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IBC - Case Laws
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2025 (3) TMI 1403
Wilful disobedience - binding nature of Resolution Plan, on any creditor including the Central Government, State Government or any local authority, once it is approved by an adjudicating authority under sub-section (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016 - amendment to Section 31 by Section 7 of Act 26 of 2019 is clarificatory/declaratory or substantive in nature? - initiation of any proceedings for recovery of any of the dues from the Corporate Debtor, hich are not a part of the Resolution Plan approved by the adjudicating authority, after approval of resolution plan by the Adjudicating Authority a creditor including the Central Government, State Government or any local authority.
HELD THAT:- All the dues of any of the stakeholders including the statutory dues owed to the Central Government, any State Government or any local authority, which were not part of the Resolution Plan, stood extinguished from the date on which the Resolution Plan stood approved.
This Court has held that a successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor. It has also been held that all claims must be submitted to and decided by the RP so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor.
There are no hesitation in holding that the demands raised by the respondents/authorities for a period prior to the date on which the learned NCLT has approved the Resolution Plan were totally contemptuous in nature. The respondents could not have raised the said demands inasmuch as they are not part of the Resolution Plan.
Undoubtedly, in the present case, in spite of public notice, neither the State of Chhattisgarh nor its authorities raised any claim before the CoC. In that view of the matter, the case of the present Petitioner is specifically covered by the judgment of this Court in the case of Ghanshyam Mishra, which judgment was brought to the notice of the respondents/authorities, the respondents/authorities could not have proceeded with the recovery proceedings - When the law laid down by this Court in the case of Ghanshyam Mishra is clear and unambiguous and specifically when the Petitioner’s own case was part of the batch which is specifically dealt with by this Court, the respondents/alleged contemnors ought not to have proceeded further with the recovery proceedings and ought to have dropped them forthwith. The continuation of such proceedings despite the judgment and order of this Court being pointed out to their notice is nothing but contemptuous in nature.
There are no hesitation in holding that the continuation of the proceedings by the respondents/authorities even after the judgment of this Court in Ghanshyam Mishra was specifically brought to their notice is contemptuous in nature. However, we do not propose to proceed against the respondents/contemnors inasmuch as they are entitled to benefit of doubt.
Conclusion - The act of the alleged contemnors is contemptuous in nature, it is not proposed to take any action against them. The demand notices issued by the contemnors on the Petitioner Company and all proceedings pursuant thereto are held to be illegal and the same are quashed and set aside.
The contempt petition accepting unconditional apology of the contemnors disposed off.
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2025 (3) TMI 1355
Dismissal of Section 7 application filed by the Financial Creditor-Appellant on the grounds of being time-barred - sufficient ground for allowing extension of the period of limitation and the applicability of the suo moto orders of the Hon’ble Supreme Court or not - HELD THAT:- It is well settled that if a corporate debtor acknowledges its debt in writing before the expiration of the three-year period, the limitation period would be extended by another three years. This is in conformity with Section 18 of the Limitation Act, which allows for the revival of the limitation period based on the acknowledgment of debt. The question of acknowledgement of liability made in a Balance sheet as acknowledgement of debt has been considered by the Hon’ble Supreme Court in Tulip Star [2022 (8) TMI 70 - SUPREME COURT] wherein it has been held that balance sheet entry can be regarded as an acknowledgment of liability for the purpose of limitation law.
The argument canvassed by the Appellant that there is acknowledgement of debt in the balance sheet for FY 2019-20 considered, and it is noticed that the said balance sheet of FY 2019-20 was signed on 12.08.2020, Even in this case, para 5.III of the suo moto orders would have been attracted and the last date for filing of Section 7 petition would have continued until expiry of 90 days from 01.03.2022. Since the Section 7 petition was filed on 15.01.2024, it, therefore, stood clearly time-barred. The Adjudicating Authority has correctly held that the exclusion period under suo moto orders does not come to the rescue of the Appellant even in this case.
Whether acknowledgment in Balance sheet for the purpose of limitation has to be counted from the date of signing of the Balance sheet or from the date of its uploading with the RoC on the MCA portal? - HELD THAT:- The conditionalities required for attracting Section 18 of the Limitation Act, 1963 are (i) an admission or acknowledgement of liability; (ii) such acknowledgement must be in respect of a property or right; (iii) that the acknowledgement must be made before the expiry of limitation and (iv) that it should be in writing and signed by the party against whom such property or right is claimed. The Explanation clause thereto, however, provides that an acknowledgment may be sufficient though it may omit to specify the exact nature or the specific character of the said liability. However, the person acknowledging must be conscious of his liability and commitment should be made towards that liability - Any writing to be an acknowledgment of liability must entail an admission of a subsisting jural relationship between the parties and there should be a conscious affirmation of an intention of continuing such relationship in respect of this existing liability.
Guidance also provided by judgement of Hon’ble High Court of Andhra Pradesh in Vijaya Kumar Machinery & Electrical Stores Versus Alaparthi Lakshmikanthamma [1968 (1) TMI 23 - ANDHRA PRADESH HIGH COURT] wherein it has been held that that the date on which the balance-sheet was signed is material to constitute an acknowledgment.
Conclusion - There are no error on the part of the Adjudicating Authority to have relied on the date of signing of the Balance sheet for extension of limitation period - There is no merit in the argument of the Appellant that the Adjudicating Authority had wrongly calculated the extension of limitation from the date of signing of the Balance sheet by the Corporate Debtor i.e. on 12.08.2020 instead of calculating it from the date it was uploaded on the MCA website i.e. on 14.02.2021. There is no mandatory requirement for factorising the date of uploading of the balance sheet on the MCA portal for computing the period of limitation.
There are no merits in the appeal - appeal dismissed.
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2025 (3) TMI 1255
Admission of Section 9 Insolvency and Bankruptcy Code (IBC) petition against the Corporate Debtor - settlement arrived between the parties - HELD THAT:- There has been a settlement between the parties.
In view of the aforesaid, nothing remains further to be done - The impugned order passed by the NCLAT is hereby set aside.
Appeal disposed off.
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2025 (3) TMI 1254
Exclusion of commercial spaces from the assets of the Corporate Debtor - owners of the units allotted, on the basis of allotment of commercial spaces by the CD - dissenting Financial Creditors - it was held by NCLAT that the approval of Resolution plan upheld.
HELD THAT:- There are no good ground and reason to interfere with the impugned judgment which, in our opinion, is in accord with the provisions of the Insolvency and Bankruptcy Code, 2016; hence, the appeals are dismissed.
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2025 (3) TMI 1253
Direction to hand over the possession of the constructed flats/units in Phase-I of the Greenopolis Project to the persons who had paid monies directly to the said concern - HELD THAT:- The homebuyers represented by GWA, who are opposing the present application, had made their investments and payments to TCSPL. Consequently, they cannot insist or compel Orris to allot residential flats/units in their favor. It goes without saying that they must pursue their claims in the CIRP proceedings concerning TCSPL, which remain pending before the NCLT. The order dated 01.07.2021 passed by the Supreme Court and the subsequent order dated 29.03.2022 passed by the NCLT categorically lay down that the TCSPL has no right, title or interest in the ‘Greenopolis Project’ and they have no right to dispose of the property or sale of any units in the same. In essence, the Greenopolis Project is not an asset of TCSPL and, therefore, does not fall within the scope of CIRP Proceedings concerning TCSPL.
Considering the entire gamut of the case and its larger ramifications, where TCPSL and its sister concerns are under investigation by the Serious Fraud Investigation Unit, and Orris and other companies are facing inquiries by the Registrar under Chapter XIV of the Companies Act, 2013, the issue in question are undoubtedly interwoven. Nevertheless, the lengthy and excruciating litigation process involved should not impede the applicant, GWC, from seeking appropriate relief for its members - Unhesitatingly, the sheer audacity of the objector, namely rival GWA, is apparent. Repeated attempts have been made to deflect attention from TCSPL and its sister concerns, which have allegedly defrauded numerous homebuyers. Instead, with ulterior motives, the objector seeks to divert focus to a separate set of homebuyers who are rightfully entitled to possession of constructed residential flats/units from Orris.
The learned NCLT has already passed a detailed order dated 17.12.2024 and has not extended the status quo concerning the allotment of any completed residential flats/units to the home buyers whose cause is being espoused by the present applicant/GWC.
Conclusion - There is no legal impediment in allowing handing over of possession of 512 completed flats in terms of occupancy certificate issued on 01.10.2024 by Orris to its allottees, who are members of the applicant/GWC.
Application allowed.
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2025 (3) TMI 1193
Termination of petitioner’s appointment as developer of a slum rehabilitation project - petitioner’s failure to pay transit rent arrears and to complete the project within the stipulated time - overriding effect of Section 31 of the IBC over Section 13 (2) of the Slum Act.
Does the approval of the petitioner’s resolution plan by the NCLT under Section 31 of the IBC override or nullify the petitioner’s obligations and liabilities arising under the Slum Act and the Slum Rehabilitation Scheme? In particular, is the SRA barred or restricted by the IBC from taking action under Section 13 (2) of the Slum Act due to the resolution plan’s binding effect? - HELD THAT:- Undoubtedly, Section 238 of the IBC gives it overriding effect over inconsistent provisions of other laws. But in the present scenario, the Slum Act's mandate of ensuring timely rehabilitation of slum dwellers is not inconsistent with the objectives of the IBC. Rather, it furthers the very aim of keeping the corporate debtor as a going concern by facilitating the completion of the project that forms the basis of the company’s revival. It must be noted that the IBC is not merely a tool for liquidation or asset-stripping, but a mechanism for holistic revival of viable companies. In a slum redevelopment project, the success and viability of the corporate debtor hinges on cooperation from slum dwellers and compliance with SRA guidelines. If the developer fails to honour its obligations – such as payment of transit rent or timely completion of rehabilitation buildings – the project collapses not only financially but also socially. In such a situation, the SRA stepping in to rescue the project is a necessary regulatory response and a sovereign function exercised in public interest. The principle of public interest penetrates insolvency law.
Certain non-monetary consequences which arise under welfare legislations like the Slum Act cannot be lightly brushed aside merely because insolvency proceedings under the IBC have commenced or concluded. The removal of a developer under Section 13 (2) of the Slum Act is one such consequence. Another example arising in the present case is the proposed acquisition of the project land by the SRA. As per the Slum Act, once a developer is removed due to non-performance, the SRA has the power to acquire the land belonging to the outgoing developer, so that the same land can be handed over to the incoming developer for completing the rehabilitation scheme - the corporate debtor is not being dispossessed without remedy; rather, it is being divested of an asset which it was unable to utilise for the public good, and that too, in accordance with legal process.
In the present case, the SRA’s action of removing the petitioner as developer is a regulatory decision made in furtherance of the statutory scheme under the Slum Act. This decision is not rendered invalid merely because the developer has undergone insolvency or that a resolution plan has been approved. The two statutes operate in distinct spheres — the IBC deals with debt resolution and revival of the corporate debtor, while the Slum Act is aimed at protecting the interests of slum dwellers and ensuring timely completion of rehabilitation projects - The IBC is not a refuge for those who have failed in their public responsibilities. The approval of a resolution plan does not and cannot bind independent statutory authorities like the SRA from discharging their duties under law. The welfare of slum dwellers, the progress of redevelopment schemes, and the broader public interest cannot be made subservient to the financial restructuring of one defaulting entity. In conclusion, therefore, it must be held that the removal of the petitioner as developer and the consequent acquisition of the land by the SRA are lawful, justified, and not inconsistent with the IBC.
The resolution plan approved by the NCLT under the IBC does not override the petitioner’s obligations under the Slum Act — except to the limited extent that financial claims arising before the insolvency commencement date and duly dealt with in the plan cannot be enforced separately.
Is the obligation to pay transit rent to slum dwellers a statutory obligation imposed by the Slum Act/regulations (and thus part of the public law framework), or merely a contractual term of the development agreement between the petitioner and the slum society? - HELD THAT:- The nature and character of the obligation to pay transit rent has been debated before this Court. The petitioner suggests that this obligation is rooted in private agreements, and therefore, like any other contractual obligation, may be modified, waived, or extinguished through insolvency proceedings. On the other hand, the respondents have taken a firm stand that this is not a matter of private negotiation but a statutory duty arising from the scheme sanctioned under the Slum Act.
When a slum rehabilitation scheme is sanctioned under the Slum Act, it is not a mere private arrangement between a builder and slum dwellers. It is a public welfare scheme governed by statutory provisions, detailed guidelines of the Slum Rehabilitation Authority (SRA), and formal conditions set out in the Letter of Intent (LoI) and other regulatory documents such as Annexure II and Regulation 33(10) of the Development Control Regulations (DCR) applicable in Maharashtra. A critical condition of such schemes is that the developer must provide either alternate transit accommodation or monthly transit rent to every eligible slum dweller from the date of vacating their hutments until permanent rehabilitation units are handed over. This is not an optional or negotiable term that can be bargained away.
If the obligation to pay transit rent were viewed as a purely private or contractual liability, it would open the door for each slum dweller to individually file a claim in the corporate insolvency process as an operational creditor. However, this is both impractical and unfair, considering the socio-economic background of the slum dwellers. The insolvency framework was not designed to handle such public welfare claims in this fragmented manner. More importantly, transit rent is not a one-time debt. It is a continuing performance obligation, which accrues monthly until the permanent housing is delivered.
It is true that the petitioner entered into formal agreements with individual slum dwellers or the co-operative housing society to implement the project. These are usually in the form of tri- partite agreements involving the developer, the slum dweller, and the SRA or society - The developer cannot ignore or belittle this obligation merely because it appears in a contract. It is a duty owed not just to an individual, but to a class of beneficiaries protected by a welfare law. Accordingly, even if unpaid transit rent qualifies as an “operational debt” under the IBC for accounting purposes, this classification does not dilute the developer’s continuing obligation to ensure that transit rent is regularly paid going forward. Breach of this obligation is not merely a civil wrong — it is a breach of the statutory framework, attracting regulatory consequences including removal from the project.
The obligation to pay transit rent is essentially a statutory obligation, even though it is implemented through formal agreements.
Was the SRA justified in law in invoking Section 13 (2) and issuing the impugned order terminating the petitioner’s appointment as developer? - HELD THAT:- In the present case, it is evident that the SRA considered all relevant factors. Notably, the authority took into account the petitioner’s defence, including the approval of the resolution plan under IBC, the alleged improvement in financial capacity, and the fresh LoIs issued in 2024. However, the SRA ultimately found that on-ground progress remained unsatisfactory, and more importantly, that transit rent dues remained unpaid, thereby causing hardship to slum dwellers. 103. In such a situation, the authority was justified in taking a pragmatic decision to protect the welfare of slum dwellers, which is the central objective of the Slum Act. The decision to allow the society to appoint a new developer is not punitive, but rather remedial, to break the stagnation and ensure that the scheme is taken to its logical conclusion. This Court finds no perversity, irrationality, or illegality in the impugned order. It cannot be said that the action of the SRA was arbitrary or in breach of procedural fairness. On the contrary, the process followed appears fair, thorough, and in alignment with the statutory scheme’s objective of timely and effective rehabilitation of slum dwellers.
The action initiated by the SRA under Section 13 (2) of the Slum Act is lawful, reasonable, and justified, having regard to the petitioner’s long-standing failure to pay transit rent, the resulting hardship to slum dwellers.
Was the decision-making process of Respondent No. 6 (CEO, SRA) in issuing the impugned order fair and in accordance with law? - HELD THAT:- The petitioner is not merely an implementing agency or contractor, but also the owner of the land on which the slum rehabilitation scheme is being implemented. This dual role brings with it a greater degree of responsibility and accountability. The burden of compliance is higher, especially when the land has been granted for a public welfare scheme under beneficial terms. In such a situation, the SRA was duty-bound to afford the petitioner a conclusive and time-bound opportunity to clear the dues — particularly after revival under the IBC — before proceeding to cancel development rights. The record indicates that the AGRC did not extend such a final opportunity to the petitioner before concurring with the CEO’s decision to terminate the petitioner’s rights. In the respectful view of this Court, this constitutes a procedural lapse — not one that invalidates the SRA’s substantive powers or its overall assessment, but a deficiency in natural justice that warrants correction.
This Court finds no infirmity in the SRA’s decision to invoke Section 13 (2) of the Slum Act. The decision is well-reasoned, supported by facts, and aligned with the objectives of the Act. However, the limited procedural deficiency, namely the failure to grant a final opportunity to the revived petitioner to clear its dues and demonstrate intent, is one that must be remedied to uphold fairness.
Conclusion - i) The resolution plan approved by the NCLT under the IBC does not override the petitioner’s obligations under the Slum Act — except to the limited extent that financial claims arising before the insolvency commencement date and duly dealt with in the plan cannot be enforced separately. ii) The obligation to pay transit rent is essentially a statutory obligation, even though it is implemented through formal agreements. iii) The action initiated by the SRA under Section 13 (2) of the Slum Act is lawful, reasonable, and justified, having regard to the petitioner’s long-standing failure to pay transit rent, the resulting hardship to slum dwellers. iv) This Court finds no infirmity in the SRA’s decision to invoke Section 13 (2) of the Slum Act. The decision is well-reasoned, supported by facts, and aligned with the objectives of the Act. However, the limited procedural deficiency, namely the failure to grant a final opportunity to the revived petitioner to clear its dues and demonstrate intent, is one that must be remedied to uphold fairness.
Petition disposed off.
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2025 (3) TMI 1192
Seeking to recall order passed by the Adjudicating Authority - whether HUDCO is a related party of the Corporate Debtor or not? - HELD THAT:- Appellant and HUDCO entered into Joint Venture Agreement on 02.05.2006 incorporating Srishti Urban Infrastructure Development Ltd. The shareholding as per the Joint Venture Agreement between the Appellant and the Respondent No. 1 for SUIDL was in the proportion of 60:40. Corporate Debtor was promoted by Appellant and SUIDL. The Corporate Debtor entered into a loan agreement with HUDCO for an amount of Rs.6907.92 Lakhs. Under the loan agreement HUDCO was empowered to appoint a Nominee Director. HUDCO exercised its right and appointed a Nominee Director in the Board of the Corporate Debtor.
The submission which has been pressed by learned counsel for the Appellant is that the Application filed by the Appellant was fully covered on the ground that there was suppression on the part of HUDCO which lead to issuance of order dated 30.08.2023 which was obtained by HUDCO by playing fraud on the Court. The submission is pressed on the ground that Annual Report of the HUDCO was not placed by HUDCO when earlier application was decided on 30.08.2023.
Admittedly, the Appellant is related party of the Corporate Debtor which is an undisputed fact. All aspects of the matter including HUDCO having promoted JV with Appellant where HUDCO has 40% shareholding and Appellant has 60% shareholding has been noticed and examined by the Adjudicating Authority in order dated 30.08.2023.
In the present case suppression of relevant document cannot be accepted since all the document which were relevant for determination of issues raised in I.A. No.514/KB/2022 were filed and relied by both the parties i.e., HUDCO and Resolution Professional. It is not the case of the Appellant that HUDCO was asked to file Annual Report in which it failed to file. 51st Annual Report of HUDCO on which reliance has been placed by the Appellant was filed with the ROC and is matter of public record. When the report is filed with the ROC, there is no question of suppression of the report and submission of the Appellant tat there was any suppression on part of HUDCO is baseless.
Conclusion - HUDCO is not a related party and that the order dated 30.08.2023 was not obtained by fraud or suppression.
Appeal dismissed.
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2025 (3) TMI 1191
Admission of section 9 application - existence of pre-existing disputes between the parties or not - demand notice validly contested or not - HELD THAT:- Present is a case where demand notice issued under Section 8 was replied and reply notice issued by the corporate debtor dated 28.01.2020 is clearly notice of dispute within the meaning of Section 9(5)(d). The Adjudicating Authority in the impugned order although has noticed the reply dated 28.12.2019 as well as earlier reply sent by the corporate debtor to the legal notice but has brushed aside the said reply relying on reconciliation meeting held on 16.10.2019. The reconciliation meeting is claimed on 16.10.2019 whereas the facility termination was effected on 26.12.2019 and demand notice was issued only on 03.01.2020 which was replied by notice of dispute dated 28.01.2020. The issue raised by the corporate debtor in reply to the demand notice cannot be held to be moonshine defence.
In view of the judgment of the Hon’ble Supreme Court in Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd. [2017 (9) TMI 1270 - SUPREME COURT]], the Adjudicating Authority ought not to have admitted Section 9 application. There being pre- existing dispute which existed much prior to issuance of demand notice which is reflected from correspondences between the parties, legal notice issued by the operational creditor dated 01.07.2019 and reply to the legal notice sent by the corporate debtor on 21.08.2019. In the reply submitted by the corporate debtor, relevant materials are brought on the record which clearly reflected a pre-existing dispute between the parties prior to issuance of demand notice.
Conclusion - The Adjudicating Authority ought not to have admitted Section 9 application, there being pre-existing dispute which existed much prior to issuance of demand notice which is reflected from correspondences between the parties.
Appeal allowed.
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2025 (3) TMI 1190
Effect of Debenture Trust Deed and Non-compliance of its condition, over the proceedings - existence of any validly executed Power of Attorney to initiate Section 7 Proceedings - proceedings would be barred by limitation or not - date of default and its determination - bar of Section 10A of I & B Code could be read in conjunction to the aspect of limitation or not - implications of Section 65 of the I & B Code, 2016 on the proceedings.
What would be the effect of Debenture Trust Deed and Non-compliance of its condition, over the proceedings? - HELD THAT:- On reading of Schedule VIII, it stipulates under its Clause 2 (a), that the event described in para (a) that is the details of the default, which would necessitate the issuance of notice, has had to be as per the events of default contemplated under Clause 7 of the deed and that too in pursuance to the security document which is shown to have become enforceable under the eyes of law. In the absence of satisfaction of any of the conditions as given therein, it is opined that, the entire inception of the proceedings, under Section 7 of the I & B Code, 2016, would be bad because there has been a flagrant and intentional disregard to the content and directives contained in the Debenture Trust Deed, which could have otherwise conferred the powers on the Debenture Trustee only to initiate proceedings under Section 7 of the I & B Code, 2016, when there is a proved and established default or an event of default and in the absence of the same and adoption of procedure under Clause 10.1 (iv) of Debenture Trust Deed, the notices issued on 28.07.2020, alleging that there has chanced a default, that cannot be sustained in the eyes of law, in the absence of established authority.
Whether there was any validly executed Power of Attorney? - HELD THAT:- When the nature of default as given under the Debenture Trust Deed and the debt too as defined therein are almost akin in its reflection. An intention of the legislature as that given under the statutory definition, the term ‘coupon’ which has been sought to be argued by the Ld. Senior Counsel for the Respondent otherwise cannot be read as to be an alternative to determine a debt or a default, so as to exclude the applicability of Clause 7, which would be the act falling under the domain of exercise of powers by the Debenture Trustee.
Once it comes to determining an aspect of a procedure for the purposes of initiation of proceedings under Section 7 of the I & B Code, 2016, we have had to analyze judicially, as the sanctity of the source of power that, should have been normally exercised based on the Debenture Trust Deed, which would be binding inter-se amongst the parties, owing to the binding effect of the Debenture Trustee, as given under the Debenture Trust Deed itself, which provides for, that the Debenture Trustee though its functions has to be regulated upon by majority resolution passed by the Debenture Holder, but the contents of the same would have a binding effect on the parties whose act or actions are likely to be affected by the Debenture Trustee Agreement.
The above question is answered against the Respondent/Applicant, that since the Debenture Trust Deed, is binding on the Respondents, and the procedure for its recovery under Clause 7 of the Deed, it ought to have been initiated, by a grant of authorization to the Debenture Trustee by a majority resolution, as contemplated under the Debenture Trust Deed, and more particularly when the Debenture Trustee itself has been authorized by the Government of India under the notification referred to herein above, which happens to derive source of issuance of notification is, vested under Section 7(1) of the I & B Code, 2016. In the absence of the proceedings being drawn by the Debenture Trustee after its valid procedural authorization, the entire proceedings under Section 7 of the I & B Code, 2016, would be vitiated in the eyes of law, which deserves interference by this Appellant Tribunal.
Whether the proceedings were barred by limitation? - HELD THAT:- The object of limitation, under the Act, was to safeguard the right, or benefit which might have judicially accrued to, a person who is the beneficiary of adjudication, and maturing of right due to an inaction on the part of the person who seeks to, invoke a remedy for a redressal of his any legal rights created under an Act or law, which has been adversely effected by an adjudication made by the courts, which remains unchallenged, is matured for the winning party due to non-initiation of proceedings before a superior forum, within limitation - A rational interpretation has to be given, and the said extension should not be preposterously extended without rationality to deprive the very object of limitation. The limitation should not be extended at the cost of deprivation of a right which had accrued to the beneficiary.
The question of acknowledgment of default, being 30.09.2019 in the instant case, is not in controversy, as Section 18 only deals with the aspect of effect of acknowledgment, which had never been the disputed case of the Respondent, at any stage of the proceedings, because they had persistently argued, that the default stood acknowledged as back as on 30.09.2019 - Once the date of default is not in dispute, the implication of Section 18 of the Limitation Act will have no relevance for the purposes of determining the debt and the date of default and its conjoint reading with Section 238A of I & B Code, 2016.
The proceedings drawn under Section 7 of the I & B Code, 2016, by Respondent/Applicant was barred by limitation, this question too is answered against the Respondent and in favour of the Appellant.
Date of Default and its determination - HELD THAT:- It is a rampant case and not in aspect of debate, that the date of default is on 30.09.2019, and it is not in debate rather admitted by Respondent/Applicant, that the limitation has to be determined as per Article 137 of the Limitation Act from the date of admission of default i.e., 30.09.2019 in the instant appeal. If the limitation is construed under Article 137 of Limitation Act, as per the admitted date of default, it will be ending on 30.09.2022, but if it is determined from the date of the imposition of the restrictions because of COVID-19 and even if the same is permitted to be extended, to the period of 90 days as per Hon’ble Apex Court Suo motu case [2022 (1) TMI 385 - SC ORDER] irrespective of which that would be falling on 29.09.2022. After the extended date of 90 days of limitation as granted by the judgment of the order of the Hon’ble Apex Court, with effect from 01.03.2022, if that be so, there was no legal or factual obstruction for the Applicant/Respondent nor there is any express pleadings for inability to file proceedings between 01.03.2022 till 29.09.2022 and thereafter till 08.09.2023. In that eventuality, they would not be entitled to any benefit of limitations determined on the basis of admitted date of default, even based upon the Suo motu judgment particularly, that has contained under Para 5.3 of the said judgment. The en block exclusion, of the period from 15.03.2020 to 28.02.2022, would not be available to the Appellant, when the Section 7 application was filed after 464 days even after the extended period of 90 days.
Hence at the most, the appeal ought to have been filed, prior to 29.09.2022, and since there happens to be no valid explanation, by the Respondent for the inability to file, the application between 29.09.2022 and 07.09.2023. The limitation, could not be extended as argued by the Ld.Senior Counsel for the Respondent; which would be reckoned from the date of admitted default i.e., 30.09.2019, which was prior the restrictions of COVID-19 situation i.e., prior to 15.03.2020.
Limitation and effect of Section 10A of the I & B Code, 2016 - HELD THAT:- On a simpliciter reading, of the provisions contained under Section 10A it provides for, that the bar which was created for initiation for proceeding, was in relation to the default which was committed on or after 25.03.2020, it not apply to admitted defaults prior subsequent to the insertion of Section 10A. Since there being a specific incorporation of a cut-off date of 25.03.2020 and here in the instant case admittedly the default has been committed on 30.09.2019, Section 10A will have no applicability for the purposes of extension of the period of limitation for initiation of CIRP proceedings owing to COVID-19 situation and more particularly, when the Respondent/Applicant, himself has issued notices for initiation of proceedings on 28.07.2020 after the insertion made by the Act No. 17/2020 with effect from 05.06.2020, that is one month after the insertion. The explanation of Section 10A, has abundantly made quite clear, that the provision under Section 10A would only be applicable when the default is expressly shown to have been committed after 25.03.2020 and it will not be inclusive of any defaults which are committed prior to it.
Under Section 10A of the I & B Code, 2016, will not be attracted in the instant case and in those cases where the default has chanced prior to cut-off as ascribed under Section 10A of the I & B Code, 2016. This Appellate Tribunal too, had an occasion to deal with almost a similar issue in the matter of Company Appeal (AT) (CH) (Ins) No. 95/2024, Mr. Sudhir Bobba versus M/s. TVN Enterprises & Another [2025 (3) TMI 1142 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL AT CHENNAI], the Judgment rendered by this Tribunal is based upon the ratio of Raghavendra Joshi [2023 (8) TMI 1376 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI] as well as that of, Narayan Mangal [2023 (8) TMI 1378 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] had to propound to the same principles that Section10A will not apply in those cases where the default has occurred, prior to the insertion of Section 10A in I & B Code, 2016, and period prescribed therein.
Section 10A will have no applicability for the purposes of extension of the period of limitation in the instant case, as it has been argued by the Ld. Counsel for the Respondent/Applicant to the proceedings. Because of the fact, that the Respondent/Appellant themselves have chosen to issue notice on 28.07.2020, i.e., one month after the exemption contemplated under Section 10A, as made effective by the amending act with effect from 05.06.2020. The Respondent/Applicant will not be entitled to any benefit under Section 10A of the I & B Code, 2016, which would not be applicable - from the conduct of Respondent/Applicant, they have attempted to blow hot and cold simultaneously and take the benefit of the extended period of limitation under Section 10A of the I & B Code, 2016, by knowing the fact that they had issued the notice under Section 8, after almost one month from the date of the insertion of Section 10A of the I & B Code, 2016, and then sitting over the issue and instituting the proceedings, even after the taking off the period of limitation by the Hon’ble Apex Court, with effect from 28.02.2022 to 30.05.2022 and waiting till 07.09.2023, the proceedings drawn by the Respondent would be barred by limitation and Article 137 of the Limitation Act will come into play. Thus, this question is answered, against the Respondent thereby the Section 7 proceedings were barred by limitation.
What implications would Section 65 of the I & B Code, 2016, would have on the proceedings? - HELD THAT:- The plea of malicious prosecution was raised in written submissions, but the Adjudicating Authority did not address it. The Court found this omission significant, rendering the judgment perverse for not considering all relevant pleas.
Conclusion - i) Because of the fact that the default is an aspect not disputed, and its limitation for the purpose of initiation of proceedings, under Section 7 of the I & B Code, 2016, will be expiring on 30.09.2022, after the gracious period granted by the Hon’ble Apex Court, since the Respondent having filed the same on 07.09.2023 would be barred by limitation. Since being in violation to Article 137 of the Limitation Act.
ii) Because of the fact that, the Debenture Trust Deed dated 22.03.2019, it was a self-contained provision, which provided for conferring of a right for initiation of proceedings for insolvency, after a majority decision of the Debenture Holders, which was to be exercised by the Debenture Trustee and since the same was not done in accordance with the covenants of the inter-se binding implications of the Debenture Trust Deed. The entire proceedings would be vitiated, since there being a contravention to the agreed terms of the deed, which is not in dispute.
iii) Because of the fact that, as per the affidavit which was filed in support of the application preferred under Section 7 for initiation of I & B proceedings was by an individual, who on the relevant date was not even holding a valid authority, owing to the cessation of his authority which was vested to him by the Boards Resolution of 05.03.2019. On the date of filing of the proceeding, since the said Boards Resolution stood superseded by the subsequent Boards Resolution of 02.02.2021, where the right set in subsequently conferred an authority to initiate proceedings to Mr. Kaustubh Sudame, by an attorney executed in his favour on 22.02.2022, thus on the date of filing of the proceedings, Mr. Manohar Maddili as he was not holding a valid authority. The proceedings would be vitiated since, having not been instituted under the valid authority.
iv) Since, the entire proceeding was maliciously oriented, as having been instituted on the basis of the notice issued on 28.07.2020, which was falling during the COVID-19 period.
v) Operation of Section 10A will not in any way impact the limitation period in this case since the limitation would start running from the date of the default being 30.09.2019, which was prior to the COVID-19 period and the limitation thereto of three years will be expiring on 30.09.2022 even after taking into account the implication of Suo motu judgment of Hon’ble Apex Court due to COVID-19 situation.
vi) It would be a malicious proceeding and would be barred by Section 65 of the I & B Code, 2016. The plea of Section 65 of the I & B Code, 2016, since having been taken by the Appellant after the leave of the Tribunal and has not been considered, it would vitiate the proceedings.
The application under Section 7 of the I & B Code, 2016 is rejected - appeal allowed.
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2025 (3) TMI 1144
Admission of Section 7 application - existence of debt and default or not - appellant has taken various opportunities and has prolonged the hearing of the appeal after obtaining an interim order due to which the Corporate Insolvency Resolution Process (CIRP) against the corporate debtor could not proceed any further - HELD THAT:- There is no dispute between the parties regarding financial facilities extended by the SBI. The amount disbursed by the SBI to the corporate debtor. The accounts were declared NPA by the financial creditor on 26.07.2017. Loan recall notice was issued by the SBI on 11.01.2019 and on behalf of the all the consortium lenders demanding a payment of amounts of ₹2078.04 Crore. Section 7 application was filed by the SBI for a default of ₹1049.72 Crore. Before the Adjudicating Authority itself, the corporate debtor pleaded that corporate debtor has submitted one-time proposal before the lenders.
Before this Tribunal the appellant pleaded that they have given OTS proposal to the financial creditors. In order dated 25.10.2024, it is noticed the submissions of the counsel for the SBI that SBI has not accepted the proposal. Even after 25.10.2024, appellant took time to bring settlement on record in which appellant miserably failed. The sequence of the event in the appeal as noted above clearly proves that debt and default is an admitted fact. From the facts brought on the record, it is clear that corporate debtor is unable to clear its debt and it is fit case where insolvency resolution process against the corporate debtor be proceeded.
Conclusion - The debt and default were established, arbitration proceedings did not impact the insolvency process, and the lack of an accepted OTS did not justify halting the proceedings.
Appeal dismissed.
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2025 (3) TMI 1143
Termination of lease during the moratorium period imposed under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC) - jurisdiction of NCLT to entertain the application filed by the Resolution Professional (RP) against the termination of the lease by GIDC - HELD THAT:- There is no dispute between the parties that Resolution Plan came to be approved by the CoC with requisite majority in 17th CoC Meeting held on 10.02.2020 and Letter of Intent was issued to SRA, who has also submitted Performance Bank Guarantee. An IA was filed by the RP for approval of Resolution Plan being IA No.159 of 2020 immediately after approval of the Resolution Plan, which remained pending.
The Resolution Plan could not be considered at an earlier point of time on account of certain litigations with respect to eligibility of SRA. The Adjudicating Authority has also extended the time for completion of CIRP. In IA No.461 of 2022 filed by the RP challenging the order dated 07.04.2022 issued by GIDC, by which lease was terminated and further Show Cause Notice was issued for eviction of the CD. Both these orders were challenged in IA No. 461 of 2022. There is no dispute between the parties that moratorium which commenced on admission of Section 7 Application in the year 2019, continued to operate. The Resolution Plan, which was approved, for which IA No.159 of 2020 was filed, remained pending before the Adjudicating Authority. Thus, order dated 07.04.2022 was passed during continuance of the moratorium.
The Hon’ble Supreme Court in Embassy Property Developments Pvt. Ltd. vs. State of Karnataka and Ors. [2019 (12) TMI 188 - SUPREME COURT] recorded its conclusion that NCLT did not have jurisdiction to entertain an application against the Government of Karnataka for a direction to execute supplemental lease deeds for the extension of the mining lease.
The application for approval of Resolution Plan was pending consideration during which period GIDC had issued an order, terminating the lease and issuing Show Cause Notice for eviction of the CD. We are of the view that action of the GIDC by issuing Show Cause Notice of terminating the lease dated 07.04.2022 was clearly hit by Section 14 of the IBC and the Adjudicating Authority committed error in not allowing the IA, which was filed by the RP being IA No.461 of 2022. Although, interim order was passed by Adjudicating Authority for maintaining the status quo, but Adjudicating Authority directed the RP to approach the Appellate Authority of GIDC. When order passed by GIDC is clearly hit by Section 14(1), it was well within the jurisdiction of NCLT within the meaning of Section 60, sub- section (5) (c) of the IBC to entertain the application.
Conclusion - When order passed by GIDC is clearly hit by Section 14(1), it was well within the jurisdiction of NCLT within the meaning of Section 60, sub-section (5) (c) of the IBC to entertain the application.
Challenge to order of the Adjudicating Authority remanding the Resolution Plan to the CoC - HELD THAT:- Learned Counsel for the Financial Creditor is correct in its submission that Adjudicating Authority has not returned any finding that Resolution Plan submitted by SRA was not in compliance of sub- section (2) of Section 30. No such shortcomings in the Resolution Plan has been pointed out, due to which the Resolution Plan suffers from any infirmity as required by Section 30, sub-section (2).
The law is well settled, the Adjudicating Authority in paragraph-17 has already noticed the judgment of the Hon’ble Supreme Court K. Sashidhar vs. Indian Overseas Bank and Ors. [2019 (2) TMI 1043 - SUPREME COURT], where it was observed that Adjudicating Authority has ample power to remit the Resolution Plan for reconsideration by the CoC when there is violation of Section 30, sub-section (2) of the IBC. There can be no quarrel to the above proposition that Resolution Plan can be sent back for reconsideration of the CoC, if there is violation of Section 30, sub-section (2). Any violation of Section 30, sub-section (2) gives ample jurisdiction to NCLT to interfere with the decision of CoC approving the Resolution Plan or remit the Plan for making it compliant with Section 30, sub-section (2). But in the present case, there is no finding by the Adjudicating Authority with regard to non-complaint of Resolution Plan as per Section 30, sub-section (2).
Conclusion - Without recording a finding of non- compliant of Section 30, sub-section (2), the Resolution Plan could not have been returned back to the CoC for reconsideration.
Appeal allowed.
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2025 (3) TMI 1142
Maintainability of petition - operational debt of a sum exceeding rupees one crore due and payable by the respondent to the petitioner exists as on the date of filing of this petition or not - pre-existing dispute as to the subject debt between the parties or not - initiation of Corporation Insolvency Resolution Process (CIRP) against the respondent is barred under section 10A of the Insolvency & Bankruptcy Code, 2016 or not.
Whether an operational debt of a sum exceeding rupees one crore due and payable by the respondent to the petitioner exists as on the date of filing of this petition? - If so, whether the respondent defaulted in repayment of the same? - HELD THAT:- The answer is unequivocally yes because admittedly by as per the statement of account of the financial year 2020-2021 and financial year 20212022, the due at the end of respective financial year is shown as Rs.1,00,49,270/- (Rupees One Crore Forty Nine Thousand and Two Hundred and Seventy only). Further, it is seen that the debt due is not hit by limitation as the date of default being 14.03.2020, as claimed by the Operational Creditor, or, 15.12.2020 as the demand notice falls within 3 years of the filing of application.
Whether there is a pre-existing dispute as to the subject debt between the parties? If so, whether the petition is maintainable? - HELD THAT:- The issue has also been dealt with correctly by the Ld. Adjudicating Authority by holding that the Corporate Debtor has accepted the supplies made by the Operational Creditor without any goods being returned and without raising any issues, that since the payment for supplies are to be made within 30 days from the date of invoice, he should have raised disputes if any for each supply within such or reasonable period, that no record have been placed by the Appellant before the Ld. Adjudicating Authority to show that he has raised quality complaints as per the general practice in the business and therefore the claim of a pre-existing dispute with respect to the debt cannot be accepted for the purpose of rejecting the Section 9 application of the Operational Creditor.
Whether the initiation of Corporation Insolvency Resolution Process (CIRP) against the respondent is barred under section 10A of the Insolvency &Bankruptcy Code, 2016? If so, whether the Company Petition is maintainable? - HELD THAT:- In the present case, the debt which due remained to be paid on 11.11.2022 was Rs.1,00,49,270/-, consisting of the amounts relation to in 28 invoices that were raised by the Operational Creditor and were not paid by the Corporate Debtor within the period of 30 days of raising of each invoice till the date of filing of the Section 9 application. Out of these 28 invoices, 27 invoices fell due for payment and were defaulted on, in the period 25.03.2020 to 25.03.2021, that is Section 10 A period, if 30 days added to the date of raising of each invoice. Thus, clearly the debt due on these 27 invoices will attract the provision of Section 10 A of the Code.
It is to be seen that this is a running account of goods received and payments made by the Corporate Debtor and though the payments have not been made invoice-wise it is clear that the Corporate Debtor has cleared about Rs. 74.95 lakhs out of Rs.1,05,08,583/- being the opening balance of the dues to be paid as on 01.04.2020 and that the amounts pending to be paid pertain to invoices that were raised during Section 10 A period, that is during the period 25.03.2020 to 25.03.2021.
In the instant case, each unpaid invoice gives rise to a distinct & separate default. Further, only Rs.2,86,762/- is the amount that is in default from the pre-section 10A period. Even though the Corporate Debtor has acknowledged the debt that has accumulated in the period 25.03.2020 to 16.09.2020, it cannot be taken as a continuation of the default claimed to have been committed on 14.03.2020, for the reason being that the Corporate Debtor had repaid a total of Rs.79,54,973/- of the amount due as on 01.04.2020 during the period of 01.04.2020-31.03.2021. Thus there will be a bar on including the amount involved in the 27 invoices that fell due during the Section 10 A period to the total debt due for the purpose of initiating CIRP as per the proviso to Section 10 A of the Code. Accordingly, the threshold limit of Rs. 1 crore as stipulated in Section 4 will not be met and as a result, the order of the Ld. Adjudicating Authority admitting the Corporate Debtor into CIRP will have to be set aside.
There are no hesitation in saying following the decision of the Hon’ble Apex Court in the matter of Ramesh Kymal [2021 (2) TMI 394 - SUPREME COURT], that the amount represented by these 28 invoices will remain a debt due and that they will not be extinguished but they cannot be used as a basis to initiate CIRP proceedings.
The Respondent will continue to have the right to recover the said dues by all the means available to him including approaching commercial courts except resorting to proceedings under the I & B Code.
Conclusion - i) The operational debt claimed exceeded Rs. 1 crore, but the inclusion of invoices that fell due during the Section 10A period was barred, reducing the debt below the threshold required for CIRP initiation. ii) The alleged pre-existing dispute was not substantiated, and thus did not bar the CIRP initiation. iii) The application of Section 10A barred the inclusion of debts that arose during the specified period, and the remaining debt from the pre-Section 10A period did not meet the threshold limit under Section 4 of the Code.
Appeal allowed.
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2025 (3) TMI 1105
Condonation of delay of 233 days in refiling the appeal by the appellant - delay caised due to old age and health issues - Sufficient reasons for delay or not - HELD THAT:- The Appeal being filed on 22.02.2024 through e-filing, which was within the 30 days from the impugned order dated 24.01.2024, was filed within limitation period and there is no delay in filing of the Appeal. However, it is to be noted that the defects have to be cured within a period of 7 days as per Rule 26 of the National Company Law Appellate Tribunal Rules, 2016. But in this case, it has not been done repeatedly and the cumulative delay in refiling is 233 days. Furthermore, same defects were being notified again and again and the Appellant has allowed the Appeal to remain defective for a very long time with the Registry.
The Appellant has been callous in not correcting the defects pointed out by the NCLAT registry in a timely manner. The grounds taken by the Appellant giving health reasons of the Appellant do not correlate with the reality in the present case.
The grounds taken by the Appellant giving health reasons of the Appellant do not correlate with the reality in the present case. It is not clear as to why the Appellant was not pursuing his case for curing of the defects in a timely manner. In case if the defects were not curable, the Appellant could have mentioned it before this Tribunal to take up the Appeal with defects, which was not done in this case. The explanation provided in the Additional Affidavit also doesn’t inspire much confidence. The reasons as provided are not sufficient to condone the delay in refiling.
Conclusion - As there is no sufficient cause explained by the Appellant, therefore, the condonation of delay application is dismissed.
The condonation of delay application is dismissed.
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2025 (3) TMI 1070
Objection to the decision of Liquidator to include the Haldia property in the Liquidation Estate - HELD THAT:- The present is a case where no steps were taken by the Appellant under Regulation 37 and at no point of time, even a communication was sent by the Appellant to the Liquidator for informing about the estimated amount required to be paid under Regulation 21A (2) (a). As noted above, the Applicant as a secured creditor was to make payment under sub- regulation (2) of Regulation 21A, within 90 days from the liquidation commencement date. When obligation is linked with the time period, the Appellant cannot fall back on the argument that the Liquidator has not communicated the estimated amount to the secured creditor. When secured creditor at no point of time even asked for estimated amount from the Liquidator and no steps were taken under Regulation 37 by the Appellant, it is not open for the Appellant to contend that Regulation 21A, sub-regulation (2) shall not apply, since he was not communicated the estimated amount by the Liquidator.
The second proviso clearly protects the interest of the secured creditor to the extent that if there is any difference between the amount payable under sub-regulation (2) and the amount paid under the first proviso, the Liquidator or the creditor, as the case may be, is to do the needful. Thus, even if, a secured creditor, who does not write to the Liquidator for any estimation or Liquidator does not send any estimate and any amount is paid by the secured creditor, he is well protected by second proviso and thus, the secured creditor cannot fall back on the argument that Liquidator having never communicated the estimated amount, sub- regulation (2) of Regulation 21A is not attracted.
The view taken by the Liquidator as well as by the Adjudicating Authority that by virtue of sub-Regulation 2 of Regulation 21A, Haldia Unit is also part of the Liquidation Estate of the CD, is correct and cannot be faulted.
It appears that SCC in its Meeting dated 03.02.2024 has declared the Halder Venture Ltd. as successful bidder. Halder Venture has submitted the EMD of Rs.5,71,00,000/- on 30.01.2024. We have already noticed that as per the SCC decision, auction of Haldia Unit was subject to order passed by NCLT in MA 03 of 2023, which MA remained pending till the order was passed by the Adjudicating Authority on 16.02.2024. It is further relevant to notice that Liquidator on non-payment of entire amount by Halder Venture, has proceeded to issue fresh Sale Notice for auction to be held on 30.08.2024. It has been submitted before us that no bidder came forward and no auction has yet taken place of the units.
Conclusion - i) The Appellant's failure to comply with Regulation 21A resulted in the Haldia property becoming part of the Liquidation Estate, affirming the Liquidator's actions. ii) The secured creditors must actively comply with the requirements of the IBBI regulations to retain their security interests during liquidation. iii) The successful bidder, Halder Venture Ltd., is allowed to complete the purchase of the Haldia property by depositing the balance amount with interest, recognizing the bidder's readiness to fulfill its obligations.
Appeal dismissed.
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2025 (3) TMI 1069
Seeking de-freezing of demat account of the Corporate Debtor, frozen due to non-compliance with SEBI regulations - waterfall mechanism under Section 53(1) of the Insolvency & Bankruptcy Code, 2016 (IBC) - jurisdiction of the National Company Law Tribunal (NCLT) extends to adjudicating matters related to the freezing of demat accounts under SEBI regulations, in light of Section 60(5) of the IBC - HELD THAT:- SEBI issued a circular in order to ensure effective enforcement of the SEBI LODR. Further, it was the obligation of all the recognized stock exchanges to intimate the depositories of non-compliance of SEBI LODR on part of any listed entity, and on receipt of such intimation, it is the obligation of the depositories to freeze or unfreeze, as the case may be, the entire shareholding of the promoter and promoter group in such non- compliant listed entity as well as all other securities held in the demat account of the promoter and promoter group.
Further, due to non-compliance of various regulations of SEBI (LODR) Regulations, 2015, demat accounts of Cox and Kings Limited, Cox and Kings Financial Services Limited and Tulip Stars Hotels Ltd., were put on freeze on 19.11.2019 and 31.12.2019. Since, Liz Traders and Agents Private Limited/ Corporate Debtor was disclosed as Promoter of the above mentioned companies in the shareholding pattern filed by them, demat account of Corporate Debtor was also put on freeze on 19.11.2019 and 25.02.2020.
Since the Corporate Debtor is under liquidation and Liquidator’s request to defreeze the demat account has not yielded any result, the Applicant has filed the present application seeking directions against Respondent nos. 1, 2 and 3 to defreeze the demat account of the Corporate Debtor, in order to enable the Applicant to take immediate custody of the shares to sell the same and distribute the proceeds as per the waterfall mechanism under section 53(1) of the Code, to the stakeholders of the Corporate Debtor.
In the facts and circumstances of the case it does not bar the jurisdiction of this Tribunal. Further, the aforementioned shares of 6 companies are assets of the Corporate Debtor, and under liquidation, it’s the duty of the liquidator to liquidate the Corporate Debtor expeditiously and maximise the recovery.
The Hon’ble Supreme Court in Gujrat Urja Vikas [2021 (3) TMI 340 - SUPREME COURT] have observed that if a nexus with the insolvency of the Corporate Debtor exists then this Tribunal have jurisdiction to decide the dispute. The CIRP or liquidation process is a time-bound process. The continued freezing of demat accounts would cause delay in the liquidation process, especially in the facts when the two defaulting listed entities are also under liquidation and compliances expected of them for defreezing of the Demat account of the Corporate Debtor is an impossibility. Further, for an entity under liquidation, this dispute or impasse cannot be of any benefit to anyone, including the concerned regulators. Accordingly, there is clear connection of the issue/dispute involved with insolvency of Corporate Debtor.
The protection of the corporate debtor’s property from attachment and restraint in proceedings related to offenses committed before the initiation of the CIRP continues even during the liquidation process, where the successful sale of assets is affected. In the present case, the freezing of demat account is obstructing the Liquidator from selling the shares and obtaining their best value. In light of the aforesaid judgement, such attachment and restraint cannot be allowed to be continued during the proceedings of liquidation under IBC.
The Respondent No. 1, 2 and 3 is directed to defreeze the demat account of the Corporate Debtor. Further Respondent no. 4 is directed to extend its co-operation to the Applicant by ensuring the proper functioning of the trading account.
Conclusion - i) The IBC's provisions, particularly regarding liquidation, have an overriding effect over conflicting SEBI regulations when they impede the liquidation process. ii) The CIRP or liquidation process is a time-bound process. The continued freezing of demat accounts would cause delay in the liquidation process, especially in the facts when the two defaulting listed entities are also under liquidation and compliances expected of them for defreezing of the Demat account of the Corporate Debtor is an impossibility.
Application allowed.
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2025 (3) TMI 976
Maintainability of section 9 application initiating CIRP - parties had already entered into settlement much before issuance of demand notice which gave rise to the Section 9 application - section 9 application filed ignoring the payments of 20 instalments - HELD THAT:- It is already noticed that when earlier demand notice was issued on 05.03.2018, parties have entered into settlement dated 24.06.2019 revised on 03.07.2020 for final settlement of Rs.8, 30, 31, 244/- equivalent to $1, 110, 489 in 21 instalments last instalment to be paid by March, 2022. 20 instalments were paid and it was only due to some calculation issues last instalment was not paid, however, during the pendency of Section 9 proceeding said instalment was paid.
Respondent fairly admitted that entire debt has been discharged. In facts of the present case, present is not a case for initiation of Section 9 proceeding against the Corporate Debtor who after receipt of the demand notice has entered into settlement and paid 20 instalments out of 21 instalments and non-payment of 21st instalment was due to calculation issues regarding amount of last instalment. Hence, present was not a case for initiation of any insolvency proceeding against the Corporate Debtor.
Conclusion - Section 9 of the Insolvency and Bankruptcy Code is not to be used as a debt recovery mechanism when a settlement agreement is in place and substantially complied with.
Section 9 application filed by the Respondent was inappropriate and unwarranted given the settlement and subsequent payment of the disputed instalment - appeal allowed.
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2025 (3) TMI 975
Homebuyer or an unsecured financial creditor in the insolvency proceedings of the corporate debtor - reimbursement of the amount paid to the bank - HELD THAT:- The present is a case where Appellant on his own request got his unit cancelled and he has filed the claim with respect to the amount which was paid to the corporate debtor towards allotment of the unit as noted above, allotment was made on 04.06.2025 and the entire amount was paid by the UCO Bank to the corporate debtor. No payment was made by the Appellant to the Corporate Debtor. Appellant has brought on the record the order of the DRAT dated 10.02.2021 filed as Annexure A3 of the Affidavit.
The Appellant entered into settlement with the Bank and paid Rs.17 lakhs towards full and final settlement of the dues, hence, there are no bank dues with respect to the unit in question. Adjudicating Authority in the order although has noticed the amount of Rs.29 Lakhs is reflected as payable by the Corporate Debtor in its books of accounts and the Resolution Professional shall intimate the bank about the amount payable to them forthwith - the Appellant has already paid the amount to the bank and all dues of the bank are settled with the Appellant. The Resolution Professional shall ensure that the amount of Rs.17 lakhs which was paid by the Appellant is paid to the Appellant from the amount reserved in the Resolution Plan. Counsel for the Resolution Professional submitted that the Appellant having paid the amount, the said amount will be paid to the Appellant.
The ends of justice be served in disposing of the appeal directing the Respondent to make payment of amount of Rs.17 lakhs which was paid by the Appellant to the bank for arriving at settlement with the bank regarding amount paid by the bank towards unit in question - The said payment shall be paid to the Appellant within period of 60 days from today.
Conclusion - The Appellant was rightly classified as an unsecured financial creditor and directed the reimbursement of the amount paid to the bank, ensuring compliance with the resolution plan.
Appeal disposed off.
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2025 (3) TMI 974
Entitlement of dissenting financial creditor to receive their liquidation value upfront before any payments are made to the assenting financial creditors - true import and interpretation to Clause 21 of the resolution plan - HELD THAT:- Adjudicating Authority has rightly taken the view that approved resolution plan is binding on all stakeholders including assenting and dissenting and SRA also. The judgment of this Tribunal in Puro Natural Sugars JV [2023 (11) TMI 1034 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], which has been relied by the appellant has also been noticed and considered by the Adjudicating Authority. In the above case, appeals were filed challenging the Order of the Adjudicating Authority rejecting the resolution plan and the orders passed in the other connected IAs. The objection to the plan was raised by the dissenting financial creditors.
The present is a case where Clause 21 of the plan itself contemplates mechanism of payment to the assenting financial creditor and dissenting financial creditor. Liquidation value of dissenting financial creditor is provided to be paid prior to any recovery are made by assenting financial creditor, hence there is no indication in the resolution plan that the dissenting financial creditor has to be paid as per instalment i.e., for period of 10 years. The decision by dissenting financial creditor not to approve the plan was on the premise that they were not agreeable to receive the 100% payment of their claim within 10 years period rather they were satisfied to receive only lesser amount i.e., 15% in case of IDBI as liquidation value before any payment is made to the assenting financial creditor. Judgment of this Tribunal in Puro Natural Sugars JV, does not come to the aid of the appellant in the facts of the present case where payment to dissenting financial creditor is clearly contemplated in Clause 21 of the resolution plan as noted above and considered by the Adjudicating Authority.
Conclusion - The Adjudicating Authority has passed the impugned order after correctly interpreting Clause 21 of the resolution plan and no error has been committed by the Adjudicating Authority in directing for payment to the dissenting financial creditor prior to any recoveries are made by assenting financial creditor.
Appeal dismissed.
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2025 (3) TMI 973
Extension of timeline for the successful bidder to pay the balance sale consideration beyond the 90-day period prescribed by the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016 - HELD THAT:- The Hon’ble Supreme Court in V.S. Palanivel vs. P. Sriram, CS, Liquidator, Etc. [2024 (9) TMI 625 - SUPREME COURT] itself had occasion to consider the power of the Adjudicating Authority in reference to extension of time for deposit of the balance consideration.
The Hon’ble Supreme Court held that the Adjudicating Authority exercised statutory powers under Section 35 read with Rule 11 of the NCLT Rules for extending the time. Thus, Hon’ble Supreme Court itself did not find any fault in the order of the Adjudicating Authority extending the time of payment after expiry of time of payment prescribed. As noticed above, an application filed by successful bidder/ successful auction purchaser for extension of time was allowed by the Adjudicating Authority on 05.05.2020 which was challenged by the Appellant in Company Appeal (AT) (Ins.) No.343 of 2021 which came to be dismissed on 16.09.2022 - The law laid down by the Hon’ble Supreme Court clearly comes to the aid of the successful bidder in the present case. Adjudicating Authority having extended the time for deposit of the amount which deposit was made and thereafter application was filed for approval of the sale which has also been granted by the Adjudicating Authority.
Conclusion - While the provisions of Clause 12 of Schedule 1 are mandatory, the Adjudicating Authority has the discretion to extend the timeline for payment under certain circumstances, exercising its statutory and inherent powers.
There are no ground to interfere with the impugned orders - appeal dismissed.
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2025 (3) TMI 972
Termination of Corporate Insolvency Resolution Process (CIRP) initiated - seeking clarification of the order on the ground the order simply stops the IRP to take further steps in the Corporate Debtor but in no way it says the CIRP has come to an end or the order dated 04.12.2023 of the Ld. NCLT initiating the CIRP is quashed - HELD THAT:- Admittedly upon initiation of CIRP, the moratorium is to be declared which in fact was declared by the impugned order 04.12.2023. Admittedly vide such order, the IRP was appointed and admittedly per Section 17 of IBC, from the date of the appointment of the IRP, the management of the affairs of the Corporate Debtor stood vested with the IRP on 04.12.2023 itself - A bare perusal of the order dated 07.12.2023 passed by this Tribunal shows the Tribunal only granted a stay on further steps to be taken by the IRP.
Admittedly the applicant being the majority shareholders of the Corporate Debtor and in the wake of allegations it makes; including admission by the appellant that some portion of property of Corporate Debtor has been mortgaged after the CIRP is initiated; the applicant needs to be heard and it cannot be said it has no locus. Even otherwise we need not dwell upon this issue as even the appellant’s application is also for clarification of order dated 07.12.2023.
The main issue in it was qua exclusion of some period for counting of the time limits for completion of CIRP, hence would not be relevant for the issue involved herein. The learned senior counsel also referred to Rajendra Bhutia Vs Suri Rahul Erstwhile Director of the Corporate Debtor and Another [2021 (10) TMI 1458 - NATIONAL COMPANY LAW TRIBUNAL MUMBAI BENCH] wherein the facts were the RP did not take possession of the assets during a particular period and the Board of Directors of Corporate Debtor were incharge of its affairs and it was held there cannot be a vacuum in the management of company. However, in this case too the amount so withdrawn by the erstwhile Directors was directed to be refunded alongwith fine to the IRP, hence also is not relevant.
Admittedly after 07.12.2023 the RP is precluded from taking steps qua inviting claims; constituting of Committee of Creditors etc. etc, but this would not mean the Suspended Board shall be incharge of assets of the Corporate Debtor.
Conclusion - i) The management of the Corporate Debtor remains with the IRP despite the stay on further CIRP steps, as per the legal fiction created by the IBC. ii) The stay order does not imply a return to the status quo ante, and the Board of Directors cannot resume control.
Application disposed off.
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