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IBC - Case Laws
Showing 101 to 120 of 9417 Records
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2025 (2) TMI 425
Jurisdiction of Adjudicating Authority to entertain the Application relting to refund of pre-CIRP dues - Adjudicating Authority had become quorum non-judice - extinguishment of claims of the Appellant for pre-CIRP dues, upon the approval of the Resolution Plan by the Adjudicating Authority - Estoppel from claiming a refund of the amount paid towards pre-CIRP dues.
Jurisdiction of Adjudicating Authority to entertain the Application relting to refund of pre-CIRP dues - HELD THAT:- The approval of the Resolution Plan by the Adjudicating Authority dated 21.09.2021 and the claim which was filed by the Appellant in the CIRP. The correspondence entered between the Parties was in reference to the approval of the Resolution Plan and payment of the amount which was due to the Appellant as per the Resolution Plan with a prayer to resumption of supply.
Section 60(5) clearly indicates that under Section 60(5)(c) any question arising out of or in relation to the Insolvency Resolution or Liquidation proceeding of the Corporate Debtor is covered by the said definition. On looking into the reliefs and the concessions granted by the Order dated 21.09.2021, and the letter given by the Corporate Debtor on 29.10.2021, offering to make payment under the Resolution Plan and seeking restoration of supply, the said request clearly fell within Section 60(5)(c) - The NCLT had jurisdiction to entertain the application filed by the Respondent No.1 concerning the refund of pre-CIRP dues and compliance with the Resolution Plan.
Extinguishment of claims of the Appellant for pre-CIRP dues, upon the approval of the Resolution Plan by the Adjudicating Authority - HELD THAT:- The law is well settled that by approval of the Resolution Plan, all dues and claims of pre-CIRP stand extinguished. In the present case, the DVC has filed its claim in the CIRP of ₹2,32,13,387/- for which an amount of ₹4,64,003/- was allocated for the Resolution Plan. Judgment of this Tribunal relied by the Respondent in the matter of Damodar Valley Corporation Vs. Kharkia Steels Pvt. Ltd. & Ors. [2022 (3) TMI 821 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], as well as the Judgment of the Hon’ble Supreme Court in Paschimanchal Vidyut Vitran Nigam Ltd. Vs. Raman Ispat Pvt. Ltd. & Ors. [2023 (7) TMI 831 - SUPREME COURT] as well as the Judgment of the Hon’ble Supreme Court in Ghanshyam Mishra & Sons Pvt. Ltd. [2021 (4) TMI 613 - SUPREME COURT] clearly lays down that all claims after approval of the Plan stands extinguished.
The claims of the Appellant for pre-CIRP dues were extinguished upon the approval of the Resolution Plan, and the Appellant was not entitled to claim any additional pre-CIRP dues.
Estoppel from claiming a refund of the amount paid towards pre-CIRP dues - HELD THAT:- The correspondence entered between the Parties clearly indicates that Respondent No.1 has offered to make the payment which was due as per the Plan. However, the Respondent itself has asked the Appellant to give the details of the payment which are required to be paid. Vide letter dated 07.12.2021 in response to which communication dated 07.12.2021 was issued.
The Appellant has sought for claims that were due before the CIRP period and during the CIRP period as well. No issue can be raised regarding any claim prior to CIRP period since, the claim said after approval of the Resolution Plan and payment of amount under the Plan to the Appellant stood extinguished. It is however relevant to notice that no bifurcation and details have been given as to what was the claim prior to CIRP period and what was the claim subsequent to the CIRP period as was communicated by the Appellant vide letter dated 07.12.2021. On the record, there are also no details to come to the conclusion that how much amount as communicated in letter dated 07.12.2021 was during the CIRP period and what was the amount prior to CIRP period. The Impugned Order passed by the Adjudicating Authority cannot be faulted insofar as is directed for refund of the amount which was claimed by the Appellant of pre-CIRP period.
The Respondent No.1 was not estopped from claiming a refund of pre-CIRP dues, as the payments were made under duress to ensure the resumption of electricity supply.
Conclusion - i) The NCLT had jurisdiction to entertain the application filed by the Respondent No.1 concerning the refund of pre-CIRP dues and compliance with the Resolution Plan. ii) The claims of the Appellant for pre-CIRP dues were extinguished upon the approval of the Resolution Plan, and the Appellant was not entitled to claim any additional pre-CIRP dues. iii) The Respondent No.1 was not estopped from claiming a refund of pre-CIRP dues, as the payments were made under duress to ensure the resumption of electricity supply. iv) The Appellant is not entitled for recovering any dues from the Respondent which relate to pre-CIRP period with regard to which claim was filed by the Appellant and was dealt in the Resolution Plan approved on 21.09.2021.
Appeal disposed off.
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2025 (2) TMI 378
Authority or jurisdiction to invoke the corporate guarantee after the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - admission of claim filed by the Respondent based on the invoked guarantee - applicability of Section 14 of the Insolvency and Bankruptcy Code (IBC) regarding the moratorium on invocation of guarantees.
HELD THAT:- This Tribunal while considering the aforesaid issue referred to and relied on judgment of the Hon’ble Supreme Court in Ghanshyam Mishra and Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Limited [2021 (4) TMI 613 - SUPREME COURT] as well as judgment of this Tribunal in Edelweiss Asset Reconstruction Company Ltd. vs. Orissa Manganese and Minerals Ltd. [2019 (6) TMI 639 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI]. This Tribunal ultimately held that the corporate guarantee could have been invoked prior to commencement of the CIRP. In paragraphs 27, 28, 29 and 30 of the judgment, following has been held that 'In the instant case, the CIRP commencement date of the ‘Corporate Debtor’ is 27/01/2020 and the Appellant had recalled the entire redemption amount with respect to debentures on 25/03/2020 subsequent to the initiation of CIRP. The Adjudicating Authority recorded that the Corporate Guarantee was invoked on 07/04/2020. The claims were filed by the Appellants on 10/02/2020. This Tribunal is of the earnest view that the Appellants cannot Claim the amounts in the CIRP of the ‘Corporate Debtor’ who is a ‘Corporate Guarantor’ on the basis of the Deed of Guarantee which was never invoked as on the date of filing of the Claims.'
When the Respondent having invoked the guarantee on 18.09.2020 i.e. subsequent to initiation of the CIRP, on the basis of said invocation no claim could have been accepted in the CIRP.
The Respondent could not have been invoked the guarantee given by the corporate debtor on 18.09.2020. The said invocation cannot be base for any claim to be admitted in the CIRP it having not matured. It is not necessary to examine the contention that the claim of the Respondent has to be treated to have been filed on 23.10.2020 and not on 13.10.2021.
Conclusion - i) The invocation of a corporate guarantee after the initiation of the CIRP is prohibited under the moratorium imposed by Section 14 of the IBC. ii) Claims based on such impermissible invocation cannot be admitted in the CIRP.
Appeal allowed.
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2025 (2) TMI 273
Condonation of delay of 115 days in refiling the Company Appeal - sufficient cause for delay or not - HELD THAT:- In the present case, it is an admitted fact that defects were notified by the NCLAT Registry on 12.08.2024 with directions to cure the defects by 19.08.2024. However, the defects were cured after an efflux of 115 days. The question of condoning this delay in refiling would therefore need to be seen in the context of explanation offered as to whether the reasons causing the delay were beyond the control of the Applicant and that the defects could not be cured inspite of genuine efforts put in by the Applicant.
It is noticed that one of the principal grounds adduced to explain the delay was that since the Applicant and their counsel were based out of Ahmedabad, they could not physically inspect the record in person.
Equally facile is the explanation that despite constant coordination and follow up, the process of obtaining a certified copy of the impugned order took a lot of time. This feeble defence is belied by the fact that when we look at page 62 of Appeal Paper Book (APB) it is found that the date on which the application for certified copy was reapplied was 09.12.2024 and the NCLT Registry had delivered the certified copy on the same date. This clearly demonstrates that had the Applicant been serious and earnest in their efforts in pursuing the matter with the NCLT Registry, there would have been no need to wait for nearly four months to obtain certified copy of the impugned order which was pronounced as early as 21.06.2024. It is not persuaded to accept that the Applicant had been prevented by any exceptional reason beyond its control in obtaining certified copy of the impugned order in a timely fashion.
It is well recognised that speed is of essence in IBC. It is a given that the need of speed is important both for insolvency as well as for liquidation process. It flows therefrom that once the liquidation process is set into motion, the liquidator is expected to act swiftly and ensure that minimal time is lost in procedural technicalities including curing of defects etc. while conducting the liquidation exercise. The initiation and closure of liquidation is a time-bound process which is to be completed within one year. A liquidator therefore has the principal responsibility of completing the liquidation process as quickly as possible by adhering to the legal regulations and time-frame set therein for conduct of the liquidation process and not allow scope of any unnecessary delay.
Conclusion - The delay in refiling by nearly four months has been occasioned by rather perfunctory reasons. The Applicant is found to have remained nonchalant and callous about the need to correct the defects pointed out in the Appeal Petition by the NCLAT Registry in a timely manner. In such circumstances, allowing refiling delay condonation on such frivolous grounds would be an anathema to the timeliness and integrity of the liquidation process.
There are no merit in the Application filed for seeking condonation of 115 days delay in refiling the appeal. Sufficient grounds have not been made out for condonation of delay in refiling - appeal dismissed.
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2025 (2) TMI 272
Dismissal of Section 7 application filed by the Appellants on the grounds that neither debt nor default is reasonably proved - insufficient proof of debt and default - amicable settlement of disputes - HELD THAT:- The matter went through several rounds of hearing and after considering the arguments advanced by the Learned Counsels for all the parties, the matter was reserved for judgement on 19.12.2024. After the matter got reserved, the parties approached each other for amicable settlement to resolve the disputes. It has now been submitted that a Settlement Agreement dated 15.01.2025 has been entered upon.
In view of the mutual settlement having been entered into between the parties, no opinion expressed on the rights and contentions of either of the parties. Nothing survives to be decided in the appeals. Hence, all the three appeals stand disposed of. No costs.
Appeal disposed off.
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2025 (2) TMI 271
Admission of application filed u/s 7 of the Insolvency and Bankruptcy Code, 2016 - proper service of notice or not - Notice served through two newspaper publications - declaration of the loan as a non-performing asset (NPA) by the Financial Creditor - time limitation - HELD THAT:- It is found that at no stage the Corporate Debtor had denied its liability to pay to the Respondent bank. The feeble argument raised is that the publication of notice was in Kolkata editions of the newspaper, which are not readily available in Jalpaiguri, where the registered office of the Corporate Debtor is situated. However, it is found that advance notice of the application has been served on the Corporate Debtor. Further, the notice issued by the Registry through Speed Post and Email has been duly served upon the Corporate Debtor. The Corporate Debtor was admittedly served on earlier occasions and since none appeared on its behalf, it was only as an abundant caution the service by publication was ordered. Now the Corporate Debtor cannot say that earlier service was invalid or withdrawn because of reservice being ordered. It is also found that the debt and default are recorded in the records of the Information Utility (NeSL).
The debt has been authenticated by NeSL with the description “default submission” indicating that no response had come from the Corporate Debtor. Apparently, it is the Corporate Debtor who has chosen not to join the proceedings. Even during the appeal proceedings, on query, the Corporate Debtor was unable to commit to the repayment of debt. This case meets all the ingredients required for admission under Section 7 of the IBC, 2016, including existence of debt, failure to repay the debt leading to default and application filed under Section 7 within the limitation.
Conclusion - The service of notice was proper, the NPA declaration was valid, and the initiation of CIRP under Section 7 was justified, leading to the dismissal of the appeal.
There are no reason to interfere in the orders of Ld. NCLT in admitting the Corporate Debtor under CIRP - appeal dismissed.
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2025 (2) TMI 270
Seeking direction against the Appellant to pay the Liquidator's fee for liquidation process under the Insolvency and Bankruptcy Code, 2016 - Whether the Liquidator's fee is payable even if the Liquidator did not directly realise or distribute the secured asset? - compliance with Regulation 21A of the Liquidation Process Regulations, 2016 or not.
HELD THAT:- The Appellant / Shikshak Sahakari Bank Ltd. is a Secured Creditor who decided not to relinquish security interest and opted to realise its security interest through its own proceedings under the SARFAESI Act. On 11.05.2023, the Appellant intimated the Respondent / Liquidator its intent to realise the secured asset in the manner as provided under Section 52(1)(b) of the Code and decided the reserve price to be Rs 2,24,15,000/- - The Appellant has been seeking clarifications with respect to the calculation of the liquidation cost, which has been duly replied to time and again by the Respondent / Liquidator, along with the provision of Regulation 21-A(2) and also Regulation 2(ea) of the Liquidation Process Regulations, 2016.
Regulation 21-A of the Liquidation Process Regulations, 2016, mandates Secured Creditors to inform the Liquidator of their decision to realise their security interest and to pay their share of the liquidation costs within 90 days. It was agreed by the Appellant that the liquidation cost will of 2013), if any, shall not form part of liquidation cost. be shared as per Regulation 21-A but was raising clarifications regarding its calculations and which was clarified also by the liquidator again and again and this exchange was going on for quite some time.
It will be clear from this provision that the Secured Creditor is mandatorily obligated to pay its share as per Section 53(1)(a) and 53(1)(b)(i) of the Code which provides for distribution of assets from the sale of liquidation assets in the order of priority. (waterfall mechanism). Further, Regulation 21A (3) of Liquidation Process Regulations, 2016, provides that where a Secured Creditor fails to comply with Sub-Regulation (2), the asset, which is subject to security interest, shall become part of the liquidation estate.
Conclusion - Regulation 21-A(2)(a), which is applicable in this case. The Liquidator’s fee is also prescribed under Regulation 4. Regulations 4(1) and 4(1A) provides primacy to CoC and consultation Committee. The Respondent’s claim that the Liquidator is entitled for a fee under Regulation 4(2)(b) only when he has actually realised or distributed any amount is not tenable in the light of Regulation 21A. There are no infirmity in the orders of the Adjudicating Authority.
Appeal dismissed.
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2025 (2) TMI 217
Seeking permission of the Adjudicating Authority, to sell the Corporate Debtor (CD) as a going concern through private sale method - appropriateness of the Swiss Challenge Mechanism - HELD THAT:- The Hon’ble Supreme Court in R.K. Industries [2022 (8) TMI 1162 - SUPREME COURT] held that anchor bidder had no vested right to insist that the process must be taken to its logical conclusion. R.K. Industries was treated to be anchor bidder, but due to intervening facts, including the offer received from Welspun for purchase of materials as well as the land, SCC had decided to go for private sale of consolidated assets. Due to the above reasons, the Liquidator left the process of Swiss Challenge and discontinued the Swiss Challenge Process opting for private sale. The above observation of the Hon’ble Supreme Court was in reference to the facts of that case. There can be no dispute to the proposition that an anchor bidder has no indefeasible right. Anchor bidder has to place first bid, after which other bidders are required to participate and give a higher bid.
The present is a case where the OASPL, offer was treated to be a base bid giving right of RoFR and the Swiss Challenge Process was to proceed thereafter, which was fixed for 29.01.2025. The judgment of the Hon’ble Supreme Court in R.K. Industries’ case as noted above, in no manner support the submission of the Appellant in the present case that the OASPL could not have been given Right of First Refusal.
On looking into the Discussion paper, it clearly mentions that Swiss Challenge is a time-tested mechanism and has proven to be highly effective. The Swiss Challenge Mechanism has also been incorporated in hybrid method pertaining to pre-packaged insolvency resolution process. Section 54K of the IBC contemplate the base resolution plan by the Applicant and thereafter other competitive resolution plans are invited in event the base resolution plan is not approved.
The Discussion Papers issued by IBBI are Discussion Papers to elicit response from stakeholders and to inform the stakeholders about the issues, which arose regarding working of IBC and Regulations. Discussion Papers are only to inform the issues and elicit response to strengthen the regulatory framework. The Discussion Paper in no manner can affect the statutory and regulatory scheme governing the liquidation process as noticed in foregoing paragraph of this judgment. Thus Discussion Paper dated 27.08.2021 relied and as extracted by the Appellant, in no manner help the Appellant to support his submission in the present case.
The power and duties given to the Liquidator under the IBC and the 2016 Regulations, has to be exercised within the four corners of the statutory provisions. The decision taken by the Liquidator to proceed with private sale by adopting Swiss Challenge Mechanism, cannot be said to be a decision beyond the jurisdiction or authority of the Liquidator. Furthermore, SCC has already endorsed the said decision after detailed discussion as noted above.
Conclusion - i) The Swiss Challenge Mechanism is a valid and transparent method for asset sale, consistent with the principles of natural justice. ii) Granting the Right of First Refusal to OASPL was justified given the context and lack of other offers. iii) The Liquidator acted within the scope of the IBC and 2016 Regulations, with SCC's approval supporting the actions taken.
There are no error in the order passed by Adjudicating Authority, which warrant any interference by this Tribunal in exercise of its appellate jurisdiction. There is no merit in the Appeal - appeal dismissed.
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2025 (2) TMI 109
Maintainability of Petition filed by the Respondent No. 1 under Section 95 of IBC - initiation of Personal Insolvency Resolution Process (PIRP) against the Appellant who is the guarantor of the of the Corporate Debtor ESL - barred by limitation - no privity of contract between the Appellant and State Bank of India (SBI) - Impugned Order based on invocation of personal guarantee by 3rd party - no direction issued u/s 100 (2) of the Code regarding negotiations to be held in Appellant/ personal guarantor and the Creditor/ Respondent - undervaluation of shares.
The application filed under Section 95 of the Code was barred by limitation - HELD THAT:- The Respondent No. 1 issued a demand notice on 22.06.2018 requesting for payment within 60 days i.e., by 22.08.2018 and therefore, for the purpose of calculating limitation period in the present case would have started on 22.08.2018 and would have ended on 21.08.2021. The application was filed on 31.03.2021 much before the expiry of the limitation period.
Both the demand notice as well as Section 95 application were filed within period the period of limitation - arguments of the Appellant on the issue of limitation stand rejected.
Privity of contract - HELD THAT:- There was no privity of contract between Respondent No.1/ SBI and Appellant/ personal guarantor.
Impugned Order based on invocation of personal guarantee by 3rd party - HELD THAT:- The Adjudicating Authority could not have passed the Impugned Order based on invocation of personal guarantee by 3rd party - such trusteeship deeds are generally signed between the trust on behalf of the lenders and the personal/ corporate guarantor of the principal borrower. However, by its inherent nature and intent, the lenders or the Financial Creditors are the true beneficiaries of such deed of guarantee.
From the terms of the MRA and the STA, it is clear that the security trustees are holding 'Security' not for themselves, but on behalf of, and for the benefit of, the Claimant/Lender. The Lenders, can therefore, enforce the security documents even if they are not a party to the trusteeship agreement.
The Adjudicating Authority has rightly held in para 14 of the Impugned Order that merely because the trustee acted on behalf of Respondent No. l/SBI, it cannot be said that the beneficiary/creditor cannot enforce the Personal Guarantee executed by the Appellant. As can be seen from clause O of the MRA, SBICAP was appointed as Security Trustee in accordance with the terms of the Security Trustee Agreement dated 25.03.2014 for the purpose of holding the security interest for the benefit of the CDR lenders and non-CDR lenders. Thus, SBI had the locus to file the Company Petition - there are no merit and the pleadings of the Appellant on this account stand rejected.
The Appellant has also challenged on the ground that the debt itself has not been crystalised - HELD THAT:- The personal guarantor signed the personal guarantee on 03.06.2015 and became guarantor on behalf of principal borrower. The borrower amount has been stipulated therein. It is already noted that there has been established the case of default of debt and subsequently CDR was sanctioned which also failed - the arguments of the Appellant not appreciated on this account based on argument that mere fact that the case is pending before the DRT and certain counter claims have been filed by the Appellant will not make debts payable by the Appellant as debts not have been crystalised - the contention of the Appellant on this ground stand rejected.
Impugned Order did not issue directions under Section 100 (2) of the Code regarding negotiations to be held in Appellant/ personal guarantor and the Creditor/ Respondent - HELD THAT:- Section 100 (2) Code is applicable if repayment plan is prepared by the debtor under Section 105 of the Code then opportunity should be offered to the debtor. The order of the Adjudicating Authority is only if the Resolution Professional makes an application for the same.
The Impugned Order ignored the fact regarding under valued sale of shares of Corporate Debtor subsidiary in learning.com leading to gross under recovery for the principal borrower - HELD THAT:- There are no merit on this ground in the present appeal.
Conclusion - i) The application under Section 95 was filed within the limitation period. ii) The lack of direct privity of contract did not prevent the creditor from enforcing the personal guarantee. iii) The debt was crystallized, and pending proceedings did not affect this status. iv) No directions for negotiations were warranted under Section 100(2) as no repayment plan was proposed. v) The undervalued sale issue was addressed in a separate judgment, and no merit was found in the Appellant's arguments.
Appeal dismissed.
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2025 (2) TMI 77
Distribution of distribution mechanism - Whether CoC was justified in approving the Resolution Plan on the basis of security interest of the Financial Creditor and not approving the distribution mechanism on the basis of vote share of the financial creditors? - HELD THAT:- The amended provisions clearly empower the CoC to vote after considering its feasibility and viability. The manner of distribution proposed which may take into account the order of priority amongst creditors as laid down in sub-section (1) of Section 53, including the priority and value of the security interest of a secured creditor. After the amendment of sub-section (4) of Section 30, the priority and value of the security interest of a secured creditor has also become one of the factor which may be considered by the CoC for approval of a plan.
Section 30(2)(b) also provided that the Financial Creditor who do not vote in favour of the Resolution Plan shall be paid an amount not less than the amount to be paid to such creditors in accordance with sub-section (1) of Section 53 in the event of a liquidation of the corporate debtor takes place. In the present case, the Resolution Plan was submitted by the SRA which contains provision for pertaining to mechanism for payment amongst the Financial Creditors and payment to the dissenting financial creditor.
Judgment of the Hon’ble Supreme Court in India Resurgence ARC (P) Ltd. [2021 (6) TMI 684 - SUPREME COURT] which has been relied by both the parties clearly has laid down the law on the subject. In case before the Hon’ble Supreme Court, the CoC has approved the Resolution Plan approving the distribution as per the vote share of the financial creditor. The Appellant who was a financial creditor with vote share of 3.94% expressed reservations on the distribution mechanism. The CoC, however, approved the Resolution Plan with 95.35% vote shares which decision was challenged by the Appellant. The Adjudicating Authority approved the Resolution Plan and rejected the objection and Appeal filed by Appellant was also dismissed by this Tribunal against which the matter was taken by the Appellant before the Hon’ble Supreme Court.
As per liquidation value of the Appellant, he was to receive Rs.97 Crores and as per the plan approved by the CoC he has been offered Rs.1.05 Crores, thus, provision of Section 30(2)(b) are fully satisfied.
Conclusion - i) It is clear that after amendments made in Section 30(4), the CoC have been given jurisdiction to take a decision as to distribute the amount as per vote share of the financial creditor or as per the security interest which is in their commercial wisdom and decision taken by requisite vote share by the CoC is final and binding on all including the dissenting financial creditors and dissenting financial creditors at best is entitled for minimum of liquidation value. The use of expression “may” in Section 30(4) clearly indicate the discretion vested in the CoC to take into account of the matter of security interest of the secured creditors in approving the Resolution Plan. ii) There are no error has been committed by the Adjudicating Authority rejecting the application filed by the Appellant seeking direction to distribute the amount as per security interest. The decision of the CoC approving the Resolution Plan as per security interest was in accordance with Section 30(4) and has rightly been not interfered with by the Adjudicating Authority in the impugned order.
There are no error in the impugned order warranting interference by this Tribunal. There is no merit in the Appeal. The Appeal is dismissed.
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2025 (2) TMI 71
Admission of section 7 application - Validity of the amended default date cited by the respondent and the applicability of Section 10A of IBC - change of date of default after filing the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) - determination of date of default.
Whether the date of default can be changed after filing the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC)? - HELD THAT:- The Corporate Debtor had availed various credit facilities from Bharat Cooperative Bank through successive sanction letters dated 21.03.2017, 14.08.2018, and 11.03.2020. Despite these agreements and restructuring efforts, the CD failed to meet payment deadlines, resulting in the debt claimed by ASREC - ASREC (India) Limited/R-1 initially filed its Section 7 petition stating a default date of 31.10.2020, which was later amended to 02.08.2019. The tribunal permitted this amendment on 13.10.2023. The revised date is crucial as it aims to establish that the default occurred outside the Section 10A exemption period (introduced to protect defaults during the COVID-19 pandemic).
In Dena Bank v. C. Shivakumar Reddy and Another [2021 (8) TMI 315 - SUPREME COURT] Dena Bank sought to initiate insolvency proceedings against a corporate debtor by filing a Section 7 application with the NCLT. The bank' s petition was based on the default date related to a Non- Performing Asset (NPA) declared years earlier. Dena Bank later sought to rely on new documents and amendments. Hon’ble Supreme Court vide judgement ruled that amendments to the application or submission of additional documents could be made before the final order admitting or rejecting the petition under Section 7. The Court clarified that the law does not explicitly bar such amendments, as they support the IBC's goal of comprehensive debt recovery. However, the Court noted that such amendments should not manipulate the limitation period, but may reflect new acknowledgments of debt or judgments creating a fresh cause of action.
In the present case, Unlike Plus Corporate Ventures [2022 (10) TMI 1273 - NCLAT], where the default date clearly fell within the Section 10A period, there is dispute in the current case, over whether the default indeed occurred during this period. The respondent asserts that the default date was August 2, 2019, which predates the Section 10A moratorium period. This amended default date, places the present case outside the protective scope of Section 10A. As such, the ratio of Plus Corporate Ventures to this case does not apply.
As per the provisions of the Code, the NCLT is empowered to allow the parties to amend the pleadings before the final orders in CIRP proceedings are passed. This would however be subject to the procedure laid down in the code, as confirmed by Dena Bank (Supra). We have observed that the Adjudication Authority in this case has correctly followed the laid down process and the judgement of Dena bank is applicable squarely in this case. The amendment of date of default has been correctly allowed by AA.
Whether the date of default has been correctly identified in this case? - HELD THAT:- It is seen that RBI as the regulatory authority during the inspection of the bank found that compliance with the conditions laid down in the sanction letters were not met and hence the CD was ineligible for restructuring. Accordingly, due to noncompliance the extent sanction letter dated 17.03.2020 became void ab-initio and the same was not tenable in the eyes of law. Banks have to mandatorily comply with the guidelines of the RBI in this regard. Therefore, the date of NPA became 01.11.2019 and the original date of default would be 02.08.2019 i.e., 90 days prior the date of NPA as per RBI IRAC Guidelines. The amended date of 02.08.2019 is also supported by records from the National EGovernance Services Limited (NESL) database, which confirms the occurrence of a default prior to the COVID-19 moratorium period.
Section 10A of the IBC was introduced to provide relief to businesses affected by the economic impact of the COVID-19 pandemic by precluding insolvency proceedings for defaults occurring between 25.03.2020 and 25.03.2021. The appellant’s reliance on Section 10A is premised on the initial default date of 31.10.2020, which falls within this protected period. However, the respondent’s assertion of a default on 02.08.2019 predates the moratorium period, rendering Section 10A inapplicable - The respondent’s actions in initiating CIRP are consistent with the objectives of the IBC, which prioritize the resolution of insolvency cases in a time-bound manner to maximize asset value and ensure the equitable treatment of creditors. The evidence presented demonstrates the corporate debtor’s prolonged financial incapacity and failure to fulfill its debt obligations despite multiple opportunities to restructure and repay. The respondent, as a financial creditor, is entitled to seek relief under the IBC when defaults are established and substantiated by documentary evidence.
Conclusion - The amendment of the default date was correctly allowed and that the default date of 02.08.2019 was valid, rendering the protections under Section 10A inapplicable.
There are no infirmity in the impugned order of the Adjudicating Authority - appeal dismissed.
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2025 (2) TMI 19
Interpretation and application of the proviso to Section 31(4) of the Insolvency and Bankruptcy Code (IBC) - whether the requirement for obtaining the Competition Commission of India (CCI) approval prior to the approval of a resolution plan by the Committee of Creditors (CoC) is mandatory or directory? - Locus standi of the appellants - adequacy of data presented for regulatory approvals.
As per Hrishikesh Roy, J. and Sudhanshu Dhulia, J.
Locus standi - HELD THAT:- Once the CIRP is initiated, the nature of proceedings are no longer in personam but rather become in rem. In light of the same, the expression ‘any person aggrieved’ in the context of the IBC has been held to be indicative of there being no rigid locus requirements to institute an appeal challenging an order of the NCLT before the NCLAT or an order of the NCLAT before this Court - In the present case, the Appellant as an unsuccessful resolution applicant whose Resolution Plan could have otherwise been approved by the CoC, satisfies the requirement of being aggrieved. This preliminary locus standi objection vis-à-vis the Appellant, therefore, does not merit acceptance.
Proviso to Section 31(4) IBC - HELD THAT:- The introduction of a proviso, specifically addressing those Resolution Plans with provisions for combination, and the use of the term ‘prior’ therein, makes it starkly clear that the intent of the legislature was to create an exception. This ensures that in cases containing combination proposals, the approval of the CCI i.e., the regulatory body designated to ensure fair competition in markets and preventing anti-competitive practices, should first be obtained before the same is approved by the CoC. No other provision of the IBC has been pointed out that might suggest otherwise or cause disharmony between the scheme and intent of the IBC or the said proviso to Section 31(4) of the IBC - The above provision makes it abundantly clear that the proviso herein creates an exception for those Resolution Plans that contain provisions for combination. The language used therein appears to be clear, precise & straightforward. As such, to understand the legislative intent, the Rule of Plain Reading or literal interpretation should find favour rather than the rule of purposive interpretation as is suggested by the other side.
Undertaking Interpretation: Why Literal and not Purposive? - HELD THAT:- The so-called ‘spirit of the law’ is an indeterminate construct, whose nature renders it subjective and susceptible to varied interpretations depending on the personal predilections of those tasked with interpreting it. Therefore, it is almost unattainable as a definitive guide, especially in the face of or when put in opposition to the unambiguous, clear and plain language used in a particular provision, as is presently the case - Therefore, it is almost necessary for the courts to interpret the provision in its natural sense, as it is through the words used in a provision that legislature expresses its intention. When the language is unambiguous, as in the present matter, the courts must respect its ordinary and natural meaning instead of wandering into the realm of speculation and unintended overreach invoking the so-called ‘spirit of the law’.
Principle of Plain Meaning - HELD THAT:- In the present case, the use of the word ‘prior’ at the appropriate place in the proviso besides being direct, clear and unambiguous also does not lead to any absurd consequences. The proviso to Section 31(4) of IBC mentions that the approval to the Resolution Plan from CCI shall be obtained ‘prior’ to its approval by the CoC - to interpret the specific word to mean that such an approval can be obtained even ‘after’ and not necessarily ‘prior’ to the approval by the CoC would amount to reconstructing a statutory provision, which is not permissible.
Different Threshold for Combinations - HELD THAT:- The statute provided a different threshold for the CCI’s approval as compared to approvals to be received from other statutory and regulatory bodies. Such arrangement appears to be deliberate as the Competition Act contains both specific restrictions with respect to combinations that may lead to an Appreciable Adverse Effect on Competition (AAEC) in the relevant market as well as a detailed procedure of enquiry and scrutiny of such combinations, to prevent such AAEC. Based on the same, the CCI is empowered to either approve, reject or modify such a combination or to mould it in a manner that is in consonance with the scheme of the Competition Act.
Harmony between Stipulated Timelines - HELD THAT:- In the present case, even though dilatory tactics are said to have been adopted in the submission of notice under the Combination Regulations, with Form II submitted on 03.11.2022, the combination was approved on 15.03.2023 i.e., within 132 days. The recent Competition (Amendment) Act, 2023 which reduced the timeline for approving combination proposal from 210 days to 150 days and requiring the CCI to give a prima facie opinion on the likelihood of a combination causing an Appreciable Adverse Effect on Competition (AAEC) from 30 days to 15 days, is indicative of the more realistic and shorter timelines that the CCI ordinarily requires for its analysis and decision-making, pertaining to such combination proposals - it is difficult to interpret the provisions disjunctively, as has been done by the NCLAT, in the impugned order dated 18.09.2023.
Procedural Lapses under the Competition Act - HELD THAT:- The failure to issue a SCN under Section 29(1) to the Target Company/Corporate Debtor, constitutes a major procedural lapse with significant consequence. The statutory scheme of the Competition Act, as well as the synergistic framework of the IBC, demands that all parties to the combination are afforded a fair opportunity to participate in the decision - making process, particularly when the proposed measures bear a direct and material impact on their interests. The absence of such notice undermines the procedural sanctity of the modification process and renders the resultant approval susceptible to bona fide challenge - The issuance of SCN to both the acquirer and the target under Section 29(1) of the Competition Act in our opinion, is a non negotiable procedural imperative. The interplay between the provisions of the Competition Act and the IBC necessitates a careful balancing of competing interests, underscoring the indispensability of procedural compliance. The lack of participation by the Target in the voluntary modification process, especially where the modification entails the divestment of their assets, vitiates the approval granted by the CCI and warrants remedial intervention by this Court.
Discrepancies in Data - HELD THAT:- Transparent and accurate data disclosures are fundamental to the regulatory mechanism. The identified discrepancies compromise the very basis of the CCI’s decision-making process. It is imperative to therefore underscore that discrepancies in operational capacity data would strike at the very root of the regulatory mechanism. While we do not intend to embark on a fact-finding expedition afresh, the prima facie inconsistencies in the submitted data ought to have been examined with greater care by the NCLAT. But this was not done. Consequently, the conditional approval should have been revoked, especially in light of the CCI’s express mention in its order (dated 15.03.2023) that the order may be revoked if the information provided by the acquirer is found to be incorrect at any particular time.
The CoC shall reconsider the Appellant’s Resolution Plan and any other Resolution Plans which possessed the requisite CCI approval as on 28.10.2022 i.e., the date on which the CoC voted upon the submitted Resolution Plans.
As per S.V.N. Bhatti J.
Since it is the commercial wisdom of the CoC that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting-up of such Committee and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion. Thus, section 21(2) of the IBC mandates that the CoC shall comprise of financial creditors of the corporate debtor - The CoC consists of financial creditors who are in the business of money lending, and the commercial angle of CIRP is within the domain of the CoC. Thus, when the CoC exercises its commercial wisdom, the adjudicating authority cannot interfere on merits with the commercial decisions taken by the CoC.
This Court also held that there is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and the feasibility of the proposed resolution plan. They act on the basis of a thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the adjudicating authority and is made nonjusticiable.
The jurisdiction bestowed upon NCLAT is also expressly circumscribed. It can examine the challenge only in relation to the grounds specified in section 61(3) of the IBC, which is limited to matters “other than” enquiry into the autonomy or commercial wisdom of the dissenting financial creditors. Thus, the prescribed authorities (the Adjudicating Authority/NCLAT) have been endowed with clearly demarcated jurisdiction as specified in the IBC and are not to act as a court of equity or exercise plenary powers.
The proviso to sub-section (4) of section 31 is directory and would be compliant with IBC and the Competition Act. Hence, the combination approval of CCI at the stage of consideration of the resolution plan by the Adjudicating Authority under section 31(1) would be proper and legal. Such interpretation keeps the operations of the successful resolution applicant as a going concern, without deviating from the rigour of the Competition Act, and simultaneously, a one-year window is granted to obtain licenses, permissions, consents and other regulatory approvals envisaged by a host of laws. Therefore, the proviso is interpreted purposively and held that the approval of a combination of CCI at the stage of consideration by CoC is directory and not mandatory. By operation of section 31(2) of the IBC, to avoid rejection of a fully compliant and voted resolution plan, the Adjudicating Authority confirms that the approval of the combination is available before implementing the resolution plan. At best, the use of the words “prior to” is a temporal expression whose mandatory or directory nature is to be determined from the context surrounding section 31.
The view taken by the NCLAT on the question of whether the requirement of proviso to sub-section (4) of section 31 of IBC is mandatory or directory is correct. Thus, the appeals fail.
Conclusion:- As per HRISHIKESH ROY, SUDHANSHU DHULIA i) The AGI Greenpac’s Resolution Plan is unsustainable as it failed to secure prior approval from the CCI, as mandated under the proviso to Section 31(4) of the IBC. Consequently, the approval granted by the CoC to the Resolution Plan dated 28.10.2022 without the requisite CCI approval, cannot be sustained and is hereby set aside and quashed. ii) the CoC shall reconsider the Appellant’s Resolution Plan and any other Resolution Plans which possessed the requisite CCI approval as on 28.10.2022 i.e., the date on which the CoC voted upon the submitted Resolution Plans. As per S.V.N. BHATTI i) The object of IBC is to provide the institutional framework for theoretical resolution without considering liquidation as the first option. The buoyant economy needs absorption mechanisms to prevent collateral and cascading impact on the investors, depositors and financial creditors. Therefore, the idea of the IBC is to let the financial markets work. ii) The view taken by the NCLAT on the question of whether the requirement of proviso to sub-section (4) of section 31 of IBC is mandatory or directory is correct. Thus, the appeals fail.
A common conclusion cound not be reached. Such differences must be understood as useful steps towards the evolution of jurisprudence in the field of Insolvency and Bankruptcy Code, 2016 and the Competition Act, 2002.
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2025 (2) TMI 18
Dissolution of the Corporate Debtor - whether the Appellant herein, being determined as to be a successful bidder in the liquidation proceedings and having apparently defaulted in the remittance of the amount which was the settled due to be paid under the terms and conditions of the tender document, could be granted any leverage by way of an extension of time period to pay the amount, beyond the time period stipulated under the tender document? - HELD THAT:- Because the entire auctioning process was being conducted during the COVID-19 situation, the Appellant, despite his best efforts to mobilize the required amount and to deposit the same as stipulated under the award by attracting foreign investors, was unable to do so because of the inordinate time taken by the Financial Investment Unit (FIU) of RBI to process the case as per their regulations in relation to investment in India by foreign investors.
The Appellant had made all genuine efforts to deposit the amount, but he could not do so despite of extensions granted, because of the factors outside his control. Hence, he should not be saddled with the forfeiture of the entire EMD amount, which has been deposited by him as part of contract. As such taking a pragmatic view, and particularly in the light of the Judgment, of Alisha Khan, of [2021 (12) TMI 1483 - SUPREME COURT] it is apt and fair that, in order to balance the equities without adversely affecting the interest of any of the parties to the appeal, 25% of the Rs. 5 Crores of EMD deposited by the Appellant, i.e. Rs. 1,25,00,000/- is to be retained and the balance 75% of the EMD amount i.e. Rs. 3,75,00,000/- is to be refunded back to the Appellant, within one month from the date of service of the certified copy of this Judgment.
Conclusion - The Appellant's request for an extension of time to pay the balance amount denied but a partial refund of the EMD granted, acknowledging the unique challenges posed by the pandemic.
Appeal allowed in part.
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2025 (1) TMI 1453
Distribution of liquidation proceeds - waterfall mechanism - distribution to be made based on the security interest of secured creditors or in proportion to their admitted claims as per Section 53(1) of the Insolvency and Bankruptcy Code, 2016? - No Resolution Plan having been approved in the CIRP - HELD THAT:- This Tribunal in the matter of Oriental Bank of Commerce Vs. Anil Anchalia & Anr. [2022 (5) TMI 1367 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] had occasion to consider distribution of sale proceeds in the Liquidation as per Section 53 of the Code, in which proceeding, an IA was filed by Oriental Bank of Commerce seeking a direction to distribute the entire sale proceeds to the Punjab National Bank who has exclusive charge over the property of the Corporate Debtor. The Application was rejected by the Adjudicating Authority against which the Appeal was filed. The Appeal was heard and by the Judgment of this Tribunal dated 26.05.2022, the Appeal was dismissed.
Coming to the undertaking which is relied by the Appellant, the undertaking submitted before the Adjudicating Authority was to the effect that excess money received as per distribution shall be returned, when Order is passed by Tribunal or Hon’ble Supreme Court the undertaking given by stakeholders was in terms of Regulation 43 of the Insolvency and Bankruptcy Board of India, Liquidation Process Regulations 2016, which undertaking has to be given while accepting any distribution of the sale proceeds in the Liquidation, which undertaking was for the benefit of the Secured Creditors, who is ultimately found to have larger share of sale proceeds in the Liquidation. Thus, undertaking given by the Parties in no manner can come in the way of Adjudicating Authority in issuing direction for re-distribution in accordance with law.
Conclusion - The Adjudicating Authority has not committed any error in directing distribution of sale proceeds as per the admitted claim of the Financial Creditor pro-rata basis.
Appeal dismissed.
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2025 (1) TMI 1452
Appointment of the Resolution Professional (RP) in accordance with Section 97, sub-section (3) of the Insolvency and Bankruptcy Code, 2016 (IBC) - submission of the Appellant is that the Adjudicating Authority ought to have directed the IBBI to nominate the RP for the insolvency resolution process, which was not done and the Adjudicating Authority relied on a Circular issued by the IBBI - HELD THAT:- There is no dispute with regard to interpretation of Section 60, sub-section (2), which provides that where a CIRP or liquidation proceedings of a Corporate Debtor is pending before a NCLT, an application relating to the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor, shall be filed before such NCLT. The question to be answered is as to whether when no CIRP or liquidation proceedings of a Corporate Debtor is pending before the NCLT, whether an Application for personal insolvency against a Personal Guarantor has to be filed before the NCLT. Sub-section (2) of Section 60 begins with the expression “Without prejudice to sub-section (1)”. Thus, the provision of sub-section (2) are without prejudice to provisions of sub-section (1) of Section 60. The expression “without prejudice”, came for consideration before the Hon’ble Supreme Court in large number of cases.
Reference made to judgment of the Hon’ble Supreme Court in Shri Shiv Kripal Singh vs. Shri V.V. Giri [1970 (9) TMI 127 - SUPREME COURT], where the Hon’ble Supreme Court held that the expression “without prejudice is to the generality of the provisions of sub-section (i)”. It is well settled that when this expression is used anything contained in the provisions following this expression is not intended to cut down the generality of the meaning of provision.
Two judgments have been relied by learned Counsel for the Respondent, which need to be noticed. The first judgment, which has been relied by learned Counsel for Respondent is State Bank of India vs. Mahendra Kumar Jajodia [2022 (1) TMI 1294 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI], in which case, an Application under Section 95 was filed by the State Bank of India before NCLT, Kolkata Bench, seeking initiation of CIRP against Personal Guarantor, which Application came to be rejected by the Adjudicating Authority as premature relying on Section 60, sub-section (2) and holding that for an insolvency resolution process to be initiated against the guarantor there must be CIRP or liquidation process pending against the principal borrower/ Corporate Debtor.
The above Notification dated 15.11.2019 came to be challenged before the Hon’ble Supreme Court in Lalit Kumar Jain vs. Union of India & Ors. [2021 (5) TMI 743 - SUPREME COURT]. One of the grounds to challenge the notification was whether provisions of IBC against Personal Guarantors have been enforced, which is discriminatory and is violative of Article 14 of the Constitution of India. In reference to challenge to the aforesaid Notification, the Hon’ble Supreme Court had occasion to consider the Scheme of IBC. The Hon’ble Supreme Court noticed the 2018 amendment and the Report of the Insolvency Law Committee - The above judgment of the Hon’ble Supreme Court also clearly emphasized that Personal Guarantor of the Corporate Debtor has been treated as a separate species of individuals. Hence, provision regarding Personal Guarantor of the Corporate Debtor have been enforced and when we read Section 60, sub-sections (1) and (2), the conclusion is inescapable that for insolvency resolution process of personal guarantor, the jurisdiction is with the NCLT.
This Tribunal in its judgment in Mahendra Kumar Agarwal has noticed the judgment of the Delhi High Court in Axis Trustee Services Ltd. vs. Brij Bhushan Singal [2022 (11) TMI 297 - DELHI HIGH COURT], where the Delhi High Court had occasion to consider Section 60 of the IBC. After considering Section 60 and 179 of the IBC, the Delhi High Court held that NCLT will be the Adjudicating Authority in respect of insolvency proceedings against Personal Guarantors.
Conclusion - The NCLT is the appropriate adjudicating authority for insolvency proceedings against personal guarantors of corporate debtors, as per Section 60(1) of the IBC. Section 60(2) does not restrict the filing of applications against personal guarantors to situations where proceedings against the corporate debtor are pending.
It is not required to accept the submissions of the Appellant that NCLT Delhi has no jurisdiction to entertain Section 95 Application filed by the Financial Creditor against the Personal Guarantor for initiating insolvency resolution process - there is no merit in the appeal - appeal dismissed.
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2025 (1) TMI 1325
Application for withdrawal of the Company Petition - settlement agreement and Form FA were obtained under force, coercion and threat - HELD THAT:- The present appeals are disposed off without adjudication on merits in view of the appellant’s stand and claim based upon the settlement agreement dated 02.01.2025. Form FA dated 02.01.2025, being the application for withdrawal of the Company Petition, signed on behalf of respondent No. 1, M/s. K. Computers, addressed to the Interim Resolution Professional is placed on record by the appellant, Kalyan Muppaneni, the erstwhile Director of the corporate debtor.
Appeal disposed off.
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2025 (1) TMI 1324
Seeking permission to applicant to manage the operations of the corporate debtor as a going concern and also permit the applicant to perform all the duties under section 18 of IBC - Appointment of a new Resolution Professional (RP) and the associated financial management of the corporate debtor - HELD THAT:- It is disputed by Counsel for the Central Bank of India and Arrow Engineering Ltd. that Corporate Debtor is not running as a going concern, hence no payment be directed towards the salary as claimed by the RP. Learned Counsel has also relied on the Judgment of the Hon’ble Supreme Court in the matter of Sunil Kumar Jain & Ors. Vs. Sunaresh Bhatt & Ors. [2022 (4) TMI 888 - SUPREME COURT] to support his submission that unless the employees have worked during CIRP period, no CIRP cost be paid.
The new RP may incur expenses which are absolutely necessary for maintaining the Corporate Debtor i.e., security expenses, expenses which are incurred towards payment to Statutory Auditors, Practicing Company Secretary and as well as the RP which was permitted by the Adjudicating Authority itself, this shall be in addition to necessary payments towards the statutory compliances.
It is directed that all payments which are to be made in pursuance of this Order shall be upon undertaking that the payments are subject to ratification by reconstituted CoC and in event of CoC not approving the payment, payments are to be refunded.
Conclusion - i) RP is permitted to incur expenses towards statutory compliances. Payments towards Statutory Auditor, Practicing Company Secretary and RP shall be paid in accordance with the Order as approved by the Adjudicating Authority on 13.05.2024. The above payments shall be subject to ratification by the reconstituted CoC and shall be undertaken after undertaking from the Parties to whom the payments are being made that in event of payments not being approved, the said shall be refunded. ii) With regard to other claims of payment, including payment of salary to the employees, the same shall be placed before the reconstituted CoC for consideration and approval. iii) Payment to security agencies who have been appointed to securing the assets of the Corporate Debtor shall also be paid. iv) It is further directed that new RP shall not engage any new Professional in the CIRP process, for the time being.
Application disposed off.
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2025 (1) TMI 1266
Fresh valuation of shares of The Learning Internet Inc. held by EAPPL ordered by the Adjudicating Authority - scope of the Adjudicating Authority in directing fresh valuation - assets of the subsidiary company are different from the assets of the holding company or not - preservation of values of shares of EAPPL by Resolution Professional - No reasoning for under valuation has been recorded - three valuation reports quoted by the Respondent No. 1 to justify the revaluation.
Whether the Adjudicating Authority could have passed the directions to the Respondent No 2 to approach the IBBI for appointment of valuers for valuation of shares The Learning Internet Inc. based on the alleged under valuation of shares by the Respondent No. 1?
HELD THAT:- The Adjudicating Authority has rightly held that in terms of the Code and the Regulation, the Corporate Debtor and its subsidiary are two legally distinct entities. It has also been correctly held that the assets of the subsidiary company cannot be treated as part of the assets of the Corporate Debtor. The Adjudicating Authority further rightly held that it is not the duty of the Respondent No. 2 to preserve the assets of the subsidiary company which are not under control of the Corporate Debtor or which are not part of estate of the Corporate Debtor. The Adjudicating Authority has also not found anything wrong in the selling of the shares of The Learning Internet Inc. - However, the Adjudicating Authority has held that the Respondent No. 1 being the corporate guarantor of the principal borrower i.e., EAPPL (subsidiary of the Corporate Debtor) has right to protect its interest in corporate guarantee and therefore the Respondent No. 1 can take certain step to protect himself to reduce risk of standing as guarantor to EAPPL.
The Respondent No. 1 aggrieved due to alleged under valuation shares of The Learning Internet Inc., could have approached the liquidators or could have invoked the suitable jurisdiction, if any, in accordance with the relevant insolvency law of the Singapore before the High Court of Singapore, which he has not done as confirmed by the Respondent No. 1 in reply put by this Appellate Tribunal to Respondent No. 1 during the pleadings - it does not give any right to the Respondent No. 1 to approach the Adjudicating Authority on this issue and without any doubt, the Adjudicating Authority did not has any jurisdiction to give such directions w.r.t. fresh valuation in this regard as contained in Para 27 of the Impugned Order.
The valuations were done at different time periods and in different context on different issues and we are, therefore, of opinion that such valuation reports could not have been relied upon by the Adjudicating Authority. In any case such valuation reports were done long back in 2008 and 2014-2021 which would have been conducted based on the estimates and future projections relevant at that times and cannot be relied upon now.
Regulation 21A of the Liquidation Regulations has no applicability in the present Company Petition which is for insolvency proceeding of the Corporate Debtor.
Conclusion - The assets of a subsidiary cannot be treated as assets of the holding company in insolvency proceedings. The moratorium under the IBC applies only to the assets of the Corporate Debtor. The NCLT's directive for a fresh valuation of shares set aside, stating that it was beyond the scope of its jurisdiction.
The impugned order set aside - appeal allowed.
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2025 (1) TMI 1216
Admissibility of application under Section 9 of the Insolvency and Bankruptcy Code (IBC) - barred by the limitation period or not - pre-existing dispute or not - service of demand notice.
Maintainability on the grounds of limitation - multiples dates of default have been mentioned - HELD THAT:- On the question whether the Petition was filed within the limitation period, it is pertinent to note that the last part payment made by the CD on 17.02.2017 is undisputed. Accordingly, the limitation period was extended for 3 years from 18.02.2017, expiring on 17.02.2020. The Petition was admitted and filed on 17.02.2020, making it well within the limitation period.
Even assuming, without prejudice, that the limitation period is reckoned from 17.02.2017 (the date of the last payment), the 3-year period would expire on 16.02.2020, which was a Sunday and a non-working day for the Tribunal and its registry. As per Section 4 of the Limitation Act, read with Rule 3 of the NCLT Rules, the Petition could be validly filed on the next working day, i.e., 17.02.2020, which is when it was indeed filed. Hence, the Petition is still within the limitation period - Appellant’s grounds on limitation cannot be therefore accepted and the application is very much maintainable on this ground.
Whether the Demand Notice in Form-3 dated 15.01.2020 was properly served or not? - HELD THAT:- CD claims that the OC falsely asserted in its affidavit that it did not receive a Reply to the Demand Notice. The CD claims that it duly responded to the Demand Notice, with supporting postal receipts provided as evidence. The tracking reports were unavailable due to the operational challenges during the COVID-19 pandemic. It is claimed that CD replied to the Demand Notice within the statutory period and raised a legitimate dispute regarding the claimed amount. Consequently, the Order violates Section 9(5) of the Insolvency and Bankruptcy Code (IBC), as the application is incomplete and OC has not received the reply to the demand notice and for that reason should be set aside by this Tribunal - there are no infirmity in the conclusion of the Adjudicating Authority on this hyper-technical ground raised by the Appellant.
Pre-existing dispute or not - HELD THAT:- There is no material placed on record to show that the dispute existed between the parties much before the issuance of the Demand Notice. There is no correspondence between the parties to that effect. Further only after the service of Demand Notice and filing of Petition by OC, CD disputed it. Further, on the one hand, the Appellant contends pre-existing dispute, while on other hand, assumes an entirely contradictory position that the entire debt amount was paid by way of cash in instalments during the period of 03.05.2018 to 27.02.2019. Further, the CD claims to have passed entries of cash payments in its ledger annexed at Page No. 158 to 160 of APB while acknowledging debt payable by the CD for principal debt amount of Rs 11,69,948/- as on 01.04.2018. These are self-serving accounts of OC. Except for CD’s ledger account, with large number of small value cash entries, without producing any evidence, including any cash receipts – nothing else has been placed on record. The assertions of the Appellant cannot be, therefore, relied upon basis such material record. Hence, it can be safely concluded that there is no pre-existing dispute regarding the claim in hand.
Conclusion - i) The application was filed within the limitation period, as the last payment extended the limitation period, and the application was filed timely. ii) The Demand Notice was properly served and that no pre-existing dispute was established. iii) The application was maintainable despite the OC being an unregistered partnership firm, as the bar under Section 69(2) of the Indian Partnership Act does not apply to insolvency applications.
The Appeal is, therefore, dismissed and Section 9 proceedings against the CD must go on.
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2025 (1) TMI 1215
Liquidation of the Corporate Debtor - CoC had not taken full initiatives to resolve the Corporate Debtor which is against the spirit of the Code - Section 7 application was admitted on forged documents - Request to Appellate Tribunal not to consider such additional document filed by the Respondent No. 1.
The CoC had not taken full initiative to resolve the Corporate Debtor against the spirit of the Code - HELD THAT:- Section 33(2) of the Code leaves hardly any choice to the Adjudicating Authority, once the CoC decide with the 66% voting rights to liquidate the Corporate Debtor. In the present case, the resolution to liquidate was passed by 100% votes in CoC. Hence, there are no error in the Impugned Order.
Section 7 application was admitted on forged documents filed by the Respondent No. 1 - HELD THAT:- The Section 7 application was admitted on forged documents filed by the Respondent No. 1 and the conduct of the Resolution Professional is not good as it accepted the claims of the Financial Creditor without verification.
Additional documents of ledger accounts of SVC Bank were introduced to harm the Corporate Debtor - HELD THAT:- These documents were part of the judicial record and necessary for determining the validity of the Section 7 application. There are no merit in the Appellant's objections to the introduction of these documents.
Alleged manipulation of record by Financial Creditor - HELD THAT:- No concrete evidenced has been reproduced by the Appellant to establish the said allegations. It is already noted that the documents produced by the SVC Bank clearly stipulate responsibilities of the Corporate Debtor as co-borrower and Corporate Guarantor. There are no merit in the submissions made on this account by the Appellant.
Conclusion - i) The CoC's decision to liquidate, supported by 100% voting, was in compliance with Section 33(2) of the Code, which mandates liquidation if the CoC resolves to do so with the requisite majority. ii) There are no error in the Adjudicating Authority's order to liquidate, given the absence of assets and the lack of viable resolution options.
There are no error in the CoC decision to the Liquidator of the Corporate Debtor which was accepted by the Adjudicating Authority in the Impugned Order - appeal dismissed.
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2025 (1) TMI 1214
Exclusion of period from 12.04.2023 until 01.07.2024 from the period of implementation of the Resolution Plan approved by NCLT - effect of interim order, which restrained the Successful Resolution Applicant (SRA) from transferring any units, in the Resolution plan - HELD THAT:- The present is not a case where after approval of the Resolution Plan, the Applicant has not taken any steps towards the implementation of the Resolution Plan and has not infused any funds. It is the case of the Appellants that although an amount of Rs.10 crores was to be infused by the SRA. The fact that SRA has infused Rs.7 crores, is not even disputed and it is an admitted fact. In the Application, which was filed before the Adjudicating Authority, the SRA has given the details of various steps taken by it towards implementation of the Plan and amount spent by the SRA towards the implementation of the Plan - Huge amount has been spent by the SRA for obtaining the renewal. As noted above the SRA has also submitted an application to the State Environment Impact Assessment Authority for securing the grant of environment clearance and amount has been deposited where on 28.05.2024, the State Environment Impact Assessment Authority has recommended for grant of environmental clearance. Electricity connection has been restored by Dakshin Haryana Vidyut Nigam, Faridabad.
The present is a case where approval of Resolution Plan was challenged before this Tribunal in four Appeal(s), in which Appeal(s), interim order was also passed on 12.04.2023 and Appeal(s) could be ultimately decided on 01.07.2024, rejecting the challenge to the approval of Resolution Plan by elaborate consideration. The period, which was sought to be excluded by the SRA is period from which interim order was started operating against the SRA. When the approval of Resolution Plan is challenged in the Appeal(s), and the issues remained sub-judice and pending consideration and an interim order was also passed by this tribunal, there are no error in the order of the Adjudicating Authority, excluding the period from implementation of the Resolution Plan, during which an interim order was operating against the SRA. As noted above, the SRA has moved an Application in the Appeal(s) for vacation of the interim order, which Application could not be decided and remained pending till the dismissal of the Appeal till 01.07.2024.
The substantial steps were taken by the SRA to implement the Resolution Plan and various steps were taken by the SRA to implement the Plan as has been pleaded in the Application filed by the SRA as well as in the affidavit in the present Appeal. It is also noticed above that SRA is none-else than the Association of allottees, which is representing about 250 allottees. One of the Association of the allottees had also challenged the Resolution Plan, which Appeal was also dismissed.
Conclusion - i) The interim order passed by this Tribunal clearly prohibited the SRA to realize the aforesaid amount of Rs.50 crores. ii) The interim orders affecting the financial execution of a Resolution Plan justify the exclusion of time from the implementation timeline. iii) There are no error in the order passed by the Adjudicating Authority dated 28.08.2024 excluding the period from 12.04.2023 to 01.07.2024, during which the interim order passed by this Tribunal in the Appeal(s) challenging the approval of Resolution Plan was in operation.
Appeal dismissed.
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