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IBC - Case Laws
Showing 1 to 20 of 9149 Records
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2024 (11) TMI 1352
Admissibility of petition - initiation of CIRP - Validity of demand for interest and repayment of principal amount by the Financial Creditor - Existence of debt and default or not - Time limitation - HELD THAT:- As per provisions of Section 5(8) of IBC, 2016, financial debt means a debt alongwith interest, if any, which is disbursed against the consideration for the time value of money. In the present case money has been disbursed to the Corporate Debtor towards time value of money and interest is shown as due in the ledger accounts of the Corporate Debtor. The total interest due is more than Rs. 1 crore and was demanded by the Financial Creditor through letter dated 22.01.2019 which was not paid by the Corporate Debtor. Thus, the debt of above Rs. 1 crore was due, was demanded and was payable which was not paid by the Corporate Debtor. The ingredients of petition under Section 7 of the IBC, 2016, mainly existence of debt, and default are established in this case, and the Corporate Debtor was eligible to be admitted in CIRP on application under Section 7 of IBC, 2016.
Time limitation - HELD THAT:- The application under Section 7 of the IBC, 2016 was filed on 30.05.2022. The Appellant itself as Director of the Corporate Debtor had acknowledged the debt in the ledger accounts of Financial Year 2016-17, 2017- 18 and 2018-19 through confirmation of accounts including the last dated 01.04.2019 appearing at page 104 of the Appeal Paper Book. The three year period, since the acknowledgement, expired on 31.03.2022. However, as per the direction of the Hon'ble Supreme Court in Suo Moto Writ Petition No. 3 of 2020 decided on 10.01.2022 [2022 (1) TMI 385 - SC ORDER], the period from 15.03.2020 till 28.02.2022 is to be excluded for counting of limitation under any law. Excluding the said period, the present petition under Section 7 was filed within the limitation period by the Financial Creditor.
The Ld. NCLT has rightly admitted the Corporate Debtor in CIRP on an application under Section 7 of IBC, 2016 filed by the Financial Creditor. We do not find any reason to interfere in the impugned order of Ld. NCLT - The appeal, devoid of merit, is dismissed.
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2024 (11) TMI 1351
Admission of section 7 application - Respondent No. 1 and Respondent No. 2 are related parties, who in collusion and connivance with the ex- management/promotor/director/shareholder of Respondent No. 1 i.e. Respondent No. 3 to 5 initiated the CIRP - HELD THAT:- The Respondent No. 3 who happened to be a director and shareholder in all three companies, namely, Navayuga, Respondent No. 1 and Respondent No. 2. In Navyuga he is director and 21.77% shareholder, in Respondent No. 1 he was a Promotor and director till 2015 and 33.34 % shareholder and in Respondent No. 2 he is a director & 66.66% shareholder which shows that this case shall come within Section 5(24)(m)(i) and (iii) of the Code as Respondent No. 3 is controlling more than 20% of the voting share of these companies and also the assignor.
It has been held by the Hon’ble Supreme Court in the case of Phoenix ARC (P) Ltd. [2021 (2) TMI 91 - SUPREME COURT] that amount disbursed to third party that too by the related party will not qualify as a financial debt under the Code. It has also been held in the case of Hytone Merchants Pvt. Ltd. [2021 (7) TMI 60 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] that even if Section 7 of the Code ingredients are fulfilled then also if collusion is proved CIRP can be set aside. The Appellant has specifically averred in para 33 of the appeal paper book about the presence of Respondent No. 3 in all three companies as shareholder and director which has not been denied by Respondent No. 2 and 3 in their reply, firstly, there is no parawise reply filed and secondly in the reply the emphasis is more on the issue as to how the provision of Section 5(24) is attracted about which an inference can be drawn that the allegation of the Appellant about Respondent No. 3 is correct and once he was the director/promotor 33.34% shareholder in Respondent No. 1 and Director in both Navayuga and Respondent No. 2 with 21.77% and 66.66% shareholder, it cannot be said that he was not a related party especially when it is incorporated in the financial statement of the CD much less Note 3 of the audit report that long term borrowings the amount in question, is taken from the related parties. The collusion between Respondent No. 1 and Respondent No. 2 can be ascertained from such circumstances.
There are no doubt that the petition filed by Respondent No. 2 against Respondent No. 1 was collusive and for a purpose other than for the resolution of insolvency and hence the impugned order by which Respondent No. 2 has pushed Respondent No. 1 into CIRP is hereby set aside.
Appeal allowed.
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2024 (11) TMI 1289
Entitlement to raise an objection to the Resolution Plan - Whether the appellant, GNOIDA, is to be treated as a financial creditor? - HELD THAT:- The appellant, GNOIDA, will be entitled to raise all claims in this regard in accordance with law and in terms of the provisions of the Insolvency and Bankruptcy Code, 2016.
Recording the aforesaid, the appeal is dismissed.
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2024 (11) TMI 1288
Maintainability of Section 9 application - rejection due to pre-existing disputes - operational debt - whether there is any infirmity in the impugned order passed by the Adjudicating Authority dismissing the Section 9 application on the ground that the operational debt claimed by the Appellant was embedded with pre-existing disputes?
HELD THAT:- It is clear from the agreement arrived at the meeting held on 26.01.2021 that the Operational Creditor had agreed to replace the defective pump sets and meet the standards as per the tender conditions which is a clear admission on their part for having been unable to discharge their obligations up to the expectations of the tender specifications. The Appellant has however contended that these minutes indicate that the dispute had come to an end and stood amicably settled - merely because a meeting was held between the two parties to overcome the shortcomings in the meeting the obligations of supply and installation of pump-sets cannot be taken to imply that all disputes between the parties had subsided without the parties being at ad idem on whether the obligations stood discharged on a mutually satisfactory basis.
The Adjudicating Authority has concluded at paragraph 7 of the impugned order that the dispute which existed between the Operational Creditor and the Corporate Debtor prior to the demand notice about the quality of the pump sets supplied requires detailed inquiry and investigation by the proper forum and that the Adjudicating Authority is not that forum - the Adjudicating Authority did not commit any error in returning this finding keeping in mind that IBC bestows only summary jurisdiction upon the Adjudicating Authority. Once plausibility of a pre-existing dispute is noticed, it is not required of the Adjudicating Authority to make further detailed investigation. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court.
It is well settled that in a Section 9 proceeding, the Adjudicating Authority is not to enter into final adjudication with regard to existence of dispute between the parties regarding the operational debt. There was no requirement for the Adjudicating Authority in the present case to go under the skin of dispute and therefore the Adjudicating Authority rightly held that the Section 9 application was not maintainable in the present factual matrix.
The defence taken by the Appellant that the Corporate Debtor was trying to manufacture disputes fails to succeed. The defence raised by the Corporate Debtor cannot be held to be moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. The Adjudicating Authority has therefore correctly noted that the conditions laid down in Section 9 having not been fulfilled, the application deserved to be rejected. There are no good reasons to disagree with the findings of the Adjudicating Authority.
The Adjudicating Authority did not commit any error in rejecting the Section 9 Application filed by the Appellant - There is no merit in the Appeal - Appeal is dismissed.
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2024 (11) TMI 1287
Re-constitution of the Committee of Creditors (CoC) by excluding Appellants - misinterpretation of provisions of Section 140 of the Indian Contract Act - Application filed by the Central Bank of India, Appellants were not heard - violation of principles of natural justice - whether the Appellant are the Financial Creditor of the Corporate Debtor and they are entitled to be part of the CoC as has been allowed by the RP, which inclusion has been set aside by the Adjudicating Authority by the Impugned Order?
HELD THAT:- The plain language of Section 5(8)(i) clearly indicates that any of the Guarantee or indemnity for any of the items referred to in sub-Clauses (a) to (f) may also be Financial Debt. In event, there is any “amount of any liability in respect of”. Thus, by giving Guarantee to a transaction referred to in (a) to (i) will not be covered by Financial Debt unless there is any liability in respect of the Guarantee. Thus, Guarantee given by a Guarantor plain and simple cannot be basis for a Financial Debt, unless there is an amount of any liability in respect of such Guarantee. Thus, a Financial Debt will arise only when in respect to Guarantee as covered by Section 5(8)(i) any liability has arisen which is the Statutory Scheme of the IBC - Personal Guarantors claim which obviously will be ₹10 Crore each is accepted the Bank’s voting share shall be reduced to only 20% and 3 Guarantors shall be given 20% vote shares each and 1 Guarantor against whom ₹25 Lakhs have been realised, his claim shall be entitled to be accepted, and he shall also be entitled for voting shares of 2.5%. The above interpretation shall lead to reducing the Bank’s share to minority, which cannot be the scheme of IBC.
The Statutory Scheme is thus clear that for accepting transaction as a Financial Debt, in addition of establishing a Guarantee or indemnity liability in respect of Guarantee has also to be established - The Personal Guarantor while giving the Guarantee for Guarantee of repayment to the loan has guaranteed for repayment of the loan, in event, principal failed to make a payment to the Guarantor. Thus, Guarantor in the present case has to make payment and performance of all that is liable for is payment to the Bank none-else.
Personal Guarantors who have not made any payment in discharge of their Guarantee given to the Central Bank of India cannot be accepted as Financial Creditor of the Corporate Debtor, nor any voting share can be allocated to them in the CIRP of the Corporate Debtor.There are no error in the Order of the Adjudicating Authority holding that Appellants who have not made any payment to the Creditor cannot be treated to be a Financial Creditor. There is no infirmity in the Order passed by the Adjudicating Authority allowing I.A. No. 294/2020 filed by the Bank.
Appeal dismissed.
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2024 (11) TMI 1286
Service of demand notice - whether petition filed under Section 95 was premature? - appellant argued that period of service of demand notice has to be counted in terms of Section 95(4)(b) of the Code and the period mentioned in the guarantee agreement should not be taken into consideration - HELD THAT:- The facts are not in dispute that a personal guarantee deed was executed on 27.07.2011 amongst the Appellant as a lender, SPIL as the Borrower and Respondent No. 2 as the Guarantor. Clause 3 of the said agreement categorically lays down that the Guarantor would pay the amount of ICD of Rs. 1 Cr. 75 Lac to the lender within 60 days from the date of demand notice served by the Lender requiring the payment. Therefore, from the plain reading of this clause it is apparent that the liability to pay by the Guarantor to the lender shall arise only in two circumstance firstly, on the service of demand notice and secondly, within the period of 60 days from the receipt of demand notice. In fact the time was provided in the agreement to the guarantor to arrange payment of the lender to avoid legal complications. The right to file the petition under Section 95 thus would not arise after 14 days of service of the notice in view of the specific agreement between the parties that after the demand notice is served, 60 days time shall remain available with the guarantor for discharging his liability whereas in the present case the demand notice is dated 01.11.2021 and the application was filed on 01.12.2021, just after the expiry of one month, which is contrary to clause 3 of the agreement.
It is obvious from the dates because the petition under Section 9 of the Act was filed by Respondent No. 1 on 30.11.2021 and when the case was adjourned to 03.12.2021 for orders, the petition under Section 95 was filed on 01.12.2021 as a result of which the petition filed under Section 9 had to be adjourned by the Hon’ble Bombay High Court.
There are no error in the findings recorded by the Tribunal for not only allowing the application of the Respondent No. 1 but also dismissing the application filed under Section 95 of the Code by the Appellant and imposition of cost.
There are no merit in the present appeal and hence, the same is hereby dismissed.
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2024 (11) TMI 1236
Dismissal of Company Appeal against the order admitting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of pre-existing dispute has not been proved - HELD THAT:- The appellants have not placed on record even the proof of dispatch of the letters and the Notice referred above, leave apart, the proof of service. More pertinently, while replying to the Demand Notice dated 26th April, 2017 issued by the respondent under Section 8 of the IBC, none of the letters and the Notice referred above have been referred to and relied upon. In the absence of the proof of dispatch and/or service of the letters and the Show Cause cum Demand Notice dated 11th December, 2012, it is impossible to come to the conclusion that there was a pre-existing dispute. A contention regarding pre-existing dispute has to be supported by the evidence. In this case, it is wholly unsupported by the evidence.
The view taken by the NCLAT is agreed upon - appeal dismissed.
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2024 (11) TMI 1235
Condonation of delay of 4486 days in filing the appeal to assail money recovery decree - benefit under Section 14 of the Limitation Act - professional misconduct of the counsel of appellant.
HELD THAT:- The delay in filing the appeal is not for an insignificant period; it is an inordinate delay of 4486 days. The impugned judgment and decree being dated 18.09.2012, the period of limitation prescribed for filing appeal expired on 17.12.2012. The delay till 29.11.2019 (the date of filing of application under Order IX Rule 13 CPC) has been attributed by the appellant company to the professional misconduct of their erstwhile counsel. The appellant is not an individual litigant, much less an illiterate lay person. The appellant is a limited company. Admittedly, the appellant was being represented through an employee of theirs, who left job. That being so, the appellant cannot claim no duty to be diligent in keeping track of the lis. Further, during arguments learned counsel for appellant submitted that no action has been taken against the erstwhile counsel for his alleged misconduct - no satisfactory explanation is set up by the appellant to explain their having not filed the appeal during the period from 17.12.2012 to 29.11.2019.
The period from 29.11.2019 to 20.09.2024 has been explained by the appellant, pleading that they filed application under Order IX Rule 13 CPC, which got dismissed, so they filed the present appeal on 08.10.2024. The appellant has claimed benefit under Section 14 of the Limitation Act for the said period of almost five years - The expression “good faith” is defined under Section 2(h) of the Limitation Act, stipulating that nothing shall be deemed to be done in good faith which is not done with due care and attention. What is to be seen is as to whether the institution and prosecution of the other proceeding in wrong forum was done with due care and attention, thereby in good faith. Another requirement of Section 14 of the Act is that the applicant must have been prosecuting the previously instituted proceedings with due diligence. Due diligence is a measure of prudence or activity expected from and ordinarily exercised by reasonable and prudent person under the particular circumstances.
In the present case, complete lack of due care and attention is writ large on the face of record. According to the appellant’s own case, for the first time they became aware of the impugned judgment and decree upon receipt of demand notice on 27.09.2019 and filed application under Order IX Rule 13 CPC on 29.11.2019, which application was dismissed by the trial court vide order dated 27.05.2024 - There is not even a whisper in the impugned judgment that it was being passed ex-parte. Even counsel for the appellant was conscious that the impugned judgment and decree was not ex-parte and that is the reason, the appeal FAO 300/2024 was withdrawn on 20.09.2024. Evidently, the appellant first filed the application under Order IX Rule 13 CPC without there being ex-parte judgment and decree, and thereafter, continued to prolong the application from 29.11.2019 to 20.09.2024 i.e., almost five years. By any liberal standards, it cannot be treated as proceedings pursued by the appellant in good faith.
Therefore, for the period from 29.11.2019 to 20.09.2024, benefit of Section 14 of the Act cannot be granted to the appellant. In any case, since for the first part of delay period of almost seven years no sufficient cause has been shown, thereby disentitling the appellant benefit under Section 5 of the Act, for the subsequent part of delay period of more than five years, no benefit under Section 14 of the Act can be granted.
This is not a fit case to condone the colossal delay of 4486 days in filing the present appeal. Therefore, the delay condonation application is dismissed.
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2024 (11) TMI 1234
Dismissal of Section 7 application filed by the Appellant - financial debt or not - share application money in respect of the shares not allotted - whether in the facts of the present case, the share application money which was deposited with the Corporate Debtor by the Appellant fell in the category of Section 5(8) of the IBC? - HELD THAT:- The basic ingredients which are required to be met for a debt to become ‘financial debt’ are that there must be a disbursal against the consideration for time value of money. Further sub clauses (a) to (i) of Section 5(8) delineates the various transactions which are included in the ambit of ‘financial debt’. Prima-facie, amounts raised by way of share application money is not expressly covered in the transactions covered by sub clauses (a) to (i) of Section 5(8) of the IBC.
On looking at Rule 2(c)(vii) of the CADR Rules, 2014 and the explanatory clause appended thereto, it becomes clear that it refers to any amount received and held pursuant to an offer made in accordance with the provisions of the Companies Act, 2013 towards subscription to any securities, including share application money. It flows therefrom that for the aforementioned CADR Rules to be attracted in respect of share application money, there has to be a clear nexus to show that the share application money amount was advanced in conformity with the relevant provisions of the Companies Act, 2013 - There is no evidence of any valid concluded agreement between the two parties with respect to allotment of shares. Hence, the amount which was advanced by the Appellant cannot be treated to be amount in response to the private placement offer. Rule 2 of CADR Rules envisages that only if any amount is received pursuant to any private placement offer made in accordance with the provisions of the Companies Act, 2013 and no shares are allotted qua that amount, only then the sum becomes a deposit. When no proof of any private placement offer made in accordance with the provisions of the Companies Act, 2013 has been placed on record by the Appellant, the CADR Rules cannot be held to be applicable. Since the amount advanced cannot be related to Section 42 of the Companies Act, the applicability of Section 42(6) cannot be pressed as is being sought by the Appellant in the present case.
There are no infirmity in the order of the Adjudicating Authority rejecting the Section 7 application of the Appellant - there is no merit in the appeals - appeal dismissed.
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2024 (11) TMI 1186
Seeking equitable treatment with that of other creditors in class - seeking amendment of the Information Memorandum (IM) reflecting the units of the Appellants as cancelled - seeking refund of the amount paid - HELD THAT:- It is to be noted that it is the duty of the RP to collate all the claims filed before him and verify the same from the books of the Corporate Debtor. The submission of the RP agreed upon that it lacks adjudicatory powers on the claims filed before him. The RP could not have reversed the action of cancellation taken by the Corporate Debtor prior to the initiation of CIRP.
Even though the allotment were cancelled by erstwhile management of the Corporate Debtor, the Resolution Plan had provided treatment to the said cancelled allottees. And this Resolution Plan was approved by the CoC with 100% majority in their 12th CoC meeting held on 03.08.2023 - Resolution Plan was prepared and filed by the Resolution Applicant in compliance with Section 30 of the Code and later it has been duly approved by the CoC in its commercial wisdom. It is well settled position of law that the Resolution Plan, duly approved by the COC as per their commercial wisdom has a very limited scope of judicial review and which is circumscribed by the provisions contained in Section 31 of the Code.
In the instant case, the Appellants had already approached UPRERA, seeking refund of their entire amount, along with the interest which was decreed in their favour. The Applicant had accepted partial amount paid to them from the erstwhile management. The conduct of the allottees in accepting the refund towards their allotment, indicates that allottees have accepted the cancellation of the allotments. In this conspectus, the submissions of the Respondent that the refund, which was initiated by the erstwhile management at the instance of the Appellants, cannot be given a colour of unilateral cancellation of allotment, agreed upon.
It is to be noted that the Appellants did not challenge their cancellation of allotment, which was pre-CIRP. It is also clear from records that they have accepted the partial payments basis the decretal amount of UPRERA. Now their primary grievance is qua the cancellation of their respective units. Since earlier they had accepted the money and while filing their claims they misrepresented and filed full claim and are now seeking the revocation of the cancellation of the units - The CoC, RP could not have revoked the cancellation as it was beyond their jurisdiction. In fact, they had gone ahead as per the information collated from the records of the Corporate Debtor. Therefore, the contention of the Appellant that there is a failure to comply with the UPRERA Decree cannot be accepted.
The cancellation of the units was based on the UPRERA’s Order which was not challenged. The Information Memorandum contained this information and CoC could not have revoked the cancellation and acted within its commercial wisdom approving the Resolution Plan - there are no fault in the due process which was followed by AA - appeal dismissed.
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2024 (11) TMI 1143
Cancellation of sale certificate issued by the Respondent - Appointment of a local commissioner to verify the machinery mentioned under the tender document and as per valuation report annexed to the application - Grant of Stay on auction going to be conducted on 08.02.2022 by the liquidator - HELD THAT:- In the present case, admittedly the Sale Certificate was issued to the Successful Bidder, after issuance of Sale Certificate on 08.11.2021, it is failed to see any relevance of LoI which was referred to in Clause 9. Under the Liquidation Regulation 2016, there is a statutory requirement of payment of bid amount within 90 days.
The submission of the Appellant that he was never intimated that he has to make the payment of 90 days cannot be accepted. The bid document as well as Regulation clearly provided for payment. Appellant having failed to make the payment of the balance amount. Liquidator did not commit any error in forfeiting the EMD and cancelling the Sale Certificate. The amount of Rs.58.10 Lakhs which was paid after e-Auction has already been refunded to the Appellant.
There is no ground to interfere with the Impugned Order - Appeal is dismissed.
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2024 (11) TMI 1142
Locus of the Appellant to file the Appeal - nonfulfillment of threshold for filing a Section 7 application under the Insolvency and Bankruptcy Code (IBC).
Whether the appellant has locus to file this Appeal? - HELD THAT:- By admission of Section 7 Application, the Corporate Debtor or allottees of project may have any grievance, a person, who is neither allottee of the project, nor has any stake in real estate project, which is subject matter of the insolvency, cannot be allowed to challenge the order admitting Section 7 application. Section 7 application has been admitted on account of debt and default by the Corporate Debtor, who committed default in delivering the possession of the unit to the allottees. There are substance in the submission of learned Counsel for the Respondent that the Appellant has no locus to challenge the order admitting Section 7 application.
Nonfulfillment of threshold for filing a Section 7 application under the Insolvency and Bankruptcy Code (IBC) - HELD THAT:- Section 7 application filed by the Financial Creditors in class is dated 25.09.2021, is much subsequent to the registration of the project Lotus Isle (Residential). The Applicants in the application under Section 7 have given relevant facts. The copy of the application is filed as Annexure A-44, which clearly mentions that the project was bifurcated by permission dated 31.01.2017. Section 7 application was filed by the Financial Creditor in a class alleging default committed by the Corporate Debtor in giving possession of the units, within the time given in the Builder Buyers Agreement. Several amounts have already been disbursed by the Financial Creditors in a class in residential units consisting three towers wherein total allotted units are 255, out of which 29 unit holders were Applicants in Section 7 application.
The Adjudicating Authority has returned a finding in paragraph 17 that 10% allottee of the real estate can maintain a petition. It is not a dispute between the parties that total units for the residential project are 255 and the application was filed by 29 unit holders - the application filed by Financial Creditors in a class, fulfill the threshold as provided under Section 7, second proviso and the submission advanced by the learned Counsel for the Appellant that application did not fulfill the threshold limit, cannot be accepted.
There are no ground to interfere with the impugned order - The Appeal is dismissed.
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2024 (11) TMI 1141
Rejection of liquidator's claim by the workmen - closure of factory - violation of the provisions of the Industrial Dispute Act, 1947 - HELD THAT:- From the facts brought on the record, it is clear that the corporate debtor ceased to work from June, 2010 and according to the case of the Appellants themselves, they worked in the factory till April 2012 only. The claim was filed by the Appellants who were asked by the liquidator to submit evidence to substantiate the claims. No satisfactory evidence having been produced by the Appellant that they were in the employment of the corporate debtor on the date of commencement of the liquidation, the Liquidator rejected the claims and sent communication dated 02.03.2019.
In the present case, according to own case of the Appellants that they could not work after April, 2012. They had not taken any proceedings before the Industrial Court or Labour Court for their wages and other claims. For violation of provisions of the Industrial Disputes Act, 1947, the remedy available to the workmen was to approach the Industrial Court or Labour Court. Adjudicating Authority has rightly observed that the workmen/ employees have slept over their rights for years together and they filed the claim only when CIRP/ liquidation has commenced - The NCLT while exercising its jurisdiction on the liquidation process of the corporate debtor is not entitled to enter into issue as to whether the closure of the factory from June 2010 was in violation of the Industrial Dispute Act, 1947. The said issue ought to have been raised by the Appellants before the Industrial Court or Labour Court.
Reference made to the judgment of this Tribunal in Era Labourer Union of Sidcul, Pant Nagar, through its Secretary vs. Apex Buildsys Ltd. [2024 (9) TMI 1323 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB]. In the above case also, labourer union of Sidcul, Pant Nagar had filed a claim in the CIRP of the corporate debtor which commenced on 20.08.2018. Direction for liquidation was also passed by the Adjudicating Authority on 09.01.2020. Before the Adjudicating Authority, IA was filed by Era Labourer Union where declaration of the lockout on 31.07.2017 was under challenge and Appellant claimed for payment from date of the lockout till the commencement of the liquidation proceedings. The liquidator had not accepted the claim from date of lockout till the commencement of the CIRP. The claims of the Claimants were not verified from the date of closure. Adjudicating Authority rejected the application of the Labourer Union questioning the layoff. Challenging the said order, the appeal was filed.
The above judgment fully supports the submission of the Liquidator that the issue of closure of the factory from June, 2010 cannot be questioned and the issue which ought to have been raised by the Appellants before the Industrial Court or Labour Court. Before the liquidator, no material having brought by the Appellants to prove their employment and working till 31.12.2018, the Liquidator did not commit any error in rejecting the claims.
There are no infirmity in the order of the Adjudicating Authority warranting interference by this Tribunal in exercise of Appellate Jurisdiction - There is no merit in the Appeal - The Appeal is dismissed.
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2024 (11) TMI 1140
Condonation of 26 days delay in filing the Appeal - sufficient cause for delay or not - admission of Section 95 Application filed by the State Bank of India (SBI) against the Appellant, Sanjay Jain - whether the Appellant has made out the case for condonation of 26 days delay as prayed in the Application? - HELD THAT:- Law is well settled that this Tribunal has no jurisdiction to condone delay beyond 15 days. The Hon’ble Supreme Court in the matter of National Spot Exchange Limited. Vs. Anil Kohli, Resolution Professional for Dunar Foods Limited, [2021 (9) TMI 1156 - SUPREME COURT], has held that Appellate Tribunal has no jurisdiction at all to condone the delay exceeding 15 days.
The submission of the Appellant for explaining the delay is on the basis that Appellant came to know about the Order only on 30.03.2024, hence from 30.03.2024, the Appeal filed on 22.04.2024 is within time. Limitation for filing an Appeal begins from the date when the Order is pronounced by the Adjudicating Authority. In the present case, Order was delivered on 26.02.2024. The Hon’ble Supreme Court in the matter of V Nagarajan Vs. SKS Ispat & Power Limited & Ors., [2021 (10) TMI 941 - SUPREME COURT (LB)], had laid down about commencement of limitation for filing the Appeal had noted the difference between the Statutory Scheme under Section 421 of the Companies Act, 2013, and Section 61 of the Insolvency and Bankruptcy Code, 2016. It was held by the Hon’ble Supreme Court that omission of the words “from the date on which a copy of the Order of the Tribunal is made available to the person aggrieved from Section 421(3) to Section 61(2)” are not mere omission and power to condone the delay is slightly circumscribed and conditioned upon showing sufficient cause.
In the case of AARYAN PROJECTS PRIVATE LIMITED VERSUS KLOWIN INFRASTRUCTURE PRIVATE LIMITED [2022 (8) TMI 1551 - CALCUTTA HIGH COURT], even after substituted service, Plaintiff obtained fresh summons of service which was returned unserved and when the summons were pending suit was transferred into the list of undefended case which were the reasons for allowing the Application by the Hon’ble High Court. The said Judgment was also on its own fact. The above Judgment does not help the Appellant for condonation of delay as prayed in the present Appeal.
The Application for condonation of delay of 26 days is rejected - Memo of Appeal is also rejected.
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2024 (11) TMI 1082
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 - entitlement for the amount as per Section 30, sub-section (2)(b) of IBC - sufficient grounds to interfere with the order passed by the Adjudicating Authority, approving the Resolution Plan.
Whether the units allotted to commercial space buyers (the Appellant(s) herein), required to be excluded from the assets of the Corporate Debtor? - Whether the Appellant(s) on the basis of allotment of commercial spaces by the CD, by virtue of Lease Deed dated 24.12.2014 in respect to Appellant, the Appellant(s) are owners of the units allotted to them? - HELD THAT:- The Hon’ble Supreme Court had occasion to consider a homebuyer’s project in Jaypee Kensingston Boulevard Apartment Welfare Association & ors. Vs. NBCC (India) Ltd. & Ors. [2021 (3) TMI 1143 - SUPREME COURT], where Hon’ble Supreme Court has held that Resolution Plan has to comprehensively deals with all the assets and liabilities of the Corporate Debtor and no housing project could be segregated for the reason that the same has been completed or is nearing completion.
Thus, by virtue of allotment of commercial space in favour of the Appellant(s), including the Lease Deed dated 24.12.2014, the Appellant(s) cannot claim to have become owners of the commercial spaces. The CD continues to own the assets and the plea of the Appellant(s) that assets be excluded from CIRP of the CD, or the Appellant(s) are owners of the commercial space/ units allotted to them, cannot be accepted.
Whether the Appellant(s) being dissenting Financial Creditors, entitled for the amount as per Section 30, sub-section (2)(b)? - Whether the Appellant(s) had made sufficient grounds to interfere with the order dated 30.10.2023 passed by the Adjudicating Authority, approving the Resolution Plan submitting by the SRA? - HELD THAT:- As per Resolution Plan and the order passed by the Adjudicating Authority, the commercial space buyer are entitled for 100% of their principal amount with alternate option for commercial space buyers. Thus, as per the Resolution Plan, the Appellant(s) are entitled either to opt for 100% refund of the principal amount within 90 days or to opt for an alternate option for commercial space, which is part of Resolution Plan. Thus, the Appellant(s) under Section 30, sub-section (2)(b) were entitled for only liquidation value, which according to the Resolution Plan is ‘zero’. However, the SRA having offered 100% refund of the principal amount with alternative proposal for commercial space, the entitlement of Appellant(s) as per the Resolution Plan is of 100% refund of the principal amount or the option for alternate commercial space.
The law with regard to interference with the commercial wisdom of the CoC approving the Resolution Plan is well settled. The limited ground on which the Adjudicating Authority or the Appellate Tribunal can interfere with the approval of the Resolution Plan is only to examine as to whether the Resolution Plan is in compliance of Section 30, sub-section (2) of the IBC. The present is not a case that Appellant(s) have pleaded or proved any ground that Resolution Plan is in violation of provisions of Section 30, sub-section (2) (b) - the payment offered to the Appellant(s) in the Resolution Plan, does not violate the provisions of Section 30, sub-section (2) (b) - there are no ground to interfere with the order dated 30.10.2023 passed by Adjudicating Authority approving the Resolution Plan. The question is answered accordingly.
Whether rejection of IA 3524 of 2020, filed by the Appellant of Company Appeal (AT) (Ins.) No.61 of 2024 and the rejection of IA No.4369 of 2022 and 5253 of 2023 filed by the Appellant(s) of Company Appeal (AT) (Ins.) No.45 of 2024 deserve to be interfered with? - HELD THAT:- The prayer of the Appellant to exclude the commercial space from the Resolution Plan, could not have been accepted, nor any direction could have been issued for registration of Sale Deed. The claim, which was submitted by the Appellant was admitted in the CIRP. In the Appeal filed by Nupur Garg, at Annexure A-10, the list of financial creditors in the class of commercial space buyers has been annexed at page 175, which include the amount of claim submitted and amount of claim admitted by the RP - There has been no consideration of the claim of the rent by the Appellant from July 2019, which was one of the prayers made in the application, we are of the view that ends of justice will be served in granting liberty to the Appellant to file an appropriate application for claim of rent subsequent to commencement of CIRP. It shall also be open for the Appellant to claim the said rent as CIRP cost. However, no concluded opinion expressed for the said claim and it is for the Adjudicating Authority to consider and take appropriate decision.
The order of the Adjudicating Authority upheld - appeal dismissed.
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2024 (11) TMI 1054
Maintainability of application - initiation of CIRP u/s 9 of the I&B Code - performance pay - Operational Debt or not - Operational Creditor or not - issuance of Section 8 notice - HELD THAT:- Where a payment of a financial debt owing to the employment, if it is required to be arithmetically determined during the proceedings based upon a subjective satisfaction and application of criteria of performance pay, based upon the policy as referred to by the Learned Counsel for the Respondent i.e., 06.01.2019, that has to be read with the criteria of assessment of performance pay dated 24.04.2018, the amount claimed by the Appellant in his notice issued under Section 8, will fall to be a variable factor and that will not fall to be within the definition of the “operational debt” or even a “debt” as defined under the I & B Code and thus the denial of the same by the Learned Adjudicating Authority cannot be said to be irrational or without an application of mind.
There is yet another aspect which is required to be taken into consideration, its that at the stage of initiation of proceedings the issuance of demand notices under Section 8 of the I & B Code, which is a condition precedent for raising a determined demand for the claim, which is falling within the purview of debt or an operational debt herein, the Appellant admittedly has issued Form 3and Form 4. In fact, the two forms provided under rules, of the raising of a demand they altogether intend to meet a distinct objective accordingly it classifies the demand itself. The rules prescribe that the Operational Creditor can send a demand notice, either in Form 3 or in Form 4 as contemplated under Section 8 of the I & B Code, which is to be read with Rule 5 of the I & B Code, as well as the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules 2016.
The Learned Adjudicating Authority while considering the claim has further observed, that the sending of the notices under Form 3, as well as under Form 4, that itself depicts that the Appellant was not very sure about the nature of the claim and its classification, under which he was raising because he himself has not been able to classify as to under which form of debt, would his claim towards the performance pay, would lie and thus issuance of two forms, i.e., Form 3 and Form 4, since they intend to meet a difference objective, as it has been dealt with in the Impugned Judgment, the claim raised by the Appellant Operational Creditor will not fall to be payable by the issuance of multiple formulated notices under Section 8 of the I & B Code and it cannot be taken as to be an operational debt for the purposes of invocation of the proceedings under Section 9 for drawing a CIRP proceedings against the Corporate Debtor.
The claim as raised by the Operational Creditor, in the proceedings of the Company Petition, will not be an operational debt and hence drawing of a proceedings by invocation of Section 9 will not be justified, to bring a Corporate Debtor to face the CIRP proceedings and particularly when the Appellant himself was not very sure enough, that it was not a determined claim of a debt, which was being raised before the Learned Adjudicating Authority and hence the rejection of the claim by virtue of the Impugned Order, which is under challenge i.e., dated 02.05.2024, as it has been rendered in petition, do not suffer from any apparent illegality which may call for an interference in the exercise of ours Appellate Jurisdiction under Section 61 of the I & B Code, 2016 and thus the reason which has been assigned by the Learned Adjudicating Authority is absolutely justified.
This Appeal lacks merit and the same is accordingly dismissed.
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2024 (11) TMI 1053
Maintainability of Civil suit - bar under Order 7 Rule 11 of CPC - Ownership and possession rights of the Appellant over the disputed land during CIRP proceedings - bar u/s 238 of I & B Code - specific case has been made that the property in question is being used for the industrial purposes of the Corporate Debtor, which is a fact not denied by the appellants and it was falling within the premises of the Corporator Debtor which is already in custody of the Resolution Professional - HELD THAT:- The orders under Section 7 were reserved on 06.02.2023 and the Corporate Debtor itself vide its Diary No. 5214 dated 02.12.2022, had stated that it signifies its willingness to admit the application and the directions for initiation of the CIRP proceedings in view of financial stress. In these circumstances, sale of the said property immediately after reserving of the judgment on 06.02.2023, itself is an avert act, and actions of the Appellant with regard to the aforesaid transaction which is subject matter of the Civil Suit, which has been instituted at his behest together with chronological sequence of transactions in the scheduled land during the pendency of CIRP proceedings shows that the sale was not bonafide and apart from this, since the appellant himself has already questioned the rights of the respondent in a regular Civil Suit, and his rights over the property are yet to be determined by the competent Civil Court, which he himself has invoked at this stage the pendency of the Civil Suit cannot be taken as a reason for interference in the CIRP proceedings. Further, the resolution plan as filed through IA No. 02/2024 in its Clause 5, describes the assets of the Corporate Debtor, which also refers to the ensuing litigation being Suit O.S. No. 16/2024.
The apprehension expressed on the basis of the written submissions is without basis, as the Resolution Plan since it does not in any manner transfer or affect the title of the subject property and there is no immediate change of ownership or the Applicant’s right. In view of the discussions as above, it does not call for any interference at this stage and that too, while exercising the inherent powers under Rule 11 of the NCLT Rules, 2016.
Having scrutinised the reasons which has been assigned by the Learned Adjudicating Authority in relation to the status of the property and the effect of the pendency of the Civil Suit filed by the Appellant, the rejection of the two applications of the Appellant by the Learned Adjudicating Authority by the Impugned order does not call for any interference in the exercise of the Appellate Jurisdiction under Section 61 of I & B Code.
Thus, these appeals lack merit and they are accordingly dismissed.
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2024 (11) TMI 1052
Rejection of application filed by the Appellant under Section 10 of the Insolvency and Bankruptcy Code, 2016 - proceedings under Section 13, sub-section (2) of the SARFAESI Act was initiated by the SBI against the Appellant prior to filing of Section 10 Application - main reason for dismissing Section 10 application is that Applicant has filed Section 10 application with malicious and fraudulent intent to delay and halt the recovery proceedings initiated by Respondent Bank - whether filing of an application by the Appellant under Section 10, can be termed as initiation of proceedings with fraudulent and malicious intent? - HELD THAT:- The basis for Section 65 application filed by the SBI is the fact that SBI has initiated proceedings under Section 13, sub-section (2) of the SARFAESI Act vide notice dated 24.02.2023, prior to filing of the application under Section 10 by the Corporate Applicant. Admittedly, Section 10 application was filed by the Appellant, subsequent to initiation of proceedings under Section 13, subsection (2) by the SBI. The pleadings of the of the SBI in proceedings under Section 13, sub-section (2) were that 13(2) proceedings were on the verge of being completed, when Corporate Applicant has filed application under Section 10 with malafide and fraudulent intent. From the pleadings in Section 65 application, we do not find any foundation to come to the conclusion that application under Section 10 was fraudulently initiated.
The learned Counsel for the Appellant has relied on judgment of this Tribunal in Unigreen Global Private Limited vs. Punjab National Bank and Ors. [2018 (1) TMI 505 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], where this Tribunal noticing Section 7 and Section 10 of the IBC held that, two factors are common i.e. the debt is due and there is a default - This Tribunal further held that action under Section 13(4) of SARFAESI Act against Corporate Debtor or proceedings before Debt Recovery Tribunal, if any, are pending, cannot be a ground to rejection application under Section 10, if the application is complete.
The present is a case where Adjudicating Authority has allowed Section 65 application filed by the SBI principally based on the foundation of the SBI that Section 10 application filed at the time when proceedings under Section 13, sub-section (2) were on the verge of completion. Whether Section 10 application deserve to be admitted or not, is a decision, which has to be taken by the Adjudicating Authority on facts of each case.
For allowing Section 65 application, fraudulent and malicious intent of CD has to be proved from some materials on record. Merely because proceeding under Section 13, sub-section (2) and (4) has been initiated by the creditor prior to filing of Section 10 application, cannot be a ground to hold that Section 10 application is filed with malicious and fraudulent intent. For proving fraudulent and malicious intent, something more is required to be pleaded and proved apart from initiation of proceedings under Section 13, sub-section (2) and (4) by the creditor against the Corporate Applicant.
The Adjudicating Authority committed error in allowing Section 65 application filed by the SBI and rejecting Section 10 application. In event a proposition of law is accepted that when a creditor has initiated proceedings under Section 13, sub-section (2) against the CD, he is precluded to file Section 10 application, that proposition will be clearly against the intent and purpose of Section 10 of the IBC - the basis of rejection of Section 10 application is the finding by the Adjudicating Authority that application has been filed with malicious and fraudulent intent to delay and halt the recovery proceedings. There mere fact that application is filed, consequent of which the recovery proceedings may be halted, cannot lead to conclusion that intent and purpose of the application is malicious and fraudulent - Adjudicating Authority committed error in allowing Section 65 application filed by the SBI.
The company petition filed under Section 10 is revived to be considered and decided by the Adjudicating Authority afresh - appeal allowed.
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2024 (11) TMI 1051
Rejection of Section 9 Application filed by the Appellant - pre-existing disputes - dispute existed much before Demand Notice was issued - inflated invoices - HELD THAT:- When the Corporate Debtor is entitled to all rights, interests and has to discharge all liabilities obligations of Transferor under the Principal Agreement, any entitlement or liability of it, which flow from the Master Service Agreement has to be shouldered/claimed by the Corporate Debtor. It cannot be said that inflated invoices which is claimed to have been issued by staff and employees of the Appellant though related to the different Project under the same Master Service Agreement is alien or foreign to claim which has been raised by the Appellant. In the present case, after coming to know about the issue of inflated invoices, Appellant itself has commenced investigation and filed the Police Complaint as well as directed for investigation through Ernst and Young, which is an admitted fact. Appellant in his Appeal has brought on record the Police Complaint which was submitted by Appellant on 24.02.2023.
The correspondence between the Parties which relates to the payments which are subject matter of Demand Notice and Section 9 Application is clear communication by Corporate Debtor that payments have been put on hold indicates that there was dispute raised by Corporate Debtor with regard to entitlement and payment of the invoices which are subject matter of Section 9 Application much before issuance of Demand Notice dated 06.11.2023.
Thus, it is clear that the claim of Appellant for payment of invoices which are subject matter of Section 9 Application was disputed much before Demand Notice was issued - In facts of the present case, Adjudicating Authority has not committed any error in refusing to initiate CIRP, there being Pre-Existing Dispute which is reflected with the correspondence which took place between the Parties much prior to issuance of Demand Notice.
Thus, no error has been committed by the Adjudicating Authority in rejecting Section 9 Application filed by the Appellant.
There is no merit in the Appeal - The Appeal is dismissed.
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2024 (11) TMI 1050
Maintainability of the appeal by a shareholder under Section 61 of the Insolvency and Bankruptcy Code, 2016 - pre- existing dispute between the appellant and Corporate Debtor/Respondent No.1 or not - interpretation of “dispute” under Section 5(6) of the code - HELD THAT:- The disputes related to shareholder oppression or mismanagement under the Companies Act, 2013 are distinct issues governed by separate statutory provisions and fall outside the purview of the Code. As a special statute, the IBC prevails over the Companies Act pursuant to Section 238, which has been affirmed by the Hon’ble Supreme Court in Innoventive Industries Ltd. v. ICICI Bank [2017 (9) TMI 58 - SUPREME COURT], which held that the resolution process under the IBC takes precedence over any conflicting laws. Hence, the contention of appellant regarding resolution of Company Petition under Section 241 & 242 of Companies Act, 2013 before the CIRP petition does not hold water.
The NCLT has passed the order after hearing both the parties and it’s an order complying with relevant provisions of the code. The debt and default are on record and there was no pleading of pre-existing dispute in this case.
As owners the equity shareholders are biggest beneficiaries when the company does well. Their capital is multiplied due to increase in share prices and by receipt of dividends. On the other hand, if the company performs badly and goes in liquidation, the equity shareholders loose their entire share capital. The owners of the company have a major role to play in the proper functioning of the company, as equity shareholders are represented through the Board of Directors (BoD) and the BoD holds the management accountable for its proper functioning - As soon as the CIRP petition is admitted and IRP is appointed, the functions of the BoD are taken over by IRP. As a representative of Shareholders erstwhile Directors of CD are allowed to intervene and file appeals under Section 61, but the individual or even majority shareholders are not allowed to pursue derivative action.
The appellant’s argument is that the definition of 'aggrieved person' under Section 61 should include any party whose legal interests are impacted by the outcome of insolvency proceedings, even if not directly named as a party in the original application. The restrictive interpretation conflicts with the broader intent of the IBC to allow for effective appeals by any stakeholder with a demonstrable interest, especially in complex insolvency scenarios where indirect impacts on third-party rights are substantial. Thus, the scope of 'aggrieved person' must not be so narrowly construed as to exclude genuine stakeholders who have a legitimate legal or financial interest in the outcome of the case.
The appellant being a shareholder of the company is not the “aggrieved party” as per the provisions of the Code. The appellant has no locus to file this appeal and the same is not maintainable.
Accordingly, the appeal is dismissed.
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