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IBC - Case Laws
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2024 (12) TMI 884
Admission of section 7 application - time limitation - Corporate Debtor has able to prove discharge of liability or not - sufficient grounds made out to invoke Section 65 of the IBC for imposing any penalty on the Financial Creditor.
Whether Section 7 Application filed by Respondents No. 1 to 3, the Financial Creditor herein was barred by time? - HELD THAT:- The project having not commenced within seven months from execution of Agreement, the Plan having not been sanctioned within a period of 6 months and grace period of one month from 16.05.2010, the Project never commenced and under Clause 8, the cause of action arose to Financial Creditor to claim refund of the said investment and the said cause of action cannot remain arrested or suspended till the Financial Creditor exercise its option under Clause 6. Limitation for filing the proceeding for claiming refund of investment long expired after three years from 16.12.2010 i.e., in 15.12.2013 itself.
Long silence of the Financial Creditor after 16.12.2010 till filing of Police Complaint by Corporate Debtor itself speaks volumes of the ground realities and State of Affairs between the Parties. We, thus are satisfied that Application filed by the Financial Creditor was hopelessly barred by time and deserves to be rejected. Adjudicating Authority had only adverted to the one part of the submission of the Appellant that on commencement of limitation from 30.07.2019, the Application was barred by time, without adverting to and finding out as to when the cause of action arose for filing the Section 7 Application to the Financial Creditor. As and above the cause of action for filing the Application arose on 16.12.2010 and Section 7 Application which was filed by the Financial Creditor was hopelessly barred by time.
In the present case, the Project did not commence within 6 months and 1 month grace period, which was provided in the MoU when Project did not commence, cause of action arose to the Financial Creditor as per Clause 8 of AoA noted above. Hence the submission of the Respondent that there being continuous obligation, limitation will not commence cannot be accepted.
In view of admission of Financial Creditor, that out of ₹3 Crores paid by the Financial Creditor to the Corporate Debtor, whether Corporate Debtor has able to prove discharge of liability of balance amount of ₹1.7 Crores? - HELD THAT:- The fact that right after execution of the Agreement on 16.05.2010 till sending of the Police Complaint by Corporate Debtor on 04.07.2019, there is not even the letter of demand of any amount from Financial Creditor to the Corporate Debtor towards refund of ₹3 Crores speaks for itself. The letter dated 15.10.2011 was sent by the Financial Creditor, acknowledging the receipt of the payment of ₹1.3 Crores. A Submission was advanced by the Counsel for the Financial Creditor that after receipt of the letter dated 15.10.2011, Corporate Debtor never wrote back to the Financial Creditor that there was other amounts paid by to the Thakkars - The letter dated 15.10.2011 which was sent by the Financial Creditor was only towards acknowledgement of ₹1.3 Crores. When we read the said letter, the said letter does not indicate that Financial Creditor had complaint of non-receipt of any balance amount apart from ₹1.3 Crores. Thus, the said letter 15.10.2011 cannot read to mean that no amount was paid by the Corporate data towards refund of ₹3 Crores received by them.
The Financial Creditor initiated the proceedings by filing Section 7 Application only after Police Complaint was filed by the Corporate Debtor on 04.07.2019, making allegations against Thakkars. Financial Creditor found an opportunity to launch a proceeding after the receipt of the Police Complaint dated 04.07.2019. It is satisfied that Corporate Debtor had refunded the amount of ₹1.7 Crore to Thakkars and their Company, which was meant for refund to the Investors towards their amount of ₹3 Crores - Silence of Financial Creditor for long 8 years of not writing even letter to Corporate Debtor or Vendors/Thakkars clearly indicates that refund of ₹3 Crores was satisfied. Thus, the Developers have refunded the amount of ₹1.7 Crores through Thakkars and its Companies for payment to Investors.
Whether sufficient grounds have been made out to invoke Section 65 of the IBC for imposing any penalty on the Financial Creditor? - HELD THAT:- On looking into the Reply which was filed by the Corporate Debtor to Section 7 Application, although it was pleaded that there is a collusion between Financial Creditor and Thakkars and they have colluded with each other with mala fide intention to cheat the Corporate Debtor, but there are no averment that Section 7 Application has been filed fraudulently or with malicious intent. In the facts of the present case, especially when Corporate Debtor has not pleaded that proceedings have been initiated maliciously with fraudulent intent, the ingredients of Section 65 are not fulfilled, hence Notice under Section 65 is discharged.
The detail facts and opinion given by the IRP were wholly uncalled for IRP who is giving a certificate on 15.07.2022 is not supposed to know the events and facts which transpired between the Parties from 16.05.2010. Learned Counsel for the IRP submits that in view of the `Form–2’ requiring Optional Certificate, the IRP has given the Option Certificate and there was no mala fide intention of the IRP or an intent to help the Financial Creditor. The Optional Certificate was not necessary, and the use of the word “Optional” itself indicates that unless IRP is aware of the facts and events, he is not required to give facts or opinion - Section 7 Application filed by the Financial Creditor was hopelessly barred by time and was nothing but abuse of process of the Court by the Financial Creditor.
Section 7 Application filed by the Financial Creditor dismissed - appeal allowed.
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2024 (12) TMI 847
Entitlement of members to retention allowance - whether the members of the Appellant Association, which is a registered body in the name of M/s. Lanco Infratech Employees Welfare Association, who are 212 in number, are entitled to be paid with the “retention allowance” or not? - HELD THAT:- On analysing the judgment of Sunil Kumar Jain and Others Vs. Sundaresh Bhatt and Others [2022 (4) TMI 888 - SUPREME COURT] from the perspective of Section 53 of the IBC code, it was rendered in those circumstances where, the issue that came up for consideration before the Hon’ble Apex Court, was pertaining to the claim of the workmen employees towards their wages, salary, during CIRP proceedings. It was not a case which was dealing with, any of the aspect of payment of the retention allowance which is a subject altogether, alien to the one which was under consideration in the matter of Sunil Kumar Jain and others (supra). Hence, the observation made in Para 19, where the determination was being made for the entitlement of salary and wages for the workers who worked during the CIRP proceedings, was based upon a case with a marked distinction, than to the one at hand, where the Appellant claims for the retention allowance which is yet to be established as part of wages and salary.
After having scrutinized the Impugned order of, the Ld. Adjudicating Authority, after considering the rival contentions, and particularly the stand taken by the Appellant, based upon the endorsement of 18.05.2017, pertaining to the denial of payment of the retention allowance amounting to Rs. 2,80,36,076/- it is determined to be non-payable as, no service conditions were placed on record, based upon the terms of the appointment, that the retention allowance did ever form as to be part of an emolument, which was ever made payable to the members of the Appellant association, based upon the service contract entered into with them. The payment slip placed on record and the endorsement of the then Managing Director on which the Ld. Counsel for the Appellant has relied heavily, will not establish the case for making the retention allowance as part of salary in itself in the absence of there being any supporting documents, about its legal enforceability. Accordingly, the Appellant and its members would not be entitled for, the payment of the ‘retention allowance’, for the period of claim since not being part of the salary and since not being a fact established by the Appellant before the Ld. NCLT.
The logic which has been assigned by the Ld. NCLT, while rendering the Impugned Order dated 11.03.2024, does not suffer from any apparent error as such, which could call for any interference, in so far as the aspect and entitlement of, the retention allowance is concerned. But having said so, as far as the amount pertaining to the determination of salary for the month of June 2017 is concerned, that will be considered to be paid as per the decision dated 11.03.2024, subject to the condition that it has not already been paid or it is subjected to a challenge before any superior forum.
The Impugned Order dated 11.03.2024, does not suffer from any apparent error as such, which could call for interference in the exercise of our Appellate jurisdiction - The appeal lacks merit and the same is ‘dismissed’.
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2024 (12) TMI 846
Dismissal of application for non-prosecution - whether the Tribunal while passing the Order dated 11th January, 2024 has passed a speaking Order or not? - violation of principles of natural justice - HELD THAT:- In the present legal system where the party who has engaged his counsel remain supremely confident that his Counsel would appear on his behalf and submit his case, should not be penalized if the Counsel engaged by the Appellant, left for USA without informing the Appellant.
There are no doubt that the parties who have been pursuing this application continuously for two years, i.e. from the date of filing till ultimately dismissed on 6th October, 2023 would not appear deliberately. The Review Application i.e. RA 200 of 2023 which was dismissed by the learned Tribunal is also on the issue that the Counsel for the Appellant did not appear but the Appellant has given the reason for the non-appearance and said reason has not been appreciated by the learned Tribunal while dismissing Restoration Application 2 of 2024.
The Appellant has invested his hard earned money of Rs.65 lakhs and that the claim of the Appellant was once admitted by the IRP and the RP in the list dated 29th June, 2020, the amount claimed by the Appellant was shown as nil, this Appeal deserves to be allowed because the impugned Order is totally non-speaking - the matter is remanded back to the learned Tribunal to decide the said application in accordance with law by passing a speaking order.
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2024 (12) TMI 799
Ownership of the amount in the "No Lien Account" - whether the amount of Rs. 1 Crore lying in the “No Lien Account” with the Appellant/Bank belongs to the Appellant bank or to the Corporate Debtor? - HELD THAT:- It is admitted fact that the said amount was paid on behalf of the Corporate Debtor pursuant to an OTS proposal on 16.07.2017. The purpose of the said payment was to show bona-fide of the Corporate Debtor towards the OTS. It is also admitted fact that OTS did not materialize and the money lying in the “No Lien Account” was not adjusted/enchased by the Bank. Subsequently, the CIRP was initiated on 03.01.2020 and despite repeated requests of the Resolution Professional, the Appellant bank did not release the said amount.
Once the CIRP was initiated, the amount lying in the “No Lien Account”, which on that date belonged to the Corporate Debtor, by natural corollary is an asset of the Corporate Debtor which the IRP/RP was obliged to take under his control/custody as per provisions of Section 18 of IBC, 2016. Since the moratorium had commenced, on initiation of CIRP on 03.01.2020, the Bank in any case could not have appropriated this money.
Following the judgment of the Co-ordinate Bench in the case of Bank of India Vs. Vinod Kumar P. Ambavat [2022 (9) TMI 683 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] and on consideration of the facts of this case, we find that the Adjudicating Authority has rightly held that the said amount of Rs. 1 Crore lying in “No Lien Account” with the Appellant bank is an asset of the Corporate Debtor. The IRP/RP has rightly claimed the said deposit for its utilization in CIRP.
There are no reason to interfere in the order of the Adjudicating Authority and accordingly, this appeal is dismissed.
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2024 (12) TMI 746
Condonation of 16 days of delay in filing Appeal - Appellant herein is not a party to the proceedings - condonable period u/s 61(1) of I & B Code, 2016 - HELD THAT:- It is seen that admittedly here, the knowledge of the Impugned Order was attributed on 19.08.2024 to the Appellant herein, who is not a party to the proceedings, that if the time taken to file the Appeal is contemplated to be determined from the date of knowledge, the Appeal filed by the Appellant, will be well within the proviso to Sub Section 2 of Section 61 of I & B Code, 2016, and that, since, he was not a party to the proceedings and has sought for a complete exemption from filing the Certified copy of the Impugned Judgment by filing an Exemption Application i.e. IA No. 1010 / 2024, the delay in filing the Appeal can be denied to be condoned merely because, he has not applied for the Certified copy within 30 days from the date of the Judgment and even the date of knowledge i.e. 19.08.2024 which was an issue dealt in the matters of V. Nagarajan V. SKS Ispat & Power Limited [2021 (10) TMI 941 - SUPREME COURT (LB)].
Since the law provides the latitude for a complete exemption from supplying the Certified copy, failure to apply for the Certified copy within the prescribed period of limitation from the date of knowledge i.e. 19.08.2024, since applied only on 08.10.2024, may be fatal enough to deny condonation of delay and that too, in the circumstances of the instant case, where the Appeal has been preferred on 14.09.2024 i.e., it was beyond the upper 45 days of time period prescribed under the proviso to Sub Section 2 of Section 61 of the I & B Code, 2016, if computed from the date of pronouncement of the Judgment.
The Appellant will not be falling within the proviso to Sub Section 2 of Section 61 of the I & B Code, 2016. Thus, the instant Appeal deserves rejection on the ground of limitation.
Appeal dismissed.
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2024 (12) TMI 681
Irregularities in the conduct of CIRP by RP - Existence of evidence of irregularity in the conduct of CIRP proceedings by the RP or not - Appellant in their capacity as suspended management was prevented from effectively participating in the CoC deliberations or not - Adoption of the Swiss Challenge Method by the CoC - approval of resolution plan of the SRA - Denial of effective participation to the Appellant in the Committee of Creditors (CoC) meetings.
Adoption of the Swiss Challenge Method by the CoC - HELD THAT:- The Challenge Mechanism envisaged under Regulation 39(1A) by its nature envisages multiple rounds of challenge so as to enable Resolution Applicants to improve their Plans. Regulation 39(1A) does not prohibit CoC from negotiating with Resolution Applicants or asking Resolution Applicants to further increase the Plan value. Any such step taken by the CoC to follow the Swiss Challenge Method cannot be said to be arbitrary or in violation of any statutory provisions of the IBC - The CoC had noted that the process has been carried on by the RP and his team in a completely fair and transparent manner which process was also well explained to all the PRAs. The declaration of the Anchor Bidder was also made in a transparent manner and all the other PRAs were given opportunity to improve the consideration in two rounds of discussions held in the COC meeting on 09.05.2024.
This contention of the Appellant questioning Swiss Challenge method clearly lacks merit as the adoption of Swiss Challenge for value maximization was the outcome of the commercial wisdom of COC. The Adjudicating Authority has not committed any error in holding at para 30 of the impugned order that “a perusal of the 52nd CoC Meeting reveals that the agenda qua adoption of the Swiss Challenge Method and the Anchor Bidding system were duly approved by the CoC in its commercial wisdom.”
Denial of effective participation to the Appellant in the Committee of Creditors (CoC) meetings - HELD THAT:- The RP apprised the members of CoC that despite being the highest bidder, Truflair Buildwell has further improved the offer by Rs 1.50 cr and cured their plan by removing the conditional clause. Thus, clearly this is a case where the revised resolution plan of the SRA was duly considered, evaluated and approved by the CoC before the RP placed the same for the approval of the Adjudicating Authority and hence the ratio of the judgement of the Hon’ble Supreme Court in M.K Rajagopalan [2023 (5) TMI 344 - SUPREME COURT] is clearly not applicable in the present factual matrix.
The CoC members were fully aware of the details of the plan proposals submitted by the PRAs. At this stage, all PRAs were asked to send their best possible offers in a closed envelope and password protected soft copy by 21.05.2024 for consideration of the CoC. This modality was equally applicable on all the PRAs in terms of the decision taken by the CoC. The resolution plans received from PRAs other than the anchor bidder were opened up during the first session of the 54th meeting and was displayed through shared screen during the said meeting. Thereafter the resolution plan submitted by the anchor bidder for approval of CoC was also shared on screen by the RP and then the same was thoroughly evaluated by COC. When the CoC, inspite of being the stakeholder whose interests were most critically affected, had evinced no complaints about the fairness and transparency of the process which had been followed by the RP, there are not much force in the contention of the Appellant that there were irregularities in the process followed by the RP.
Whether the Adjudicating Authority had erred in approving the resolution plan of the SRA? - HELD THAT:- The Hon’ble Supreme Court in a catena of judgments has laid down that commercial wisdom of CoC has to be given paramount importance and cautioned time and again about the need of minimal interference in the commercial decision of CoC to approve the Resolution Plan. It has been held that the opinion expressed by the CoC after due deliberations in the meetings through voting, as per voting shares, is the collective business decision and that the decision of the CoC's commercial wisdom is non-justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of IBC. The Hon’ble Supreme Court has consistently held that it is not open to the Adjudicating Authority or the Appellate Authority under IBC to take into consideration any other factor other than the ones specified in Section 30(2) or Section 61(3) IBC in questioning the decision of the CoC - No sufficient ground has been made out within meaning of Section 61(3) of the IBC to interfere with the decision of the Adjudicating Authority approving the Resolution Plan of the SRA.
The Adjudicating Authority did not err in approving the resolution plan of the SRA. We are also of the considered view that the Adjudicating Authority did not commit any error in rejecting the interlocutory application of the Appellant objecting to the approval by the CoC of the resolution plan of the SRA. In result, the impugned order does not warrant any interference.
Appeal being devoid of merit is dismissed.
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2024 (12) TMI 614
Implementation of the Resolution Plan - release of Non-Fund Based (NFB) facilities - appellant contends that the order passed by the Adjudicating Authority is contrary to the Resolution Plan - one of contention between the parties is that although Resolution Plan contain issuance of NFB facilities after considering the projects where the agreement contains a clause which provide due consideration of the borrower and project by lenders - HELD THAT:- Present is a case where except Bank of Baroda, no other lender has issued any bank guarantee or letter of credit. Present is not a case that the company has defaulted in any of the bank guarantee or letter of credit issued by the bank. At very threshold, the lenders are not operationalising the clauses of the Resolution Plan which provided roll-over of the NBF facilities. It is also not the case of the lenders that the project for which bank guarantee or letter of credit has been asked for are not viable project nor there being any consideration and rejection of issuance of bank guarantee on the basis of evaluation of any project.
Reference made to judgment of this Tribunal in STATE BANK OF INDIA VERSUS MBL INFRASTRUCTURES LIMITED, ANJANEE KUMAR LAKHOTIA [2023 (5) TMI 1082 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] which also arose out of the direction issued by the Adjudicating Authority for implementation of the Resolution Plan. This Tribunal in the above judgment has observed that when the Resolution Plan has been approved, it is obligatory on all stakeholders to act in manner so as to implement the Resolution Plan. The argument that on account of extension of three years and nine months in the implementation of the plan, the plan is no more viable and cannot be accepted was raised and rejected.
Present is a case where Resolution Plan has already been approved by the CoC where decision was consciously taken to roll-over NFB facilities by the existing lenders. It is also not the case that the borrower has defaulted in any of the bank guarantees or letter of credit so as to give any apprehension in the mind of the lenders that borrower will not be able to honour the service the NFB facilities. Direction issued by the Adjudicating Authority is only to the effect that the lenders shall examine the project for which bank guarantees have been asked for and the Respondent shall have right to constantly monitor the business performance of the company and shall be competent to raise flag at appropriate time in case of deviation and take corrective action at that time and company shall furnish information/ documents required by the lenders for review of financial performance of the company after its first release.
The company being EPC contractor has to carry out and to work the contract to earn revenue, without the company carrying any contract it cannot generate revenue. Stopping the company to not able to work any contract due to non-release of bank guarantee is akin to stopping the company from carrying out normal function which shall lead non-compliance of the repayment obligation of the company which can never be object of approval of the Resolution Plan. Counsel for the Respondent has also relied on Joint Lenders’ Meeting held on 26.09.2024 i.e. after passing of the order passed by the Adjudicating Authority where IDBI Bank has also flagged the issue the non-release of NFB limits may jeopardise the operations of the company which will impact the repayment of NCDs to assenting Financial Creditors.
The issue that non-release of NFB limits has also been flagged before the joint lenders meeting and the lenders have to think twice before not acting as per the approved Resolution Plan. Counsel for the Appellant has relied on the judgment of the Hon’ble Supreme Court in VENKATARAMAN KRISHNAMURTHY AND ANOTHER VERSUS LODHA CROWN BUILDMART PVT. LTD. [2024 (2) TMI 1154 - SUPREME COURT] to support his submission that the court cannot rewrite or create a new contract between the parties and has to simply apply the terms and conditions of the agreement as agreed between the parties under the contract.
The NFB Agreement entered between the parties was entered to give effect to the approved Resolution Plan between the parties and the NFB Agreement has to be read in a harmonious manner to give effect to the purpose and intent of the clauses of the approved Resolution Plan. NFB Agreement clearly stipulated “Recital D of the NFB Agreement: The execution of this Agreement and other financial documents by the borrower has been authorised to give effect to the terms of the approved Resolution Plan. Thus, clauses of the NFB Agreement have to be read in a manner to give effect to the Resolution Plan and not to make any clause of the Resolution Plan otiose and unworkable.
There are no merit in these Appeals - Appeals are dismissed.
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2024 (12) TMI 537
Compliance with Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 - agreement for joint sale of the assets by both the liquidators - non-payment of CIRP and liquidation costs by the Appellant.
Compliance with Regulation 21A of the IBBI (Liquidation Process) Regulations, 2016 - HELD THAT:- In the present case, there are ample materials to indicate that Appellant has informed the liquidator of its decision to relinquish its security interest. Letter dated 10.01.2020 relied by the Appellant is referred, thus, there is no applicability of Section 21A(1) in the present case. Reliance which has been placed by the liquidator is on sub-regulations (2) and (3) of Regulation 21A - In the present case, the Appellant after informing the liquidator on 10.01.2020 proceeded to realise its security interest by issuing notice under Section 13(2) on 20.08.2021 which was already intimated to the liquidator on 10.01.2020. Present is a case where liquidator has communicated the Appellant twice for payment of proportionate share of the liquidation costs on 16.02.2023 and 29.05.2023 although communication was sent in response to the said letter by the Appellant but fact remains that no payment was made by the Appellant towards liquidation costs.
Submission of the Counsel for the Appellant that Appellant is ready and has never denied to make the payment shall not make the sub-regulation (3) of Regulation 21A inapplicable. When Appellant has proceeded to realise its security interest it was required to pay the amount as referred to in Regulation 21A (2)(a). The Adjudicating Authority thus, has rightly referred to and relied on Regulation 21A (2) & (3).
The submission of the Counsel for the Appellant as well as Counsel for the Respondent agreed upon that present is a case where Appellant has communicated its intention to realise its security interest, hence, there is no applicability of Regulation 21A(1).
Appellant in Joint Lenders Meeting has agreed for joint sale of the assets by both the liquidators - HELD THAT:- All the stakeholders agreed to the suggestion of the liquidator towards joint sale of the assets. Another Joint Lenders Meeting relied by the Counsel for the Respondent is the Joint Lenders Meeting dated 12.04.2024 where again two representatives of Suraksha were present which is reflected from Annexure R-6 of the reply. In the minutes, it was noted that Suraksha although having agreed in the Joint Lenders Meeting held on 12.04.2024 for joint sale has filed the appeal against the order passed in IA No.1069 of 2023. The representatives of Appellant intimated that they have no instructions from the apposite parties so they are unable to comment on the matter. In the said meeting, even the modalities of the joint sale and appropriation of proceeds to the liquidation estates was mentioned.
Non-payment of CIRP and Liquidation Costs by the Appellant - HELD THAT:- The submission of the Respondent also noted that certain issues regarding 32 acres of land claimed by Gujarat NRE Coke Ltd. is pending consideration before the Adjudicating Authority. Suraksha has not paid the CIRP costs or the liquidation costs - The liquidator did not commit any error in communicating decision dated 29.05.2023 to the Appellant that on account of non-payment of liquidation costs, security interest of the Appellant stood relinquished in terms of Regulation 21A (2) &(3) of the Liquidation Regulations. Adjudicating Authority after considering the submissions of the parties has rightly refused to grant any relief to the Appellant.
This is not a fit case to exercise our Appellate jurisdiction in interfering with the impugned order passed by the Adjudicating Authority - The Appeal is dismissed.
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2024 (12) TMI 536
Application for prayer to set aside the order of admitting the Corporate Debtor into CIRP proceedings under Section 7 of I & B Code - Section 7 application was preferred with malicious intention or not - allegation of malice and fraud - appeal against the approved Resolution Plan - HELD THAT:- Since the Resolution Plan itself which has been approved by the Impugned Order dated 28.05.2024 satisfies the test of Section 30(2) to be read with Section 30(6) of the Insolvency and Bankruptcy Code and since it does not suffer from any defect which could be at all be agitated by the Appellant when he himself has independently agitated the proceedings under Section 7 of the Insolvency and Bankruptcy Code, the Appeal is held to be devoid of merit and the same is accordingly rejected.
Appeal dismissed.
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2024 (12) TMI 474
Condonation of delay in refiling of Company Appeal - delay was intentional or deliberate or not - sufficient reasons for delay condonation or not - HELD THAT:- The delay has to be tested on the parameters of reasonableness so that the objectives of IBC of time-bound resolution is not diluted and the interest of either of the parties involved is not prejudicially affected in any manner.
The question of condoning any delay in refiling would have to be seen in the context of the explanation offered to find out whether the reasons cited were beyond the control of the Applicant and all efforts were made to overcome the delay with due diligence and utmost despatch. There is no hard and fast rule to measure due diligence and due despatch. However, due diligence and despatch can always be assessed from how a prudent person would act or can be expected to act in a timely manner in similar circumstances - It becomes clear that the Applicant was actively litigating before other judicial forum while being clearly negligent in following-up the present matter before the Tribunal. This is indicative of negligence and inaction on the part of the Applicant. No sufficient cause has been made out which would warrant overlooking the delay caused in curing the defects on the grounds of ill-health of the clerk.
There are some other grounds cited to explain the delay in rectifying the defects. One such ground was that as several duplicate emails/SMSs were received from the NCLAT Registry, this had hampered them in effectively attending to the defects in a timely manner. This is a facile explanation as the Registry was duty-bound to convey the defects and since there were admittedly five related appeals with a host of applications, there was nothing unusual for the Registry in communicating the defects to the Applicant by sending bunched automated emails and SMSs. Interestingly, on the one hand, the Applicant has relied on this plea to explain the delay in redressing the defects while on the other hand they have admitted their failure to place on record the duplicate emails/SMSs which impeded their swift action. The lackadaisical approach of the Applicant is further borne out from the fact that it has admitted that their counsel was unable to access these communications sent by the Registry from their own clerk.
The Applicant has clearly failed to indicate any circumstance beyond his control which warranted 121 days to clear the defects. This renders all their explanations for delay to be bald and facile. Since the time of intimation of defects, the Applicant was prevaricating over the defects for nearly four months. No credible, genuine endeavours were made by the Applicant to correct the defects. This shows that the Applicant was casual, callous, careless and negligent in refiling the appeal on time and such inaction or dereliction cannot be countenanced. The Applicant cannot be shown indulgence keeping in view that the IBC proceedings have stringent timelines to be followed and the adjudicatory proceedings have to be completed in a prompt, expeditious and time bound manner.
Thus, sufficient grounds have not been made out for condonation of 121 days’ delay in refiling of the application - application rejected.
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2024 (12) TMI 412
Dismissal of application for condonation of delay of 17 days on the ground that delay only up to a period of 15 days can be condoned under the proviso to Section 61(2) of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- By order dated 29.04.2024, while issuing notice, it was recorded that 29.07.2023 was a gazetted holiday and 30.07.2023 was a Sunday and the appeal was preferred on 31.07.2023. It is also brought to notice that the appellant, Bhupendra Jivrajbhai Surani, had applied for a certified copy of the judgment/order dated 14.06.2023 on 27.06.2023 and the same was prepared and delivered on 30.06.2023. Hence, the total period which has to be excluded for computation of limitation would be 5 days. This being correct, the period of delay in the filing of the appeal would be about 12 days, which is within the condonable limit of 15 days.
The error made in the impugned judgment passed by the NCLAT, as is apparent, had arisen on account of the fact that in the application for condonation of delay, the above facts were not mentioned, and delay of 17 days was sought to be condoned - the application for condonation of delay should be decided on merits.
The matter will be listed before the NCLAT on 29.01.2025, when the next date of hearing will be fixed. If required, the NCLAT will issue notice to the respondent - Appeal allowed.
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2024 (12) TMI 411
Financial Debt or not - Compulsory Convertible Debentures (CCDs) issued by the Corporate Debtor - whether there is time value of money in respect of the debt, which is reflected by debenture? - HELD THAT:- For finding nature of transaction, the documents entered between the parties are the best guide to find out nature of debt, as to whether there was time value of money or not. On looking into the clauses of DSA pertaining to the present case, we are of the considered opinion that the transaction, which was entered between the parties has time value of money and the redemption of debenture was also contemplated and conversion of debenture was operational at the option of Investor. The Issuer has raised the amount by issuance of debenture, which was clearly a ‘financial debt’ within the meaning of Section 5, subsection (8).
There are no good ground to interfere with the order of the Adjudicating Authority, allowing the Application of Respondent No.1. There is no merit in the Appeal - The Appeal is dismissed.
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2024 (12) TMI 410
Admission of Section 7 Application by commencing Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor - relevancy of direction issued by the Reserve Bank of India dated 14.08.2018 to ICICI Bank to initiate CIRP process against the Corporate Debtor for determining default by Corporate Debtor within meaning of Section 3(12) of the IBC - scheme of arrangement was framed to transfer the debt or not - default on part of the Corporate Debtor with regard to debt under Bucket 2B or not - sufficient material brought on record by Financial Creditor to prove debt and default on the part of the Corporate Debtor or not.
Whether the direction issued by the Reserve Bank of India dated 14.08.2018 to ICICI Bank to initiate CIRP process against the Corporate Debtor is not relevant for determining default by Corporate Debtor within meaning of Section 3(12) of the IBC? - HELD THAT:- Application by Financial Creditor has to be filed in Form-1. Part V of Form-1 refers to financial debt documents, records and evidence of default. Thus, Financial Creditor is fully entitled to file documents, records and evidence of default. When direction has been issued by the RBI which is a regulator of banking companies directing for initiation of the CIRP against the Corporate Debtor, the said direction cannot be disregarded or ignored while determining application under Section 7 filed by the Financial Creditor against the Corporate Debtor. The direction issued under Section 33AA of the Banking Regulations Act by the RBI are relevant for determining default by Corporate Debtor within the meaning of Section 3(12).
Whether under the Resolution approved in JLF meeting held on 22.06.2017 for debt of Rs.11833.55 Crore (including interest) a scheme of arrangement was framed to transfer the above debt along with land parcel of equivalent value to an SPV, namely Jaypee Infrastructure Development Ltd., which debt was referable to Bucket 2B, and the Section 7 application filed by the ICICI Bank related to debt of Bucket 2B only? - Whether Master Restructuring Agreement entered on 31.10.2017 between JAL and lenders also covered the facilities, default of which was claimed by the ICICI Bank in application under Section 7 filed against the Corporate Debtor on 06.09.2018? - HELD THAT:- Under the Restructuring Plan approved in JLF meeting held on 22.06.2017 for debt of Rs.11833.55 Crore (including interest) a scheme of arrangement was framed to transfer the above debt along with land parcel of equivalent value to an SPV, namely Jaypee Infrastructure Development Ltd., which debt was referable to Bucket 2B, and the Section 7 application filed by the ICICI Bank related to debt of Bucket 2B only - Master Restructuring Agreement entered on 31.10.2017 between JAL and lenders did not cover the facilities, default of which was claimed by the ICICI Bank in application under Section 7 filed against the Corporate Debtor on 06.09.2018.
Whether the Scheme of Arrangement which was to come into effect w.e.f. 01.07.2017 having not been approved, there is default on part of the Corporate Debtor regarding not servicing the debt of Bucket 2B? - Whether the fact that 1st motion petition, CP (CAA) No.174/ALD/2017 was approved vide order dated 08.12.2017 by NCLT and Second motion petition CP (CAA) No.19(ALD)2018 filed on 23.01.2018 being pending, there shall be no default on part of the Corporate Debtor with regard to debt under Bucket 2B and Section 7 application filed by the ICICI Bank on 06.09.2018 deserved to be rejected? - HELD THAT:- The Scheme of Arrangement which was filed before the NCLT for approval having not been approved, there is default on part of the Corporate Debtor regarding not servicing the debt of Bucket 2B - The fact that 1st motion petition was approved by the NCLT on 08.12.2017 and Second motion petition was filed on 23.01.2018 which remain pending cannot be a ground to hold that there shall be no default on part of the Corporate Debtor with regard to debt under Bucket 2B and Section 7 application filed by the ICICI Bank on 06.09.2018 did not deserve to be rejected on the above ground.
Whether the Corporate Debtor before Adjudicating Authority by filing reply to Section 7 application and other materials had proved that there was no default on part of Corporate Debtor, hence the application under Section 7 did not merit admission? - Whether there were sufficient material brought on record by Financial Creditor to prove debt and default on the part of the Corporate Debtor? - HELD THAT:- MRA dated 31.10.2017 did not cover the facilities for which Section 7 application was filed. Clause 2.2 of the MRA has no applicability and the default for which Section 7 application was filed cannot be treated to be waived by the lenders - The OTS having been submitted by the Corporate Debtor offering upfront amount and the total amount, it does not lie in the mouth of the Corporate Debtor to contend that no default has been committed by the Corporate Debtor. In the OTS proposal submitted on 23.06.2024 to the ICICI Bank, lenders have offered to give upfront payment of Rs.500 Crores (200+300) and total amount of Rs.16,016 Crores. The copy of the OTS proposal dated 23.06.2024 submitted on behalf of the Corporate Debtor has been filed as Annexure R- 18 to the Reply of the Respondent No.1. The OTS proposal submitted both before the Adjudicating Authority as well as before this Tribunal on behalf of the Corporate Debtor contains the clear acknowledgment of debt and default - the findings returned by the Adjudicating Authority on the debt and default are based on materials on record and are affirmed.
Thus, no ground has been made out in this Appeal to interfere with the impugned order - appeal dismissed.
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2024 (12) TMI 363
Validity of the Execution Application in light of the approved Resolution Plan - Respondent has submitted that in view of the finality attained by the order approving the Resolution Plan in respect of the Respondent, the Execution Application does not survive - HELD THAT:- The law as settled by the Hon'ble Supreme Court in the case of Ghanshyam Mishra and Sons Private Limited, Through the Authorised Signatory vs. Edelweiss Asset Reconstruction Company Limited, Through the Director and Others [2021 (4) TMI 613 - SUPREME COURT] enunciates that once the Resolution Plan has been approved by the Adjudicating Authority under Section 31 (1) of the IBC, all such claims which are not a part of the Resolution Plan shall stand extinguished and no person will be entitled either to initiate or to continue any proceedings in respect of a claim which is not part of the Resolution Plan and if the dues owed are not part of the Resolution Plan, they 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 can be continued.
The resolution process is over as the Resolution Plan has been approved by the NCLT on 5th March 2020. The order of the NCLAT dated 6th July 2023 referred to by the learned Counsel for the Respondent also records that the Resolution Plan was finally approved on 5th March 2020 and while rejecting the application filed by the Applicant herein under Section 60 (5) and Section 9 of the IBC on the ground that the same was filed after expiry of several months from the date of the Resolution Plan approved by the Adjudicating Authority observed that the same was also approved by the Appellate Tribunal, of course with a liberty to either of the parties to pursue legal remedy in accordance with law. The order of the NCLAT has not been challenged any further by the Applicant.
It would also not be necessary for an operational creditor of the nature of an Applicant, to be shown separately as a Decree holder or dealt with any differently although a Decree holder undisputedly is a separate class of creditor.
This Execution Application, which has been filed on 28th October 2015 with respect to a claim prior to the date of approval of the Resolution Plan and had admittedly been lodged with the Resolution Professional by the Applicant as an operational creditor, is to receive NIL payment as per paragraph 27 of the order approving the Resolution Plan. Therefore, the claim stands rejected and extinguished and the execution proceeding cannot be continued - thus, no useful purpose would be served in perusing the Resolution Plan or directing the Respondent to furnish the Resolution Plan except to satisfy academic curiosity, in as much as, the Resolution Plan has been approved even by the NCLAT and admittedly there is no challenge to the order of the NCLAT approving the Resolution Plan and even the request for the Resolution Plan by application under Section 60 (5) and Section 9 of the IBC has not been entertained by the NCLT as well as the NCLAT.
The Execution Application and the connected Notice are dismissed as infructuous.
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2024 (12) TMI 362
Admission of application under Section 7 of IBC filed by the Union Bank of India - application under Section 7 was barred by Section 10A or not - declaration of the account as Non-Performing Asset (NPA) - HELD THAT:- Prior to Section 10A period, there is clear acknowledgment by the corporate debtor that there is outstanding amount. During 10A period, two facilities were extended first on 16.09.2020 funded interest term loan (FITL) of Rs.3,21,63,265/- which was repayable by 6th monthly instalment commencing from September 2020. No moratorium was provided and interest to be serviced as and when debited. In the additional affidavit which was filed by the bank before the Adjudicating Authority, statements of account of the Corporate Debtor have been brought on record which indicate that amount of more than Rs.1 Crore was due as on 31.03.2021. Even according to the statement, EMI repayment chart submitted by the Appellant during the course of hearing indicate that there is overdue amount of 5th and 6th EMI and according to own statement of the Appellant, amount due on 31.03.2021 was Rs.1,09,28,247/-.
It is clear that the amount has been calculated w.e.f. 31.03.2021. The amount was claimed due on the date of filing of the application. The calculation chart further clearly state that there was default committed by the corporate debtor even after 10A period. There was continuous default after 10A period which was much more than the threshold amount. Counsel for the Appellant has contended that the bank has treated the date of NPA as date of default which is not in accordance with the RBI guidelines.
Reference made to the judgment of the Hon’ble Supreme Court in Laxmi Pat Surana vs. Union Bank of India & Anr. [2021 (3) TMI 1179 - SUPREME COURT] where Hon’ble Supreme Court has held that ordinarily, upon declaration of the loan account/ debt as NPA that date can be reckoned as the date of default to enable the Financial Creditor to initiate action under Section 7 of the Code.
The facts of the present case, clearly indicate that the borrower is liable to undergo insolvency resolution process and the application under Section 7 filed by the Bank cannot be thrown out on the bar of Section 10A. There being default prior to Section 10A period and subsequent to 10A period, order of the Adjudicating Authority admitting Section 7 application need no interference - It is well settled that at the time of admission of Section 7 application, Adjudicating Authority is not called upon to determine the amount of claim of the Financial Creditor who initiated Section 7 application, and those issues are to be left for Resolution Professional to be determined at the time of collation and admission of the claim.
However, in view of the legal position that default during 10A period cannot be basis for any proceeding under Section 7 only observe that any amount defaulted during 10A period need not be included in the claim admitted of the Appellant.
Appeal dismissed.
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2024 (12) TMI 361
Approval of Resolution Plan - violation of Regulation 37(ba) of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - HELD THAT:- Regulation 37 has to be read to mean that Resolution Plan shall provide for the measures as may be necessary, including but not limited to as has been enumerated in Clause a to m. Clause (ba) on which reliance has been placed by the Appellant is regarding the restructuring of the Corporate Debtor, by way of merger, amalgamation and demerger. The above Clause in the Plan is required to be put if it is necessary, thus it cannot be said that Resolution Plan which does not contain any Plan pertaining to Regulation 37(ba) violates any provisions of law. The use of expression “as may be necessary” clearly indicates the intent of the statutory requirement. The Clause pertaining to restructuring of the Corporate Debtor is required to be put when it is necessary for insolvency resolution of the Corporate Debtor, hence a Plan which does not contain such Clause regarding restructuring of the Corporate Debtor cannot be said to violate any provisions of law.
The Appellant in the Appeal has not made out any ground to the effect that Resolution Plan submitted by Respondent No. 3 violates any of the provisions of Section 30(2) of the IBC. It is well settled that commercial wisdom of the CoC in approving the Resolution Plan needs no interference by the Adjudicating Authority/Appellate Tribunal unless the Plan is violative of Section 30(2). The Hon’ble Supreme Court in the matter of K. Sashidhar Vs. Indian Overseas Bank & Ors. [2019 (2) TMI 1043 - SUPREME COURT], has held that legislature has not endowed the Adjudicating Authority with the jurisdiction or authority to analyse or evaluate the commercial decision of the CoC.
Insofar as submission that proceeding by SRA itself has filed an Application for recall of the approval of the Resolution Plan is not the issue which need to be considered in this Appeal.
There are no ground to interfere with the decision of the Adjudicating Authority approving the Resolution Plan submitted by the Respondent No. 3 - there is no merit in the Appeal - The Appeal is dismissed.
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2024 (12) TMI 360
Irregularities and non-compliance of CIRP Regulations identified by the Adjudicating Authority purportedly committed by erstwhile Resolution Professional in the CIRP of the Corporate Debtor - discharge of professional duties by the erstwhile RP - HELD THAT:- In the impugned order, it has been observed by the Adjudicating Authority that the RP did not act in accordance with the provisions of the IBC and the CIRP Regulations framed thereunder in the conduct of CIRP of the Corporate Debtor and the issue before us is to decide on the tenability of these adverse remarks. It is an admitted fact that the RP had taken the following steps as envisaged in the IBC for conduct of CIRP including the preparation of Information Memorandum; publication of Form-G inviting Expressions of Interest; preparation of provisional list of eligible PRAs; appointment of Transaction Auditor; filing of Section 43 and 66 IBC applications; approval of CoC to the bidding documents and bid process etc.
The irregularities in the conduct of the RP have been observed in the impugned order by the Adjudicating Authority only after the stage of receipt of resolution plans from the three eligible PRAs. One allegation which has been taken note of by the Adjudicating Authority is that RP had allowed multiple revisions in the plan - The RP has also been held responsible by the Adjudicating Authority for having committed the irregularity in that the marking of resolution plans was done by the CoC on the basis of evaluation matrix on 02.04.2024 while the plan of Sanklecha was received on 03.04.2024. The Adjudicating Authority held that marks could not have been allocated by the CoC prior to the date allowed for submission of modifications to the resolution plan. It was held that CoC had never deliberated on the revised resolution plan of Sanklecha which was received on 03.04.2024 which was the last date granted by CoC to the PRAs for submitting resolution plan.
The RP cannot be blamed for having breached the IBC for the CoC to have approved the resolution plan of Parth with requisite majority share which action was taken by the CoC in the exercise of its commercial wisdom - the erstwhile RP has acted in deference to the wisdom of the CoC which is in line with the well settled legal precept of attaching paramount importance to the commercial wisdom of the CoC.
The impugned order is modified to the extent that the observations made by the Adjudicating Authority on the performance and conduct of the RP is expunged. Rest of the operative portion of the impugned order remain unchanged - Appeal disposed off.
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2024 (12) TMI 294
Preferential Transaction under Section 43 of the Insolvency and Bankruptcy Code (IBC) - deposit of VAT by VE Commercial Vehicles Limited - violation of Moratorium imposed under Section 14 of the IBC.
Whether the transaction in question was a Preferential Transaction under Section 43 of the Insolvency and Bankruptcy Code? - HELD THAT:- The condition precedent for attracting Section 43(1) is whether the Corporate Debtor has at any relevant time given a preference in transaction. The present is a case where no transaction was made by the Corporate Debtor which was questioned in Application filed by the RP. Transaction in question was act of depositing of Rs.17,12,094/- by M/s. VE Commercial Vehicles Limited before the Commercial Tax Department in consequence of the Notice dated 03.07.2019. Thus, clearly Section 43 was not attracted and Application under Section 43 was wholly misconceived.
Whether the deposit of the VAT Tax by M/s. VE Commercial Vehicles Limited can be treated to be in violation of Moratorium imposed under Section 14 against the Corporate Debtor? - HELD THAT:- Present is a case where no recovery has been affected by Commercial Tax Department from the Corporate Debtor, the GST Tax Liability of the Corporate Debtor which was not satisfied by the Corporate Debtor was directed to be discharged by M/s. VE Commercial Vehicles Limited which has taken benefit of input tax without GST dues being deposited by the Corporate Debtor. As noted above, under Section 28 of the MP VAT Act, 2002, the recovery can be from any person who holds any money for on account of such dealer or person. M/s. VE Commercial Vehicles Limited has contended before the Adjudicating Authority that it has reversed input tax benefit taken by it by depositing the amount of Rs.17,12,094/-, since the Corporate Debtor did not deposit the GST amount - The transaction which was questioned by the RP before the Adjudicating Authority of M/s. VE Commercial Vehicles Limited depositing the amount of Rs.17,12,094/- before the Commercial Tax Department to reverse the input tax availed by it cannot be in any manner said to be violate provisions of Section 14 of the IBC. Commercial Tax Department did not recover any amount from the Corporate Debtor or form its assets, the amount was recovered from an entity, M/s. VE Commercial Vehicles Limited which had taken the benefit of input tax where GST had not been deposited, hence M/s. VE Commercial Vehicles Limited reversed it benefits of input tax taken from Commercial Tax Department - there was no applicability of Section 14, the transaction in question under which the M/s. VE Commercial Vehicles Limited deposited the amount of Rs.17,12,094/- before the Commercial Tax Department in response of statutory Notice dated 03.07.2019 cannot be said to be in violation of Section 14 of the IBC.
The Adjudicating Authority committed error in directing the Appellant to refund the amount of Rs.17,12,094/-. The Order passed by the Adjudicating Authority directing the Appellant to refund the aforesaid amount is unsustainable and is set aside - appeal allowed.
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2024 (12) TMI 225
Invocation of bank guarantee and its impact on the claim of the Financial Creditor under Section 53 of the IBC - waterfall mechanism under Section 53 of the IBC - effect of moratorium under Section 14 - HELD THAT:- There is no dispute that irrevocable bank guarantee was issued by the Bank which was independent and separate contract between the parties - It is well settled that the moratorium under Section 14 shall not come in the way of invocation of bank guarantee which is independent and separate contract.
In event, the bank guarantee is invoked and any amount is received by Respondent No.1, the claim of Respondent No.1 has to be revised as intimated by the IRP by his email dated 22.12.2022. Recording the aforesaid, we are of the view that there is no error committed by the Adjudicating Authority in allowing the application filed by the Respondent herein.
It will be open for the parties to point out order dated 24.07.2024 passed by the Adjudicating Authority in IA No.699/KB/2023.
Appeal is dismissed.
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2024 (12) TMI 93
Condonation of 104 days delay in refiling of Company Appeal - sufficient reasons for delay or not - HELD THAT:- The impugned order dated 30.04.2024 passed by the Adjudicating Authority has been challenged vide the present Company Appeal No. 1901 of 2024 which was e-filed on 01.06.2024 with a delay of 2 days. Since, sufficient cause had been shown for condonation of delay of two days in filing the Appeal, the same was allowed by this Tribunal. The Registry after due scrutiny, intimated the defects to the Applicant on 14.06.2024 and allowed time to remove the defects in 7 days. The Applicant, however, refiled the Memo of Appeal on 03.10.2024 after a delay of 104 days.
There are no doubts that delay in refiling can be condoned only when the Tribunal is satisfied that there are reasonable and cogent grounds for not refiling the appeal on time. While agreeing that an application for condonation of refiling delay is a matter which is between the Applicant and the Bench in which the Respondent is not supposed to have any determinative say, nonetheless, it cannot be unmindful of the fact that the Bench is equally duty-bound to scrutinise the reasons for delay in refiling the petition and cannot allow any unexplained delay to pass muster. Though the rigours of condonation of delay in refiling are not as strict as condonation of delay in filing, it cannot be oblivious of the fact that IBC is a time bound process and no wanton delay can be permitted in IBC proceedings.
The prime explanation attributed by the Ld. Counsel for the Applicant was difficulty faced by her in obtaining instructions from the client with regard to refiling the appeal and to take requisite steps for listing of the appeal. In the same breath, we also notice that submission was made by the Ld. Counsel for the Applicant that the Applicant was waiting and watching the proceedings before the CoC in respect of the resolution plan. This submission clearly shows that instead of making genuine endeavours to cure the defects, the Applicant was being opportunistic and trying to fine-tune the optimal timing for pressing the appeal. The Applicant was thus deliberately keeping the appeal in defects as a matter of strategy - the Applicant had slept over the defects wilfully and deliberately for more than three months and grounds now cited in the fresh affidavit cannot be construed to be genuine grounds for delay caused by personal difficulty of Applicant.
There are no merit in the Application filed for seeking condonation of 104 days delay in refiling the appeal. The refiling delay application is rejected.
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