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IBC - Case Laws
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2024 (11) TMI 998
Dismissal of application filed by the appellant under Section 7 of the Code - Respondent miserably failed to meet its obligation - existence of debt and default - judicious application of mind by the Adjudicating Authority - Appellant assailed the conduct of the Respondent for taking several frivolous grounds including that the application of the Appellant under section 7 of the Code has been rejected earlier and by doctrine of res-judicata the same could not have been filed.
Whether there was a debt and default which could trigger Section 7 application filed by the Appellant? - HELD THAT:- There was outstanding debt and there was a clear default on the part of the Respondent in meeting its obligation which entitles the Appellant to take suitable remedy as per the Code and therefore, he correctly filed the Application under Section 7 of the Code - there are no meaningful and detailed discussion on this issue in the Adjudicating Authority decision in the Impugned Order, especially on issue of default which is against the spirit of the Code. In view of these discussions, the debt and default is established in favour of the Appellant.
Whether, ratio of Vidarbha Industries [2022 (7) TMI 581 - SUPREME COURT] was applicable in the present case based on which the Adjudicating Authority rejected the application of the Appellant filed under Section 7 of the Code? - Whether, there was judicious application of mind by the Adjudicating Authority as evident in the Impugned Order while rejecting the application of the Appellant under Section 7 of the Code? - HELD THAT:- In the present case, the total outstanding of all lenders was thousands of crores and debt claims of Appellant was itself Rs. 646.38 Crores, whereas the Respondent is now hopeful of Rs. 1271 Crores to be recovered from other telecom companies based on Arbitration etc., which are at present at different stages of being finalised, thus, perception of the Respondent looks far from finality. It is anybody’s guess as to when this money, if at all, will come to the Respondent’s account after all sort of claims, counter claims and litigations at various legal fora.
The Adjudicating Authority has not even discussed the nature of this repayment of Rs. 16915 Crores i.e., whether it was paid in cash component as per loan agreements or major chunk as deemed payable due to conversion of debt into equity as per CDR/ SDR in terms of RBI Guidelines, which Lenders/ Bank had to follow without any option. We note that both the CDR/SDR failed due to default of the Respondent. This could have been relevant factor to determine viability of the Corporate Debtor in terms of Vidarbha Industries - It would have been desirable for the Adjudicating Authority to go into details as what was the total outstanding claims all the lenders pre CDR/SDR as well as post CDR/SDR and what was the total payment made thereon. This would have given a clear picture in terms of total payment made by the Respondent on account of principals, interest and other ancillary charges like penal interest, if any, happened due to non payment on part of the Respondent to the Lenders. The Adjudicating Authority has not gone into any of these details, as such we are not in position to support the Impugned Order rejecting Section 7 application of the Appellant only on the ground of Vidarbha Industries.
The Adjudicating Authority has not applied the ratio of Vidarbha Industries correctly in the present case while rejecting the application of the Appellant, filed under Section 7 of the Code.
Whether the Adjudicating Authority ignored the acknowledgements of debt and default by the Respondent in its various statements, books of accounts, affidavit in reply and Written Submissions filed before the Adjudicating Authority? - HELD THAT:- There are several acknowledgements of debt and default on the part of the Corporate Debtor - there is a clear debt and default backed several acknowledgements by the Respondent which entitled the Appellant to file application under Section 7 of the Code before the Adjudicating Authority.
Whether the Appellant is permitted to raise any disputed issues of facts before this Appellate Tribunal through Rejoinder dated 11.04.2023 to the Affidavit in Reply and Additional Affidavit in reply and whether it is an impediment in the present appeal? - HELD THAT:- The Appellant pleaded that in the present case, the question as to the applicability of Vidarbha Industries is not a new plea set out by the Appellant. It has its basis in the pleadings of the Respondent as well as the Appellant before the Adjudicating Authority - it is already noted the relevant para of Vidarbha Industries [2022 (7) TMI 581 - SUPREME COURT], Innoventive Industries Ltd. [2017 (9) TMI 58 - SUPREME COURT], Vidarbha Review Order and it is already noted the various financial facts and figures regarding viability of the Corporate Debtor, as such the contentions raised by the Respondent does not hold good.
Even without considering the Rejoinder filed by the Appellant, the ratio and applicably of Vidarbha Industries is in the present appeal is required to be taken into consideration along with various financial facts which are found in the pleadings made as well as written submissions and which are based on the financial statements of the Corporate Debtor which are in public domain.
Whether, the Appellant was duty bound to agree with majority of the lenders to assign its debts to EARC? - HELD THAT:- The Appellant is not duty bound to agree with majority of the lenders to assign its debts to EARC - It is clear that it is the commercial wisdom of the lenders is paramount in deciding to assign its debts or to pursue other remedies including filing under Section 7 of the Code or otherwise and these can’t be any judicial intervention on this aspect by the Adjudicating Authority or this Appellate Tribunal.
The case is remanded back to the Adjudicating Authority to hear the original petition of the Appellant a fresh, taking into consideration all the relevant facts - Appeal allowed by way of remand.
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2024 (11) TMI 930
Rejection of appeal - challenge to acceptance of certain additional documents, together with a rejoinder affidavit filed by the respondent - HELD THAT:- Since the proceedings are pending before the NCLAT, we are not inclined to entertain the appeal, at this stage, particularly in the absence of a substantial question of law.
The appeal is accordingly dismissed.
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2024 (11) TMI 929
Challenge to Impugned Order - directions has been issued to the IBBI to conduct detailed inspection regards the conduct of Liquidator and the records, pertaining to the Corporate Debtor in order to find out the irregularities in the process - cause of action - prior to passing of the order, no opportunity of explaining or defending himself was provided - violation of principles of natural justice - HELD THAT:- The appellate proceedings under Section 61, of I & B Code cannot be resorted to by the Liquidator, for the purposes of the challenging direction issued to the IBBI to enquire into the conduct of the appellant regards his functioning as a liquidator, because that will be absolutely an in-house proceeding of the registering body of the liquidator to justify as to whether at all, the based on the set of allegations, if proved, he is required to continue as a Liquidator or not. In fact, at this stage, there is nothing apparently adverse against the Appellant, which could call for invocation of an Appellate Jurisdiction particularly when it is only an enquiry and upon which the decision on the same is yet to be taken.
As of now there is no specific cause of action for the Appellant, to invoke the Appellate Jurisdiction under Section 61, of I & B Code. The Appeal lacks merit and the same is accordingly dismissed.
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2024 (11) TMI 928
Challenge to order filed by the Resolution Professional (RP) - HELD THAT:- It is clear that Resolution Plan which was submitted by the Appellant was approved on 07.11.2020 by the CoC. It was the Excise & Taxation Officer, Officer-Cum-Assessing Authority filed its Application before the Adjudicating Authority for accepting its claim which was allowed by the Adjudicating Authority. However, the said Orders was reversed by this Appellate Tribunal, against which, Civil Appeal No. 7514– 7515/2022 was filed. The Order of the Hon’ble Supreme Court in [2024 (1) TMI 1382 - SC ORDER] has been brought on record by the Appellant.
It is clear that under the Order passed by the Hon’ble Supreme Court in the Appeal filed by Excise & Taxation Officer, Officer-Cum-Assessing Authority, the process was to be completed within 90 days and for taking steps in pursuance of the Order of the Hon’ble Supreme Court dated 22.01.2024 [2024 (1) TMI 1382 - SC ORDER], I.A. was filed by the RP. Adjudicating Authority by the Impugned Order has allowed the Application in terms of Prayer (c) but has not issued any direction as to what process, RP has to conduct. The expression used is “conduct the ongoing Corporate Insolvency Resolution Process for M/s. Mastana Foods Private Limited”.
The ends of justice be served in disposing the Appeal permitting the RP to place an agenda before the CoC with regard to necessary steps which are required to be taken in the CIRP of the Corporate Debtor in pursuance of the directions of the Hon’ble Supreme Court dated 22.01.2024 in Civil Appeal No. 7514–7515/2022. It is the CoC which is in overall control of the entire CIRP Process to take such steps as required by law.
There are no reason to keep this Appeal pending any further and dispose of the Appeal with liberty to the RP to place appropriate agenda before the CoC, who may take decision and complete the process of CIRP as directed by the Hon’ble Supreme Court.
Appeal disposed off.
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2024 (11) TMI 879
Seeking to withdraw Appeal - seeking permission to withdraw the amount of Rs. 20,00,000/- that had been deposited in this Court pursuant to an interim order, along with accrued earnings thereon - HELD THAT:- The pleadings considered by the Supreme Court in Axis Bank vs. SBS Organics Private Limited and Another [2016 (4) TMI 917 - SUPREME COURT] on the very same question, and the resultant outcome of releasing the ICICI Guarantee, make it clear that security interests over the assets of the corporate debtor in order to secure amounts due from the corporate debtor under a judgement or decree would give way to the provisions of the IBC. The proceedings under the IBC may lead to an approved resolution plan or liquidation of the corporate debtor. Therefore, it is not appropriate to continue to hold the position that the interplay between the rights of a judgement creditor and the implications of insolvency law as existing in 1924 (in terms of Chowthmull) would still apply in 2024, when the IBC governs the field of insolvency and bankruptcy of corporate debtors.
The real import of the ruling by the co-ordinate Division Bench in the NAHAR BUILDERS LTD VERSUS HOUSING DEVELOPMENT AND INFRASTRUCTURE LTD [2020 (1) TMI 1704 - BOMBAY HIGH COURT], which was essentially to make the release of the amount deposited under Section 9 of the Arbitration Act, to the judgement creditor in the arbitration proceedings, subject to the provisions of IBC. Since another co-ordinate bench in Rajendra Bansal [2023 (1) TMI 306 - BOMBAY HIGH COURT] proceeded to release funds deposited by a corporate debtor to the judgement creditor on its reading of CHOWTHMULL MAGANMULL VERSUS THE CALCUTTA WHEAT AND SEEDS ASSOCIATION [1924 (5) TMI 5 - CALCUTTA HIGH COURT] and Nahar Case, it is clarified that the ruling in RAJENDRA PRASAD BANSAL VERSUS RELIANCE COMMUNICATION LIMITED [2023 (1) TMI 306 - BOMBAY HIGH COURT] applies only to the parties in that case, although the statement of law as contained therein, has been overtaken, as explained above. Since the Supreme Court has conclusively released the ICICI Guarantee in this very case, no question of law remains for reference to any larger bench.
Taking into account the decision of the Supreme Court in respect of the ICICI Guarantee, and that too based on similar pleadings made by the parties before the Supreme Court; and also taking into account the provisions of the IBC and its implications for decree holders, the monies deposited in this Court are indeed assets under the ownership of the Applicant-Appellant, with possession being in the hands of the Court. No meaningful purpose would be served in continuing with the deposit, since even if the Appeal were to fail, the Respondent would need to be subjected to the CIRP run by the Committee of Creditors through the Resolution Professional. If the resolution attempts fail, the Respondent’s rights under the Impugned Judgement would be subject to the waterfall mechanism for distribution of liquidation proceedings, stipulated under the IBC.
The monies or any other asset deposited by a corporate debtor in court prior to commencement of CIRP by way of security (to protect against execution of any judgement or decree), would not cease to be the asset of the corporate debtor - the monies deposited by the Applicant-Appellant in this Court constitute assets owned by the Applicant-Appellant although they are not in possession of the Applicant-Appellant - the Applicant-Appellant is permitted to withdraw Appeal No. 597 of 2016, and indeed withdraw the amounts deposited in this Court in these proceedings, along with all earnings thereon. Refund of Court fees shall be processed as per Rules.
Appeal disposed off.
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2024 (11) TMI 842
Maintainability of appeal - Approval of resolution plan - HELD THAT:- The appellants have preferred an appeal before the NCLAT on the ground that they were not aware about the Corporate Insolvency Resolution Process (CIRP). Therefore, the NCLAT is right in not entertaining the appeal.
Appeal dismissed.
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2024 (11) TMI 841
Rejection of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - no valid Board resolution in favour of the appellant - existing arbitration clause under the agreement - HELD THAT:- This aspect as to whether there was a bona fide pre-existing dispute or not has to be considered by the Tribunal and Appellate Tribunal which has not been dealt with nor the application under Section 9 of the IBC has been rejected on the above ground.
Both the impugned orders passed by the NCLAT as also by the NCLT are set aside and the application filed under Section 9 of the IBC needs to be considered afresh on its own merits after hearing learned counsel for the parties and the material on record - Appeal allowed.
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2024 (11) TMI 840
Permission to withdraw application filed u/s 9 of the Insolvency and Bankruptcy Code, 2016 - Appellant challenging the order contends that the Adjudicating Authority committed error in not granting liberty to the Appellant to file a fresh Application - it was held by NCLAT that 'no error has been committed by the Adjudicating Authority in permitting withdrawal of the Application, while denying liberty to file fresh Application, once again.'
HELD THAT:- There are no good ground and justification to interfere with the impugned judgment and, hence, the present appeal is dismissed.
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2024 (11) TMI 839
Non-compliance with sub-section 1 of Section 9 of the IB Code - HELD THAT:- Issue notice on the application for stay, returnable on 18th November, 2024.
By order dated 26th November, 2020, a company has been impleaded as Additional Corporate Debtor in the pending application under Section 9 (1) of the Insolvency and Bankruptcy Code, 2016 2016. Prima facie, the order is illegal as compliance with sub-section 1 of Section 9 of the IB Code has not been made.
The order dated 26th November, 2020 passed by the National Company Law Tribunal, Kochi Bench, Kerala is stayed - the main application under Section 9 of the IB Code can always proceed against the original Corporate Debtor.
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2024 (11) TMI 838
Maintainability of Application seeking reference to Arbitration - existence of debt and default or not - commencement of the Arbitration Proceeding by the Financial Creditor - HELD THAT:- In the present case, the Reply to Section 7 was filed in December 2023, whereas Application under Section 8 has been moved on 07.03.2024. There are substance in the submission of the Appellant that right to move Section 8 Application was forfeited since Corporate Debtor did not choose to file the Application.
Application under Section 7 was filed by the Financial Creditor in the Year 2023. The thrust of submission of the Appellant is that Financial Creditor itself has initiated Arbitration Proceeding by unilaterally appointed an Arbitrator on 26.07.2019, hence Section 7 Application ought not to have been proceeded and the Adjudicating Authority ought to have allowed the Application filed by the Corporate Debtor under Section 8 of the Arbitration Act. There is no dispute to the fact that Financial Creditor has unilaterally appointed a sole Arbitrator and sole Arbitrator, however, terminated the Arbitration Proceeding on 26.10.2021 holding that appointment of Arbitrator is contrary to the law laid down by the Hon’ble Supreme Court in `Perkins Eastman Architects DPC & Anr.’ Vs. `HSCC (India) Limited’ [2019 (11) TMI 1154 - SUPREME COURT] reported in Arbitration Application 32/2019.
From the law laid down by the Hon’ble Supreme Court, it is clear that if an Application under Section 8 of the Arbitration and Conciliation Act, 1996, is filed, the Adjudicating Authority is duty bound to proceed first to decide the Application under Section 7 by recording a satisfaction with regard to their being default or not. The fact that whether Arbitration Proceedings are pending on the date when Section 7 Application is filed or it is sought to be initiated subsequent to filing of Section 7 Application is immaterial. The remedy under Section 7 is a special remedy, keeping the object and purpose of the IBC Code. When it is brought in the notice of the Adjudicating Authority that a Corporate Debtor needs a resolution it having committed default in payment of debt, the Court is obliged to consider the Section 7 Application to find out as to whether there is a debt and default.
Allowing the Application under Section 8 filed by the Corporate Debtor amounts to asking the Adjudicating Authority to wait till Arbitration Proceedings are decided which is not in accord with the scheme of the IBC and shall defeat the entire purpose and object of the IBC. Adjudicating Authority in the Impugned Order has rightly rejected Application under Section 8 filed by the Corporate Debtor for referring to the dispute between the parties to the Arbitrator.
The Application under Section 8 was filed much subsequent to the filing of the Reply by the Corporate Debtor.
In the present case, debt and default is admitted by Corporate Debtor in its One Time Settlement offers issued twice in the Year 2019 and 2022 - no error has been committed by the Adjudicating Authority in rejecting the application filed by the Appellant.
There is no merit in the Appeal. The Appeal is dismissed.
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2024 (11) TMI 837
Condonation of delay of 3 days in filing the appeal - Computation of limitation period for filing the appeal - whether the date of limitation is to be counted from the date of e-filing or the date of presentation of appeal? - HELD THAT:- As per the provisions of Section 61 of IBC, any person who is aggrieved against the order passed by the Tribunal has a statutory right to file an appeal before the Appellate Tribunal. Section 61(2) provides statutory period of 30 days for filing such an appeal, however, if the proposed Appellant failed to file the appeal within a period of 30 days for some reason then Section 61(2) proviso gives another period of 15 days to file the appeal provided it satisfy the Appellate Tribunal that there was a sufficient cause for not filing the appeal in time. In no case, the period beyond 15 days can be extended.
Since, the appeal has been filed by the Appellant on 30.05.2022 through e-filing and the hard copy was filed on 20.06.2022 though before coming into force the SOP dated 21.10.2022 which has been made effective from 01.11.2022, the SOP dated 21.10.2022 has been withdrawn by SOP dated 24.12.2022 and it has been ordered that limitation is to be counted from the date of e-filing, therefore, in view of the decision of the Hon’ble Supreme Court in the case of Somdev Kappor [2013 (10) TMI 384 - SUPREME COURT] where it has been held that the rules which are prevalent on the date when the application is considered are to be applied and not the date when the application is made, the application having been filed by the Appellant has to be considered in terms of SOP dated 24.12.2022 which is in operation at the time when the application for condonation of delay is being considered.
The argument raised by Respondent No. 1 not agreed upon, that limitation is to be counted from the date of presentation of appeal at the counter because the issue of computation of limitation was first determined by way of SOP dated 21.10.2022 whereas the appeal was filed much earlier in both ways i.e. e-filing as well as by way of hard copy and the SOP dated 21.10.2022 was superseded/withdrawn by SOP dated 24.12.2022 as per which the limitation is to be counted from the date of e-filing.
The objection raised by the Respondent is hereby overruled and since there is a delay of only three days in filing the appeal which has also been duly explained in detail in the application which is supported by an affidavit and the power to condone the said delay in terms of Section 61(2) proviso is with this Tribunal, therefore, the same is hereby condoned on being satisfied that sufficient reason has been assigned by the Appellant.
The application is thus allowed.
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2024 (11) TMI 836
Service of notice - notice issued under Section 8 of the Code was not in accordance with law - appellant argued that the Tribunal has committed a patent error in dismissing the application on the ground that the notice was not given to the juristic person but has been addressed to the KMP of the CD - HELD THAT:- Undisputedly, the issue of notice under Section 8 that too on a printed proforma (Form 3) is a sine qua non for the purpose of invoking Section 9 of the Code for filing an application under Section 9 of the Code by the OC. In case, the notice is not issued then the cause of action is not complete and application under section 9 cannot be maintained. In the present case, though the notice has been issued on 31.03.2021 and it is also on Form 3 but the same has been addressed to Mr. Sameer Singh, Director, Bibhuti Bhushan Rath, Chief Financial Officer and Mr. S. Subudhi, Manager Commercial of the Corporate Debtor in their capacity of KMP of the CD but no notice has been addressed to the company (CD), namely, Mesco Kalinga Steel Ltd. through its managing director etc., therefore, the said notice cannot be termed to have been delivered to the CD and therefore, the same cannot be taken to be a notice issued under Section 8 of the Code.
In so far as the delivery of notice is concerned, Rule 5 of the Rules prescribes the procedure in which Rule 5(2)(a) provides that notice has to be sent to the Registered office for which various modes have been provided, namely, it can be sent by hand, registered post or speed post with acknowledgement but the notice has to be sent of the CD at its registered office. Rule 5(2)(b) provides for delivery of notice by electronic mail to the KMP of the CD but it does not apply to the present case because no electronic mail has been sent, therefore, it is not required to make any observation in this regard. Form-3 specifically provides for a notice to mention the name of the CD and delivered at the address of the registered office of the corporate debtor.
In so far as the decision in the case of Niraj Kumar [2023 (1) TMI 1147 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] is concerned, that was a case where the dispute was about the nomenclature of the Company because the name of the company was Lex Innova Digital Payments Pvt. Ltd. which was mentioned as LI Digital Payments Pvt. Ltd. and in this regard, the judgement is not on the issue which has been addressed before this Court, therefore, the said judgment is on its own facts and has settled the law which is not applicable to the present case.
There are no error in the impugned order which may require any interference by this Court. Hence, the present appeal fails and the same is dismissed.
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2024 (11) TMI 802
Jurisdiction to enter into issue as to whether the subject land is asset of the corporate debtor - parties were required to be relegated to the Competent Civil Court having jurisdiction or not - proceedings conducted by Sole Arbitrator and the orders passed by the Sole Arbitrator amounts to arbitral award under the Arbitration & Conciliation Act, 1996 determining the rights of both the parties so as to bind the parties in any subsequent proceedings - IRP/ RP could or could have been included the subject land in the Information Memorandum/ CIRP process of the corporate debtor by virtue of Section 18(1)(f) explanation.
Whether the Adjudicating Authority had jurisdiction to enter into issue as to whether the subject land is asset of the corporate debtor or the parties were required to be relegated to the Competent Civil Court having jurisdiction? - HELD THAT:- Whether an asset is required to be reflected in the Information Memorandum or the asset belong to the Corporate Debtor are the question which arise out of or in relation to the insolvency resolution process. The present is a case where the Corporate Debtor has claimed development rights in the land. It is no more res-integra that the development rights are property within the meaning of Section 3(27) of the IBC. We may refer to the judgment of the Hon’ble Supreme Court in “Victory Iron Works Ltd. vs. Jitendra Lohia & Anr. [2023 (3) TMI 699 - SUPREME COURT] where the Hon’ble Supreme Court had held that the development rights created in favour of the corporate debtor constitute “property” within the meaning of Section 3(27) of the IBC.
The question as to whether the assets which are included in the Information Memorandum are the assets of the corporate debtor is foundation of entire CIRP process. When the inclusion of the said asset is questioned before the NCLT by the Appellant, Adjudicating Authority does not lack jurisdiction in entering into question and deciding as to whether assets are part of the CIRP or it should be excluded. We, thus, are of the view that the above question could be determined by the Adjudicating Authority and parties need not have to be relegated to the Civil Court having jurisdiction, the view of the NCLT to the contrary cannot be approved. Judgment of the Hon’ble Supreme Court in Victory Iron [2023 (3) TMI 699 - SUPREME COURT], clearly has held that the NCLT and NCLAT can exercise jurisdiction in the above facts.
Whether proceedings conducted by Sole Arbitrator and the orders passed by the Sole Arbitrator dated 27.05.2014 and 15.07.2015 amounts to arbitral award under the Arbitration & Conciliation Act, 1996 determining the rights of both the parties so as to bind the parties in any subsequent proceedings? - HELD THAT:- In view of the statutory scheme of the Arbitration & Conciliation Act, 1996, and the fact that both City Civil & Session Court Judge as well as High Court of Karnataka having held that the order dated 15.07.2015 passed by the Sole Arbitrator is an order under Section 33(2)(c), the order dated 15.07.2015 cannot be held to be arbitral award within the meaning of Arbitration & Conciliation Act, 1996 so as to make it binding on the parties under Section 35 of the Act. Thus, in view of the fact that the Sole Arbitrator terminated the arbitration proceedings under Section 33(2)(c) by order dated 15.07.2015, the order dated 15.07.2015 cannot be held to be an award within the meaning of Arbitration & Conciliation Act, 1996.
Whether the IRP/ RP could or could not have included the subject land in the Information Memorandum/ CIRP process of the corporate debtor by virtue of Section 18(1)(f) explanation? - Whether Adjudicating Authority erred in not allowing the IA No.4648 of 2020 as prayed by the Appellant? - HELD THAT:- The present is a case where corporate debtor is not claiming any ownership rights over the subject land. Corporate debtor is claiming development rights and the ownership of the Appellants is not even denied by the Resolution Professional. Reply to the IA was filed by the Resolution Professional. In the reply, Resolution Professional has pleaded that the Resolution Professional has rightly included the project in the Information Memorandum as besides receiving the compensation due and payable by the Applicants in terms of clause 6, the Resolution Professional is also required to deal with the claims of Real Estate Allottee pertaining to said project.
IRP/RP has rightly included the subject land in the Information Memorandum/ CIRP and he was not precluded by virtue of Section 18(1)(f) explanation from asserting development rights in the subject land - Adjudicating Authority did not commit any error in not allowing IA No.4648 of 2020 which prayed for exclusion of subject land from the Resolution Plan/CIRP of the corporate debtor.
Whether the Adjudicating Authority committed error in allowing the IA No.58 of 2023 filed by the SRA? - HELD THAT:- The Adjudicating Authority did not commit any error in allowing Intervention Petition filed by Art Construction Pvt. Ltd.
The order dated 30.04.2024 passed in IA No.58 of 2023 upheld - appeal dismissed.
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2024 (11) TMI 801
Admission of Section 7 application filed by the Financial Creditor through Interim Resolution Professional (IRP) - financial debt present in the case or not - Section 10A of the IBC Code - Section 7 application filed by the Financial Creditor dated 20.01.2023 was barred by time, loan having disbursed on 16.12.2016 or not - Section 7 application was barred by Section 10A since as per the letter dated 20.08.2020 issued by the Corporate Debtor and acknowledged by the Financial Creditor the amount was to be paid by the Corporate Debtor by 01.12.2020 and the default if any occurred on 01.12.2020 is hit by Section 10A or not.
Whether Financial Creditor has been able to prove that there was financial debt? - HELD THAT:- It is relevant to notice that in Section 7 application, the financial creditor has filed its ledger with regard to corporate debtor which is part of Section 7 application and as per the ledger as on 31.03.2020 amount outstanding was Rs.4,74,48,109/-. The ledgers indicate that there was entry of payment of interest as on 31.03.2017, 31.03.2018, 31.03.2019 and 31.03.2020. Payment of TDS was also mentioned.
A perusal of the ledger indicate that the closing balance of amount in the ledger of the corporate debtor as on 31.03.2020 towards the financial creditor was Rs.4,78,69,260/-. There were entries regarding ‘interest on loan’ and ‘TDS on interest’ in the ledger of both the corporate debtor and the financial creditor, hence, there is no doubt that the amount is a financial debt. Further in the letter dated 20.08.2020 which has been written by the corporate debtor to the financial creditor, there is a clear admission of loan - Financial Creditor has successfully proved that there is a financial debt.
Whether Section 7 application filed by the Financial Creditor dated 20.01.2023 was barred by time, loan having disbursed on 16.12.2016? - HELD THAT:- In the present case, we have already noted the letter dated 20.08.2020 which was filed by the corporate debtor in the reply to Section 7 application. Reliance has been placed on the said letter by the Appellant also in the present Appeal. The letter dated 20.08.2020 contained a promise to repay the outstanding amount. Even for arguments’ sake, if we accept that three years period as per Article 21 came to end on 15.12.2019, the letter dated 20.08.2020 is clear promise by the corporate debtor to make the payment and as per Section 25 of the Indian Contract Act, 1872, the corporate debtor is bound by the said promise and fresh period of limitation shall commence from 20.08.2020 - Section 25(3) is attracted when a promise is made by letter to make the payment of a time barred debt. In view of Section 25(3), the said promise is enforceable and the promise in writing given by the corporate debtor in letter dated 20.08.2020 will make the said promise enforceable within a period of three years and the application which was filed by the financial creditor dated 20.01.2023 cannot be said to be barred by time. Hence the application under Section 7 cannot be held to be barred by time relying on Article 21 of the Limitation Act.
Whether Section 7 application was barred by Section 10A since as per the letter dated 20.08.2020 issued by the Corporate Debtor and acknowledged by the Financial Creditor the amount was to be paid by the Corporate Debtor by 01.12.2020 and the default if any occurred on 01.12.2020 is hit by Section 10A? - HELD THAT:- It is well settled when default has been committed by the Corporate Debtor prior to commencement of Section 10A period, the application filed under Section 7 cannot be held to be barred by Section 10A. In the present case, as per the case of the Appellant, default took place since the loan was payable within three years from the date of grant of the loan i.e. from 16.12.2016 - Notice issued by the IRP was neither replied nor any amount was paid, hence, the financial creditor treated the date of default as 07.12.2022 i.e. 7 days from the notice - thus, the application filed by the financial creditor was not barred by Section 10A.
One of the submissions also advanced by Counsel for the Appellant is that in the letter dated 20.08.2020 it was provided that in the event, the payment is not made by the corporate debtor prior to 01.12.2020, the financial creditor will be entitled to two residential premises in the project which is currently being developed by the Director of the company. The letter dated 20.08.2020 cannot extinguish the financial debt on a promise to allot two residential premises which is developed not by the corporate debtor but Director of the company. It is not satisfied that the financial debt shall extinguish by the promise made in the letter dated 20.08.2020.
There are no error in the order of the Adjudicating Authority admitting Section 7 application. There is no merit in the Appeal. The Appeal is dismissed.
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2024 (11) TMI 800
Challenge to order directing for reversal of the directions which took place after 22.02.2023 till 01.06.2023 - determination of the Insolvency Commencement Date (ICD) and its implications - Respondents opposing the interim prayer contends that the amount having been appropriated, is clear violation of moratorium which commenced on 22.02.2023 - HELD THAT:- Notices are already issued in the Appeals and a date for hearing is fixed, thus, the ends of justice be served in directing the Axis Bank and other lenders, who are Appellants before us, to keep the amount which is to be reversed under the impugned order in a separate interest bearing account so that in the event amount is finally decided to be reversed the interests of the corporate debtor are protected. Appellant being themselves banks and financial institutions there can be no apprehension that the banks shall not reverse the amount in the account of the corporate debtor in event any final decision is taken in the appeal to that effect. The above interim management shall protect the interest of all the parties.
List these Appeals on 03.12.2024 at 2.00 P.M. for hearing and disposal.
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2024 (11) TMI 737
Seeking an order of this Court at the instance of this RP staying an acquisition process under the Slum Rehabilitation Act, 1995 - Preferential right to self-redevelop - it was held by High Court that 'A preferential right to an owner is available only when someone other than the owner is being preferred and the owner has never before been given or availed of a right to develop.' and the petition was rejected - HELD THAT:- It is not required to entertain the Special Leave Petition under Article 136 of the Constitution of India.
SLP dismissed.
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2024 (11) TMI 736
Preferential and fraudulent transaction - Seeking avoidance of certain preferential and fraudulent transactions carried out by the suspended directors of the Corporate Debtor - Sections 43 and 66 of the IBC - it was held by NCLAT that 'The Adjudicating Authority has erroneously dismissed the application filed by the Resolution Professional under Sections 43 and 66 of the IBC.' - HELD THAT:- After having heard the learned counsel appearing for the appellants, the view taken by the National Company Law Appellate Tribunal concurred upon.
There is no merit in the Civil Appeal and the same is accordingly dismissed.
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2024 (11) TMI 735
Seeking grant of interim relief - failure to consider the preliminary objections raised by the Petitioner concerning the maintainability of the Show Cause Notice - Time limitation - HELD THAT:- It is important to note that the amended writ petition is exhaustive and voluminous, raising numerous grounds of challenge. Given the breadth and complexity of these issues, it is neither practical nor appropriate to adjudicate them fully at this interim stage. It is also pertinent to observe that Mr. Krishnan, Senior Counsel for the Petitioner, appropriately chose not to delve deeply into the merits of the grounds for suspension. Instead, his arguments primarily focused on the jurisdictional issues noted above, which forms the core of the challenge against the impugned order.
Thus, it should be made clear that a detailed examination of the substantive grounds on merits is not being undertaken, since at this interim stage, the assessment of contentions particularly in terms of the merits of the case must necessarily be only on a prima facie basis.
Time Limitation - Regulation 3(4) of the IBBI (Grievance and Complaint Handling Procedure) Regulations, 2017 - HELD THAT:- The Regulation clearly stipulates that a complaint must be filed within forty-five days of the occurrence of the cause of action. A complaint filed after the aforesaid period can be entertained only if there are sufficient reasons justifying the delay, but such period shall not exceed 30 days. Thus, the proviso to Regulation 3(4) indeed sets a strict time limit for filing a complaint, hence, the critical issue here is determining when the cause of action for the grievance or complaint actually arose.
In the instant case, the allegations against the Petitioner in the Show Cause Notice dated 2 nd April, 2024 are serious and revolve around the improper constitution and functioning of the CoC. Specifically, it is alleged that Axis Bank, a Financial Creditor of the corporate debtor, had not filed its claim at the time, yet the Petitioner proceeded to form a CoC comprising only the sole operational creditor - the Petitioner took no action to notify Axis Bank about the initiation of the CIRP. This raises serious concerns about the Petitioner’s conduct in ensuring that all relevant creditors were duly informed and included in the CoC, as required under the IBC. These allegations, if substantiated, point to significant procedural irregularities and potential breaches of duty on the part of the Petitioner.
Under Section 13(2) of the General Clauses Act, 1897, it is provided that in all Central Acts and Regulations, unless there is anything repugnant in the subject or context, words in the singular shall include the plural, and vice versa. This principle of statutory interpretation allows for flexibility and adaptability in the application of the law, ensuring that the legislative intent is not frustrated by a narrow or literal interpretation - Applying this principle to the present case, on a prima facie view of Section 220(1) of the IBC, it is noted that the term “whole-time members” can reasonably be understood to also include a scenario where there is only a singular “member” of the committee. This interpretation is in consonance with the functional necessity of ensuring that the disciplinary committee can be constituted and can operate effectively, even if there is only one whole-time member available.
The Court finds no ground to grant any interim stay on the impugned order - the present application is dismissed.
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2024 (11) TMI 734
Dishonour of cheque - prosecution of Corporate Debtor - whether, the existing criminal liability of the Company and its erstwhile Directors will get extinguished in view of the resolution plan approved by NCLT? - HELD THAT:- After insertion of Section 32-A in the IBC by way of amendment with effect from 28/12/2019, the liability of the corporate debtor for prior offences is restricted. In Ajay Kumar Radheshuyam Goenka case [2023 (3) TMI 686 - SUPREME COURT], the Hon’ble Supreme Court, after considering the effect of the Section 32-A of IBC in respect of prior liability of the Company and its directors, particularly in proceedings under Section 138 of Negotiable Instrument Act, had vividly clarified the legal position holding 'where the proceedings under Section 138 of the NI Act had already commenced and during the pendency the plan is approved or the company gets dissolved, the Directors and the other accused cannot escape from their liability by citing its dissolution. What is dissolved is only the company, not the personal penal liability of the accused covered under Section 141 of the NI Act. They will have to continue to face the prosecution'.
Thus, it is clear that the corporate debtor cannot be prosecuted for the prior liability after the approval of the Resolution Plan. At the same time, it is to be bear in mind the protection under Section 32-A of Insolvency & Bankruptcy Code, 2016 is restricted only to the corporate debtor and not to its Directors who were in-charge of the affairs of the Company when the offence committed or the signatory of the cheque.
The Criminal Original Petitions are allowed.
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2024 (11) TMI 733
Demand of property tax by the Municipal Corporation of Delhi (MCD) for the period prior to the effective date of the resolution plan - Section 123D of DMC Act, 1957 - HELD THAT:- In Ghanashyam Mishra [2021 (4) TMI 613 - SUPREME COURT], it was noticed that the mischief that was sought to be remedied by the legislature by amending Section 31(1) of IBC was that despite the legislative intent to extinguish debts upon approval of the resolution plan, there were instances where State/Central Government authorities continued to pursue proceedings for the recovery of debts owed to them - It was held that 'all the dues including the statutory dues owed to the Central Government, any State Government or any local authority, if not part of the resolution plan, shall stand extinguished and no proceedings in respect of such dues for the period prior to the date on which the adjudicating authority grants its approval under Section 31 could be continued.'
In the present case, the MCD did not lodge its claim in respect of property tax dues against the petitioner during the CIRP. Admittedly, the claim of the MCD is not a part of the approved resolution plan. Consequently, prima facie, any statutory dues owed to the MCD by the petitioner prior to the date on which the resolution plan is approved i.e. 26.03.2021, cannot be demanded/recovered.
The decision of Rainbow Papers [2022 (9) TMI 317 - SUPREME COURT] does not detract from the above inasmuch as unlike in the said case, the concerned statutory authority (MCD) did not lodge its claim before the resolution professional during the CIRP initiated qua the petitioner. Further, MCD has not challenged the approval of resolution plan by the Adjudicating Authority.
An ad-interim order is passed staying the operation of the impugned Common Assessment Order dated 02.03.2024 (to the extent it relates to Flat Nos. 109 to 112 owned by the petitioner). However, the petitioner is directed to pay the property tax for the period after 26.03.2021 - List on 25.07.2024.
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