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IBC - Case Laws
Showing 161 to 180 of 9149 Records
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2024 (9) TMI 1321
Lifting of attachment - invocation of provisions of Sub Regulation 8 of Regulation 39 of Regulations of 2016 - HELD THAT:- The instant Appeal would stand disposed off leaving it open for the Appellant to file an appropriate application falling within the domain of Sub Regulation 8 of Regulation 39 of Regulations of 2016 to be read with sub Clause (i) of XV of the Impugned Judgment of 20th March 2024, and if the Appellant does so, the Application thus to be preferred by the Appellant for the purposes of lifting the embargoes for enforcement of the Resolution Plan, by lifting attachment, the same would be adjudicated upon by the Learned Adjudicating Authority, in accordance with law.
Since the Appeal is only the enforcement of the approved resolution plan, which has been sought by the appellant for that, he will have to abide by Sub Regulation 8 of Regulation 39 of Regulations of 2016 and if the appellant does so, it may be proceeded to be decided in accordance with law.
Subject to the above, the Company Appeal stands disposed off.
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2024 (9) TMI 1305
Maintainability of application u/s 9 of the IBC - initiation of CIRP - pre-existing dispute between the parties - whether there existed a ‘pre-existing dispute’ at the time of filing the Section 9 Application, thereby rendering the dismissal of the Application by the Adjudicating Authority proper and valid? - whether the Appeal is maintainable on any other ground? - HELD THAT:- The Appellant had provided the particulars of operational debt for five invoices only for the year 2019 but while producing records of outstanding it has produced ledgers starting from 2016. The Respondent has contested the Appellant’s Application of the FIFO method for adjusting payments, and there is no evidence to suggest that this method was mutually agreed upon. Moreover, the claim in the Section 9 Application concerns five invoices only and not for past invoices. In fact for establishing the payment made, the Respondent has filed the statement of account from the Federal Bank for each of the five invoices from @329 to @379 in the APB, which clearly establish that payment was made without any doubt. The ledger of Operational Creditor/Tamra Dhatu also is very clear from @382 to @384 and establishes that instead Operational Creditor has to pay Rs 75,627/- to the Corporate Debtor. There is no question of any outstanding to be paid by the Corporate Debtor.
This is a case wherein there is a clear case of pre-existing disputes with respect to the quality of goods which was supplied by the Operational Creditor. Therefore, we cannot find any infirmity in the Order of the Adjudicating Authority.
Under Section 9 (5) (ii) (d) of the IBC, an Application for initiation of CIRP by an Operational Creditor must be rejected if a ‘pre-existing dispute’ is shown to exist prior to the issuance of the demand notice. The Hon’ble Supreme Court in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. [2017 (9) TMI 1270 - SUPREME COURT] held that the dispute need not be a meritorious one but must be real, substantial, and bona fide, and it must predate the demand notice.
The Adjudicating Authority correctly dismissed the Section 9 Application. The Respondent has demonstrated the existence of a pre-existing dispute, as evidenced by the civil suit filed before the demand notice and the ongoing contentions regarding defective goods.
The impugned order is upheld - appeal dismissed.
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2024 (9) TMI 1304
Rejection of application filed by the Appellant - Appellant who is an Operational Creditor can be given any preference over the debt of the unsecured financial creditor or not - difference between unsecured financial creditor and related party unsecured financial creditor u/s Section 53 of IBC - whether Appellant who is an operational creditor has priority in payment in distribution of the liquidation estate of the corporate debtor over the Respondent No.2 who was financial unsecured creditor?
HED THAT:- Section 53(1) provides that liquidation assets shall be distributed in the order of priority as enumerated therein. In the order of priority, financial debts owed to unsecured creditors are at Clause (d). Clause (f) deals with any remaining debts and dues. The operational debt of the Appellant falls under clause (f). Thus, on plain reading of Section 53(1), it is clear that financial debts owed to unsecured creditors ranked higher than debt of operational creditor. The submission which has been advanced by the Counsel for the Appellant to support the appeal is that the Respondent No.2 being related party, he need not be treated under sub-clause (d) rather he has to fall under sub-clause (h) as equity shareholder. The submission of the Appellant is that admittedly Respondent No.2 was ex-director and being related party of the corporate debtor, he cannot claim any preference over the operational creditor who have given services to the corporate debtor and who are entitled for priority in payment.
The Hon’ble Supreme Court in Swiss Ribbon [2019 (1) TMI 1508 - SUPREME COURT] held that there is intelligible differentia between the financial debts and operational debts. The reason for differentiating between financial debt and operational debt was noticed and differentiation was upheld. The BLRC Report has also been quoted by the Hon’ble Supreme Court in paragraph 118 of the judgment. The BLRC Report also highlighted the importance of financial debt and dues of unsecured financial creditor were kept higher than the remaining debts within which operational debt now formed.
Definition of ‘financial debt’ as contained in Section 5(8) does not indicate any exclusion of financial debt which is reflected by any transaction with the corporate debtor by related party. When a financial debt is extended by related party the consequence for such creditor is captured in Section 21. As per Section 21(2), a financial creditor if it is related party of the corporate debtor shall not have any right of representation, participation or voting in a meeting of the CoC. Further by virtue of Section 29A, related party may incur any of the disqualifications under Section 29A.
The judgment in M.K. Rajagopalan vs. Dr. Periasamy Palani Gounder and Anr [2023 (5) TMI 344 - SUPREME COURT] was rendered in context of Section 21 of the IBC which mandates that the related party of corporate debtor is prohibited to be part of CoC. The Hon’ble Supreme Court further held that so long as the provisions of the Code and the CIRP Regulations are met, any proposition of differential payment to different class of creditors in a resolution plan is, ultimately, subject to the commercial wisdom of CoC and no fault can be attached to the resolution plan merely for not making the provisions for related party. Those observations made by the Hon’ble Supreme Court were in context of approval of the Resolution Plan by the CoC in its commercial wisdom and in the said case also, the Hon’ble Supreme Court has not laid down any ratio with respect to distribution under Section 53 in reference to operational creditor and unsecured financial creditor.
The Adjudicating Authority has not committed any error rejecting the application filed by the Appellant. Appellant cannot claim any priority in distribution of assets of the corporate debtor as compared to unsecured financial creditor - Appeal is dismissed.
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2024 (9) TMI 1255
Approval of the Resolution Plan - Section 30(6) and Section 31 of the IBC - HELD THAT:- The statutory protection granted to the operational creditor in Section 30(2)(b) is that they shall not be paid any amount less than as mentioned in (i) and (ii). Appellant case in the Appeal is not that the Appellant was entitled for any payment as per Section 30(2)(b) which has been denied in the Resolution Plan.
The issue raised by the Appellant is fully covered by the recent judgment of this Tribunal in Rajat Metaal Polychem Pvt. Ltd. vs. Mr. Neeraj Bhatia and Anr. [2024 (9) TMI 411 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB] where this Tribunal while dealing with the similar claim of the operational creditors has laid down that 'It is true that Operational Creditors as the law stands now are denied any payment when the amount payable to them in the event of Liquidation is NIL, but till the Legislature comes to the aid of the claim of Operational Creditor by amending the Legislative Scheme hands of the Courts are tied to take any other view in the matter.'
Appeal dismissed.
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2024 (9) TMI 1254
Approval of Resolution Plan - HELD THAT:- The jurisdiction of Adjudicating Authority and the Appellate Tribunal to interfere with the Resolution Plan approved by the CoC, in exercise of its commercial wisdom, are well settled. The limited jurisdiction as has been recognized by the precedents of the Hon’ble Supreme Court is when the Resolution Plan is in not conformity with statutory requirements of Section 30, sub-section (2) of the IBC. Thus, the jurisdiction with NCLT and Appellate Tribunal is limited to examine as to whether the Resolution Plan is in compliance with Section 30, sub-section (2), sub-clause (e) of the IBC.
The part of the Resolution Plan being not in accordance with law, which has been approved by the Adjudicating Authority, the course open for this Tribunal is to either set aside the Resolution Plan or to delete the clauses, which are not in accordance with law to make the Resolution Plan compliant. The second course need to be adopted, by deleting the clauses in the Resolution Plan, which are contrary to the law, as per Section 30, sub-section (2), sub-clause (e), so as not to interfere with the other part of the Resolution Plan, which have been approved.
The resolution plan modified partially.
Application disposed off.
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2024 (9) TMI 1179
Entitlement to the payment of its pre-CIRP dues from the Respondent in a manner different from the manner of payment provided for in the resolution plan, as approved by the Adjudicating Authority - appropriation of all payments made after CIRP commencement only towards current CIRP costs - HELD THAT:- The insolvency commencement date was 18.05.2017. On completion of the CIRP proceedings, the resolution plan of the Corporate Debtor was approved by the Adjudicating Authority on 12.12.2017. It is also an undisputed fact that the resolution plan provided for payment of pre-CIRP dues of the Appellant and also prescribed the manner and modalities of how the payment of these pre-CIRP dues were to be provisioned. In terms of the resolution plan, the pre-CIRP dues were to be made good in 8 quarterly instalments commencing from June 2022 to March 2024. It is pertinent to note that though the Appellant had admittedly not filed their claims during CIRP, the payment of pre-CIRP dues of the Appellant had been provided for in the resolution plan. As the law stands today, no exception can be taken to such a plan as long as it provided for payment to the Appellant in accordance with Section 30(2)(b) of the IBC.
In any case, the present is not a case where the Appellant is contending that payment of their dues is not as per provisions of Section 30(2)(b) of the IBC. It is neither a case where the Appellant is claiming entitlement to receive any higher amount in respect of pre-CIRP dues. Furthermore, the resolution plan not having been challenged, the terms of the resolution plan had attained finality and become binding on all stakeholders including the Appellant.
The Appellant have not raised any dispute that the Respondent by their conduct had displayed any signs of disapproving or breaching or side-stepping or disturbing the schedule of payment as delineated in the plan in respect of meeting the pre-CIRP dues of the Appellant. There is nothing which has been placed by the Appellant on record, basis which, the intent of the Respondent to pay pre-CIRP dues in accordance with the resolution plan can be doubted - Merely because the Corporate Debtor had paid the pre-CIRP dues of Rs 1.76 Cr. in May-June 2017, the Appellant cannot insist that this payment has to be accounted only towards payment of pre-CIRP dues and that this amount cannot be subjected to adjustment against current CIRP electricity dues. The schedule and calendar of payment of pre-CIRP dues of the Appellant as given in the resolution plan is sacrosanct and cannot be allowed to be superseded simply because payment thereto had been voluntarily done earlier by the Corporate Debtor. If the payment of pre-CIRP dues is insisted upon being made in any manner which is not specified and factored in the resolution plan, that would amount to be an infraction of the resolution plan and cannot be countenanced.
The Adjudicating Authority has rightly observed that any payment made by the Corporate Debtor to the Appellant after the insolvency commencement date cannot be appropriated towards electricity charges which have arisen prior to or became due as on the insolvency commencement date and that such payment, if already made, must be appropriated only towards the dues which become payable during CIRP period on account of availing of services during CIRP period only. Hence, any amount, if paid, by the Corporate Debtor after insolvency commencement date shall only be adjusted against CIRP dues while pre-CIRP dues shall be paid in accordance with the approved resolution plan.
The Appellant was entitled to the payment of its pre-CIRP dues from the Respondent only in the manner as provided in the resolution plan of 12.12.2017 and hence payment of the pre-CIRP dues from the assets of the Corporate Debtor after insolvency commencement has been correctly appropriated by the Respondents towards current CIRP dues. The view taken by the Adjudicating Authority is therefore reasonable and sound and does not call for any interference.
Appeal dismissed.
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2024 (9) TMI 1178
Application under Section 9 of the IB Code, 2016 - default in respect of the work done qua fabrication and erection of steel structure at the plant of the Corporate Debtor situated in Meghalaya - time limitation - HELD THAT:- Admittedly on 03.12.2020 the Respondents have filed the requisite documents as were required vide order 25th October, 2019 and these are annexed as Annexure C to the reply to this appeal. The appellant was, therefore, required to inspect the documents and to pinpoint any document to show any acknowledgement upon the part of the Respondent to its debt after the year 2013. The matter was listed three times thereafter and only written submissions have been filed by the appellant, reiterating the same issue without identifying the exact document to show any acknowledgement of debt by the corporate debtor in the financial documents filed by the appellant since the year 2011-12 till 2017-18 and hence no further opportunity can be granted now.
The appellant was not able to identify any entry in the trial balance or in the balance sheet or in other documents which could serve the purpose of acknowledgement of debt and thereby extension of limitation period, and hence we find no force in the appeal and the same is accordingly dismissed for the reasoning given in the order dated 25th November, 2022.
Appeal dismissed.
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2024 (9) TMI 1093
Cancellation of the lease deed by NOIDA - claim of right within meaning of Section 116 of Transfer of Property Act, 1882 as a tenant holding over - exclusion of Plot No. SC-01/ D1, Sector 79 Noida from Resolution Plan submitted in the CIRP of the Corporate Debtor - HELD THAT:- It is clear that at no point of time, neither the Corporate Debtor has paid any rent/instalments after the cancellation of the Plot nor any such amount was accepted by the NOIDA. The other Clause under which case is sought to be covered i.e., “or otherwise assent to this continuing in possession. There is nothing on the record to prove that NOIDA at any point of time assented to the continuing of the Corporate Debtor in possession”. The right of the Corporate Debtor having come to an end after cancellation of the Plot, it cannot claim any rights nor it can claim itself to be a tenant holding over.
Reference made to the Judgment of the Hon’ble Supreme Court in the matter of Nand Ram (Dead) through Legal Representatives Vs. Jagdish Prasad through Legal Representative [2020 (3) TMI 1247 - SUPREME COURT], in which case Hon’ble Supreme Court came to consider the submissions made on the strength of Section 116 of the Transfer of Property Act, 1882. The Hon’ble Supreme Court in the said Judgment has held that after expiry of the lease status of Lessee will be that of tenant of sufferance and not of tenant holding over. In the Judgment of the Hon’ble Supreme Court, it was reiterated that it is only ascent of the landlord to the continuance of possession after determination of the tenancy will create new tenancy.
There is nothing on record to indicate that NOIDA at any point of time, expressly or impliedly assented to the continuance of Corporate Debtor in possession - no right can be claimed by the Appellant on the principal as contained in Section 116 of the Transfer of Property Act, 1882.
In the present case, the mere fact that after cancellation of the lease, Corporate Debtor has made a request for restoration of lease, shall has no effect on the termination of the lease which had already been accomplished by letter dated 13.08.2015. The Corporate Debtor cannot claim any right within meaning of Section 116 of Transfer of Property Act, 1882 as a tenant holding over.
It is thus concluded that Plot in question i.e., SC–01/D – 1, Sector 79, NOIDA is not part of the assets of the Corporate Debtor and Adjudicating Authority did not commit any error in allowing the Application, I.A. No. 1592/ND/2019 filed by the NOIDA for excluding the Plot in question from the CIRP of the Corporate Debtor - the Order of the Adjudicating Authority, excluding the Plot in question from the CIRP of the Corporate Debtor, upheld.
Role of NOIDA with respect to the Project in question - HELD THAT:- As per Section 6(1) the object of the authority is to secure the Plan development of the Industrial Development Area. NOIDA has acquired the land for the above purpose and leased out to various entities for planned development - Hon’ble Supreme Court had occasion to consider the role of Development Authorities, including NOIDA in respect to the Real Estate Projects with regard to protection of interest of the homebuyers. In Bikram Chatterjee & Ors. Vs. Union of India & Ors. [2019 (7) TMI 1233 - SUPREME COURT], Hon’ble Supreme Court has made several important observations and guidelines with respect to Real Estate Project and duties of the public authorities.
When the NOIDA is obliged to monitor the implementation of the Project, it has to take proactive steps with regard to implementation of the Project. Even after cancellation of the Plot on 13.08.2015, no steps have been taken by the NOIDA. The CIRP against the Corporate Debtor commenced only on 09.03.2018, NOIDA had approved the layout and map, it is obliged by the statutory provisions to keep a vigil on the construction done by the Lessee, which had to be in accordance with the Plan and directions issued by NOIDA Authority from time to time. Homebuyers are unsecured Financial Creditor of the Corporate Debtor who do not have any charge on the land. It is only the NOIDA Authority who has charge over assets under Section 13-A of the UP Industrial Area Development Act 1976. Under Section 14, which has been noticed by the Hon’ble Supreme Court in the Bikram Chatterjee & Ors. NOIDA Authority can cancel the Lease on breach committed by Lessee and resume the site on building and further forfeit the whole on any part of the money which paid in respect thereof.
Order dated 11.01.2024 passed by the Adjudicating Authority, allowing I.A. No. 1592/ND/2019 for excluding the Plot SC-01/D-1, Sector 79, NOIDA is upheld - application filed by the RP under Section 30(6) for approval of the Resolution Plan is rejected.
Appeal disposed off.
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2024 (9) TMI 1092
Rejection of claims of the Operational Creditor on the basis that he did not get sufficient documentation - HELD THAT:- The Hon’ble Supreme Court of India in the matter of Regen Powertech (P) Ltd. [2023 (9) TMI 1406 - SUPREME COURT] has given ratio decidendi that Resolution Professional has to be neutral party and not expected to take a stand, which is contrary in present appeal where the Appellant filed appeal on merits of the Impugned Order and that too in his personal capacity as Resolution Professional of Corporate Debtor.
It is further interesting to note that one Unsecured Financial Creditor, namely, Paton Construction Private Limited who is supposed to have given a loan of paltry sum of Rs. 1 Lakh knowing well that CIRP is being initiated against the Corporate Debtor, then original IRP is removed and the present Appellant is appointed as Resolution Professional, who in turn rejected the claims of Operational Creditor and accepted the claims of the Unsecured Financial Creditor and claims of promoter. This made the way for making Unsecured Financial Creditor of Rs. 1,05,877/- as a Sole Member of the CoC and ousting the Malharshanti Enterprises Limited the Operational Creditor out of CoC having claim of Rs. 1,94, 62, 148/-.
Although the Adjudicating Authority in Impugned Order dated 16.02.2023 in Para 22 has recorded that “the conduct of the Resolution Professional also need to be thoroughly investigated". However, the Adjudicating Authority did not give directions for the further course of action for the same or direction to the IBBI. Hence, this Appellate Tribunal is required to take this to logical conclusion as we are upholding the Impugned Order in toto. In this background, the IBBI is directed to look into the role of the Appellant in accordance with the law regarding conduct/ misconduct of the Appellant as the Resolution Professional and take further necessary action as deemed fit and warranted on the facts of the case and as per law.
Cost of Rs. 10 Lakhs on the Appellant to be paid in Prime Minister’s National Relief Fund within four weeks of pronouncement of this order. The compliance for the same will be reported to the Adjudicating Authority by the Appellant.
Initiation of CIRP - It is claim of the Appellant that he did not know about the on going proceedings by the Respondent against the Corporate Debtor and only on publication of public announcement by the IRP inviting claims from the Creditors on 28.01.2020, the Appellant came to know about these developments and filed the claim of Rs. 1,05,877/- before the IRP/ RP - HELD THAT:- There are no fault in the finding of the Adjudicating Authority contained in Impugned Order includings as contained in para 20 against which the Appellant has filed this. The Impugned Order merely recorded that an application filed under Section 12 A on the ground of purported settlement entered between the CoC and the sole Appellant herein who is Unsecured Financial Creditor who took a loan just before passing CIRP order is indigenous idea of Corporate Debtor and the Promoters of Corporate Debtor to bring out the Corporate Debtor from the clutches of CIRP which attained the finality through back door entry.
The order admitting CIRP against the Corporate Debtor was passed on 27.01.2020. This was for the first and the last time that the Appellant paid money to the Corporate Debtor - there are noting which prevented the Appellant to disburse further amount under the agreement and it is only after the claims of the operational creditor got rejected the Appellant expressed its intention to continue the business relations with the Corporate Debtor. Incidentally it has been brought to our notice by the Respondent No. 1 that the alleged loan agreement was backdated and unstamped documents.
There are no error in the Impugned Order and the Appeal devoid of any merits is dismissed.
Challenge to claims submitted by the Operational Creditor - fraudulent claims - HELD THAT:- Once the claims of the Operational Creditor have been crystalized and admitted by the Adjudicating Authority while admitting Section 9 application of Respondent No. 1 and initiating CIRP against the Corporate Debtor. We also find that IRP was duly appointed by the Adjudicating Authority who collated the claims and admitted the claims of the Respondent No. 1 basis on the documentation submitted by the Respondent No. 1. It is surprising as how the claims of the Operational Creditor have been rejected later by the Resolution Professional - appeal dismissed.
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2024 (9) TMI 1091
Maintainability of application u/s 9 of Insolvency and Bankruptcy Code (IBC), 2016 - initiation of insolvency resolution process against the Corporate Debtor for the non-payment of dues arising from supply of manpower services - pre-existing dispute between the parties or not - HELD THAT:- It is well-settled law that for an Application under Section 9 of the IBC to be admitted, the Operational Creditor must demonstrate that there is a ‘debt’ and a ‘default’ as defined under the IBC. However, if the Corporate Debtor can prove the existence of a bonafide dispute regarding the debt prior to the issuance of the demand notice under Section 8, the Application must be dismissed.
In the present case, the emails dated 18.12.2018, 22.05.2019, 26.05.2019 and 25.08.2019 clearly indicate that the Respondent had raised concerns regarding the adequacy of services provided by the Appellant, including manpower shortages and security lapses. These communications occurred prior to the issuance of the demand notice, which was issued on 14.01.2020, and provides sufficient evidence of a pre-existing dispute.
The main ground basis which the Appeal cannot be accepted is existence of pre-existing dispute, which is noted in series of email exchange of emails. In such situations of pre-existing disputes, Hon’ble Supreme Court in Mobilox Innovation Pvt. Ltd. Vs. Kirusa Software Private Limited [2017 (9) TMI 1270 - SUPREME COURT] had held 'It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational creditor the “existence” of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties.'
The Corporate Debtor had raised a plausible contention about a pre- existing dispute, which in the instant case is not a moonshine or feeble legal argument. Therefore, the Adjudicating Authority was not incorrect to reject the Application filed under Section 9 of the Code. Given the existence of a bonafide dispute, this Tribunal finds no reason to interfere with the Impugned Order of the Adjudicating Authority.
The Impugned Order dated 05.03.2024 passed by the Adjudicating Authority is upheld - Appeal dismissed.
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2024 (9) TMI 708
Admission of application filed under Section 7 of the Insolvency & Bankruptcy Code, 2016 - Suspended Director of the Corporate Debtor and Financial Creditor have jointly submitted that in view of the settlement (Consent term) the impugned order may be set aside and the CIRP initiated against the Corporate Debtor may be dropped - HELD THAT:- The present appeal is disposed of and the impugned order is hereby set aside.
The matter qua the claim of the IRP is being kept open for him to file an appropriate application, if so advised, before the Tribunal for redressal of his grievances - The Registrar shall release the FDR within two weeks from today to the counsel for the respondent.
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2024 (9) TMI 625
Validity of auction conducted by the Liquidator - COVID-19 pandemic and its impact on Limitation - Allegations of undervaluation of the auctioned property - Non-constitution of a Stakeholders' Consultation Committee - Allegation of violation of Regulation 33 of the IBBI Regulations, 2016 and its effect - Impact of attachment order by the Income Tax Authorities on the sale of the auctioned property -
COVID-19 pandemic and its impact on Limitation - HELD THAT:- In the present case the period of 90 days for depositing the balance sale consideration had expired just after the crucial date, i.e., 23rd March, 2020. There are no merit in the submission made by the appellant that the Tribunal ought not to have accepted the view taken by the Adjudicating Authority that Covid-19 lockdown was a valid reason for extension of time to deposit the balance sale consideration.
Allegations of undervaluation of the auctioned property - HELD THAT:- Admittedly, in the first round of the Notice for sale through e-auction published by the Liquidator on 25th November, 2019, he did not receive any bid. As a result, the Liquidator reduced the reserve price of the subject property by 25 per cent to conduct a second auction on 23rd December, 2019 wherein the Auction Purchaser was declared as the successful bidder. In our view, the Liquidator cannot be faulted for having exercised the discretion vested in him under Rule 4A of Schedule I when the auction scheduled earlier, did not bear any positive result. In fact, Rule 4B empowers the Liquidator to reduce the reserve price fixed under Rule 4A for subsequent auctions with a rider that the price shall not be reduced to more than 10 per cent at a time. The said eventuality did not arise in the present case since the Auction Purchaser was declared as the successful bidder in the second round of auction - If the appellant was so confident that the subject property would have fetched a much higher price, nothing precluded him from identifying a bidder who was willing to offer a better price.
The Liquidator had stated that “If you are confident enough that the property may fetch for more than Rs. 100.00 Crores you are at liberty to bring the proposed buyers and ask them to participate in the bidding process.” Again, the Liquidator wrote a letter dated 27th November, 2019 to the appellant suggesting that ask eligible parties willing to offer a better price to participate in the auction process. The appellant did not follow up after that.
The appellant cannot be permitted to argue that since the tax value of the subject property was estimated by the Registered Valuers at above ₹ 48 crores, the Liquidator ought not to have fixed the reserve price at ₹39,41,28,500/- (Rupees Thirty nine crore forty one lakh twenty eight thousand five hundred only) for the simple reason that though the reports of the Registered Valuers mentioned the tax value of the subject property at a little above ₹ 48 crores, but the liquidation value in both the reports was much lower and the Liquidator arrived at the average of the two estimated liquidation values to fix the reserve price of the subject property.
Non-constitution of a Stakeholders' Consultation Committee - HELD THAT:- By virtue of the Notification dated 28th April, 2022, an Explanation was appended at the foot of Regulation 31A which clarifies that the requirement of constituting a Stakeholders’ Consultation Committee shall apply only to those liquidation processes that were to commence on/after the date of commencement of the IBBI Regulation, 2016. In the present case, the liquidation process in respect of the company had commenced on 17th July, 2019 and therefore, the submission made by the appellant that the Liquidator has breached Regulation 31A of the IBBI Regulations, 2016 by not constituting a Stakeholders’ Consultation Committee, is devoid of merits - the objection taken by the appellant that the Liquidator has breached Regulation 31A, does not hold any water. Nor is the Court inclined to examine the submission made at the instance of the appellant that in the absence of any explanation appended to Regulation 31A as it stood before 25th July, 2019, it was incumbent for the Liquidator to have constituted a Stakeholders’ Consultation Committee in view of his own conduct. Further, such an objection was taken for the first time at the stage the appellant filed a recall application before Adjudicating Authority on 25th September, 2020 by which time the entire sale transaction was over.
Allegation of violation of Regulation 33 of the IBBI Regulations, 2016 and its effect - HELD THAT:- In THE STATE OF BIHAR & ORS. VERSUS BIHAR RAJYA BHUMI VIKAS BANK SAMITI [2018 (8) TMI 34 - SUPREME COURT], referring to Section 34(5) of the Arbitration and Conciliation Act, 1996, this Court has held that the absence of any consequences for infraction of a procedural provision implies that such a provision ought to be interpreted to be directory and not mandatory.
Rule 12 would have to be treated as mandatory in character for the reason that it contemplates a consequence in the event of non-payment of the balance sale consideration by the highest bidder within the stipulated timeline of 90 days, which is cancellation of the sale by the Liquidator. To that extent, there is substance in the submission made on behalf of the appellant that since the second proviso under Rule 12 contemplates a consequence of cancellation of the auction on non- payment of the balance sale consideration within 90 days, the Liquidator was not empowered to extend the timeline.
In the present case, records reveal that when the Auction Purchaser had approached the Liquidator seeking extension of time to deposit the balance sale consideration. The Liquidator had rightly expressed his inability to do so and indicated that such a power vests only in the Adjudicating Authority. On receiving the aforesaid response, the Auction Purchaser did take steps to move the Adjudicating Authority for seeking extension of time for making the payments. It is a matter of record that the said application was allowed by the Adjudicating Authority on 5th May, 2020 and time was granted to the Auction Purchaser to pay the balance sale consideration on the Central Government/State Government lifting the lockdown.
In the facts of the present case, the Adjudicating Authority exercised statutory powers under Section 35 of the IBC read with its inherent powers under Rule 11 of the NCLT Rules, 2016 for extending the time to deposit the balance sale consideration on sufficient cause being shown, i.e., in view of the countrywide lockdown due to the Covid- 19 pandemic. This latitude that was given in the aforesaid extraordinary circumstances to meet the ends of justice, cannot be faulted.
Impact of attachment order by the Income Tax Authorities on the sale of the auctioned property - HELD THAT:- It was for the Auction Purchaser as an intending bidder to have conducted a due diligence at its own end, gather all the relevant information pertaining to the subject property which included the status of the property and the liabilities attached to it, weigh all the pros and cons and only thereafter participate in the auction process. After having participated in the e-auction with its eyes wide open, the Auction Purchaser cannot be heard to state that payment of the balance sale consideration was linked with the lifting of the attachment order passed by the Income Tax Department when it knew all along that the auction was being conducted on an "AS IS WHERE IS", "AS IS WHAT IS" and "WHATEVER THERE IS” basis.
The subject land has been utilized by the Auction Purchaser to build a 200-bed Mother and Child hospital which is operational. Huge amounts have been pumped into the project by the Auction Purchaser. The hospital is fully functional providing medical facilities to seven surrounding districts. In contrast, the appellant has not been a vigilant litigant. His conduct shows that he has dragged his feet at every stage. Records reveal that belated applications have been filed by him for seeking recall of the orders passed by the Adjudicating Authority granting extension of time to the Auction Purchaser. For reasons best known to him, it took 19 months for the appellant to prefer an appeal before the Tribunal against the order passed by the Adjudicating Authority, as provided for in the IBC. Furthermore, the appellant resisted handing over possession of the subject property to the respondents thereby causing more delay.
Given the facts noted, it is refrained from cancelling the sale or declaring the Sale Deed as void. Instead, it is deemed appropriate to balance the equities by directing the Auction Purchaser to pay an additional amount in respect of the subject property.
Appeal partially allowed.
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2024 (9) TMI 624
Rejection of appeal on grounds of being filed beyond the prescribed time limit - it was held by NCLAT that 'Since the Appellants have invoked Appellate Jurisdiction under Section 61 of the I & B Code, 2016, as against the Impugned Order rendered by the NCLT without giving a challenge to the Orders passed on the IAs, rejecting their intervention, the Appeal at their behest would not be maintainable.'
HELD THAT:- There are no reason to interfere with the impugned order passed by the National Company Law Appellate Tribunal at Chennai - Appeal dismissed.
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2024 (9) TMI 623
Order of NCLT admitting Section 7 application filed by the first respondent, affirmed - Full and final settlement of the claim of the first respondent reached at - HELD THAT:- It appears that the Corporate Debtor has been able to provide for the claims raised against it. However, the learned counsel appearing for the second respondent submitted that the quantum of CIRP expenses till the date of termination of CIRP is yet to be determined and the same will have to be borne by the Corporate Debtor. This question is kept open for the NCLT to determine - the appellant shall furnish a bank guarantee within a period of two weeks from today for an amount of Rs 1,12,37,781 being the amount claimed towards CIRP expenses in accordance with the affidavit of the Resolution Professional. The bank guarantee shall be in the name of the Resolution Professional.
The operational creditors and other creditors, if any, will have their own right to avail such legal remedies as may be available to them in law with respect to their claims if any.
The impugned order passed by the NCLAT is set aside and the CIRP initiated in respect of the second respondent, namely, Bazargaon Paper and Pulp Mills Private Ltd stands hereby terminated - appeal allowed.
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2024 (9) TMI 622
Seeking recall of the order - liberty given by the Hon’ble Supreme Court to file a review of the said order limited to the grounds of limitation - Rule 11 of NCLAT Rules.
Whether in view of the facts and circumstances of the case, there are sufficient and cogent grounds for recall of the order of this Tribunal of 02.04.2024 at a time when liberty was given by the Hon’ble Supreme Court to file a review of the said order limited to the grounds of limitation? - HELD THAT:- The law as it stands today, this Tribunal in exercise of its inherent jurisdiction can entertain an application for recall of judgment on sufficient grounds. Inherent powers not being powers which are conferred expressly upon the Tribunal but are innate powers of the court which can be exercised to dispense justice between the parties subject to exercise of these powers not contravening or violating any express provision in the statute.
In the present matter, the Adjudicating Authority considering the facts of the attendant case, has relied on the ratio of the judgment of the Hon’ble Supreme Court in B.K. EDUCATIONAL SERVICES PRIVATE LIMITED VERSUS PARAG GUPTA AND ASSOCIATES [2018 (10) TMI 777 - SUPREME COURT] to hold that for calculating the period of limitation in an application under Section 7 of the IBC, the date of default is significant and keeping in mind that the present Company Petition is filed within 3 years from the date of default, it held that the petition was within the period of limitation in terms of Article 137 of the Limitation Act.
Similar view has been espoused again by the Hon’ble Supreme Court in JIGNESH SHAH & ANOTHER VERSUS UNION OF INDIA & ANOTHER [2019 (9) TMI 1121 - SUPREME COURT] wherein it held that the period of limitation for making an application under Section 7 or 9 of the IBC is three years from the date of accrual of the right to sue, that is, the date of default.
Given the catena of judgments of the Hon’ble Supreme Court which affirm the applicability of Article 137 of the Limitation Act in respect of Section 7 applications filed under IBC, we find that the contention of the Appellant that the present Section 7 application be held as time-barred under Article 21 of the Limitation Act is misconceived and untenable.
Given the catena of judgments of the Hon’ble Supreme Court which affirm the applicability of Article 137 of the Limitation Act in respect of Section 7 applications filed under IBC, it is found that the contention of the Appellant that the present Section 7 application be held as time-barred under Article 21 of the Limitation Act is misconceived and untenable.
The Adjudicating Authority did not commit any error in holding that the Company Petition was not barred by limitation - there are no error in the order of the Adjudicating Authority holding that the application is well within time - there is no merit in the recall application - application is dismissed.
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2024 (9) TMI 569
Rejection of Section 9 application filed by the Operational Creditor-Appellant seeking initiation of Corporate Insolvency Resolution Process - whether the Appellant is an Operational Creditor of the Respondent and whether the claim of the Appellant is an operational debt qua the Respondent? - Time limitation.
HELD THAT:- The Appellant has not placed on record any documentary evidence or agreement between the Appellant, Respondent and Empathy stipulating the terms and conditions of the guarantee of payment allegedly undertaken by the Respondent on behalf of Empathy for the goods supplied to it by the Appellant. It has, however, been canvassed by the Appellant that there is no need for any signed instrument to substantiate a contract of guarantee and that the existence of such a contract can be conclusively established from other correspondences/documents exchanged between the parties in this context.
The Adjudicating Authority was not off the mark in observing that the Appellant has failed to produce any documentary evidence/tripartite agreement stipulating the terms and conditions of the guarantee of payment undertaken by the Respondent on behalf of the third party for the goods supplied to it by the Appellant. In the absence of any privity of contract between the parties, the Appellant cannot be treated as the Operational Creditor of the Respondent.
It is a well settled legal proposition that the operative requirement of operational debt is that the claim must bear some nexus with a provision of goods or services, without specifying who is to be supplier or receiver. In the present case, the absence of any contractual agreement between the Appellant and the Respondent, defining their business relationship is an admitted fact - in the facts of the present case, it is undisputed that goods were not supplied by the Appellant but supplied by some third parties. It is however the claim of the Appellant that they had supplied the goods through the third parties who were their local distributors. the submission made by the Appellant that the suppliers were their local distributors since there is no agreement or documents placed on record to show that the goods were to be supplied by the Appellant through local distributors and that any such arrangement had been agreed to by Empathy or the Respondent is not impressive. The assertion of Appellant is therefore at best a fanciful proposition bereft of any substance. Since the invoices were raised by third parties and not by the Appellant, basis these invoices, the Appellant cannot justifiably claim any amount as purportedly due to them from the Respondent.
When there is no co-relation between the goods supplied by the third parties to Empathy and the claim raised by the Appellant in respect of such goods on the Respondent, the Appellant/Operational Creditor had clearly failed to fulfil the requirements of Rule 5(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 to establish their operational claims. The operative and primary requirements of Section 5(21) not having been met, we are therefore not convinced by the contention of the Appellant of their claim arising out of supply of goods as operational debt. In the absence of operational debt, no liability could be fastened on the Respondent to pay for these goods - thus the precondition for initiation of Section 9 IBC proceedings was non-existent in the facts of the present case.
It is, therefore, clear that in the reply to the Section 8 Demand Notice, the Respondent has not only denied their liability to pay the claims raised by the Appellant but also raised question marks on the privity of contract between them.
Time Limitation - HELD THAT:- In the present case, the date of default shown in Part IV of Form 5 was 28.08.2015. However, the Section 9 application was filed on 11.02.2019 which was clearly beyond the three years limitation period and hence clearly time barred.
The Section 9 application was not filed for the purpose of insolvency resolution but for recovery of money owed to them by Empathy from the Respondent. Such behaviour on the part of the Appellant amounts to misuse of the provisions of the IBC and is strongly deprecated.
The Adjudicating Authority has rightly rejected the application of the Appellant filed under Section 9 of IBC - the impugned order does not warrant any interference. There is no merit in the Appeal - Appeal dismissed.
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2024 (9) TMI 568
Condonation of delay in filing the appeal under Section 61 of the Insolvency and Bankruptcy Code - relevant dates for calculation of limitation period - HELD THAT:- Undisputedly, the Appellant has made the prayer for condonation of delay of 50 days in filing the appeal, meaning thereby, if the limitation period is counted from the date of passing of the order i.e. 11.03.2024 and it is to be counted from the next day i.e. 12.03.2024 then it would come to 80 days till it is filed on 31.05.2024. Thus, besides statutory period of 30 days, the Appellant has consumed another 50 days for filing the appeal though there is a window of only 15 days for considering the appeal by condoning the delay on sufficient cause assigned by the Appellant. In no case, the delay can be condoned beyond the period of 15 days i.e. 30 + 15 = 45 days whereas in this case it is 30+50=80 days, therefore, in view of the decision of the Hon’ble Supreme Court in the case of National Spot Exchange Limited [2021 (9) TMI 1156 - SUPREME COURT], this court has no jurisdiction to condone the delay.
As regards the case of the Appellant that it had no knowledge of the order having been passed, the appellant itself was an intervenor in that case pending before the Tribunal, therefore, the Appellant had knowledge of the matter which was pending and cannot be allowed to show ignorance. Even otherwise, after the impugned order was passed on 11.03.2024, notice was published on 13.03.2024 in the newspaper and in this regard, the Appellant had the deemed knowledge in view of the decision of the Hon’ble Supreme court in the case of M/s PRS Infrastructure Ltd. [2023 (9) TMI 516 - SUPREME COURT].
Thus, there is hardly any merit in the present application for considering the application for condonation of delay as it is totally barred by time and beyond the period of 45 days.
Application dismissed.
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2024 (9) TMI 567
Admission of Section 7 Application filed by the Financial Creditors - debt and default or not - constituition of CoC - inclusion of related parties in the CoC - HELD THAT:- The debt and default on the part of the Corporate Debtor is not even questioned, which is an admitted fact. Hence, apart from challenging the order of admission, it is not required to enter into issues sought to be raised by the Appellant that both the Intervenors are related party and their claims have wrongly been admitted. The issue regarding they being related party and their claims have wrongly been included, are issues, which need to be raised by the Appellant before the Adjudicating Authority by filing appropriate application under Section 60, sub-section (5) of the IBC.
The ends of justice will be served in giving liberty to the Appellant to file an appropriate application before the Adjudicating Authority, questioning the admission of claim of M/s Certa Infrastructure Pvt. Ltd. and M/s Proplarity Infratech Pvt. Ltd., including the challenge to their inclusion in the CoC, which issues need to be decided by Adjudicating Authority after hearing the parties.
The Appellant is given liberty to file an appropriate application under Section 60, sub-section (5) of the IBC, challenging the inclusion of M/s Certa Infrastructure Pvt. Ltd. and M/s Proplarity Infratech Pvt. Ltd. in the CoC and admission of their claims, which application may be filed within a week from today - For a period of two weeks, the IRP shall not convene the meeting of the CoC. The IRP shall be entitled to convene the meeting of the CoC after two weeks from today, subject to any order or directions passed by Adjudicating Authority in the application to be filed by the Appellant.
Appeal disposed off.
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2024 (9) TMI 566
Dismissal of application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 - refund of the entire amount of advance alongwith interest - cancellation of amount which was disbursed as loan - whether appellant has given money as loan or not - HELD THAT:- The Appellant has not advanced the money as loan rather the money has been given to the Respondent for the purpose of clearing their title over the land in question which was to be shared by both of them in the ratio of 30% / 70%. It is pertinent to mention that the Appellant has not filed any financial statement on record in order to show that the money which has been given as per term sheet has been shown as a loan advanced to the Respondent.
There are no reason to interfere with the well-considered findings of the Tribunal whereby the application filed by the Appellant has been rejected - there are no merit in the present appeal - appeal dismissed.
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2024 (9) TMI 565
Approval of Resolution plan - grievance is that the Appellant was treated as an unsecured creditor, the claim of the appellant was termed as unsecured debt and was not considered as secured debt under Section 30 of the Code - HELD THAT:- The entire case of the Appellant is based upon the decision in the case of Rainbow Papers [2022 (9) TMI 317 - SUPREME COURT] in which, while interpreting Section 48 of the GVAT Act, the Hon’ble Supreme Court has held that the State Tax Office, in the said case, was secured creditor.
In the case of Commissioner of Income Tax Vs. KTC Tyres (India) Ltd. [2005 (9) TMI 665 - SUPREME COURT], the argument raised was that the capital gain tax which was payable by the company must be treated as liquidation expenses and therefore, must be paid first even before the dues of the workmen and secured creditors are discharged. This contention was totally rejected by the Hon’ble Supreme Court in the aforesaid case KTC Tyres holding that “reading sections 529A and 530 together, there is no escape from the conclusion that the liability towards workmen’s dues and debts due to secured creditors as provided under clause (b) of Section 529A(1) has to be paid in priority to all other debts including tax dues to the revenue.”
In the case of Zicom Saas Pvt. Ltd. [2023 (2) TMI 1170 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], the Department of State Tax of Maharashtra filed the claim before the RP of an amount of Rs. 43,72,97,479/- out of which Resolution Professional accepted the claim of Rs. 36,68,12,729/-and in the plan they were allotted only 1% of the admitted claim. In this case also reliance has been placed upon in the case of Rainbow Papers alleging that the claim of the State Tax Maharashtra has to be treated as secured charge in terms of Section 37 of the MVAT Act, however, while interpreting Section 48 of the GVAT Act vis a vis Section 37 of the MVAT Act, this Court has found that Section 37 was made subject to any provision regarding creation of first charge in any central act, the provisions of Section 48 of the GVAT Act and Section 37 of the MPVAT Act were not pari materia and therefore, it was held that “9. When we compare the provisions of Section 48 of the provision of Gujarat Values Added Tax which was relied in “Rainbow Papers Limited” and the Provisions of Section 37 which is sought to be relied on in the present Appeal, distinction between the provisions is clear.
Although it has also been held by the Hon’ble Supreme Court in the case of Paschimanchal Vidyut Vitran Nigam Limited [2023 (7) TMI 831 - SUPREME COURT] that the decision in the case of Rainbow Papers is a decision of the Court in the facts of the said case but without going into this aspect of the matter, it is opined that argument of the Appellant would not cut any ice that Section 48 of the GVAT Act and Section 33 of the MPVAT Act are pari materia, therefore, the ratio laid down by the Hon’ble Supreme Court in the case of Rainbow Papers has to be applied rather the provisions of Section 37 of the MVAT Act and Section 33 of the MPVAT Act appears to be pari materia about which a decision has been taken by this court in the case of Zicom Saas [2023 (2) TMI 1170 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] that both the provisions are not pari materia with Section 48 of the GVAT Act, therefore, no benefit can be given to the Appellant on the basis of the decision of the Rainbow Papers.
There are no merit in the present appeal and hence, the same is hereby dismissed.
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