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IBC - Case Laws
Showing 121 to 140 of 9149 Records
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2024 (10) TMI 571
Admission of Section 7 application - locus of appellant to challenge the order of admission passed by the Adjudicating Authority - pending Section 66 application - loan transaction is a sham or collusive or not - illusion that money has been disbursed to a borrower.
Locus of appellant to challenge the order of admission passed by the Adjudicating Authority - HELD THAT:- The Appellant’s case as set up on the appeal is that the Appellant has entered a Share Purchase Agreement dated 17.05.2019 with two shareholders of the Corporate Debtor namely Vision India Fund (VIF) and Infra Resurrection Fund (IRF). Share Purchase Agreement has been brought on the record by the Appellant which indicate that it was entered with two entities VIF and IRF and the Corporate Debtor was also part of the Share Purchase Agreement entered with two shareholders of the Corporate Debtor. The Appellants could not acquire any shareholding of the Corporate Debtor since according to its own case the Share Purchase Agreement could not be given effect to in view of attachment of land by the Enforcement Directorate (ED) on 04.02.2020. The Appellant has referred to Settlement Award dated 19.04.2021 where it was agreed between the parties that the Appellants would be liable to pay the amounts due towards repayment of the loan amount received by Varutha Developers Private Limited (VDPL) within 360 days of the variation of the ED order, whereunder the Land had been attached by the ED. Provisional attachment has been confirmed by the Adjudicating Authority under the PMLA Act.
Section 7 application has been filed by the SREI Equipment Finance Limited challenging default on part of the Corporate Debtor in repayment of loan of Rs.300 crores. The Appellant’s case itself is that it has undertaken to pay the loan of the Corporate Debtor. Thus, the Appellant is not disputing the debt and default committed by the Corporate Debtor in repayment of loan.
The debt and default is not denied only by the Corporate Debtor but the Appellants also. There are no valid ground on which Appellants can question order of Adjudicating Authority admitting the Section 7 application - The Appellant has every right or jurisdiction to enforce his Settlement Award. Appellant has also brought on the record application filed by Appellant for execution of award dated 19.04.2021 before the District Judge Cum Presiding Officer Special Commercial Court, Gurugram, Haryana.
There being debt and default against the Corporate Debtor, which is an admitted fact, no error has been committed by the Adjudicating Authority in admitting Section 7 application - Appeal dismissed.
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2024 (10) TMI 511
Condonation of 15 days’ delay in filing the Appeals - time limitation - computation of limitation period - Whether the Appeal is filed with delay of 15 days or with delay of 16 days? - HELD THAT:- The law is well settled that limitation for filing the Appeal under Section 61 of the IBC commences after pronouncement of the order and in event, the certified copy is applied within 30 days, period which is consumed in preparation of certified copy of the order is excluded. Timelines under IBC are tightly circumscribed as has been held in V. Nagarajan [2021 (10) TMI 941 - SUPREME COURT (LB)].
The judgment of this Tribunal in Ashok Tiwari [2023 (11) TMI 313 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] has no application in the facts of the present case. Since present is not a case of modification of the order. The Application filed by the Appellant in the above case for rectification of the order was partly allowed and order was modified and earlier order dated 17.01.2023 was modified, hence, this Tribunal held that earlier order stood merged with the subsequent order dated 21.03.2023. Present is not a case of any modification of the judgment dated 13.05.2024. The order delivered on 13.05.2024 in no manner was modified or changed. What was corrected was only a typographical error in the date of pronouncement which was wrongly mentioned as 13.06.2024 in place of 13.05.2024.
The Hon’ble Supreme Court in V. Nagarajan [2021 (10) TMI 941 - SUPREME COURT (LB)] has categorically held that period of limitation in filing the Appeal commences from the date when order was pronounced. In “V. Nagarajan”, the order was passed on 31.12.2019 by the NCLT and the Hon’ble Supreme Court held that 30 days period expired on 30.01.2020. The proposition laid down by the Hon’ble Supreme Court in V. Nagarajan is fully attracted in the present case. When the order was pronounced on 13.05.2024, 30 days period expired on 12.06.2024 and Appeal was filed on 28.06.2024 i.e. 16th day after expiry of limitation. The jurisdiction to condone the delay is limited to 15 days only as per Section 61(2) proviso.
The delay of 16 days’ in filing these two Appeals cannot be condoned - appeal dismissed.
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2024 (10) TMI 510
Time limitation of section 95 application - whether the application filed under Section 95, at the instance of Respondent No. 1, is within the period of limitation if it is to be counted from the date when the notice under Section 13(2) was issued on 26.05.2016 and or on the basis of the acknowledgement in the balance sheet which was signed by both the appellants on 01.09.2017? - HELD THAT:- The appellant has wrongly relied upon the decision of Amanjyot Singh [2023 (1) TMI 253 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] and has changed his stand so conveniently during the course of final arguments which he had otherwise taken at the time when stay was granted because at that time it was the case of the appellant that the notice dt. 26.05.2016 is for invoking the personal guarantee.
The facts in the case of Amanjyot Singh are that the Corporate Debtor M/s Gulati Retail India Ltd. had obtained financial facilities from Punjab and Sind Bank and ICICI Bank Ltd. Amanjyot Singh was one of the personal guarantors of the financial facilities extended by Punjab and Sind Bank. The Punjab and Sind Bank issued a notice under Section 13 (2) of the Act on 04.10.2023 to both the corporate debtor and the guarantors. By the said notice, they were called upon jointly and severally to make the payment and discharge their liability with interest with effect from 01.10.2023. Amanjyot Singh, being the guarantor, himself filed an application under Section 94 of the code to initiate the CIRP.
If the notice dated 26.05.2016 is treated to be the notice invoking the personal guarantee, whether the petition having been filed on 02.12.2021 is still within the period of limitation? - HELD THAT:- Section 18 provides for acknowledgement in writing and the balance sheet indicating the liability is the acknowledgement in writing - It is also pertinent to mention that the balance sheet has been signed by the both the appellants herein and it has been held by the Hon’ble Supreme Court in the case of Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal & Anr. [2021 (4) TMI 753 - SUPREME COURT] that the admission of liability in the financial statement i.e. balance sheet indicates the debt from the date when it is signed.
Since the balance sheet was signed on 01.09.2017, therefore, counting the limitation from 26.05.2016 to 01.09.2017, the period of three years would again start running from 01.09.2017 and shall come to an end on 31.08.2020. This date i.e. 31.08.2020 happens to fall during the period of covid 2019 for which the Hon’ble Supreme Court has passed an order in Suo Motu 3/2020 order in [2022 (1) TMI 385 - SC ORDER] that if the limitation expires during this period then it shall continue to run till 01.03.2022 and an additional period of 90 days shall also be available in particular circumstances.
Since the period of limitation to file petition under Section 95 by Respondent No. 1 was expiring during the period protected by Hon’ble supreme Court, therefore, it cannot be said that this application which has eventually been filed on 02.12.2021 was beyond the period of limitation.
There is hardly any merit in the present appeals and hence, both the aforesaid appeals are hereby dismissed.
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2024 (10) TMI 509
Approval of Resolution Plan - Jurisdiction of CoC to substitute the SRA with another SRA who was not part of the CIRP process - Resolution Applicant after approval of plan by the CoC on 21.10.2021 has substituted the Resolution Applicant with Respondent No.4 with the approval of the CoC - Jurisdiction of to modify a Resolution Plan already approved by the CoC and submitted before the Adjudicating Authority for approval under Section 30(6) of the IBC - HELD THAT:- The clear provision of the statute is that the Resolution Plan received from a person who does not appear in the final list of Prospective Resolution Applicants (PRAs) cannot be considered. In the present case, there is no dispute that the Respondent No.4 has never submitted a Resolution Plan and he was not included in the list of PRA. The CoC has no jurisdiction to approve the Resolution Plan treating it to be the plan of Respondent No.4 or to substitute Respondent No.4 as Resolution Applicant. The outcome of the CoC approval and filing of revised Form-H is that now the Respondent No.4 has become the SRA whose plan has been approved. The approval of the Resolution Plan of Respondent No.4 is clearly in breach of Regulation 39(1)(B).
Right from Request for Resolution Plan and mandatory contents consideration of the Resolution Plan, there are different stages for reevaluation of the Resolution Plan and applicant who has not participated in any of the stages of CIRP process cannot suddenly be substituted as SRA to impleme - it is opined that substitution of Respondent No.4 in the Resolution Plan is contrary to the statutory scheme of the IBC read with CIRP Regulations 2016.
The Adjudicating Authority committed error in approving the Resolution Plan which was modified Resolution Plan substituting Respondent No.4 as SRA. Order of the Adjudicating Authority is unsustainable and cannot be approved.
In the facts of the present case, one more time bound opportunity to be given for finding out as to whether any other Resolution Applicants can revive the Corporate Debtor - by setting aside the order of the Adjudicating Authority approving the Resolution Plan, it is directed for issuance of fresh Form-G by the Resolution Professional and complete the entire process within 90 days from today.
The Order is set aside. The Resolution Professional and the CoC is directed to issue fresh Form G inviting Resolution Applicants and thereafter complete the entire process leading to approval of the Resolution Plan, if any, within 90 days - appeal allowed.
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2024 (10) TMI 508
Precedence/priority of consideration and decision filed by application u/s 54(C) of IBC, over and above the application filed under Section 7 of IB, against the same Corporate Debtor - application under Section 7 is filed much prior of enforcement of the amendment of the Act, 2021 i.e. w.e.f. 04.04.2021 and is hit by Section 11A(4) of the Code - HELD THAT:- Section 11A(2) says that precedence is to be given to an application if the application under Section 54C already pending and application under Section 7, 9 or 10 is filed or if the application under Section 7, 9 or 10 is pending and the application under Section 54C is filed within 14 days of the filing of the said application then the precedence has to be given to the said application but Section 11A(3) cast an exception as it provides that where an application under Section 54C is filed after fourteen days of the filing of the application under Section 7, 9 or 10 then it has not to be given precedence rather the precedence has to be given to the application filed under Section 7, 9 or 10 of the Code.
Section 11A(4) of the Code says that the provision of this Section i.e. 11A shall not apply where an application under Section 7, 9 or 10 is filed and pending as on the date of the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2021. Meaning thereby, if the application under Section 7, 9 or 10 is already filed and then the Act of 2021 came into being then the applicant filing the application under Section 54C cannot take the help of this Section.
In the present case, what precisely has happened is that the application under Section 7 was filed on 09.12.2020, the Act of 2021 came into being on 04.04.2021 and the application under Section 54C was filed on 04.09.2022 that is much after the expiry of year, therefore, the rigours of Section 11A(4) is squarely applied to the controversy at hand and hence the Tribunal has committed a patent error in taking up the application under Section 54C of the Code over and above the application filed much earlier under Section 7 of the Code and decided the same.
This procedure could not have been followed as the law is totally against it, therefore, in such circumstances, the order passed on the application filed under Section 54C on 20.04.2023 for the purpose of initiation of PPIRP is patently illegal and thus, the same is hereby set aside.
Appeal allowed.
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2024 (10) TMI 507
Non-compliance with submission of Performance Bank Guarantee (PBG) by the Appellant - insertion of Clause (4-A) in the Regulation on 24.01.2019, much after submission of the Resolution Plan and approval of the Resolution Plan - Jurisdiction of Adjudicating Authority to permit participation of the Applicants, who were not part of the CIRP.
HELD THAT:- The Performance Bank Guarantee was not submitted by the Appellant despite dozens of reminders sent by the Resolution Professional to the Appellant. There was clear non- compliance of provisions of the RFRP Clause 1.9.3 which oblige the Resolution Applicant after approval of the Resolution Plan by the CoC to furnish the Performance Bank Guarantee of an amount equivalent to 20% of the bid consideration amount within two business days. It is also noticed that the two applications one by the State of Arunachal Pradesh and another by THDC were filed before the Adjudicating Authority praying for liberty to submit the Resolution Plan for resolution of the corporate debtor.
The stand which was taken by the CoC before the Adjudicating Authority is that the Appellant did not give any heed to submit Performance Bank Guarantee and it failed to adhere to the terms and conditions. CoC in its reply, therefore, clearly stated that after deliberation CoC is not objecting to the applications filed by the State of Arunachal Pradesh and the THDC and which applications need to be allowed in the interest of the Corporate Debtor.
The requirement of submission of Performance Bank Guarantee was contained in the RFRP. RFRP was dated 21.05.2018. Clause (4-A) which was inserted in Regulation 36B only made it mandatory for Request of Resolution Plan to provide a performance security within time specified therein. There is no conflict in the provisions of the RFRP in the present case and Regulation 36B (4-A). The fact that Clause (4-A) was added subsequently has no bearing in the present case since in the present case RFRP dated 21.05.2018 itself contained Clause 1.9.3 requiring submission of the Performance Bank Guarantee of an amount equivalent to 20% of the bid consideration amount within two business days.
The Application for approval of the Resolution Plan being CA No. 246 of 2019 was heard by the Adjudicating Authority and by impugned order, the said application stood rejected. The application for intervention filed by the Appellant became inconsequential when the application for plan approval of the Appellant stood rejected on account of non-compliance by the Appellant - there are no substance in the submission of the Appellant that the order passed by the Adjudicating Authority is in violation of principle of natural justice.
The view taken by the CoC that Resolution Applicant who has not been able to deposit the Performance Bank Guarantee of Rs.72.72 Crores it cannot be trusted for implementation of the huge project. Adjudicating Authority in the impugned order has considered all aspects of the matter and has rightly come to the conclusion that Appellant having not deposited the Performance Bank Guarantee inspite of several opportunities/reminders given to the Appellant, Adjudicating Authority has no option except to reject the application for approval of the Resolution Plan - The Adjudicating Authority by the impugned order has also clearly given liberty to the Appellant to submit a Resolution Plan in response to EoI.
Thus, no grounds have been made out to interfere with the impugned order. Looking to the fact that Appellant has filed this appeal and Appellant was already permitted by the Adjudicating Authority to submit a Resolution Plan, it is inclined to grant two weeks’ time to the Appellant to submit a Resolution Plan before the Resolution Professional which may also be considered along with the other Resolution Plans which have already been received in the CIRP of the Corporate Debtor.
Appeal dismissed.
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2024 (10) TMI 464
Approval of Resolution Plan - the plan stood approved by the CoC - Section 30(2) of IBC - HELD THAT:- The Appellant cannot be allowed to challenge the approval of the Resolution Plan by the Adjudicating Authority, which stood approved by the CoC by vote share of 97.54%. It is well settled that commercial wisdom of the CoC in approving Resolution Plan is not to be lightly interfered with. The jurisdiction of the Adjudicating Authority to interfere with approval of the Resolution Plan is limited within the four corners of Section 30(2) of the Code.Adjudicating Authority in the Impugned Order has held that Resolution Plan meets the requirement of Section 30(2).
There are no ground to interfere with the Impugned Order of the Adjudicating Authority approving the Resolution Plan at the instance of the Appellant - appeal dismissed.
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2024 (10) TMI 463
Withdrawal of application under Section 12A of IBC - application can be filed after commencement of the Liquidation Proceedings or not? - Liquidation commenced on 12.09.2017 - requirement of constitution of SCC as per the Regulation 31A inserted in Liquidation Regulation with effect from 25.07.2019.
Whether an Application under Section 12A for withdrawal of the CIRP can be filed after commencement of the Liquidation Proceedings? - HELD THAT:- In view of the clear Statutory Scheme as delineated by 12A, Section 33 and Regulation 2B of the Liquidation Regulation, during Liquidation period, an Application under Section 12A is not permissible - In the facts of the present case, it is clear that former Director of the Corporate Debtor, Ashish Mohan Gupta, himself has challenged the Liquidation Order and also sought to submit a Scheme which were all rejected up to this Tribunal. The Application which has been filed by the Appellant No. 1 under Section 12A was filed after more than three years from Liquidation commencement, which was at the instance of the former Director Aashish Mohan Gupta, which has been clearly noticed by the Adjudicating Authority in the Impugned Order - the Adjudicating Authority did not commit any error in rejecting application filed by the Appellant.
Whether in the facts of the present case, when the Liquidation commenced on 12.09.2017, it was obligatory for the Liquidator to constitute the SCC as per the Regulation 31A inserted in Liquidation Regulation with effect from 25.07.2019? - HELD THAT:- The Liquidation commencement date in the present case is 12.09.2017. The provision for constitution of SCC was inserted in IBBI (Liquidation Process) Regulations, 2016, by Notification dated 25.07.2019 with effect from 25.07.2019, which required the Liquidator shall constitute the SCC. An explanation to Regulation 31A of the IBBI (Liquidation Process) Regulations, 2016, has been inserted by Notification dated 08.04.2022 with effect from 20.04.2022, which explanation is clarificatory explanation, clarifying the ambit and scope of Regulation 31A - On looking into the Scheme of IBC, SCC, which is required to be constituted within 60 days from the Liquidation commencement date is not a possibility in the facts of the present case. Statute never contemplate performance of impossible act, in the present case when Liquidation has commenced on 12.09.2017, there is no question of constitution of the SCC within 60 days from Liquidation commencement date. From bare look into the statutory provision, it is clear that Regulation 31A did not require constitution of SCC with regard to the Liquidation which has commenced years ago from the provision for SCC came into the Regulation. Explanation to Regulation 31A is a complete answer to the submission of the Appellant that there is no requirement of constitution of SCC in the facts of the present case.
There are no error in the Order passed by the Adjudicating Authority, rejecting the Applications filed by the Appellant - there are no substance in any of the submission advanced by the Counsel for the Appellant - appeal dismissed.
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2024 (10) TMI 462
Account of the Corporate Debtor was correctly declared as a Non-Performing Asset (NPA) or not - whether there was any default, since the debt is undisputed fact and has not been agitated by either of the parties? - HELD THAT:- The sanction limit was Rs.20 Crores for cash credit facilities and it is significant to note that “review was to be done within a year”. Similarly, letter of bank/ bank guarantee also sanctioned of Rs. 7.5 Crores within overall total CC limit of Rs. 20 Crore for procurement of raw material and the same was also required to be renewed within a year. Drawing power under CC including sub limit proposed for LC/BG sub limit was not to exceed Rs. 20 Crore at any time including outstanding payment under LC/BG - the sanction letter of Respondent No. 2 specifically contained clauses for review/ renewal before expiry of one year. This review/ renewal was to be done by Bank based on Annual Audited Financial Statements and other documentary evidence to be submitted by the Corporate Debtor along with request letter which the Corporate Debtor did not furnish.
It will be worthwhile to understand as to what is the need for such review/ renewal of cash credit facilities by banks at the request of the Corporate Debtor. It is noted that banks require such renewal regularly to ensure that the credit facilities and terms on which these facilities were granted, remains in sync with risk profile and credit worthiness of the Corporate Debtor so that such financial facilities remain healthy. By regular reviews, banks monitor financial performances of the borrowers, assessing that the business of the Corporate Debtor remains viable so as to meet the repayment schedule of the banks. Similarly, banks also would like to ascertain and reassess the risk profile of the Corporate Debtor which may change from time to time on several micro and macro factors including business performance by the Corporate Debtor due to technological and economical changes - the regular review/ renew of cash credit facilities is considered to be critical and vital for risk management, compliance and maintaining the account of the Corporate Debtor as standard account and failing of which such accounts are liable to be declared as an NPA with drawing power as “zero”.
The account becomes “out of order in terms of Para 2.2 of RBI Circular dated 01.07.2013 for cash credit facilities if the outstanding balance remains continuously in excess of sanction limit/ drawing power.
It is a fact that the Corporate Debtor could not get its accounts reviewed/ renewed in time and also could not take action to rectify regularities pointed out that banks, as such the Respondent No. 2 was within its right in declaring the account of Corporate Debtor as NPA and initiate Section 7 application.
The Adjudicating Authority has correctly passed the Impugned Order - Appeal dismissed.
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2024 (10) TMI 401
Disregard of commercial wisdom of the Committee of Creditors - removal of the Interim Resolution Professional (IRP) and the appointment of a new Resolution Professional (RP) - appointment of Appellant as the RP of the CD as per the voting in the 2nd CoC meeting - HELD THAT:- The claim of Respondent No. 2 in Form-C was received by IRP on 24.01.2024. It is also seen that M/s Asha Apartments Pvt. Ltd. was inducted as Sole Financial Creditor with 100% voting rights in the Committee of Creditors by the appellant as IRP at a stage when he was already voted out as IRP of the CD by the existing CoC. At no point the appellant informed the AA about the fact that first CoC has not approved his proposal for ratification as RP, rather they have voted him out.
The actions of the appellant IRP are not bona fide in the present matter. He has been very biased in his approach in this matter, particularly after the first CoC meeting where a decision was taken to remove him and appoint a new RP. Prima facie he seems to be guilty of perjury as he has stated before AA on record that the claim of Asha Apartments has been accepted by him on 25.01.2024 and accordingly he has reconstituted the CoC. Whereas in the minutes of the second CoC held on 30.01.2024, he has stated that the claims of all three creditors are under ‘verification’ category. It should be mentioned that the claim of Respondent No.1 was admitted and informed by him to AA on 12.01.2024 itself. This clearly suggests that the Respondent No.2 was introduced as the Financial Creditor, without proper verification to ensure that the Committee of Creditors consisted solely of financial creditor who would appoint the IRP as RP and further allow him to conduct the CIRP process in tandem with the newly introduced sole member of CoC.
The conduct of the RP in the instant CIRP proceeding seems to be premediated, biased and authoritarian in clear violation of the core objectives and principles of the Code, which seeks to ensure fair and transparent insolvency proceedings. The facts and circumstances presented above clearly reveal the Appellant's abuse of authority, demonstrating both overreach and bad faith; further compromising the integrity and trust that is essential to the insolvency resolution process.
It is found that the conduct of the appellant has not been neutral and impartial in the aforesaid CIRP proceedings. He had tried to conduct CIRP in such a manner to keep himself as RP by prematurely admitting the claim of Respondent No.2 as Financial Creditor and reconstituting the IRP. The Respondent No.2 in turn helped him by appointing him as RP. This conduct goes against the objectives of the Code. If such conduct and collusive practices are allowed to continue, the entire edifice of IBC would collapse. This would enable entry of erstwhile promoters though back door in the CD.
Appeal dismissed.
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2024 (10) TMI 400
Direction to RP to reconstitute the Committee of Creditors (CoC) after excluding the Appellant and other unsecured Financial Creditors - Appellant qualifies as a 'related party' or not - Appellant's claim as a financial creditor - disbursement of funds - secured creditor - necessity of a forensic audit to investigate the transactions related to the Appellant's claim - HELD THAT:- There can be ‘financial debt’ only when liability or obligation in respect of a claim, which is due from any person. The whole claim of financial debt by the Appellant is based on Deed of Guarantee-cum-indemnity dated 05.08.2022 executed by the Corporate Debtor. Clause 3 of Deed of Guarantee-cum-Indemnity as extracted above contains undertaking of Guarantor to make good the loss of lender, if the borrower fails to repay such amount to lender. Thus, there can be no liability of Guarantor, if principal borrower is not liable.
Regulation 8, sub-regulation (2) provides that existence of debt due to the Financial Creditor may be proved based on- (a) the records available with an information utility, if any, or (b) other relevant documents, including the record evidencing that the amounts committed by the Financial Creditor to the Corporate Debtor under a facility has been drawn by the Corporate Debtor. Further, sub-regulation (b) (i) refers to a financial contract supported by financial statements as evidence of the debt. Thus, financial statements need to be brought on record evidencing that amounts committed by Financial Creditor to the Corporate Debtor under a facility has been drawn by the Corporate Debtor, are the statutory prescription for proving the existence of debt. The debt shall become due only when there is liability or obligation in respect of a claim, which is due from any person. Thus, unless the liability or obligation becomes due on the Corporate Debtor, who is liable to pay the debt to the Appellant, it cannot be said that the amount of Rs.195 crores for which facility was sanctioned has become due without disbursement of Rs.195 crores, to enable the RP to admit the claim of Rs.195 crores submitted by the Appellant - When Financial Creditor has not disbursed the amount of Rs.195 crores to the principal borrower, it is failed to see that how against the guarantor, the claim of Rs.195 crores can be admitted.
There are no ground to interfere with the impugned order passed in the present Appeal. However, since Adjudicating Authority has directed for transaction audit report, which report was to be received within 60 days, in the facts of present case, the ends of justice will be served in giving liberty to both the parties to file fresh Application about:
(A)Whether any material comes in the light of transaction audit report based on which Appellant can be held to be ‘related party’?
(B)Whether based on transaction audit report, there is any ground by the Appellant to claim itself as Financial Creditor/ secured creditor?
The order dated 02.08.2024 passed by National Company Law Tribunal in IA No.2142 of 2023 is not interfered with - appeal disposed off.
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2024 (10) TMI 399
Initiation of CIRP - continous default - Rs 1 crore threshold - Dismissal of Appellant's Application under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016 - Applicability of Section 10A of the Insolvency and Bankruptcy Code (IBC) regarding the prohibited period - HELD THAT:- Reliance is placed by the Respondent on Krishna Enterprises [2018 (7) TMI 1963 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] in which it was held that ‘debt’ cannot be said to include ‘interest’ in all cases. It shall include interest only when the same has been agreed by the parties, otherwise, only the principal amount shall fall within the definition of ‘claim’ for the purpose of calculating default amount. Despite there being no provision for the Application of interest in the L&L agreement, the Appellant in its Section 8 notice and Section 9 Application claimed interest in its computation on the license fees as set out in the L&L agreement. There are no infirmity with the above analysis of the Adjudicating Authority and do not find merit in the claim of the Appellant for the interest of Rs 1,66,56,022 (rupees one crore, sixty-six lakhs, fifty-six thousand and twenty two only).
The Adjudicating Authority correctly interpreted that any default falling within this period cannot form the basis for initiating CIRP. In this case, a portion of the default claimed by the Appellant clearly falls within the protected period under Section 10A. The Corporate Debtor is entitled to seek exclusion of the license fee of Rs 69,30,442/-, which fell due and defaulted by the Corporate Debtor during the prohibited period.
It is argued by the Appellant that the default is continuous, occurring before, during and after the prohibited period under Section 10A and therefore, the CIRP petition is maintainable. Looking at the facts in the case, we find that the date of default is proposed to be changed to 31.03.2023 as per the purported settlement agreement vide letters dated 29.08.2021 and 10.03.2023 which shifts the date of default for the purposes of Section 9 to 31.03.2023 - continuous default is being artificially created by inflating claims, omitting to consider the revised license fees during the COVID period, arbitrary and unsubstantiated claim of ‘other expenses reimbursement and incorrectly claiming interest on default in payments. Therefore, the argument that it is a continuous default cannot be accepted.
The total amount of outstanding default that the Appellant has against the Respondent stands at Rs 35,02,857/-, which is below the threshold limit of Rs 1 crore prescribed under Section 4 of IBC, making the Section 9 Petition filed by the Appellant not maintainable. The IBC mandates that for a Corporate Debtor to be admitted into CIRP under Section 9, the defaulted amount must meet the threshold of Rs 1 crore. In recalculating the actual unpaid amount, excluding the portion protected under Section 10A and the improperly calculated interest and reimbursements, the NCLT correctly determined that the outstanding default amounted to Rs 35,02,857/-, far below the threshold requirement. This finding is legally sound and consistent with established principles of insolvency law.
This Tribunal finds that the Adjudicating Authority correctly interpreted and applied Section 10A of the IBC and rightly concluded that the outstanding default did not meet the Rs 1 crore threshold - the Appeal is devoid of merit and deserves to be dismissed - appeal dismissed.
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2024 (10) TMI 398
Dismissal of Company Petition on the ground of pre-existing disputes - seeking initiation of CIRP - claim did not meet the threshold of Rs. 1 crore - whether a pre-existing dispute existed between the parties at the time of filing the Section 9 Petition, which would bar the initiation of Corporate Insolvency Resolution Process (CIRP) under the Code? - HELD THAT:- The Respondent has provided documentary evidence, including communications and police complaints, that demonstrated ongoing disputes related to the possession of the leased premises and the payment obligations under the lease - The Adjudicating Authority rightly considered these disputes as substantial and pre-existing, thereby rendering the Section 9 Petition non- maintainable under the Code. It is a well-settled principle that the existence of a pre-existing dispute, regardless of its merit, disqualifies an Operational Creditor from initiating CIRP under Section 9 of the Code.
Upon careful examination of the materials on record and submissions, it is evident that there was indeed a pre-existing dispute between the Appellant (Operational Creditor) and the Respondent (Corporate Debtor) regarding the lease agreement and the outstanding dues. The Respondent provided documentary evidence, including communications and police complaints before the Adjudicating Authority that demonstrated ongoing disputes related to possession of the leased premises and the payment obligations under the lease.
Since it is a clear case of pre-existing dispute and the Appeal can be dismissed on this ground alone, therefore we are not looking into other issues in this Petition. But without going into the merit of each of them, they are just noted for record as like it could fail on the ground of not meeting the threshold of Rs. 1 crore as prescribed under Section 4 of the Code. Also likely to fail on the grounds that there are discrepancies in the amounts claimed by the Appellant, which when adjusted for prior payments, advance rent, and security deposits, could fall short of the requisite threshold. There are also claims of fabrication of invoices etc.
The Appellant has failed to demonstrate that the Adjudicating Authority erred in its decision to dismiss the Section 9 Petition - Appeal dismissed.
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2024 (10) TMI 333
Entitlement to file an application for recall of the order - Adjudicating Authority erred in recalling its earlier order or not - review or recall of the order.
HELD THAT:- The power to recall a judgment will not be exercised when the ground for reopening the proceedings or vacating the judgment was available to be pleaded in the original action but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by waiver, estoppel or acquiescence - the NCLT & NCLAT have inherent powers to recall order but have no power to review its order.
It has been brought out that the Corporate Debtor was required to replace the parts rendered unfit for use and other APU was also treated as parts and for ownership of “Parts”, the Agreements provided that, if replaced as per the Agreement, title to such replaced part was to vest in the Appellant and title to the removed part would vest with the Corporate Debtor - It has been brought out that as per definition of engine, the terms Engine includes “Replacement Engine” and engine does not fall within the definition of “Parts”.
As per the original application submitted by the Respondent No. 1, it was clearly stated and supported with documents that Corporate Debtor’s Engine bearing number 803473 and Corporate Debtor’s APU bearing number 5121 were in possession of the Appellant and should be returned back to maximize the value of Corporate Debtor, as the Corporate Debtor’s engine and APU is of greater value. In the same order, it was mentioned that ‘the Original Engine belonging to the Respondent No. 1 has travelled back to the Respondent No. 1’ which is not correct position because it was still with Respondent No. 1 as their engine was fitted in the aircraft. However, the Adjudicating Authority did not mention that Corporate Debtor’s Engine and APU were in possession of the Appellant and should be returned to Corporate Debtor as it is of greater value. This was corrected in the order of the Adjudicating Authority dated 09.05.2024 mentioning that the Appellant should return Corporate Debtor’s engine which is of greater value and the original engine of the Appellant shall be returned them by Corporate Debtor.
The Impugned Order dated 09.05.2024 is not considered as review done by the Adjudicating Authority of its earlier order dated 04.12.2023 - the Adjudicating Authority has committed genuine mistakes in order dated 04.12.2023 based on mistaken facts and thus passed the Impugned Order dated 09.05.2024 correcting the same including consequential changes.
The Adjudicating Authority has correctly passed the Impugned Order - Appeal dismissed.
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2024 (10) TMI 295
Approval of the Resolution Plan submitted by Sarda Energy and Minerals Ltd. - material irregularity in the process by the Resolution Professional and CoC - modification in the key commercial terms of the resolution plan by the SRA (allegedly) in the garb of clarification sought by RP from the Resolution Applicants and the perversity and discrimination emanating from the same - HELD THAT:- The present is the case where CoC and RP did not grant any opportunity to Sarda to modify or amend the terms of the Resolution Plan.
Hon’ble Supreme Court in Ajay Gupta’ Vs. `Pramod Kumar Sharma [2022 (6) TMI 387 - SUPREME COURT] noticed that the above was a case where question of modification of the Resolution Plan was involved hence liberty was granted to other Resolution Applicant to modify its Plan which Order was maintained. In Paragraph 13 as noted above, observation of the Hon’ble Supreme Court is “this much is clear that certain key features/stipulations of the Resolution Plan were sought to be amended by the Appellant”. Thus, the Judgment of the `Ajay Gupta’ (Supra) was in the background when Appellant sought to amend the Resolution Plan hence the liberty was granted to other Resolution Applicants also to modify its Plan in Paragraph 10.
In the present case by email dated 08.05.2023 sent by the RP clarifications was sought from Sarda. It is also noticed that clarifications were also sought form Torrent, Jindal and Vantage seeking clarification of different Clauses of their respective Resolution Plan, which clarifications were sought after the decision of the CoC taken in the CoC Meeting dated 06.05.2023. The clarification asked for by the RP which is already extracted, in no manner permitted the Sarda or any other Resolution Applicant to modify the Resolution Plan. Only clarifications were sought for and no Resolution Applicant was permitted to modify its Resolution Plan. The submission of the Appellant that under the guise of clarification dated 08.05.2024, the Sarda was permitted to modify its financial proposals which was given on 19.04.2024, is rejected.
No sufficient grounds have been made out within meaning of Section 61(3)(ii) of the IBC to interfere with the decision of the Adjudicating Authority approving the Resolution Plan of Sarda, in these Appeals filed by Unsuccessful Resolution Applicant.
Appeal dismissed.
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2024 (10) TMI 294
Seeking directions challenging the decision of CoC rejecting the proposal for settlement - Consideration of settlement proposal in Corporate Insolvency Resolution Process (CIRP) - HELD THAT:- Settlement proposal was initially rejected but revised proposal have been submitted and pending which needs to be considered by CoC in accordance with law.
It will be open for the CoC to consider the resolution plan as well as the settlement proposal simultaneously - it is not necessary for CoC to either hear the respondent no.1 unless CoC itself decides to call the respondent no.1 for necessary negotiations and deliberations. The revised settlement proposal having been submitted by respondent no.1 there is no occasion to submit any evidence or any further material unless required by the CoC or the IRP. CIRP has neither been stayed by the Supreme Court which is clearly from the order dated 03.05.2024.
Application dismissed.
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2024 (10) TMI 293
Legality of attachment orders issued by EPFO prior to the initiation of CIRP - Preferential treatment given to claims of two EPFOs - appellant has sought quashing of impugned order of AA on the grounds that similarly placed provident funds are being treated differentially - HELD THAT:- The claims of all the eight EPFO’s are to be treated on par and the entire amount of claim under Section 7A, 7Q and 14B of the EPF Act must be paid to respective PF authority from the funds available in the attached bank accounts of CD. In case the amount available is not sufficient the same shall be met from disposal of other assets of the CD. Balance left after meeting the claims of the EPFO Authorities shall form part of the liquidation estate.
The attachment on the bank accounts of the CD by the respondents is hereby removed and the liquidator along with Respondent 3 & 4 shall ensure payment of PF dues to respective PF authorities. The liquidator goes ahead with the liquidation process of CD thereafter.
Appeal disposed off.
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2024 (10) TMI 292
Rejection of prayer of the Petitioners to initiate the CIRP against the Corporate Debtor/ Respondent - financial debt or not - default has occurred as per the provisions of the code or not - HELD THAT:- In the present case, there is no loan agreement between the appellants and the CD. There is no document which provides the tenure of the loan, rate of interest prescribed and frequency of payment of interest i.e. whether monthly, yearly or any other interval. The only document in this regard relied by appellants are the ledger accounts of the appellants maintained by the CD. Regarding payment of interest by the CD to the appellants the only document in this regard is TDS certificates for the financial year 2021-2022 - It is also observed that no interest has ever been demanded by appellants from the respondent before the demand notice under Section 7.
The appellant has not submitted any agreement showing that the respondent, or corporate debtor, was obligated to pay interest on the alleged loan. Additionally, the AA correctly determined that, for a debt to qualify as a "financial debt," the amount advanced to the corporate debtor must be in consideration of the time value of money, which is clearly absent in this case. It was also rightly concluded that the appellant does not qualify as a financial creditor, since no money was disbursed with consideration for time value. Further, the CD’s claim to have paid the entire amount of principal and interest for which TDS has been deducted, has not been disputed by the appellant. Now the dispute is only about recovery of balance amount of claimed interest. As already held this Appellate Tribunal is not a debt recovery forum. The appellant is free to raise such dispute before appropriate forum for recovery of balance claim, if any.
There are no grounds to interfere with the order passed by the AA. The appeal is dismissed.
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2024 (10) TMI 157
Application has been filed under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 by the Applicant/Personal Guarantor to initiate proceeding in terms of in terms of Rule 6 of the IB (AAA for IRP for PGCD) Rules, 2019 - HELD THAT:- In the present case no document is annexed with the application which suggests that guarantee is invoked by the Respondent Bank.
The Hon’ble NCLAT in its decision in the matter of Amanjyot Singh Vs. Navneet Kumar Jain & Ors. [2023 (1) TMI 253 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] has upheld the view taken by NCLT, Delhi dismissing an application filed by the Appellant under section 94.
Therefore, by looking at the facts of the present case and the above case, the present application is filed without any cause and is premature.
Petition dismissed.
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2024 (10) TMI 156
Liquidation of the Corporate Debtor under Section 33 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The assets of the Corporate Debtor were under attachment by the Directorate of Enforcement under the provisions of the PMLA, 2002 and considering the bleak chances of insolvency resolution amid the ongoing investigations and attachment of assets, the CoC had resolved in its 06th Meeting held on 05th April, 2019 to liquidate the Corporate Debtor by a majority of 90.16% voting in favour.
The Applicant informed the CoC about his personal difficulty to act as a Liquidator and it was thus decided by the members of CoC in the 7th Meeting that if the Resolution Professional did not provide his consent, then the appointment of liquidator will be in the manner as envisaged u/s 34 of the Code. Accordingly, in the Eighth CoC Meeting held on August 01, 2019, the committee resolved to appoint Mr. Santanu T. Ray to act as the Liquidator of the Corporate Debtor and the written consent of Mr. Santanu T. Ray to act as the Liquidator of the Corporate Debtor has also been placed on record. The Financial Creditor has also filed M.A. No. 2740 of 2019 before this Tribunal proposing the name of Mr. Santanu T. Ray in place of Mr. Vijay Kumar Garg, to act as Liquidator of the Corporate Debtor.
The Hon’ble Supreme Court in the matter of K. Sashidhar Versus Indian Overseas Bank & Ors [2019 (2) TMI 1043 - SUPREME COURT] has held that the decisions of CoC based on its commercial wisdom are non-justiciable. The CoC with requisite voting as given under Section 33(2) has approved the liquidation of Corporate Debtor in view of bleak chances of receiving any resolution plan for the reasons discussed hereinbefore. This Tribunal has very limited powers of judicial review in such matters of commercial wisdom.
This Bench is of the opinion that the Corporate Debtor is required to be liquidated in the manner as laid down under the Insolvency & Bankruptcy Code, 2016 - Application allowed.
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