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IBC - Case Laws
Showing 141 to 160 of 9149 Records
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2024 (10) TMI 155
Fraudulent transactions - section 66 of the Insolvency and Bankruptcy Code, 2016 - Conversion of Share Application Money to Unsecured Loan - Conspicuous Investments into Related Parties - investment into related parties - Unaccounted rental income.
HELD THAT:- Perusal of the provision of section 66 of IBC requires a Resolution Professional to establish that 'business' of a Corporate Debtor has been carried on with intent to defraud creditors or for any fraudulent purpose. Thus, this Adjudicating Authority is bound to examine and satisfy itself whether the impugned business/transactions attribute malice and thus constitute fraud.
Perusal of the judgement in the case Union of India v. Chaturbhai M. Patel & Co. [1975 (12) TMI 176 - SUPREME COURT] would make it abundantly clear that for a fraud like any other charge whether made in civil or criminal proceedings, must be established beyond reasonable doubt. In the present case, the Applicant for all the four impugned transactions has primarily relied on the Transaction Audit alone which is also clearly disputed by the respondents.
It is also noteworthy to highlight that Section 66 of the Code vide explanation contained therein has set up a rebuttable presumption in favour of the erstwhile directors of the Corporate Debtor. This presumption can only be rebutted by providing adequate, material proofs and pleadings so as to establish fraudulent intent and knowledge of the fraudulent intent at the very inception of the transaction and not later.
Conversion of share application money - HELD THAT:- It is the admitted position that the money paid as share application money was held by the Corporate Debtor and that no shares were issued for the same. Further, the infusion of capital was subsequently converted into debt and the same would not constitute as fraudulent transaction.
Investment into related parties - HELD THAT:- The respondents have furnished accounts and explained the investments. It is also noteworthy to highlight that even in the report of the Transaction Auditor, it was suggested that in order to infer and ascertain the whole picture, a consolidated transaction audit of the group companies was necessary. The investments made thereof are not made in any manner prejudicial to the interest of the Corporate Debtor, its creditors or its stake holders. That all the investments were made in accordance with the provision of 186 of the Companies Act, 2013 at arm's length. Thus, the investments cannot be concluded as fraudulent trading under section 66 of the Code.
Unjustified Cash Withdrawal on Account of Salaries - HELD THAT:- After 2016, no payment in the name of salary to employees were made by the Corporate Debtor. Assuming that the payments made in the name of salaries were made proximate to the commencement of Corporate Insolvency Resolution process and, there may be a possible suspicion, however, in the present case, there is no disbursement after the year 2016. Hence, this Adjudicating Authority cannot conclude that these salaries were disbursed for defrauding the creditors of the Corporate Debtor.
Unaccounted Rental Income - HELD THAT:- The applicant has failed to establish with material and reason as to how and why these agreements were entered into are for the purpose of defrauding the creditors of the Corporate Debtor. The applicant has only suspicion on the genuineness of the transactions and has not sought for any application to setaside the agreements as no material is available to establish the same. Thus, it is concluded that the Applicant has failed to establish a case for intervention under section 66 of the Code.
Thus, upon detailed consideration of all the materials placed on record, this Adjudicating Authority holds that the Application has been filed on mere suspicion and the Resolution Professional has not established a case of fraudulent trading under section 66 of the Code - application allowed.
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2024 (10) TMI 62
Conflict between provisions of Insolvency and Bankruptcy Code, 2016 and Tamil Nadu Protection of Interests of Depositors Act, 1997 - Whether the provisions of IB Code, 2016, override the provisions of TNPID Act? - whether the proceedings initiated under TNPID Act, cannot go on in view of the provisions of the IB Code? - whether NCLT can declare the attachment made under the provisions of TNPID Act as null and void? - HELD THAT:- The TNPID Act is a special enactment which is intended to protect the rights of depositors and provide a mechanism for the disbursement of the assets of the accused apart from punishing the accused. The NCLT, Chennai Bench, has relied upon the judgment of Hon'ble Supreme Court in Innoventive Industries Limited Vs. ICICI Bank and Another [2017 (9) TMI 58 - SUPREME COURT] for the proposition that the provisions of the IB Code shall have effect not withstanding anything inconsistent therewith contained in any other law for the time being in force, particularly referring to Section 238 of the IB Code, 2016.
A Full Bench of this Court in S.Bagavathy Vs. State of Tamil Nadu rep.by it Secretary, Law Department, Chennai and Others [2007 (3) TMI 783 - MADRAS HIGH COURT] considered the constitutional validity of TNPID Act, elaborately. One of the issues raised before the Full Bench was regarding the legislative competence of the State to promulgate the law. Taking note of the primary object of the State legislation, the Full Bench held that the enactment is meant for public safety and to protect the interest of public and applied Doctrine of parens patriae by reminding sovereign power and duty of the State to shoulder responsibilities in public interest.
The Hon'ble Supreme Court in K.K.Baskaran Vs. State represented by its Secretary, Tamil Nadu and Others [2012 (11) TMI 205 - SUPREME COURT], considered whether TNPID Act is beyond the legislative competency of State legislature as it falls within Entries 43, 44 and 45 of List I of VII Schedule of Constitution - The Hon'ble Supreme Court disagreed with the judgment of Bombay High Court with reference to Maharashtra Act and the subject matter covered by the Maharashtra Act does not fall within the subject matter of Sections 58-A and 58-AA of Companies Act. While holding that Courts should look at the legislation as a whole and there is a presumption that the legislature does not exceed its constitutional limits, the Hon'ble Supreme Court accepted the view that incidental trenching in exercise of ancillary powers into a forbidden legislative territory is permissible if a legislation is in substance one on a matter assigned to legislature then it must be held to be valid even though it incidentally trenches on matters beyond its legislative competence.
The purpose and object of TNPID Act, which has been upheld by Hon'ble Supreme Court despite its marginal encroachment into the Central legislations, cannot be ignored. In view of the judgment of Hon'ble Supreme Court, this Court has no hesitation to hold that the order of NCLT is contrary to the settled principles of law. Therefore, this Court agrees with the submission of the learned Additional Advocate General reiterating the legal grounds raised in this writ petition.
Petition allowed.
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2024 (10) TMI 61
Compliance with the repayment plan and its implications under Section 118 of the I&B Code - It is the contention of the Appellants that the insolvency resolution process was not conducted as per the provisions of the Code and due process has not been followed, that the bank account details were shared at a very belated stage - HELD THAT:- The basis of the aforesaid orders of NCLT dated 07.02.2024 was that the Personal Guarantors / appellants of these Company Appeals have clearly failed to comply with the conditions of depositing the amount as per the repayment plan and that, since there was a breach of repayment plan as contemplated under Regulation 20 of IBBI (Insolvency Resolution Process for Personal Guarantors) 2019, the RP was fully within his rights to submit his report u/s 118(2) of the Code. Further in the Order passed on 07.02.2024, granting liberty to initiate Section 121, detailed reasoning has been given as to why the application preferred by the RP was considered and allowed. Part of the order of 07.02.2024 becomes relevant to be extracted to establish as to under what conditions the recall application as preferred by the appellants deserve rejection.
Payment of the initial instalments cannot give a leverage or an excuse to commit subsequent default in the future repayment schedule given under the repayment plan. The initial payment which was made on 27.10.2023 and it can at the best be interpreted to express the bonafides of the Appellants towards acceptance and enforcement of the repayment plan, but it cannot be used as a foundation to grant liberty to the appellants to commit default in honouring the terms and conditions of the repayment plan.
The reasons which have been assigned in the Impugned Orders for declining to recall the Orders passed on 07.02.2024, declaring the premature end of repayment plan and granting liberty to proceed u/s 121 of the Code, do not suffer from any apparent legal vices which could call for any interference by the tribunal in the exercise of the Appellate Jurisdiction, in the absence of there being any apparent factual or legal flaw.
Appeal disposed off.
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2024 (10) TMI 15
Seeking grant of permission to Applicant to distribute the unsold assets being the amount recoverable from the corporate debtor and its erstwhile management under the action to be initiated against their previous preferential, undervalued and fraudulent transactions amongst the Respondents - HELD THAT:- In the 5th SCC meeting held on 22.01.2024, it is seen that the Liquidator has proposed to assign the right to file PUFE proceedings for avoidance/recovery of amounts contemplated under the M.A.No. 1080 of 2019 (now disposed with liberty to file fresh proceedings). The assignment was accepted by VS & B Containers LLC during the meeting. It is seen that SCC with 66.82% voting (majority) resolved that the right to file PUFE proceedings for avoidance, recovery of amounts contemplated under M. A. No.1080 of 2019 (now disposed with liberty to file fresh proceedings) shall be assigned to Stakeholder - VS& B Containers LLC. It has been further resolved by SCC that, if recovery of any amounts is successful, VS & B Containers LLC shall share the amounts recovered with other Shareholders as per the claim sharing ratio of the Stakeholders.
It is ordered that the right to recover from PUFE proceedings shall be assigned to Stakeholder - VS& B Containers LLC. The amount recovered if any, shall be shared.
Application disposed off.
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2024 (9) TMI 1608
Admission of Section 7 application filed by the Respondent No.1 - initiation of CIRP - Financial debt - whether the Appellant had a financial debt qua Respondent No.1 which had become due and payable and whether there was an incidence of default thereof? - Time limitation - HELD THAT:- In the instant matter, whether on factorising the part payment against the loan on 01.05.2021 or taking into account the email of the Appellant of 11.05.2022 wherein the outstanding debt under the Facility Agreement and Supplementary Facility Agreement has been acknowledged, the present application having being filed within three years from the date of acknowledgement of the debt, it cannot be held to be barred by time.
Whether Corporate Debtor was required to be given time to regularise its loan account in terms of RBI circular before declaring the account of the Corporate Debtor to be NPA under the SARFAESI Act? - HELD THAT:- There are not much substance in the contention of the Appellant that they were denied adequate opportunity to regularise their loan account. Respondent No.1 on 24.02.2020 vide their letter had accepted to regularise the loan account of the Corporate Debtor subject to payment of an amount of Rs 2.38 Cr. towards the over-due debt on or before 15.03.2020. It is also found that in response to this letter, the Corporate Debtor deposited Rs 1 Cr. in two tranches but failed to pay the balance amount as assured by 15.03.2020 to regularise the loan account. Furthermore, declaration of account as NPA under the SARFAESI Act is an independent proceeding and cannot be adopted as a defence to obstruct the Financial Creditor from proceeding under IBC to initiate CIRP against the Corporate Debtor.
Existence of key ingredient of Section 5(8) of the IBC of disbursement of loan against consideration for time value of money by the Financial Creditor qua the Corporate Debtor or not - HELD THAT:- In the instant case, the Sanction Letter clearly provides that 15% p.a. floating interest linked to Long Term Reference Rate of the Financial Creditor was applicable. The loan facility having been extended by Respondent No.1 being interest-bearing, this disbursement squarely falls within the purview of Section 5(8)(a) of the IBC and has all the trappings of a financial debt. There are no force in the contention of the Appellant that the disbursal of funds by the Respondent No.1 was without consideration for time value of money.
The acknowledgment of debt in the present facts of the case is therefore clear and unambiguous and nothing on record controverts the position that there was a default in repayment. That being the case, there arises no doubt in our minds that there was a debt on the part of the Primary Borrower and the Co-Borrowers qua the Financial Creditor which remained unpaid. The obligation of the Co-Borrower is coextensive and coterminous with that of the Primary Borrower and hence a right or cause of action becomes available to the financial creditor to proceed against the primary borrower, as well as the Co-Borrower in equal measure in case they commit default in repayment of the amount of debt.
Since in the facts of the present case, a debt has arisen which is due and payable by the Corporate Debtor and a default has occurred, the Respondent No. 1 was entitled to file the Section 7 application - Section 7 application filed by the Financial Creditor was not barred by time and the debt and default being proven, the Adjudicating Authority did not commit any error in admitting the Section 7 application.
There are no error in the judgement of the Adjudicating Authority admitting the Section 7 application. There is no merit in the Appeal - appeal dismissed.
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2024 (9) TMI 1607
Maintainability of application filed u/s 7 of Insolvency and Bankruptcy Code, 2016 - existence of financial debt or not - Bar under Section 10A of the IBC - Record of Default - Stamping of Loan Agreement - Authorization to Submit the Application.
Existence of financial debt or not - HELD THAT:- There were a number of adjournments on the ground of some kind of settlement between the parties. Moreover, Ld. Counsel for the Corporate Debtor has even mentioned that the they have already made the part payment and the next installment will be paid by 25.09.2023. Admission of part payments towards loan repayment and further promise to pay next instalment by 25.09.2023 amounts to acknowledgement of existing financial debt - the first defense of the Corporate Debtor that there is no existence of financial debt is rejected.
Bar under Section 10A of the IBC - HELD THAT:- According to the Repayment Schedule, 1st EMI instalment of Rs. 5,70,00,000/- became payable on 05.01.2021. It is submitted that this instalment was paid by the Corporate Debtor on various occasions till 02.04.2021. Thereafter, 2nd EMI instalment of Rs. 34,20,00,000/- became payable on 05.04.2021. Part Payments were made for this end EMI till 21.06.2021. The 3rd EMI became payable on 05.07.2021 which the Corporate Debtor failed to honour. During the hearing of the matter, this aspect has not been denied by the Corporate Debtor. Thus, the default has occurred on 05.07.2021 and is clearly not barred under Section 10 A of IBC.
Record of Default - Claim is neither based on the record of default recorded with the Information Utility nor based on any other record or evidence demonstrating default as per Regulation 2A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- Admittedly, the financial creditor has not annexed record of default recorded with IU nor any evidence as specified under Regulation 2A. However, financial creditor has annexed the loan sanction letter dated 03.06.2020, loan agreement dated 03.06.2020 duly executed by the Corporate Debtor co-borrower, statement of account evidencing the disbursement of Rs. 190 crores on 23.06.2020 through RTGS No. PID0010824 copy of notice dated 20.01.2022 issued under section 13(2) of SARFAESI Act, 2002, revised payment of schedule dated 12.10.2022 - these documents constitute “such other record” as required under section 7(3)(a) of the Code. Corporate Debtor has not denied any of the above record, rather had submitted before this Court that part payment of loan has already been made and that next instalment would be paid on 25.09.2023. Therefore, this contention of the Corporate Debtor is also rejected.
Stamping of Loan Agreement - HELD THAT:- In view of the fact that existence of debt and default has been established, default amount is more than threshold limit of Rs. 1 crore, the contention of mentioning different amount in the notice and in the part IV of the petition is inconsequential. Even then on examining the petition and found that the complete break-up is provided in the Foreclosure Statement at Annex.5 of the Company Petition and the amount mentioned therein does tally with the amounts mentioned in Part IV of the petition. Therefore, this contention of the Corporate Debtor is also rejected.
Authorization to Submit the Application - Whether signatory to the petition is not authorized to initiate specific proceedings under IBC? - HELD THAT:- It is observed that the Board Resolution at Annexure 8 clearly states that Mr. Uttam Kumar is authorised on behalf of Indiabulls Housing Finance Limited to appear for and/or represent the Petitioner before the National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal (NCLAT) or such other authorities/forums/courts for the cases pertaining to the Code. We are satisfied that petition has been lawfully initiated on the strength of the board Resolution 14.08.2020. Therefore, this contention of the Corporate Debtor is also rejected.
Thus, the Petitioner has proved the debt and default and the same was also admitted during the hearing of this petition by the Corporate Debtor.
The default is to the tune of Rs. 260 Crores (which is much above the threshold of Rs.1 Crore). We are of the considered view that the Financial Creditor has proved existence of debt and default. Further the debt is in excess of Rs. 1 Crore and thus above the threshold limit mandated in Section 4(1) of the Code. Also the Petition filed is within limitation. Therefore, this company petition is admitted and also looking at the consent given by the Insolvency Professional, Mr. Ravi Prakash Ganti appointed as an IRP, with a direction to the Financial Creditor to pay remuneration to the IRP and his expenses until the constitution of CoC.
Petition allowed.
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2024 (9) TMI 1606
Maintainability of application filed under Section 94(1) of the Insolvency and Bankruptcy Code, 2016 - guarantee was not invoked against the applicant for recovery of the amount - Petitioner has not produced and has suppressed from this Tribunal regarding the cases filed by the Respondent under Negotiable Instrument Act - HELD THAT:- The Demand Notice dated 07.03.2018, which is the basis of the default as claimed by the Appellant has been filed along with Application. The notice is addressed to Rutika Creation Pvt. Ltd, the Corporate Debtor and Kiran Sanjaybhai Kanani, the other guarantor but not to the applicant. Therefore, the guarantee was not invoked by the Kotak Mahindra Bank vide demand notice dated 07.03.2018 against this applicant. Apart from this document, the applicant has not produced or placed any other document to show that guarantee was invoked against the applicant for the recovery of the amount.
This application is dismissed for filing an application being a co borrower cum guarantor in which there are certain details not revealed or attached. This application is appears to be filed to escape from the action initiated by financial creditor. Since he appears to have signed the loan as director cum guarantor, the personal insolvency on the grounds of this default cannot be filed under Sec 94 of IBC. Further the loan agreement clause 11.6 restricts default only to arbitration.
It is not agreed that the report submitted by the RP that the present application is maintainable as the guarantee has not been invoked in respect of the applicant. The report of the RP is found to be not satisfactory in examining the eligibility of the borrower to file under Sec 94 of IBC. In sequel to the above, the present application is not maintainable.
Petition dismissed.
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2024 (9) TMI 1605
Initiation of Insolvency Resolution Process against the Applicant/Debtor who is the Personal Guarantor of M/s. Sarthak Creation Private Limited - grounds for admission of the application recorded in the Report is that the Personal Guarantor admit its liability therefore Insolvency Resolution Process can be initiated - HELD THAT:- This application has not enclosed the relevant documents of demand notice of invocation and the notice under SARFESI Act.
The application is barred by limitation period in preferring the application within the relevant period considering the date of NPA and demand notice of Bank of Baroda stated to have been issued on 19.11.2015.
Petition dismissed.
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2024 (9) TMI 1604
Seeking direction to set aside the sale notice dated 19.07.2023 issued by the liquidator in respect of Haldia property - seeking to set aside the communication dated 14.07.2023 sent by the liquidator & any consequential action taken by the liquidator in respect of Haldia property and to direct the liquidator not to interfere in respect of Haldia property.
Where the amount payable by the secured creditor under sub- Regulation (2) (a), is not certain, whether liquidator is mandated to inform the secured creditor the estimated amount? - If liquidator has not informed the estimated amount, whether provision of sub-Regulation (3) would apply or not? - Whether first proviso is an exception to sub-Regulation (2) which mandates the secured creditor to pay the amount within 90 days?
HELD THAT:- It is a settled law that while interpreting a statute, courts have to see the intention of the legislature. Further, when the words of an Act or Regulations are clear and unambiguous, courts are bound to give effect to those words.
The language of Regulation 21A is plain and simple. It cast a duty on the secured creditor who proceeds to realise its security interest, it has to pay the liquidator either an amount referred to in sub-Regulation (2)(a), or an amount referred to in first proviso. Failing which, the asset shall become part of the liquidation estate as mentioned in Regulation 21A(3).
As per the Regulation 21A(1) a secured creditor is required to inform the liquidator about its decision to relinquish security interest to the liquidation estate or to realize its security interest; the said decision is to be communicated within 30 days from the liquidation commencement date failing which the assets covered under the security interest are presumed to be part of the liquidation estate. Accordingly, 30 days expired on 15.04.2021 and the remaining part of the Haldia Property admeasuring 8.04 acres became part of the liquidation estate. However, the applicant through its revised Form-D dated 28.01.2023 had for the first time claimed its security interest over remaining 8.04 acres of the property.
The plea of the applicant that since the estimate was not given by the liquidator and therefore, Regulation 21A is not applicable on it is quite misplaced. Rather the issue of estimate would arise only when the applicant had realized the security interest and inquired the liquidator about the proportionate amount payable by him, however no such steps were ever taken by the applicant. Therefore, the interpretation made by the applicant is not acceptable at all. The law is very clear that the secured creditor has to realise and pay the CIRP cost with in 90 days and also to pay the excess realized value of the asset, if any, within 180 days. Thus the applicant had to complete the entire process within 180 days itself, failing which the entire subject property would form part of liquidation estate as per Regulation 21A(3) of the IBBI (Liquidation Process) Regulations, 2016. As far as claim of the applicant for 8.04 acres is considered we are of the view that the same should also have been communicated with in 30 days from the date of the liquidation commencement order, failing which Regulation 21A(3) would apply and the said part of the property will form part of the liquidation estate.
The applicant failed to comply with the requirements of the Regulation and therefore, the decision of the liquidator that the entire property forms part of the liquidation estate is not contrary to law.
Application dismissed.
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2024 (9) TMI 1553
Seeking grant a relief as part of the IL&FS Resolution Framework for resolution of Category II Companies by permitting writing down of the entire share capital of such Category II Companies upon payment of the bid value/proceeds without the requirement of obtaining any further approvals from the shareholders of such Category II Companies, resulting in the final resolution of the said entities - HELD THAT:- From the facts and sequences of the events, it is clear that for the resolution of IECCL, steps were taken by the IL&FS from January 2021 for issuing an invitation for Expression of Interest dated 13.01.2021. The invitation for Expression of Interest clearly mentions that Expression of Interest are invited for acquisition of 42.25% of the issued, subscribed and paid up share capital of IECCL held by IL&FS and IFIN. The process in pursuance of the above invitation for expression is proceeding as on date. The ICICI Bank being lead lender of the IECCL has also participating in the process including the meetings of the CoC of the IECCL held from time to time.
The submission of the IL&FS is that the process of IECCL has gone too far and which is going for last three years be allowed to be completed and voting which has already been commenced and last date of which voting is 30.09.2024. The instance of ICICI Bank is not interdicted.
Where the revised bid submitted by Howen International Fund SPC requires consideration is not for this Tribunal to assess and it is for the CoC to take a call. Letter sent by Howen International Fund SPC dated 07.07.2024 has extended its validity of fresh EMD till 31.09.2024.
In event, the process of sale of 42.25% shareholding of IECCL is on-going resolution process is completed, the said shall not preclude the lenders including the ICICI Bank to raise objection on extinguishment of its entire debt. Liberty granted to the ICICI Bank to raise its objection on extinguishment of its entire debt for mere payment for 42.25% shareholding of IECCL.
List IA No.5036 of 2023 on 14.10.2024 for hearing and all the objections on the application including the objection filed by the ICICI Bank - It is clarified that the resolution of IECCL which commenced from 13.01.2021 need to be completed irrespective of pendency of IA No.5036 of 2023 and it is clarified that the prayers made in IA No.5036 of 2023, IECCL shall be treated to be excluded.
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2024 (9) TMI 1498
Maintainability of petition filed under Section 7 of the IBC, 2016 - dismissal on the ground that there is no evidence to show the loan given to the Corporate Debtor was due and payable - no record of default or demand letter placed by the Financial Creditor to show debt and default - failure of settlement between the parties - HELD THAT:- The Tribunal was prima facie satisfied the debt is due and not paid on demand, the application needs to be admitted unless it is incomplete, in which case, a notice to be given to the applicant to rectify the defects within seven days of receipt of notice from the Adjudicating Authority, per Innoventive Inds Ltd [2017 (9) TMI 58 - SUPREME COURT]. In Shobhnath & Ors Vs Prism Industrial Complex Ltd [2019 (8) TMI 1700 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], this Tribunal held the Adjudicating Authority is only required to ensure there is a debt and default on the basis of the record produced before it.
On perusing the record, Balance Sheets of the corporate debtor as also the legal notice of demand prima facie reveal there is no impediment to admit the petition under Section 7 of the Code against the Respondent/Corporate Debtor.
Matter remanded to the Ld. NCLT to proceed further as per law - appeal allowed.
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2024 (9) TMI 1425
Maintainability of Section 7 Application - application barred by time limitation or not - relevant date of default - exclusion of period of Limitation as available u/s 22(5) of SICA Act, 1985 - extension of Limitation in pursuance of the Recovery Certificate.
What is the date of default committed by Company, whether 01.06.2019 as claimed in Section 7 Application or the default was committed in the Year 2001 as pleaded by the Company and accepted by the Adjudicating Authority? - HELD THAT:- The Appellant in its Appeal itself claim issuance of recall Notice dated 16.02.2001, which clearly recall the loan and directed the Company to pay within 10 days. The date of default as per the recall Notice is clearly 26.02.2001 - there are no valid reason for mentioning 01.06.2019 as date of default for purposes of IBC. It is well settled that for filing an Application under Section 7, Article 137 of the Limitation Act 1963 is applicable - the date of default in Section 7 was imaginary and without any basis and the date of default is the Year 2001 (26.02.2001).
Whether the benefit for excluding the period of Limitation as available under Section 22(5) of SICA Act, 1985, has been rightly denied by the Adjudicating Authority on account of prosecuting the OA No.03/2002 before the DRT by the Appellant culminating into Recovery Certificate dated 19.10.2006? - HELD THAT:- The Adjudicating Authority did not correctly construed the provisions of Section 22 of SICA Act. The period which is covered by Section 22(1) deserves to be excluded as required by Section 22(5). In the present case, it is not required to express any opinion with regard to proceeding initiated by Appellant by OA No.03/2002 and the legal consequence of the said proceeding. It is however to be noticed that when the Recovery Certificate dated 19.10.2006 was issued, the reference under SICA had already been dismissed on 06.06.2006. Hence, on the date when Recovery Certificate was issued SICA Proceedings were not pending - the Appellant was entitled to exclude the period for the purposes of Limitation which is covered by Section 22(1) and Section 22(5) of the SICA Act and the view taken by the Adjudicating Authority in this regard is not approved in the facts of the present case.
Whether after excluding the period of Limitation as per Section 22 of SICA Act 1985, the Application filed by the applicant was within period of Limitation? - Whether the Appellant is entitled to the extension of Limitation in pursuance of the Recovery Certificate dated 19.10.2006, OTS letter dated 10.01.2008 and OTS letter dated 28.07.2010? Whether the Order of the Adjudicating Authority rejecting the Section 7 Application as barred by time deserves to be interfered with in this Appeal? - HELD THAT:- The date of default being 26.02.2001, Limitation for filing the Section 7 Application under Article 137 started running which came to be arrested by filing the reference by the Company on 12.09.2002. The reference was dismissed on 06.06.2006 thus period from 12.09.2002 to 06.06.2006 needs to be excluded. Appeal having been filed against the Order dated 06.06.2006 on 23.11.2006, which came to be dismissed on 29.09.2010. The said period from 23.11.2006 to 29.09.2010 also needs to be excluded. The period after 30.09.2010 till 04.03.2013 during which the Writ Petition remain pending before the High Court needs no exclusion being not covered by Section 22(1). Further, no exclusion can be allowed after 31.12.2013, when the AAIFR dismissed the Appeal. The period during which the Writ Petition remain pending and the period after 31.12.2013, in which no exclusion is available itself exhaust period of 3 Years for filing the Application under Article 137. On 19.12.2019 when the Section 7 Application was filed the period of 3 Years had already came to an end.
It is need to be seen whether after 27.07.2013, when the period extended under Section 18 of Limitation Act comes to an end, whether there is any other acknowledgement within 3 Years period. The Appellant has relied on the Balance Sheet for the Year 2015-16, which Balance Sheet has been brought on record both by the Appellant and the Company. The Balance Sheet 2015-16 have been signed on 26.09.2016. Thus, acknowledgement if any has to be treated from 26.09.2016, before which acknowledgement 3 Years period from the OTS letter 28.07.2010 has already come to an end. Thus, acknowledgement in the Balance Sheet are after 3 Years of the expiry of the period of Limitation. Thus, in any view of the matter, the Application filed by the Appellant on 19.12.2019, was much beyond period of Limitation which was available to the Appellant to file Section 7 Application.
The Adjudicating Authority did not commit any error in rejecting Section 7 Application filed by the Appellant as barred by time - there is no merit in the Appeal - The Appeal is dismissed.
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2024 (9) TMI 1424
Condonation of 185 days delay in refiling of the Appeal - HELD THAT:- The delay in refiling can be condoned only if the Tribunal is satisfied that there is reasonable and justifiable cause for not refiling the appeal on time. On looking at the sequence of events, it is found that the Appeal was e-filed on 02.12.2023 and defects were intimated soon thereafter by the Registry on 11.12.2023. On perusal of the defect list pointed out by the Registry, most of the defects are minor in nature like lack of pagination, need of rescanning of certain pages of the appeal, correction of index etc. The correction of such defects was by no stretch of imagination of a time-consuming nature. The defects which were indicated by the Registry clearly fell in the routine category which were easily curable. The Applicant has also not indicated any circumstance beyond his control which warranted 185 days to clear the defects. Even the attribution of court vacations as a ground for delay does not cut ice since duration of court vacations are never that long. Clearly therefore, since the time of intimation of defects, the Applicant slept over the defects for nearly six months. No earnest efforts were made by the Applicant to correct the defects. It cannot be the unilateral prerogative of the Applicant to elect when it chooses to cure the defects to get the matter listed. This shows that the applicant was casual, callous and negligent in refiling the appeal - The Applicant cannot be given any indulgence keeping in view that the IBC proceedings have stringent timelines to be followed and the proceedings have to be concluded in a time-bound manner.
Thus, sufficient ground has not been made out for condonation of 185 days delay in refiling of the Appeal. The refiling delay application is rejected - application dismissed.
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2024 (9) TMI 1423
Admissibility of pleadings when respondent does not file a counter affidavit - judicial implications of non filing of a Counter - HELD THAT:- NCLT has recorded that it was conscious of the objection raised by the Appellant in the objection, failure to consider the same and to record specific finding on it, that is, on the facts as pleaded by the Appellant in the Memo of Objection, would render Judgment being perverse and without application of mind especially when the pleadings of the Appellant remain undenied by the Respondent’s Counsel having denied to file a Counter Affidavit, qua the pleadings. Accordingly, the Judgment dated 09.07.2024 as rendered in CP/IB/173(CHE)/2023 would be held to be vitiated, owing to the ground which has been taken by the appellant that even after taking note of the Appellant’s contention raised in his objection dated 14.03.2024, and referring to the same in the body of the Judgment, the Learned Adjudicating Authority has not recorded any, no finding on the same in its judgment.
Even in the light of the Judgment of Mobilox Innovations Private Limited [2017 (9) TMI 1270 - SUPREME COURT], where the guidelines have been framed therein for the purposes of determining an application under Section 9 based on the criteria prescribed therein prior to the imposition of moratorium under Section 14, since the aforesaid factors have not been considered while passing the final judgment, the judgment Impugned will be held as being not in consonance to the provisions contained under Section 424 of the Companies Act and therefore, the initiation of the Section 9 proceedings would be bad and without application of mind.
The Impugned Judgment dated 09.07.2024 as rendered by the National Company Law Tribunal, Chennai Bench in CP/IB/173(CHE)/2023, would hereby stand quashed - the proceedings are remanded back to the Learned National Company Law Tribunal, Chennai Bench, to redecide the matter afresh after considering the rival contentions and particularly in the context of the pleading which has been raised qua the claim which is subject matter of consideration and decide the same on its merit.
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2024 (9) TMI 1422
Approval of the Resolution Plan - rejection of the application to allow submission of a revised Resolution Plan - violation of the Principle of Natural Justice - HELD THAT:- From the Minutes of the 9th CoC Meeting held on 15.12.2023, as quoted above, it is clear that CoC on 15.12.2023, considered both the Resolution Plan i.e., Resolution Plans submitted by M/s. Saverni Neutech Pvt. Ltd. as well as the SRA M/s. Trinity India Forgetech Pvt. Limited. Resolution Plan of M/s. Trinity India Forgetech Pvt. Ltd. was approved with 92.87% vote shares and Resolution Plan of M/s. Saverni Neutech Pvt. Ltd. was disapproved by 92.87%, vote shares and the Plan which was earlier submitted by M/s. Saverni Neutech Pvt. Ltd. has considered and rejected. There is no occasion for M/s. Saverni Neutech Pvt. Ltd. to pray for further revised Resolution Plan when it failed to file Resolution Plan, according to its own case within the time allowed as it reflected from the email dated 18.12.2023 sent by the Appellant themselves.
Adjudicating Authority did not commit any error in rejecting the Application I.A. No.124/2024 filed by Sandeep Jayantilal Vadodria. Insofar as the Appeal filed by the Prem Trading Company, one of the contentions raised is that Prem Trading Company who was Financial Creditor having 2.48%, vote shares was not permitted to vote. Suffice it to say that Authorised Representative of the Appellant Prem Trading Company, Rakesh Patel was present in the CoC Meeting, which is recorded in the Minutes - It has been noted that Rakesh Patel has voted only on the agenda 1, 6, 7 & 8, and thereafter he exited, he having participated in the EOI process as co- Resolution Applicant in M/s. Saverni Neutech Pvt. Ltd. and Rakesh Patel who was Authorised Representative of Financial Creditor was participating in EOI. He was rightly not permitted to vote. He rightly exited from the voting which was held on Item No. 2.
In any view of the matter, vote share of the Prem Trading Company is only 2.48% and vote share for Prem Trading Company was not considered in favour of the approval of the Plan and the Plan was approved by 92.87% vote shares of HDFC Bank Ltd. the largest Financial Creditor.
There are no merit in the Appeal filed by Prem Trading Company. In the CoC Meeting held on 15.12.2023, Prem Trading Company was represented by its Authorised Representative and the grounds which are sought to be raised in the Appeal are without any substance.
Appeal dismissed.
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2024 (9) TMI 1421
Admission of Section 7 Application - financial debt or not - Notices were never served on the Corporate Debtor and the Adjudicating Authority on second date of hearing proceeded Ex-Parte against the Corporate Debtor - HELD THAT:- In the facts of the present case, the Adjudicating Authority in the Impugned Order has relied on record of default by NeSL and held that Report is sufficient evidence to arrive at the conclusion to an amount of debt. There can be no dispute that report of NeSL is an important piece of evidence, but in the facts of the present case where the Corporate Debtor has no opportunity to place its defence, it cannot be said that reliance on NeSL Certificate was conclusive evidence to come to the conclusion that there was a Financial Debt.
Adjudicating Authority in Paragraph 3 of the Order has noticed the Balance Sheets maintained by the Corporate Debtor. Although the Balance Sheets have been noticed, but the Adjudicating Authority failed to notice that long-term borrowing and long-term liabilities have been mentioned under two different heads. Hence, non-mention of the amount of ₹1,00,00,000/- under the heading long-term borrowing has to be given some meaning and purpose. Long-term liabilities can be different kind of liabilities which may be an Operational Debt, Financial Debt or any other nature of debt. However, the real nature of transaction between the parties needs to be examined and adjudicated by the Adjudicating Authority before admitting Section 7 Application.
In the present case, the Corporate Debtor unfortunately could not appear before the Adjudicating Authority to raise his defence, hence in the facts of the present case, the ends of justice be served in remitting the matter before the Adjudicating Authority for fresh consideration with liberty to the Appellant to file its Reply within three weeks. There is no appropriate consideration of the real nature of transaction on basis of which Section 7 Application was filed by the Adjudicating Authority.
The ends of justice be served in remitting the matter for fresh consideration before the Adjudicating Authority, with liberty to the Appellant to file a Reply within 3 weeks from today - Appellant is allowed three weeks time to file a Reply to Section 7 Application before the Adjudicating Authority - appeal allowed.
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2024 (9) TMI 1362
Invocation of writ jurisdiction of this Court under Article 226 of the Constitution of India, 1950 - initiation of process of fresh voting on the Resolution Plan of the Petitioner after taking into consideration - principle of equality and fairness - HELD THAT:- This Court is not inclined to issue notice for the elementary reason that the petitioner has an alternative and efficacious remedy to assail the impugned action or inaction on the part of the CoC, if any, before the NCLT.
It is well ordained in law that the Adjudicating Authority alone has the jurisdiction to regulate the conduct of the CoC and finally adjudicate upon the resolution plan through the powers of judicial review and thereby ensure that the CoC functions as per the role and responsibilities delineated under the IBC. In other words, the Adjudicating Authority maintains a supervisory role over the entire CIRP proceedings and is empowered under Section 60 of the IBC to take action on any issue relating to the insolvency proceedings. Thus, the resolution plan decided by the CoC shall be put up for consideration before the Adjudicating Authority, which forum alone shall finally decide whether the CoC has performed its fiduciary duty as per the legislative mandate of the IBC.
This Court is not enjoined upon to exercise its power of judicial review and thereby usurp upon the powers of the NCLT to inquire into the commercial wisdom of the CoC whereby the Resolution Plan of the petitioner was rejected vide impugned letter dated 18.09.2024.
In the end, a last desperate attempt is made by the petitioner that it is willing to renew its offer and match the offer given by the SRA in every aspect, but the same cannot be entertained by this Court. Although there is no gainsaying that in matters of public funds auction the best methodology for discovering fair value and the principle criteria is to ensure maximizing the recovery, the bottom line is that the decision of the CoC shall definitely be considered by the NCLT in a just and expedient manner, and if it deems fit it, may even allow “Open Court Bidding” in accordance with law - the present writ petition is dismissed with liberty to the petitioner to take appropriate recourse before the NCLT, which forum alone shall decide the objections of the petitioner, if any preferred, on its own merits in accordance with law.
Petition dismissed.
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2024 (9) TMI 1324
Liability to pay electricity dues which had arisen during the CIRP period - Failure to take into account the current position of law with respect of Section 14 of the IBC - whether the Appellant was lawfully entitled to demand the payment of current electricity dues incurred by the Corporate Debtor during the period of moratorium and whether it was entitled to disconnect the electricity connection in the event the current dues are not met?
HELD THAT:- The Adjudicating Authority has failed to appreciate the amendments which were brought about in Section 14 of the IBC by Act 1 of 2020. The impugned order is clearly in conflict with the legislative scheme as contemplated in Explanation appended to Section 14(1) and the provisions contained in Section 14(2-A).
Section 14(1) Explanation and Section 14(2-A) was clearly introduced by way of an amendment to fill critical gaps in the Corporate Insolvency framework and that a substantive provision was introduced into IBC framework which clearly provided that the supply of goods or services, critical to protect and preserve the value of the Corporate Debtor, could always be terminated or suspended or interrupted during the period of moratorium when the dues arising from such supply during the moratorium period is not paid. Thus, the benefit of electricity supply which is enjoyed by any Corporate Debtor given by government or authority should be continued subject to the condition that there is no default of payment of current dues.
Explanation to Section 14(1) and Section 14(2-A) of the IBC is clearly attracted in the facts of the present case. The protection granted by Section 14(1) is clearly subject to no default in the payment of current dues as clearly stipulated in the explanatory clause. Further, Section 14(2-A) only prohibits interruption, termination or suspension of any such supply of goods or services to the Corporate Debtor which the RP considers critical to protect and preserve the value of the Corporate Debtor and manage the operations of the Corporate Debtor as a going concern but with an exception carved out which provides that in case the Corporate Debtor has not paid dues arising from such supply during the period of moratorium.
The impigned order is held to be legally unsustainable and accordingly set it aside - appeal allowed.
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2024 (9) TMI 1323
Challenge to closure of factory - validity of closure notice - jurisdiction of Adjudicating Authority to adjudicate upon the closure - HELD THAT:- After the order dated 08.08.2019, matter was placed before the CoC in the meeting held on 02.09.2019 in which meeting the issue was left for the Resolution Applicant to take a call and thereafter the CoC to look into. However, no Resolution Plan having been approved, the liquidation was subsequently directed on 09.01.2020. There was no determination with regard to notice dated 31.07.2017 - the Adjudicating Authority has not taken any decision and has not expressed any view that the Adjudicating Authority has jurisdiction to adjudicate the notice dated 31.07.2017. What is recorded in the order is the statement made by the Resolution Professional. Hence, the order dated 08.08.2019 cannot be read to be determination by the Adjudicating Authority of its jurisdiction to pronounce on the closure notice.
It is well settled that after initiation of the CIRP all claims against the corporate debtor has to be filed and examined in the CIRP/ Liquidation Process. It has also come on the record that after liquidation proceedings, the claims were also filed by the Appellant before the liquidator and the liquidator has admitted their claims to the extent of Rs.1,09,70,698.27/-. The direction of the High Court dated 27.04.2019 cannot be read to mean that High Court adjudicated the issue as to whether NCLT can examine the challenge to the closure notice dated 31.07.2017. The order of the High Court, thus, has to be read to mean that Appellants were given liberty to raise their claims in the proceedings before the NCLT and raise all contentions. The mere fact that liberty was granted by the High Court to file claim and raised all contentions cannot be read to mean that High Court has adjudicated and directed that the closure notice dated 31.07.2017 be also adjudicated by the NCLT.
From liberty to raise all contentions and issues are not akin to any direction or adjudication that issue pertaining to challenge to the closure notice has to be undertaken by the NCLT. The above order of the Hon’ble Supreme Court does not in any manner support the submission of the Appellant that NCLT has to adjudicate on the closure notice dated 31.07.2017 - neither of the judgment of the High Court of Uttarakhand or the Judgment of the Hon’ble Supreme Court can be read to mean that after an adjudication, the High Court or the Supreme Court has held hat question of closure of notice dated 31.07.2017 has to be examined and adjudicated by the NCLT.
The judgment of the Hon’ble Supreme Court in Embassy Property Developments Pvt. Ltd. vs. State of Karnataka [2019 (12) TMI 188 - SUPREME COURT] also throws considerable light on the jurisdiction which can be exercised by the NCLAT under Section 60(5). In the aforesaid case, with regard to mining lease which was granted to the corporate debtor notice of premature termination was issued by Government of Karnataka. Government of Karnataka subsequently rejected the proposal for extension of the lease. The Resolution Professional filed an application before the NCLT, Chennai Bench praying for setting aside the order of the Government and seeking declaration that lease should be deemed to be valid after 31.03.2020. NCLT, Chennai had allowed the application setting aside the order of the Government of Karnataka.
It is clear that the closure/lockout notice which was issued on 31.07.2017 much prior to initiation of the CIRP and the closure and lockout notice was nothing to do with the CIRP process. Challenge to the closure and lockout notice cannot be raised before the Adjudicating Authority who is not competent to adjudicate the said issue which arises out of the provision of the Uttar Pradesh Industrial Disputes Act, 1947. Hence, the Adjudicating Authority did not commit any error in not entertaining the challenge to the closure notice dated 31.07.2017.
Thus, no error has been committed by the Adjudicating Authority in rejecting the application filed by the Appellant where Appellant has sought to challenge the closure dated 31.07.2017 and transfer order dated 20.06.2017 - there are no merit in the Appeal - appeal dismissed.
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2024 (9) TMI 1322
Applicability of "clean slate" principle only to liabilities prior to the insolvency commencement date or will extend to the date of actual sale of the Corporate Debtor as a "going concern" - refusal of Adjudicating Authority to grant necessary reliefs and concessions without even considering them and without assigning any reasons - whether the Appellant was entitled to grant of reliefs and concessions not on the date prior to insolvency commencement date, but ought to have been granted the reliefs and concessions till the date of actual sale of the Corporate Debtor as a ‘going concern’?
HELD THAT:- The reliefs and concessions was granted to the Appellant with regard to declaration that Corporate Debtor shall not be liable on account of any transaction, dealing, or arrangement between it or any other person relating to the period prior to the date of CIRP. We do not find any illegality in the above relief granted to the Appellant prior to the date of CIRP. Insofar as claims of known or unknown, disclosed or undisclosed liabilities, the obligation is up to the cut-off date, i.e. date of commencement of liquidation. The e-auction Notice clearly mention that transactions prior to the cut-off date shall be dealt as per Section 53 of the IBC. Thus, all claims known or unknown on the date of liquidation commencement date has to be dealt as per Section 53.
The prayer of the Appellant in this Appeal is to grant reliefs and concessions for all claims and liabilities up to the date of sale by e-auction i.e. 30.03.2023. When the eauction Notice itself does not contemplate grant of any relief from claims and liabilities up to the date of e-auction sale, the Appellant cannot be granted reliefs and concessions, which is not contemplated by e-auction Notice itself.
Regulations 12 and 16 contemplate filing of a claim as on the liquidation commencement date. There can be no question of extinguishment of claim up to the date of sale of e-auction of the Corporate Debtor as ‘going concern’. When claim itself are as on the liquidation commencement date in the liquidation process, the argument that extinguishment of claims and liabilities should be granted till the date of sale by e-auction is not in accord with the statutory scheme as delineated by IBBI (Liquidation Process) Regulations, 2016 - the prayer of the Appellant that it should have been granted reliefs and concessions up to the date of e-auction sale, cannot be accepted and has rightly not been granted by the Adjudicating Authority.
The relief claimed by the Appellant to grant extinguishment of all claims and liabilities up to the date of e-auction, i.e. 30.03.2023, cannot be accepted and Adjudicating Authority by the impugned order has granted reliefs and concessions to which the Appellant was entitled and the reliefs and concessions not granted were in accordance with law and statutory scheme of the liquidation process - there are no error in the order impugned, warranting interference in this Appeal - appeal dismissed.
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