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Insolvency and Bankruptcy - Case Laws
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2024 (5) TMI 15 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Appointment of the Appellant as the liquidator - non-compliance of Regulation 31A of the Regulations as the mandatory written consent form, as stipulated in Form AA Schedule II has not been filed before the Adjudicating Authority - appointment of Respondent No. 2 as the liquidator though it was not approved by the SCC - locus to file appeal - HELD THAT:- Regulation 31A(11) of the Regulations categorically provides for a written consent prior to the filing of the application for replacement of the liquidator - It is an admitted fact that no such written consent was submitted by the Appellant to the SCC when it had voted in its favour in 28th meeting of SCC nor it was annexed with the application filed by the erstwhile liquidator for his replacement with the Appellant by the Adjudicating Authority.
As per Circular no. IBBI/CIRP/023/2019 dated 14.08.2019, Form No. IP1 is regarding pre-assignment which provides that “this includes consent to accept assignment of an IP as IRP/RP/Liquidator/Bankruptcy Trustee, the details of IP and the applicant, the details of the person which will undergo the process, terms of consent, terms of engagement, filing of application before AA and withdrawal before admission, etc. to be filed within three days of the relevant date” - In the present case, the relevant date was the date when the alleged consent was given by the Appellant i.e. 29.08.2023 when it had sent written consent to the Adjudicating Authority and the SCC as alleged and it was incumbent upon the Appellant to have it uploaded within three days on the portal of the IBBI which is again conspicuous by its absence.
Thus, in such circumstances, it is apparent that the Appellant had not given any written consent on 29.08.2023 as alleged rather no written consent has been given in terms of Regulation 31A(11) of the Regulations which is required to be given on Form AA of Schedule II of the CIRP Regulations, therefore, there is no error in the finding recorded by the Adjudicating Authority in this regard.
The argument of the Appellant that if the written consent was not given then at the most it is a defect which is curable but the judgment relied upon in this regard in the case of Tek Travels Pvt. Ltd. [2021 (4) TMI 813 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI] is not applicable because a written consent to act either as the IRP/RP or the liquidator is a mandatory requirement under the law which has to be obtained before the application is filed.
Whether the Adjudicating Authority has committed an error in appointing the Respondent No. 2 as the liquidator though it was not approved by the SCC? - HELD THAT:- In this regard, reference may be had to the decision of this Court in the case of CA. V. Venkata Sivakumar Vs IDBI Bank Limited, 2022 (12) TMI 1056 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI BENCH] in which it has been held that “combined reading of above case laws and provisions alongwith Section 33 and Section 34 of the Code, would make it clear that the AA which had the powers to appoint the Liquidator will also have the powers to remove the liquidator for reasons, the AA may find fit, just valid and proper”.
Whether the Appellant has no locus to file the appeal? - HELD THAT:- The submission made by the Respondent that the Appellant has no locus to file the appeal has substance because it was only a proposed/prospective liquidator and no inherent right was there to be appointed as such, therefore, the aggrieved person, at the most could have been either the erstwhile liquidator who had filed the application for replacing him with the Appellant or the SCC who had approved the appointment of the Appellant subject to the approval of the Adjudicating Authority.
There are no merit in the present appeal and the same is hereby dismissed.
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2024 (5) TMI 14 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Competence of maintaining the appeal by the present appellants - Seeking approval of the resolution plan submitted by Successful Resolution Applicants - homebuyers as a class assented to the plans - HELD THAT:- As a matter of fact, the tripartite agreement was challenged as void but the said application was dismissed by the Adjudicating Authority against which the RP filed the appeal before this Tribunal which was dismissed on 05.01.2022 holding that the RP had no locus to file the application. It was further held that the transfer of portion of plot by sub-lease was effected on 27.09.2016 whereas CIRP was initiated after more than two years i.e on 26.11.2018. It was further held that the RP has no ground to doubt the transaction which is more than two years prior to commencement of CIRP. The association did not raise any plea of fraud in transferring the plot by sub-lease and the RP failed to make out a case that the sub-lease was executed for depriving the rights of homebuyers.
Also in the case of Piya Puri [2022 (8) TMI 1111 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] the same view has been taken while discussing Section 25A of the Code and Regulation 16-A(9) of the Regulations. It has been held that where the majority (more than 50%) have voted in favour of the resolution plan approving the same, the dissenting homebuyers who are in minority have to go alongwith the views of the majority and are not entitled to prefer the appeal.
In view of the law laid down by the Hon’ble Supreme Court and this Court coupled with the fact that the homebuyers as a class through authorised representative have voted to the extent 87.60% approving the resolution plan, the other homebuyers who are in minority have to follow the decision of the majority and cannot challenge the resolution plan in appeal as they do not fall within the definition of ‘aggrieved person’ and thus, the appeal at their instance is not maintainable.
There is a merit in the objection raised by the Respondent and hence, the appeal at the instance of the present appellants is not maintainable and the same is hereby dismissed.
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2024 (5) TMI 13 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Initiation of CIRP - Relevant date of default - Delay in making payments towards interest - interest debited in the cash credit facilities which were serviced by the Respondent with delay - Period prior to period stipulated under Section 10A of IBC or not - COVID-19 pandemic Period - Respondent declared as NPA - HELD THAT:- Section 10 A of the Code was introduced by amendment Act of 2020 dated 05.06.2020 with the purpose to support the business and industry who were adversely affected due to covid 19 pandemic. Section 10 A of the Code provides temporary suspensions on initiation of CIRP, which was provided initially for six months with the provision to be extended from time to time as notified - proviso to Section 10 A clearly mentions that “no application shall ever be filed” for initiation of CIRP of “for the said default occurring during the said period”, which signifies that the Parliament clearly envisaged to bar initiation of any application for CIRP, in respect of default which has occurred on or after 25.03.2020 for a period as notified from time to time.
Section 10 A of the Code, by nature, is preventive and prohibitory and begins with non obstante clause i.e., “notwithstanding anything contained in Section 7,9 and 10” and therefore, places complete embargo for initiation of CIRP under these Sections for the period beginning with 25.03.2020 till stipulated period. However, explanation clarify the position that Section 10 A is not meant to be applicable or embargo for initiation of CIRP for default occurred prior to 25.03.2020.
The bar on the filing of application for the commencement of CIRP during stipulated period does not extinguish the debt owed by the Corporate Debtor and creditors/ lenders may continue to exercise their rights to pursue their legal remedies under Section 7,9 and 10.
In the present appeal, the Appellant fairly stated that due occurred on the last date of February, 2020 but was payable on 01.03.2020. Hence, strictly speaking the date of default can not be 28.02.2020 as claimed by the Appellant in Part IV and at best could be as 01.03.2020 i.e., when it became payable - the mere fact of a ‘debt’ being due and payable is not adequate to justify the initiation of CIRP at the instance of the creditor, unless the ‘default’ on the part of the Debtor is established.
The ‘Interest Dates’ is shown as ‘monthly’ but no’ particular date has been specified and the Appellant has pleaded that it become due on last date of month but payable on 1st of the following month - the “statement of stock” is to be submitted on monthly basis as part of the financial covenant, but no where it is indicated that submission of stock statement by the Respondent to the Appellant is condition precedent or breach of which result into default of debt.
The default is required to take place with reference to debt which is outstanding and become payable. Normally a loan recall notice mentions all the details including reasons for default and is a formal communication from the lender requesting the borrower for repayment of outstanding loan balance - here, it is noted that the alleged date of default has bee mentioned as 28.02.20220 ( it should have been 29.02.2020 being leap year) as the Appellant mentioned that the instalment become due on the last date of the month and to be payable on 01.03.2020 and as per RBI Circular dated 27.03.2020, the moratorium started from 01.03.2020 for three months which was further extended for further three months. Thus the Respondent was covered under RBI guidelines and the default could not have been taken as 28.02.2020 or even on 01.03.2020 due to RBI Guidelines and subsequently due to Section 10 A of the Code w.e.f. 25.03.2020.
The Appellant, therefore, was not entitled to initiate the CIRP in the given background of the facts as well as various RBI guidelines and the provisions of Section 10 A of the Code.
Appeal dismissed.
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2024 (4) TMI 1096 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Correctness of Resolution plan - fair and equitable distribution or not - resolution plan failed to make any provision for the operational creditors - Nil Payment to Operational Creditors - waterfall mechanism - HELD THAT:- The resolution plan has been approved by 100% voting by the CoC. It is well settled that the commercial wisdom of the CoC is unjusticiable. Moreover, the liquidation value of the operational creditors is NIL and the amount which has been distributed to the CD in accordance with Section 53(1) shall have to be Nil as well, therefore, the resolution plan is not in violation of Section 30(2)(b) of the Code.
Moreover, admitted claim regarding the financial creditors is to the tune of Rs. 12067,57,69,383 and amount provided under the plan is Rs. 2500 Cr. which is to the tune of 20.098%, therefore, all the other creditors including unsecured financial creditors and operational creditors have been provided NIL.
There are no error in the impugned order having been passed in respect of the applications filed by the Appellants, therefore, the appeal is found to be without any merit and the same is hereby dismissed.
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2024 (4) TMI 1067 - SUPREME COURT
Initiation of CIRP - Financial Creditor of Operational Creditor - Scope and Meaning of the term "Financial creditor" u/s 7(5) of IBC - security deposits under the agreements constitute financial debt or not - Invoking sub-section (5) of Section 60 of the IBC - HELD THAT:- Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or co-relation with the ‘service’ subject matter of the transaction. The written document cannot be taken for its face value. Therefore, it is necessary to determine the real nature of the transaction on a plain reading of the agreements. What is surprising is that for acting as a Sales Promoter of the beer manufactured by a corporate debtor, only a sum of Rs.4,000/- per month was made payable to the first respondent. Apart from the sum of Rs.4,000/- per month, there is no commission payable to the first respondent on the quantity of sales. Clause (6) provides for termination of the appointment by giving thirty days’ notice. Though clause (10) provides for the payment of the security deposit by the first respondent, it is pertinent to note that there is no clause for the forfeiture of the security deposit.
As there is no clause regarding forfeiture of the security deposit or part thereof, the corporate debtor was liable to refund the security deposit after the period specified therein was over with interest @21% per annum. Since the security deposit payment had no correlation with any other clause under the agreements, as held by the NCLAT, the security deposit amounts represent debts covered by subsection (11) of Section 3 of the IBC. The reason is that the right of the first respondent to seek a refund of the security deposit with interest is a claim within the meaning of subsection (6) of Section 3 of the IBC as the first respondent is seeking a right to payment of the deposit amount with interest. Therefore, there is no manner of doubt that there is a debt in the form of a security deposit mentioned in the said two agreements.
Coming back to the definition of a financial debt under sub-section (8) of Section 5 of the IBC, in the facts of the case, there is no doubt that there is a debt with interest @21% per annum. The provision made for interest payment shows that it represents consideration for the time value of money. Now, we come to clause (f) of sub-section (8) of Section 5 of the IBC. The first condition of applicability of clause (f) is that the amount must be raised under any other transaction. Any other transaction means a transaction which is not covered by clauses (a) to (e). Clause (f) covers all those transactions not covered by any of these sub-clauses of sub-section (8) that satisfy the test in the first part of Section 8. The condition for the applicability of clause (f) is that the transaction must have the commercial effect of borrowing. “Transaction” has been defined in sub-section (33) of Section 3 of the IBC, which includes an agreement or arrangement in writing for the transfer of assets, funds, goods, etc., from or to the corporate debtor. In this case, there is an arrangement in writing for the transfer of funds to the corporate debtor. Therefore, the first condition incorporated in clause (f) is fulfilled.
In the financial statement of the corporate debtor for the Financial Year 2016-17, the amounts paid by the first respondent were shown as “other long-term liabilities”. Therefore, if the letter mentioned above and the financial statements of the corporate debtor are considered, it is evident that the amount raised under the said two agreements has the commercial effect of borrowing as the corporate debtor treated the said amount as borrowed from the first respondent.
The NCLAT's view that the amounts covered by security deposits under the agreements constitute financial debt, is agreed upon. As it is a financial debt owed by the first respondent, sub-section (7) of Section 5 of the IBC makes the first respondent a financial creditor.
Appeal dismissed.
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2024 (4) TMI 1066 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Initiation of CIRP - NCLAT admitted the application u/s 7 - NPA - default in repayment of dues - Relevant date of default - date of default should be the date of the Loan Recall Notice or not - scope of Section 10A of IBC - HELD THAT:- It is an admitted fact that the Corporate Debtor owes Rs. 46.80 crores to the financial creditor, though the Appellant has been claiming that as per the Statement Of Account (SOA) the Financial Creditor has attached incorrect and fabricated SOA. Without going into the exact amount of the debt, it is an admitted fact that the debt was Rs.46.80 crores as on the date of declaration of NPA i.e. 27.09.2019. This amount is more than the threshold of Rs.1 crore and is enough for initiating proceedings. There is no requirement to calculate and fix the exact amount of repayment.
Whether the date of NPA declaration (September 27, 2019) or the date of Loan Recall Notice (August 11, 2020) constitutes the default date? - HELD THAT:- In adherence to Reserve Bank of India (RBI) regulations, the classification of Non-Performing Assets (NPAs) serves as a pivotal measure for maintaining the financial health and stability of the banking sector. When a borrower defaults on loan payments for a stipulated period, typically 90 days, the loan account is rightfully classified as an NPA. This classification isn't arbitrary; it's a well-defined threshold indicating a lapse in repayment obligations - In the present case, a loan instalment due on June 30, 2019, remains unpaid. Following the regulatory protocol, on September 27, 2019, marking the 90th day of default, the loan account was rightly categorized as an NPA. This classification is not an arbitrary punishment but rather a consequence of a fundamental breach of repayment terms.
Crucially, the onus lies on the borrower to rectify the default and regularize the loan account. Unfortunately, in this instance, the borrower, despite ample opportunity, failed to address the defaulted payments, thus perpetuating the default status. Such inaction cannot be condoned or overlooked - the bank is well within its rights to pursue its options for the outstanding amounts owed by the borrower.
In the instant case the default was occurring 90 days prior to the NPA declaration (September 27, 2019). It is difficult to accept the argument of the Appellant that this date should not be treated as the date of default.
The remedies stipulated for events of default in the Sanction Letter primarily focus on the acceleration of maturity and the enforcement of security interest, such as filing a Recovery suit before the Debt Recovery Tribunal (DRT) and enforcing security interest under the SARFAESI Act, 2002. Notably, there is no mention of resolution under the IBC. Hence, relying on events of default and their corresponding remedies outlined in the Sanction Letter does not bolster the CD's case and this line of argument cannot be relied upon - Once the CD defaulted and the loan accounts were classified as NPAs, a legal recourse was well within the Bank's statutory rights. Pursuing resolution under the IBC 2016, which serves as a specialized law governing the resolution of distressed entities, was a legitimate course of action for the Bank.
The loan accounts of the Corporate Debtor were officially classified as Non-Performing Assets (NPA) on September 27, 2019, following 90 days of non-payment, thereby triggering a default event. Despite subsequent partial payments made by the borrower, the NPA status and default persisted, indicating a continuous state of default. Consistent with established judicial precedents and the specific circumstances of the case, the date of NPA classification serves as the valid "Date of Default" for initiating insolvency proceedings. Even after the NPA classification, the borrower remained in default. Consequently, September 27, 2019, the date of NPA classification, stands as the "date of default" under the Insolvency and Bankruptcy Code (IBC), superseding any subsequent events, such as the loan recall notice issued on August 18, 2020.
There are no discernible flaws in the orders issued by the Adjudicating Authority; hence, they are upheld without any alteration - Appeal is dismissed.
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2024 (4) TMI 1065 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI
Delayed filing of appeal - relevant date for calculation of time limitation - from the date of pronouncement of the Judgment or from the date of uploading of the judgement - Maintainability of section 9 application - initiation of CIRP Proceedings - HELD THAT:- Under the NCLAT Rules, the provision for preferring an Appeal is contemplated, under section 61, which provides for the time period during which appeal could be filed before the Appellate Tribunal i.e. within the 30 days of passing of the Order, the same could be registered only based on the Certified Copy of the Order upon being produced as per Rule 22, as certified copy has be filed of along with the Appeal - The issue would be as to whether the Free Copy which has been issued under Rule 50 of the NCLT Rules, cannot be taken as to be the Certified Copy under the Provisions of section 22(2) to enable to file an appeal under section 61.
It has not been the case of the Appellant, that the Appeal was accompanied with the Certified Copy as contemplated under Rule 22 of the NCLT Rule and that the Certified Copy would be as provided under sub section 9 of section 2 of the NCLT Rules, which could be taken as to be the basis for the purpose of determining the period of limitation. The limitation to file appeal would be determined only from the date of pronouncement of the Judgment i.e, dated 31.10.2023, uploading of the Impugned on 09.11.2023 it becomes insignificant. It is admitted case of the Appellant that he has applied for the free copy only on 14.11.2023 by presenting an application before the Registry of the court.
The limitation for filing an Appeal has to be considered from the date of pronouncement of Judgment and not the date on which the Appellant received the Certified Copy, but since he applied Certified Copy on 21.03.2024 the Appeal will not be within the period prescribed under Proviso sub section 2 of Section 61 of the Code. Because, the Appeal itself for its registration was presented before the Registry on 26.12.2023, that too despite of the fact, that the Appellant had already received the Free Copy on 14.11.2023. Even, according to the case of the Appellant, since he received the knowledge and the Free Copy of the Judgment was received by him on 14.11.2023, the appeal since presented on 26.03.2024, would be barred by limitation.
As Condone Delay Application carries no justification as to why the Appeal was filed on 26.12.2023 i.e. beyond the prescribed period of limitation under Law. Even, according to the Appellant himself, the appeal has been filed with 12 days delay. The Appeal is barred by limitation, hence the Condone Delay Application i.e. IA No.95/2024 would stand rejected and consequences there to the Company Appeal (AT) (CH) (Ins) No.29/2024, M/s. Whitehand Services Vs M/s. RD Buildtech and Developers (Karnataka) Pvt. Ltd. would too stand rejected.
Appeal dismissed.
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2024 (4) TMI 1064 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Settlement of belated claims - Condonation of delay in filing the claim - direction to Resolution Professional to admit the claim of the Appellant’s in the category of Financial Creditor - Since the Resolution Plan had already been approved by the CoC, the Adjudicating Authority rejected the claim of the Appellant by the impugned order - whether claims are barred or not in terms of the provisions of IBC and Regulation 12(2) of the CIRP Regulations and also various judicial precedents? - HELD THAT:- In the instant case the date of RFRP issue date is prior to the date of COC meeting which has approved the Resolution plan. Even if later date is taken to the advantage of the Appellant as per above provision, which is later than 90 days, it will not help the Appellant due to peculiar facts of the case, where the claim has been filed after the approval of Resolution Plan by the COC.
For condonation of delay in filing the claims, the Appellant has tried to rely upon Suo Motu Writ Petition (C) No. 3 of 2020 titled “In Re: Cognizance for Extension of limitation” of Hon’ble Apex Court [2020 (5) TMI 418 - SC ORDER]. The protection with regard to extension of limitation granted by the Hon’ble Supreme Court commences from 15.03.2020 and grants protection to cases only where limitation would have expired during the period of 15.03.2020 till 28.02.2022. In the instant case, the time period available with the Appellants, even after 90 days, expired on 13.01.2020, much before the Covid-19 crises began, meaning that the protection granted by the Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 cannot be relied upon to seek refuge.
The issue regarding the belated claims is further enunciated in Pratap Technocrats (P) Ltd. vs. Monitoring Committee of Reliance Infratel Limited, [2021 (8) TMI 553 - SUPREME COURT], wherein the Hon’ble Apex Court has concluded that the jurisdiction of the Adjudicating Authority under Section 31(1) is to determine whether the resolution plan, as approved by the CoC, complies with the requirements of Section 30(2). The NCLT is within its jurisdiction in approving a resolution plan which accords with the IBC. There is no equity-based jurisdiction with the NCLT, under the provisions of the IBC.
In the instant case belated claims have been considered upto 90 days and also of those whose information exists in CRM database, even though they have not filed the claims. The Appellant has filed its claims after 540 days in terms of Section 15 of the Code and approximately two months after the approval of the plan from the CoC on 07.05.2021. The IBC is a time bound process and the Appellant cannot be allowed to reopen this chapter and unleash the hydra headed monster of undecided claims on the Resolution Applicant. Belated claim of the Appellant could not have been accepted by the RP after approval of plan by the Committee of Creditors - Appellant could not have been allowed by the Adjudicating Authority as the CoC in its commercial wisdom had approved the resolution plan on 07.05.2021 itself and the said resolution plan provides for specific treatment of belated claims, if any.
Whether on the basis the materials on record, it can be concluded that the Appellant is a homebuyer or not? - HELD THAT:- Pertinently, the Allotment Letter and the Buy Back Agreement mention different unit numbers: while the Allotment Letter mentions the unit no. D2- 601, the Buy Back Agreement mentions unit no. D2-2002. Further, there is no proof of actual disbursement of the sum of Rs. 50,00,000/- by the Appellant to the Corporate Debtor, such as bank statement, audited accounts, etc. Further, the said payment is not recorded in the Corporate Debtor’s books of accounts. All the above facts do not lend credence to the Appellant’s assertion that she is a genuine homebuyer. In fact, the Appellant herself filed the Claim in Form-C as a Financial Creditor, and not in Form CA as a Homebuyer. Further, the Appellant’s name also does not find mention in the ‘List of Homebuyers who have not submitted Claims’ published by the Resolution Professional.
The claim that the Corporate Debtor has received benefit from the allotment of the Appellant, which now stands void and in compliance of Section 65 of the Indian Contract Act, 1872, the Respondents are liable to restore the benefit received from the allotment of units is not borne out of the facts of this case. As per the records of the Corporate Debtor, there exists no allotment in the Appellant and nor has any acceptable evidence been produced for the receipt of Rs. 50 Lacs by the Corporate Debtor.
From the materials on record, it is noticed that in compliance with the provisions of IBC, the Resolution Professional has undertaken various activities relating to collation and verification of the claims and upon due verification of the books of the account of the Corporate Debtor, it duly reflected the units qua which the claims have been received and the units for which claims have been not received - there are no substance in the claim of the Appellant that the resolution professional has failed to carry out statutory duties as prescribed under Section 25 of the Code.
The claim of the Appellant is that since approval of Resolution Plan is pending before the Adjudicating Authority, its claim can be considered on merits. This issue is examined in detail basis the facts of the case, wherein the Appellant seeks condonation of 540 days and basis the current position of law. It becomes unsustainable to accede to his request to allow his belated claim to be considered, particularly in the background that there is no acceptable material on record to suggest actual disbursement of Rs.50 lakhs to the Corporate Debtor and more so when the Appellant itself has filed Form – C and not CA raising its claim.
Overall, the delay in filing the claim, lack of credible evidence, and inconsistencies undermine the Appellant's case. The Adjudicating Authority's decision to reject the belated claim is upheld, as it aligns with the time-bound nature of CIRP proceedings and the absence of legal grounds for indulgence.
Appeal dismissed.
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2024 (4) TMI 1042 - SC ORDER
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Debt or not - Civil Suit for specific performance - non-allotment of 39100 sq. ft. built-up area of land or not - default in terms of Section 3(12) of the I&B Code, 2016 - it was held by NCLAT that There is no financial debt in favour of the Appellant. It is pertinent to mention that Appellant's pleading is that the amounts have been paid by the Appellant to the Respondent and the consent decree itself is the debt for which Section 7 Application has been filed - HELD THAT:- There are no good ground and reason to interfere with the impugned judgment and hence, the present appeal is dismissed.
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2024 (4) TMI 1015 - SC ORDER
Approval of Resolution Plan - appellant submitted that the personal guarantees given by the individual guarantors, could not have been made the subject matter of the resolution plan with regard to the Corporate Insolvency Resolution Process of the corporate debtor - HELD THAT:- Issue notice, returnable in the week commencing 20.08.2024.
Notice will be served by all modes, including dasti.
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2024 (4) TMI 1014 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Liquidation of the Corporate Debtor - Application seeking extension of timeline for making the payments under the approved Resolution Plan dismissed - HELD THAT:- The Resolution Plan indicates that Resolution Applicant is a technocrat entrepreneur, who is a M. Tech from Indian Institute of Technology (IIT), Mumbai and holds more than three decades of experience in the field of Boilers and Thermal systems related equipment’s design and manufacturing. In his Resolution Plan, the Appellant claimed completion of various projects and detailed the potential and technologies developed by the CD.
As per the Resolution Plan, the amount was to be paid in six tranches. There is no dispute that first three tranches were paid in time and the fourth tranche, which was due on 15.04.2023, could not be paid and fifth tranche also became due in October 2023. It is relevant to notice certain clauses of the Resolution Plan, which contains the sources of fund. Para 5.1.2 refers to ‘Sources of funds’ and one of the items, which was mentioned at Item 10 in table ‘funds for Resolution’ is ‘Recoveries from Litigation, from which it was expected that between 18-24 months Rs.51.40 lakhs would be recovered and total recovery was expected to be Rs.1040.85 lakhs.
The Adjudicating Authority has jurisdiction to grant extension of timeline in making the payment in a Resolution Plan and the view of the Adjudicating Authority that granting of extension of the timeline is modification of the terms of the Resolution Plan is not a correct view. Further, for extension of timeline it is not necessary that CoC should express its concurrence, only then the Adjudicating Authority can exercise its jurisdiction. The jurisdiction is there with the Adjudicating Authority in appropriate case. Granting extension of time in payment as per Resolution Plan for implementation of the Resolution Plan, appropriate jurisdiction is always vested with the Adjudicating Authority to pass appropriate order.
The Adjudicating Authority committed error in rejecting application filed by the Appellant seeking extension of time for payment, on the wrong premise that since the CoC has not approved the extension, the extension cannot be granted. The extension of time in payment is not the modification of the Plan - the order passed by the Adjudicating Authority rejecting application filed by the Appellant is unsustainable and is set aside.
The Appellant is entitled for extension of sometime under the Resolution Plan, so as to ensure that the Plan is fully implemented and complied with - application allowed.
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2024 (4) TMI 970 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Initiation of CIRP - Maintainability of application filed u/s 9 of the Code - additional work got done, with the approval of MD of the Respondent, was not approved by the competent committee - Appellant has taken recourse to Arbitration under MSME Act - Respondent being a government company (PSU) is out of purview of the Code or not - debt of default was not correctly mentioned in the original petition - HELD THAT:- The Impugned Order records that the Respondent doubted existence of letter dated 02.12.2016 and 05.12.2016 as these were not available in the files of the Respondent. It is strange to note that the same Impugned Order, observed in Para 3(vii) of the Impugned Order, where it has been mentioned that the Respondent has stated that a letter dated 11.01.2017 was issued to the claimant intimating that vide earlier letter dated 02.12.2016 and 05.12.2016 the representative of claimant has already been informed that revised BOQ for Kopaganj Project and Ghosi Project has been approved along with terms and conditions as per agreement - Clearly, both the statement recorded in the Impugned Order as submitted by the Respondent are contradictory. The fact is that the Respondent has accepted and communicated to the Appellant regarding acceptance of the revised BOQ and the same should have been dealt with by the Adjudicating Authority suitably.
We feel that it will be travesty of justice, if the claims of the Operational Creditor like the Appellant herein are refuted and denied by Public Sector Undertakings like Respondent herein in such casual, catastrophic and unfortunate manner. Afterall it is the faith on such PSUs, Operational Creditors like the Appellant here in start the execution of the work immediately, sometimes even without for formal contract, based on LOI.
Hence, the ground of alleged lack of proper approval by the committee of the Respondent and therefore, the Respondent is not bound to make the payment is just not acceptable and stand rejected in the strongest terms.
Pre-existing dispute - HELD THAT:- Without going into controversy of Arbitration Award under MSME Act, 2006 V/s the application filed under Section 9 of the Code, it is suffice to note that at the time of filing the application by the Appellant under Section 9 of the Code i.e., on 16.11.2019, there was no petition by the Appellant regarding any arbitration nor any award came in favour of the Appellant which was wrongly presumed to be pre-existing dispute by the Adjudicating Authority in the Impugned Order. On face of it, the assumptions and rational taken by the Adjudicating Authority in this regard on the aspect of pre-existing dispute it patently illegal and required to be treated accordingly.
The Adjudicating Authority has jurisdiction to reject the application being incomplete but is also obligated that before such rejection has to give a notice to the Applicant to rectify the defects in his application within seven days of the date of receipt of such notice from the Adjudicating Authority - no notice seems to have been issued by the Adjudicating Authority to the Appellant.
Once the date of the original application filed under Section 9 of the Code is treated as 26.11.2019, there is no question of any pre-existing dispute - the demand notice under Section 8 of the Code was issued on 03.09.2019 to the Respondent and no dispute was ever raised by the Respondent prior to issue of such demand notice. In fact, the Respondent chose not to reply to such demand notice.
The impugned order is set aside - appeal allowed.
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2024 (4) TMI 969 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
CIRP - Validity of deed of assignment of lease - Seeking to set aside of the notice served upon them by the Respondent - Resolution Professional wanting to inspect and access certain premises belonging to the Appellant - whether the Deed of Assignment was disputed or not by the Appellant? - whether the Lease Deed in respect of the subject property, consequent on its expiry on 14.11.2021, was further extended? - whether the Corporate Debtor was in clear possession of the same at time of commencement of CIRP?
HELD THAT:- Clause 2.1 of the Deed of Lease as placed at para 9 states that the Lease deed clearly stipulated that any extension of the lease after expiry of the lease period shall be through a Lease deed executed between the parties herein and that if no terms are agreed upon, the lease period shall stand automatically expired at the end of the lease period. It is pertinent to point out that the RP had sent a letter to the erstwhile management on 03.08.2023 seeking information on the arrangement under which the Lease Deed had been extended to the Corporate Debtor and whether the store in the subject property was in the possession of the Corporate Debtor as maybe seen at page 156 of Appeal Paper Book (APB). However, no response was admittedly received from the erstwhile management. Neither have any proof of rental payments to the Appellant by the Corporate Debtor after the expiry of the lease has been placed on record to substantiate that the lease continued to subsist - there are no documentation available on record which reliably establishes the extension of lease term beyond the original period.
On looking at the legal notice of vacant possession which was served upon the FSWL by the Appellant on 24.05.2022, the same was undisputedly addressed by them to FSWL and not to the Corporate Debtor. Thus, when this legal notice for vacating the subject property was addressed by the Appellant to the FSWL and not to the Corporate Debtor, it is clear that in the Appellant’s mind the Corporate Debtor had no role or interface qua the subject property - There is nothing on record to substantiate that there is any evidence of renewal/extension of lease. The Adjudicating Authority has only held that there is no evidence to establish handing over of the subject property to the Appellant.
In terms of Section 18(1)(f) of the IBC, undoubtedly the RP is required to take control and custody of any asset belonging to the Corporate Debtor. However, it is significant to note that this provision is subject to the exclusion of assets owned by a third party as provided for under the Explanation Clause. Further, Section 25(2)(a) of the IBC also mandates the RP to take immediate custody and control of all assets of the Corporate Debtor so as to determine the valuation of all the assets of Corporate Debtor - The legislative intent of IBC is that there should be a temporary freeze and prohibition of all actions against the Corporate Debtor to preserve the status quo as it exists on the date of initiation of CIRP so as to enable the Corporate Debtor to resolve its insolvency and bring it back from the throes of corporate death.
The present is a case where CIRP was initiated on 27.02.2022. By virtue of the CIRP order, the IRP/RP was appointed and moratorium had kicked in w.e.f. 27.02.2022. The lease deed in respect of the subject property had been entered into by the Appellant with FSWL on 19.07.2018 for a duration of 3 years and 5 months. The lease deed of the subject property had been allegedly assigned by FWSL to FRL by a purported Deed of Assignment dated 06.08.2018 which is clearly disputed. The lease period between FWSL and the Appellant had ended on 14.11.2021 and documents regarding extension of lease period are not available.
The right of the Corporate Debtor not to be dispossessed as contemplated in Section 14(1)(d) of IBC will have no bearing on the present facts of the case given that the subject property was not under the possession of the Corporate Debtor at the time of admission of the Corporate Debtor into CIRP. Additionally, neither any factual analysis has been done either by the RP or any application of mind shown by the Adjudicating Authority on how the assets located on the subject property was central for the success of the CIRP and Corporate Debtor's survival as a going concern.
Assets owned by a third party in possession of the Corporate Debtor is excluded from the scope of CIRP and moratorium in view of Explanation (a) to Section 18 of the IBC. As the Appellant is a third party and undisputedly the subject property is owned by the Appellant and there is nothing foolproof to show that the Corporate Debtor was in occupation of the same, the subject property clearly fell outside the scope of CIRP and consequently the moratorium - no compelling reasons have been made out before the Adjudicating Authority by the RP to allow access into the subject property and inspection of stock/assets lying therein failing which the CIRP would have been jeopardised.
The impugned order is set aside - appeal allowed.
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2024 (4) TMI 968 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Rejection of Section 7 Application - NPA - live guarantee constitute debt or not - existence of default or not - Corporate Debtor unable to de-risk the live BGs within the time allowed - A settlement was reached between the parties, where the Corporate Debtor agreed to pay a certain amount and de-risk live Performance Bank Guarantees (PBGs) within specified timelines. - HELD THAT:- It is clear that settlement amount having been paid, the Adjudicating Authority did not commit any error in rejecting Section 7 Application, which was only based on Corporate Debtor not being able to de-risk the live BGs within the time allowed. The present is not a case that BGs were invoked and the Corporate Debtor was asked to deposit the amount for invoked BGs. The BG were given by the Bank with regard to various contracts, which were undertaken by the Corporate Debtor and Corporate Debtor was always ready to deposit the amount by 100% cash margin or by giving CBGs. The learned Senior Counsel for the Corporate Debtor has further submitted that after filing of the Appeal the Corporate Debtor has deposited amount of Rs.3.38 crores, which was required by the Bank for extension of two BGs, which were expiring and the amount of Rs.3.38 crores was deposited by the Corporate Debtor, reducing the amount of live BGs to the extent of Rs.4.27 crores only.
In the facts of the present case, the ends of justice will be served in directing the Corporate Debtor to deposit the amount of Rs.3.68 crores with the Appellant, which will be kept in no lien account, to be utilized for clearing the liabilities pertaining to outstanding PBGs, if any. The SBI after adjusting all its liabilities towards live PBGs, may refund the balance amount to the Corporate Debtor. On deposit of the amount of Rs.3.68 crores by the Corporate Debtor, the SBI to release all securities over subject facilities.
The impugned order of the Adjudicating Authority dated 18.07.2023 dismissing Section 7 Application filed by the Appellant, is upheld - The Corporate Debtor to deposit the amount of Rs.3.68 crores with the Appellant within thirty days from today, which shall be kept in no lien account, to be utilized for clearing the liabilities of existing live PBGs, if any. After satisfaction of all live PBGs, the SBI to refund the balance amount to the Corporate Debtor - On deposit of amount of Rs.3.68 crores, the Appellant shall release securities over subject properties and handover the relevant documents to the Corporate Debtor.
Appeal disposed off.
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2024 (4) TMI 914 - SUPREME COURT
Offences triable by Special Court - Offenses under the IBC - offences other than the Companies Act cannot be tried by the Special Court consisting of Sessions Judge or Additional Sessions Judge or not - Whether the Special Court under the Code would be as provided under Section 435 of the Companies Act as it existed at the time when the Code came into effect, or it would be as provided under Section 435 of the Companies Act after the 2018 Amendment?
HELD THAT:- This Court has held that once a finding is recorded that an Act is a self-contained code, then the application of either of the doctrines i.e. “legislation by reference” or “legislation by incorporation” would lose their significance particularly when the two Acts can coexist and operate without conflict.
This Court further held that, in case of general reference in the Act in question to an earlier Act but there being no specific mention of the provisions of the former Act, then it would clearly be considered as ‘legislation by reference’. In such a case, the amending laws of the former Act would become applicable to the later Act. However, when the provisions of an Act are specifically referred and incorporated in the later statute, then those provisions alone are applicable and the amending provisions of the former Act would not become part of the later Act.
This Court in the case of Girnar Traders [2011 (1) TMI 1343 - SUPREME COURT] held that, if the legislature intended to apply the provisions of the Land Acquisition Act generally and wanted to make a general reference, it could have said that the provisions of the Land Acquisition Act would be applicable to the MRTP Act, 1966. This Court observed that such expression was conspicuous by its very absence. This Court held that both these Acts i.e. Land Acquisition Act and the MRTP Act, 1966 are self-contained codes within themselves. This Court observed that the State Legislature while enacting the MRTP Act, 1966 has referred to the specific sections of the Land Acquisition Act in the provisions of the State Act. This Court further observed that none of the sections require application of the provisions of the Land Acquisition Act generally or mutatis mutandis.
The provisions of Section 236(1) of the Code. Under Section 236(1) of the Code, reference is “offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013” - It can thus be seen that the reference is not general but specific. The reference is only to the fact that the offences under the Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act.
The provision of Section 435 of the Companies Act, 2013 with regard to Special Court would become a part of Section 236(1) of the Code as on the date of its enactment. If that be so, any amendment to Section 435 of the Companies Act, 2013, after the date on which the Code came into effect would not have any effect on the provisions of Section 236(1) of the Code. The Special Court at that point of time only consists of a person who was qualified to be a Sessions Judge or an Additional Sessions Judge.
The impugned judgment and order dated 14th February 2022, passed by the learned Single Judge of the High Court of Judicature at Bombay in Writ Petition No.2592 of 2021 is quashed and set aside - Appeal allowed.
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2024 (4) TMI 913 - SC ORDER
Condonation of delay of 181 days in filing appeal - HELD THAT:- The delay of 181 days is beyond the maximum period which can be condoned under Section 62 of the Insolvency and Bankruptcy Code 2016.
The Civil Appeal is accordingly dismissed on the ground of limitation.
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2024 (4) TMI 869 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Rejection of application filed by the Appellant (Suspended Director) before the Adjudicating Authority - Challenging the authority of another director's actions and Approval of Resolution Plan CIRP - The appellant contends that the reply filed by another director on behalf of the Corporate Debtor was unauthorized and vexatious, intended to obscure alleged collusions and mismanagement. - HELD THAT:- The Adjudicating Authority in the impugned order has although noted certain submission of the Appellant made in the application but held that there being no authorization of the Board of Directors to file the application, application appears to be frivolous and seem to have been filed with the view to delay the proceeding. Appellant in the application has not claimed the application is being filed by any authorization of the Board. In the reply which was filed by Respondent No.2, which is also on the record, does not indicate that Respondent No.2 claimed any board resolution for filing reply on behalf of the Corporate Debtor. When reply filed by Respondent No.2 dated 09.05.2023 did not claim any board resolution for filing reply, we fail to see that how the application filed by the Appellant can be rejected on the ground that there is no board resolution supporting filing of the application. Appellant has filed the application as Director of the Corporate Debtor to bring various facts which according to the Appellant indicate that there is collusion between Respondent No.2, 3 and the Financial Creditor and several relevant facts have not been brought before the Adjudicating Authority by Respondent No.2 in his reply. The facts and material brought on the record does indicate that there has been serious dispute between the Directors inter se and a Memorandum of Understanding was also executed on 2901.2022, in which Memorandum of Understanding both the Appellant as well as Respondent No.2 and 3 with other persons were parties.
The observations of the Adjudicating Authority that application has been filed to delay the proceeding also does not commend us. 11.05.2023 was the first date of hearing on which order was reserved. The application was filed within three days i.e. on 14.5.2023, hence, conclusion drawn by the Adjudicating Authority that application has been filed to delay the proceeding is without any basis.
The impugned order set aside - appeal allowed.
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2024 (4) TMI 868 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Direction for payment of fees to the Interim Resolution Professional and reimbursement of Rs 9 lakhs as CIRP expenses - wrong fixation of IRP fees - lack of earnestness and proficiency on the part of the IRP - HELD THAT:- There is no dispute over the fact that only three CoC meetings were held. The 1st, 2nd and 3rd meetings of the CoC were held on 24.06.2019, 13.11.2019 and 31.01.2020 respectively and all the three meetings were attended by the Authorised Representatives of the Appellant. However, when the decision-making process is analysed, it is noticed that that there were clear signs of lethargy and tendency on the part of the Appellant to defer decisions.
Coming to the subject matter of ratification of CIRP expenses incurred by the IRP and appointment of legal counsel; to approve fees to be paid to the IRP @ Rs. 2 lakhs per month and appointment of Resolution Professional and to fix his fees, it is found that this had figured in the agenda for discussion in the first CoC meeting itself but remained inconclusive since the Appellant had informed that they would convey the approval only after securing internal approval from their competent authority. The same paralysis in decision-making continued in the second CoC meeting wherein though the extension of the 90 days of the CIRP of the Corporate Debtor was agreed to by the CoC, on the issue of IRP fees and CIRP expenses it was informed that they would convey the approval within 15 days after securing internal approval from their competent authority.
The Appellant which had been delaying the CIRP process by deferring to take decisions in the CoC meetings on the ground that approval of higher authorities was required. There is substance in the contention of the IRP that the Appellant displayed non-responsive behaviour and lackadaisical approach in the CoC meetings inspite of being the sole CoC member.
During the entire CIRP process, the CoC neither approved the fees of the IRP nor did it raise any objection to the quantum of fees claimed by the IRP - when the IRP has on his own reduced his fees by 50% shows that his endeavours has been to keep his fees reasonable, there was no error on the part of the Adjudicating Authority to agree to the reduced quantum of fees. The IRP had also submitted the detailed chart of CIRP expenses before the Adjudicating Authority. Even the CIRP expenses has been reduced from Rs.11.91 lakhs to Rs.9 lakhs. Hence, there are no cogent ground to entertain any doubt on the application of mind on the part of the Adjudicating Authority in finding the IRP fees and CIRP expenses to be reasonable.
There are no reason to interfere in the impugned order passed by the Adjudicating Authority. The Appellant is directed to pay the erstwhile IRP/Respondent No.1 the fees of Rs 33 lakhs within one month from the date of the order - In so far as, payment of Rs 9 lakhs CIRP expenses is concerned, in terms of orders of this Tribunal dated 01.11.2023, any dues thereof which still remain payable maybe made directly to the bank accounts of those who have incurred the expenses as per details to be provided by the IRP.
Appeal dismissed.
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2024 (4) TMI 867 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Admission of Section 9 application filed by Operational Creditor - time limitation - Section 10A of IBC - HELD THAT:- Section 10A of the Code prohibited filing an application under Sections 7, 9 & 10 for any default arising on or after 25.03.2020. The prohibition continues for one year from 25.03.2020 i.e., upto 24.03.2021. On looking into the Part IV of the application as well as the statement showing particulars of claim it is clear that apart from lease rental from April 2021, all claim was within the 10A period. For lease rental of April 2021, no CIRP can be commenced since it did not fulfil the threshold.
The Adjudicating Authority was of the view that Company Petition is hit by Section 10A and not maintainable. Despite the above observation, the Adjudicating Authority proceeded to admit Section 9 application by the impugned order. It is further relevant to notice that in paragraph 5 of the order dated 09.02.2024, Adjudicating Authority noted the Operational Creditor’s admission, that amount falls within a period stipulated in Section 10A of the Code - Section 10A came to considered by the Hon’ble Supreme Court in Ramesh Kymal Vs. Siemens Gamesa Renewable Power (P) Ltd. [2021 (2) TMI 394 - SUPREME COURT], Hon’ble Supreme Court after noticing the legislative scheme noticed that Section 10A provides that no application for initiation of CIRP can be initiated for a default occurring on or after 25.03.2020. The Hon’ble Supreme Court held that the expression “shall never be filed with the clear indicator that the intent of legislature is to bar the institution of any application”.
When there is a bar of initiation of an application, the mere fact that in the Reply filed of the Corporate Debtor no plea of the Bar was taken is in consequential. Further, Adjudicating Authority itself is aware of plea of Section 10A and has rejected the Amendment Application filed by the Operational Creditor on the ground that Company Petition is barred by Section 10A. Adjudicating Authority committed an error in proceeding to admit Section 9 application without adverting to the bar under Section 10A. Although in paragraph 5 itself the bar of Section 10A was noted which was admission of the Operational Creditor itself.
The purpose and object of Section 9 sub-Section (1) & Section 10A is entirely different. The scheme of the Sections 8 & 9 clearly indicate that Demand Notice can be issued only when there is a default, thus default has to be prior to Demand Notice. In the present case Demand Notice was issued dated 20.04.2021 and the default in the Part IV mentions from March 2020. The lease rental period which was claimed in the Part IV was from March 2020 till April 2021 - even if the lease rental of April 2021 is excluded, the entire claim of Operational Debt falls within 10A period and no application ever could have been filed for the default of the lease rental during the 10A period.
The application filed by the Operational Creditor was clearly hit by Section 10A and ought not to have been admitted. Adjudicating Authority committed error in admitting Section 9 application disregarding the bar under Section 10A - The application filed by the Operational Creditor under Section 9 was clearly barred by Section 10A, and the Adjudicating Authority committed an error in admitting Section 9 application by the impugned order dated 09.02.2024.
The Corporate Debtor is freed from CIRP. The IRP fee and expenses as fixed by the Adjudicating Authority in the impugned order i.e., ₹2,00,000/- shall be paid by Operational Creditor to the IRP if not already paid - the impugned order is set aside - appeal allowed.
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2024 (4) TMI 866 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Approval of Resolution plan - Propriety of the valuation exercise conducted by the RP - lenders of the Corporate Debtor are allowed to pursue the personal guarantees given by the Appellant - Corporate Debtor intended to be kept as a going concern or not - resolution plan was within the contours of Section 30(2) of the IBC or not.
Propriety of the valuation exercise conducted by the RP - HELD THAT:- The RP did not violate the CIRP Regulations in the conduct of the valuation exercise. The RP had followed Regulation 27 to disclose the estimated fair and liquidation value of the Corporate Debtor. Further, we find that the CoC had duly considered and deliberated upon the valuation reports before deciding not to have any report from a third valuer. That being the considered business decision of the CoC, the supremacy of the commercial wisdom cannot be questioned by the Appellants. In fine, there are no infirmity in the conduct of the valuation exercise.
Tenability of the contention of the Appellants that the resolution plan by allowing the lenders of the Corporate Debtor to pursue the personal guarantees given by the Appellant was in violation of law as after the transfer of debts, the liability of the Corporate Debtor would stand extinguished - HELD THAT:- The Appellant was never discharged from its liability qua the personal guarantees under the resolution plan. Moreover, under Section 128 of the Contract Act, the liability of the borrower and guarantor are coextensive and the lender can choose to recover the outstanding shortfall amount from either of them. The contract of guarantee is an independent contract from the Loan Agreement and hence the contract of guarantee does not end if the borrower has failed to discharge the entire liability. Now when we apply the ratio of the judgement of the Hon’ble Supreme Court in Lalit Kumar Jain Vs UOI and Ors [2021 (5) TMI 743 - SUPREME COURT] to the present resolution plan, the personal guarantor is not discharged of his liabilities under the contract of guarantee. The release or discharge of a principal borrower from the debt owed by it to its creditor by operation of law or due to insolvency proceedings or liquidation does not absolve the guarantor of his liability which arises out of an independent contract. There is no specific bar under the IBC that a creditor cannot claim its remaining debt from the guarantor which has not been recovered from the Corporate Debtor - when the CoC in its wisdom has approved the resolution plan which provided for the continued rights of the Financial Creditor against the personal guarantor and did away with the subrogation rights of the personal guarantors, the contention of the Appellant that the liability of the personal guarantors should stand extinguished, not being in sync with the commercial wisdom of the CoC, is clearly devoid of merit.
Allegation that the SRA did not intend to keep the Corporate Debtor as a going concern - HELD THAT:- The SRA did not conceal the fact that he was submitting his plan along with his associates and since there is no bar in bringing other associates as co-applicants, there was nothing irregular in the submission of resolution plan by the SRA along with associates. All that the RP was required to do in such circumstances was to check the eligibility of the associates and this prescriptive requirement of Section 29A of IBC was complied with by the RP. To field response to the third issue raised by the Appellant, it is held that there is no irregularity in the conclusion of the Adjudicating Authority that the RP had carried out the verification exercise in terms of Section 29A of the IBC.
Whether the resolution plan was within the contours of Section 30(2) of the IBC in that it did not contravene the provisions of any law for the time being in force and that no material irregularity was committed by the RP in the CIRP process? - HELD THAT:- The law is thus well settled that commercial wisdom of the CoC approving the Plan cannot be interfered and it can be interfered only when there is statutory non-compliance, i.e., noncompliance of Section 30(2). The Adjudicating Authority has duly analysed the contents of the resolution plan of the SRA which has been approved by the CoC on 26.02.2020 with 99.69% vote share. Furthermore, in the present case, no grounds have been made that resolution plan approved by the CoC and the Adjudicating Authority violates any of the provisions of Section 30(2). Hence the resolution plan passes the muster - Given that the CoC has considered the resolution plan and passed the same with requisite majority and given the well settled legal position that the Adjudicating Authority has limited scope of judicial review available to it and cannot interfere on merits with the commercial wisdom of the CoC, there was no error committed on the part of the Adjudicating Authority in approving the resolution plan.
There are no ground in this appeal to interfere with the impugned order of the Adjudicating Authority approving the Resolution Plan. There is no merit in the Appeal - appeal dismissed.
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