2021 (1) TMI 1207 - AT - Insolvency and Bankruptcy

Date of operation (coming into effect) of order passed by the Adjudicating Authority - whether the order becomes operative from the date it is pronounced or the order become operative only when it is uploaded on the website? - HELD THAT - From the fact which has been brought on record, it is clear that the order dated 09.03.2018 was pronounced by the Adjudicating Authority, which was duly shown in the cause list for the date 09.03.2018 at Item No. 1 under the heading pronouncement of the order - It is also apparent from the record that the order was uploaded on the website on 22.06.2018 which fact has been noticed in the subsequent order of the Adjudicating Authority dated 30.07.2018. The fact that order has not been uploaded till 22.06.2018 whether it shall be treated to have taken away the implementation of the order dated 09.03.2018, is the question to be answered. In the present case, we have already noticed that the Application under Section 7 was filed in the year 2017. Notices were served on the Corporate Debtor as recorded by the Court on 15.01.2018. Application under Section 7 was heard on 30.01.2018 and order was pronounced on 09.03.2018. It is not permissible either the Corporate Debtor or any other stakeholders to contend that the order shall not become operative on 09.03.2018 when it was pronounced - It is the case of the Appellant that vide Memorandum of Understanding dated 19.04.2018 he has been allotted 20 units in lieu of the outstanding debt on account of legal services rendered to Corporate Debtor. When Section 7 petition already admitted on 09.03.2018 and Moratorium has kicked in, there was no authority in the Corporate Debtor to enter into a Memorandum of Understanding with regard to its property and assets. Appeal dismissed.

Summary

Issues Involved:
1. Operative Date of Adjudicating Authority's Order
2. Validity of Memorandum of Understanding dated 19.04.2018
3. Rejection of Application for Amendment (I.A No. 445 of 2021)
4. Consideration of Appellant’s Claim on Merits

Issue-wise Detailed Analysis:

1. Operative Date of Adjudicating Authority's Order:
The primary issue was whether the order passed by the Adjudicating Authority becomes operative from the date it is pronounced or when it is uploaded on the website. The order dated 09.03.2018 was pronounced and shown in the cause list on that date. Despite being uploaded only on 22.06.2018, the Tribunal held that the order became operative on 09.03.2018 when it was pronounced. Rule 150 of the National Company Law Tribunal Rules, 2016, which governs the pronouncement of orders, was cited to support this conclusion. The Tribunal emphasized that the legal consequences of the order flow from its pronouncement, and any delay in uploading does not suspend its operation.

2. Validity of Memorandum of Understanding dated 19.04.2018:
The Appellant argued that based on a Memorandum of Understanding (MoU) dated 19.04.2018, he should be considered a Financial Creditor instead of an Operational Creditor. However, since the Corporate Insolvency Resolution Process (CIRP) had already commenced on 09.03.2018, the Tribunal held that the Corporate Debtor had no authority to enter into the MoU. The MoU was deemed void and inoperative as it violated Section 14 of the Insolvency and Bankruptcy Code, 2016, which imposes a moratorium on the transfer of assets once CIRP is initiated.

3. Rejection of Application for Amendment (I.A No. 445 of 2021):
The Appellant sought to amend his earlier application to include claims as a Financial Creditor based on the MoU. The Tribunal upheld the Adjudicating Authority’s decision to reject this amendment. The Tribunal reasoned that since the MoU was void, the basis for the amendment was invalid. Thus, the application for amendment (I.A No. 445 of 2021) was rightly rejected.

4. Consideration of Appellant’s Claim on Merits:
The Appellant expressed concern that the rejection of his amendment application might prejudice the consideration of his original claim. The Tribunal clarified that the Adjudicating Authority’s earlier order dated 26.07.2021, which directed the Resolution Professional to consider the Appellant’s claim on merits, remained unaffected by the rejection of the amendment application. The Tribunal assured that the Resolution Professional must consider the Appellant’s claims in accordance with the law and procedure, but it did not express any opinion on the merits of such claims.

Conclusion:
The Tribunal dismissed the appeal, affirming that the order dated 09.03.2018 became operative on the date of pronouncement, and the MoU dated 19.04.2018 was void. The rejection of the amendment application was upheld, and the Appellant’s original claims were to be considered on their merits as per the Adjudicating Authority’s prior directions.