debtor - The right of the appellant to propose a revised resolution plan - Chance to revive the corporate debtor, emphasizing the entity's MSME status and its potential for rehabilitation - HELD THAT:- The IBC itself recognises the right of MSME to revive a Corporate Debtor and even if certain ineligibility under Section 29A are not attracted. The object of Corporate Insolvency Resolution Process is always to revive the Corporate Debtor and liquidation being the last resort, which is nothing but a corporate death.
The present is a case where the Appellants – Promoters of the Corporate Debtor have undertaken to liquidate the entire debt of the Financial Creditor, who is the only Financial Creditor consisting of 100% CoC. It is relevant to notice that there are no other creditors of the Corporate Debtor. It is also relevant to notice that Appellant is making efforts from very beginning to revive the Corporate Debtor - When the Appellant is ready to liquidate the entire debt of the Financial Creditor/, there are no reason to deny an opportunity to revive the Corporate Debtor on its feet. There is no doubt that Financial Creditor is entitled to entire debt and it cannot be directed to take any haircut. The present is a case where the Appellant has undertaken to clear the entire claim, which was admitted in the CIRP.
The Adjudicating Authority committed error in not accepting the Bank Draft of Rs.75 lakhs shown to the Court on the date when the matter was heard. The Adjudicating Authority ought to have given an opportunity to deposit the Bank Draft to complete the payment of Rs.1 crore as was directed by the Adjudicating Authority.
The order passed by Adjudicating Authority is set aside - the order dated 07.08.2022 passed in IA 64 of 2023 directing the liquidation is set aside - Appellant is permitted to deposit the entire balance amount of Rs.4,92,81,826/- within 30 days from today by the Bank Draft or RTGS to the Bank. The Appellant shall bear entire CIRP costs.
Appeal disposed off.
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