2021 (4) TMI 999 - Tri - Insolvency and Bankruptcy

Directions to the Resolution Professional to effectively handover the unit of the Corporate Debtor for carrying business as per the lease agreement dated 29.09.2020 and release of goods belonging to applicant - Section 60(5)(c) of the Insolvency and Bankruptcy Code 2016 - HELD THAT - In the present case it is not in dispute that Corporate Debtor was a going concern at the time of commencement of CIRP. Hence it was the obligation on the part of RP to keep it as a going concern subject to difficulties/lockdown being imposed on account of Covid-19 pandemic. It is again reiterated that the MoU dated 02.01.2020 was in operation and had a balance period of almost three years when the Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP). There was a lock-in-period of two years. The goods worth of Rs. 4.00 Crores and more belonging to the Applicant was also lying at the plants hence on the removal of lockdown or lifting of restrictions the Applicant could start the operations without any difficulties. In this situation we are not able to appreciate as to what prompted RP to not to continue with this arrangement particularly when the Applicant was already having such arrangement since 2017 and had all the competency and all the resources to continue with the same arrangement and MoU dated 02.01.2020 was still valid. There are two clauses in the definition of claim as per Section 3(6) of the Code. Clause (a) covers right to receive payment. It is important to note that this right is defined in very wide manner and covers various kinds of rights which may arise out of contract or judgment or even disputed. Thus if claims of applicant are disputed by the RP still it would fall under the definition of claims. Assuming for a moment that it is claimed that payment of old dues was made by applicant and there is no provision for refund of that either in MoU dated 02.01.2020 or lease agreement dated 30.09.2020 hence not admissible. Our answer to this possibility is that first of all these dues were no payable by Applicant under both these agreements and secondly lease agreement has not been performed hence having regard to the term equitable used in clause (a) the applicant is entitled to get refund of the same on equitable considerations which squarely apply to the facts of the case. Further provisions of clause (b) can be applied for payment of compensation for breach of MoU on account of premature termination of such MoU (refer clause 12 of MoU). In addition to this this clause can also be applied to get suitable remedy for breach of lease agreement even if it is disputed by Corporate Debtor. Apart from maximization of value of assets of Corporate Debtor there are three more objects which are relevant for our purposes and are of equal importance. These objects are (1) to promote entrepreneurship (2) availability of credit and (3) balance the interest of all the stakeholders. If we pose a question to ourselves whether Applicant s claims fall under all the three above objects. Even a layman can answer it so. Having arrived at such conclusion we also state that preamble of any statute is not only a guiding force to find the legislative intent and policy in enacting a statute but such preamble is also equivalent to provisions of law which can be resorted to decide issues arising under that statute. It is absolutely clear that the issues raised in this application can be said both as in relation to or arising out of insolvency resolution and a claim against the Corporate Debtor. Therefore even if some financial obligation becomes payable by the Corporate Debtor in our view the same needs to be met by the Corporate Debtor. Further CoC is involved and such actions have taken place under their knowledge after certain stage i.e. after publication of advertisement dated 31.07.2017 and resolution for termination of MoU as well as for execution of lease agreement has been approved by CoC and thereafter these problems have happened hence in case the Corporate Debtor does not have resources to meet such obligations the members of CoC are liable to pay the same. Application allowed.

Summary

Issues Involved:
1. Effective handover of the unit of the Corporate Debtor to the Applicant.
2. Release of goods belonging to the Applicant.
3. Refund of monies paid by the Applicant with interest.
4. Non-cooperation and hindrance by the Resolution Professional and other parties.
5. Breach of Memorandum of Understanding (MoU) and lease agreement.
6. Jurisdiction of the National Company Law Tribunal (NCLT) under Section 60(5) of the Insolvency and Bankruptcy Code (IBC).

Issue-wise Analysis:

1. Effective Handover of the Unit:
The Applicant, M/s. Kausar Textiles Private Limited, sought directions for the Resolution Professional (RP) of the Corporate Debtor to effectively hand over the unit for business operations per the lease agreement dated 29.09.2020. Despite the execution of the lease agreement and payment of dues, the Applicant claimed that effective possession was not given due to various hurdles created by the personnel of the Corporate Debtor and Respondent No. 2. The Tribunal noted that the RP and the personnel under his control failed to hand over effective possession, which hindered the Applicant from commencing operations.

2. Release of Goods Belonging to the Applicant:
The Applicant also requested the release of its goods lying at the Corporate Debtor's plant. The Tribunal found that the RP had no right to retain the Applicant's goods under the lease agreement dated 29.09.2020. The RP's action of retaining the goods was unjustified as there were no outstanding dues under the lease agreement that could warrant such retention.

3. Refund of Monies Paid by the Applicant with Interest:
The Applicant alternatively prayed for the refund of monies paid with interest at the rate of 12%. The Tribunal held that the Applicant was entitled to a refund of Rs. 73.57 lakhs paid to the RP, with interest at 7% per annum from the date of receipt until the date of payment, if the Applicant refused to enter into a new arrangement to run the plant on lease or under any other agreement.

4. Non-cooperation and Hindrance by the RP and Other Parties:
The Tribunal observed that the RP failed to discharge his duties effectively, resulting in non-cooperation and hindrance in the Applicant's operations. The RP's conduct, supported by the Committee of Creditors (CoC), was found to be unsatisfactory. The Tribunal noted that the RP did not take corrective measures to protect the assets of the Corporate Debtor and failed to manage the Corporate Debtor as a going concern, violating Section 25 of the IBC.

5. Breach of MoU and Lease Agreement:
The Tribunal found that the termination of the MoU dated 02.01.2020 and the non-performance of the lease agreement dated 29.09.2020 by the Corporate Debtor, represented by the RP, constituted a breach. The Tribunal noted that the RP forced the Applicant to pay dues for the lockdown period when the plant was closed, which the Applicant was not liable to pay. This action was deemed coercive and an abuse of the RP's dominant position.

6. Jurisdiction of NCLT under Section 60(5) of IBC:
The Tribunal asserted its jurisdiction under Section 60(5) of the IBC to entertain and dispose of the claims made by the Applicant. The Tribunal emphasized that the NCLT has jurisdiction over claims arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor. The Tribunal also highlighted the importance of balancing the interests of all stakeholders, as stated in the preamble of the IBC, and ensuring that the Corporate Debtor remains a going concern.

Conclusion:
The Tribunal directed the immediate release of the Applicant's goods and advised the new RP to explore the possibility of running the plant on lease or under any other arrangement with the Applicant, giving the Applicant the first right of refusal. If the Applicant refused, the Tribunal ordered the refund of Rs. 73.57 lakhs with interest. The Tribunal also directed the Registry to send a copy of the order to the Insolvency and Bankruptcy Board of India (IBBI).