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IBC - Case Laws
Showing 281 to 300 of 9149 Records
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2024 (7) TMI 560
Suit for recovery - application filed u/s 9 of IBC - interest @ 24% is calculated from the date of default till the date of filing suit - HELD THAT:- The argument raised by Respondent No. 1 appears to be attractive but in view of the statement made by Respondent No. 1 while appearing in the suit which is already captured in the early part of this order, Respondent No. 1 himself stated that he has received part payment of Rs. 34,00,000/- from the Appellant herein and after giving credit to the said payment, an amount of Rs. 61,18,217/- was remaining which includes principal amount of Rs. 23,70,417/- and interest of Rs. 37,37,710/- @18% p.a. Since, Respondent No. 1 itself has claimed the interest @ 18% which too has been granted by the Hon’ble High Court in its judgment decree dated 14.12.2022, therefore, it does not lie in his mouth to claim interest @ 24% on the balance amount.
The contention of the Appellant and the calculation submitted by him by way of a chart which is already referred to above is accepted, that the remaining amount to be claimed by Respondent No. 1 is less than Rs. 1 Cr. which does not meet the criteria of the threshold, therefore, the application filed under Section 9 of the Code is not maintainable.
The appeal is thus allowed and the impugned order is set aside though without any order as to costs - appeal allowed.
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2024 (7) TMI 559
Maintainability of appeal - initiation of CIRP - Respondent had defaulted in payment of the instalments of the loan - Existence of debt and default - Application hit by Section 10A of the IB Code basis the default date being 15.12.2020.
Maintainability of the Appeal - HELD THAT:- The fresh application complies with this directive, correcting earlier technical errors and accurately reflecting the default date. Therefore, there was no bar on the Appellant to file a fresh application before the Adjudicating Authority against same debt and against the same corporate debtor. And thus the Appeal is maintainable on at least this ground.
Admission of Debt and Default by Respondent - HELD THAT:- The Respondent has explicitly admitted to borrowing funds from the Appellant and defaulting on repayment post-September 2020. Additionally, the Respondent acknowledged that initiating the Corporate Insolvency Resolution Process (CIRP) would be beneficial, supporting the Appellant's case for insolvency proceedings.
Changing of default date - Allowable or not? - HELD THAT:- The Appellant, SIDBI, has clearly demonstrated that the Respondent, Sambandh Finserve Private Limited, has ongoing defaults on its loan repayments. Each missed installment constitutes a fresh default, as evidenced by the statement of accounts. This ongoing failure to meet repayment obligations justifies the initiation of insolvency proceedings - it is clear that each failure of the Respondent to pay an instalment in terms of the repayment plan could be treated as a fresh default in payment of the loan amount.
Interpretation of Section 10A vis-a-vis Admissibility of Fresh Default - HELD THAT:- In the present case, there is a clear case of debt and default, which has been admitted by the Respondent in its Counter Affidavit before the Adjudicating Authority - in the judgment of the Hon'ble Delhi High Court in KOTAK MAHINDRA BANK LTD. VERSUS ANUJ KUMAR TYAGI [2015 (12) TMI 1903 - DELHI HIGH COURT], it was held that the "the fact that that the respondent failed to adhere to the schedule of repayment, would not deprive the right of the appellant to treat each breach as a fresh cause of action" and that "the right to sue would occur, each time when, there is a default in payment of an EMI on its due date." Therefore, it supports the case of the Appellant that each failure of the Respondent to pay an instalment in terms of the repayment plan could be treated as a fresh default in payment of the loan amount.
The material on record (namely the Statement of Account) in the instant case clearly shows that apart from default in 10A period, it was also occurring beyond threshold independently after 25.03.2021 which is beyond the suspension period - each default of the Respondent in non-payment of instalment and interest thereon amounts to fresh cause of default and event of default as per the General Conditions of the Loan Agreement and it could be a sufficient ground to file fresh application. Therefore, in situations of fresh default as in the present case, wherein the default is occurring after the 10A period, insolvency proceedings under section 7 of the IBC are justified.
This Tribunal is of the view that the Appellant, SIDBI, has established a clear case of continuous defaults by the Respondent, Sambandh Finserve Private Limited, post the suspension period of Section 10A of the IBC. The Respondent's admission of debt and default and the consistency of the default date of 10.07.2021 in the fresh application substantiate the Appellant’s claim - The application under Section 7 of the IBC filed by SIDBI for Corporate Insolvency Resolution Process deserves to be admitted against the Respondent, Sambandh Finserve Private Limited - Appeal allowed.
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2024 (7) TMI 389
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - rent to the Operational Creditor/Respondent No. 1 as per lease deed - operational debt - whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt having already become due and payable and whether the said operational debt exceeds an amount of Rs. 1 lakh and is an undisputed debt?
HELD THAT:- The Operational Creditor had been consistently pressing for release of their outstanding amount while there is nothing on record to show that the Corporate Debtor objected or controverted the claims raised by the Operational Creditor prior to the issue of Section 8 Demand Notice.
Respondent No.1 agreed upon that in accordance with the judgement of this Tribunal in Jaipur Trade Expo Centre [2022 (7) TMI 241 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], it is well settled that payment of license fee for use of leased premises for business purposes is clearly an operational debt. A conjoint reading of Sections 5(20) and 5(21) of IBC also clearly establishes that tenancy and lease rent dues fall in the category of operational debt as defined under Section 5(21) of IBC.
It was the sole responsibility of the Lessee to pay the conversion charges. In view of the above, the contention of the Corporate Debtor that in their email of 18.01.2018 they had raised the omission committed on the part of the Operational Creditor does not stand to reason. There are no cogent reasons to disagree with the Adjudicating Authority that this email constitutes a feeble ground to establish a pre-existing dispute - prima facie it is an undisputed fact that the legal notice dated 22.10.2019 was served after the filing of the Section 9 application and therefore cannot qualify as a pre-existing dispute. This lends credence to the contention of the Operational Creditor that this legal notice was served as an after-thought with mala fide intention to raise a spurious defence to evade the liability to clear the outstanding rentals.
Pre-existing dispute or not - HELD THAT:- Since the matter became a ‘Non-Starter’, the mediation application stood closed. In such circumstances, the claim made by the Corporate Debtor that the commercial civil suit was pending in the Tis Hazari Court lacks foundation. Furthermore, when HFPL on their own accord refused to participate in the mediation process, it cannot now embark on the argument that the mediation application signifies pre-existing dispute. Therefore, neither of the two commercial suits can be construed to be a pre-existing dispute.
The Corporate Debtor has defaulted in the payment of operational debt above the prescribed threshold level which amount had clearly become due and payable, and further in the absence of any pre-existing dispute, it is found that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and initiating CIRP. The interim stay on the CIRP process granted by this Tribunal on 16.03.2023 stands vacated.
There is no merit in the appeal - appeal dismissed.
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2024 (7) TMI 388
Maintainability of section 7 application - effect of approval of Resolution Plan in the CIRP of the Principal Borrower on the guarantee which was given by the Corporate Debtor to ICICI Bank - HELD THAT:- In the present case are concerned with claim of discharge of a Guarantor consequent to approval of Resolution Plan under the I&B Code.
It is to be noted that the judgment of the Hon’ble Supreme Court in Lalit Kumar Jain [2021 (5) TMI 743 - SUPREME COURT] has also been subsequently relied and reiterated by the Hon’ble Supreme Court. Reference made to judgment of Hon’ble Supreme Court in Maitreya Doshi vs. Anand Rathi Global Finance Ltd. & Anr. [2022 (9) TMI 1012 - SUPREME COURT] wherein in Hon’ble Supreme Court has quoted the judgment of Lalit Kumar Jain vs. Union of India [2021 (5) TMI 743 - SUPREME COURT] holding that the approval of a resolution plan in relation to a Corporate Debtor does not discharge the guarantor of the Corporate Debtor.
In recent judgment of Hon’ble Supreme Court in Ajay Kumar Radheyshyam Goenka vs. Tourism Finance Corporation India Ltd [2023 (3) TMI 686 - SUPREME COURT] where question arose for consideration as to whether for approval of Resolution Plan by virtue of Section 31 process Section 138 of NI Act cannot be continued.
From the facts brought on the record, it is clear that when Corporate Guarantee was invoked by the ICCI Bank on 16.10.2017 debt of more than Rs.218 Crore was due on the Principal Borrower. Initiation of proceeding against the Principal Borrower for admitted claim of Rs.294,51,35, 655/- itself proves that debt of the Principal Borrower was more than Rs.218 Crores. According to own case of the Appellant, upfront cash has been proposed of only Rs.2,06,00,000/- and rest amount of Rs.273,38,49,866/- was to be paid in preference shares - the submission of the Appellant that the guarantee dated 10.08.2016 stood terminated and unenforceable, cannot be accepted - there are no substance in this submission.
The Adjudicating Authority after considering all relevant aspects of the matter has admitted the Section 7 application against the Corporate Guarantor, in which there are no infirmity - there is no merit in the appeal - appeal dismissed.
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2024 (7) TMI 387
Initiation of CIRP u/s of IBC - debt or default on the part of the Corporate Debtor - unilateral suo-moto cancellation of the settlement agreement - winding up of the Corporate Debtor u/s 433 (e) and 433 (f) and Section 434 r/w Section 439 of Companies Act, 1956 - HELD THAT:- It is noted that the requisites of a novation may include elements like an agreement of all the parties to a new contract, the extinguishment of the old obligations, and the validity in supersession of old contract by the new contract, however, in the present case no such specific clauses exist. We also note that the Settlement Agreement dated 27.08.2019 was only with regard to disposal of the mortgaged properties of the Corporate Debtor.
It is understood that if the contract is altered in material particulars to change its essential character, the modified contract must be read as doing away with the original contract but if the modified contract has no independent contractual force, no new contract comes into play. There are no such wording in settlement agreement dated 27.08.2019.
It is found that in case of Manohur Koyal vs. Thakur Das Naskar [1888 (1) TMI 2 - CALCUTTA HIGH COURT], the plaintiff sued the defendant to recover Rs. 1100 due on a bond and after the due date of the bond, the plaintiff agreed to accept from the defendant, in satisfaction of the bond, Rs. 400/- in cash and a fresh bond for Rs. 700/-. The defendant failed to pay the Rs. 400 and to give the fresh bond of Rs. 700/-. In a suit by the plaintiff to recover the amount of original bond, the defendant contended that the subsequent agreement was a novation. It was held that Section 62 did not apply, as the subsequent agreement was made after the breach of the original contract, and that the defendant having failed to perform satisfactorily which he had promised to give, remained liable on the original, contract. This case is similar to facts of the present appeal and is found to be applicable.
It is found that the existing rupee term loan as well as foreign currency loan assigned by registered assignment deeds remain valid which are relevant documents to establish debt and default - the loans were sanctioned somewhere in 1996 i.e., almost 28 years back and the last assignment deed was signed in favour of the Respondent No. 1 on 16.04.2008 i.e., 16 years back and even after decades, the litigation has been continuing and no recovery could be affected by the original financial creditors or the present Respondent No. 1 in whose favour the assignment deed was signed almost 16 years back. This state of affair is found to be unusual and alarming.
There are no merit in the appeal. The appeal deserved to be dismissed and stand dismissed.
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2024 (7) TMI 386
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - debt and default by the Corporate Debtor qua the Respondent No.1 - whether the default amount crossed the prescribed threshold limit of Rs. 1 cr under Section 4 of IBC? - violation of principles of natural justice - HELD THAT:- It goes without saying that real and effective opportunity to hear is one of the critical quotients of the tenets of natural justice. On seeing material on record, we find that the Appellant did not appear before the Adjudicating Authority on multiple occasions, following which the Adjudicating Authority had directed paper publication of the notice so that the contesting party is put on notice. The notice was duly published in two newspapers on 01.04.2022 but in spite of that, the Appellant failed to remain present before the Adjudicating Authority until the matter was set exparte and reserved for orders. In the given facts of the case, it is satisfying that adequate notice was given to the Appellant to appear before the Adjudicating Authority to present their case.
The justification proffered now by the Appellant to explain their absence is that there was a demise in the family. Even if we give the benefit of this explanation to the Appellant, this ground cannot hold good for having been absent on 18 occasions each time when the matter was fixed for appearance and hearing - there is force in the contention of the Respondent no. 1 that when the Corporate Debtor also had other Directors on the Company, it is left unexplained why the others could not have pursued the matter before the Adjudicating Authority. Thus, this story of demise of a close relative to explain their absence from appearing before the Adjudicating Authority at a time when the matter was listed for hearing on 18 occasions lacks merit and is an eyewash which deserves scant regard.
When the Appellant failed to participate in the proceedings before the Adjudicating Authority despite reasonable opportunity having been afforded to the Appellant, the impugned order cannot be said to have been vitiated on grounds of violation of the principles of natural justice.
This brings to the basic question of debt and default and at the outset it is referred to the guiding principles propounded by the Hon’ble Apex Court in the case of Innoventive Industries Limited v. ICICI Bank [2017 (9) TMI 58 - SUPREME COURT] on admission or rejection of an application filed under Section 7 of the IBC. It is well settled that under the ambit of Section 7 of the IBC, the Adjudicating Authority is to only determine whether a default has occurred and whether the debt, which may still be disputed, was due and remained unpaid. The moment the Adjudicating Authority is satisfied that a default has occurred and the amount of default is more than the prescribed amount under Section 4 of the IBC, the application is to be admitted unless it is incomplete.
It is trite law that under the IBC once a debt which becomes due or payable, in law and in fact, and if there is incidence of non-payment of the said debt in full or even part thereof, CIRP may be triggered by the financial creditor as long as the amount in default is above the threshold limit. Once the Adjudicating Authority is subjectively satisfied that there is a debt and a default has been committed by the Corporate Debtor and the Section 7 application is complete in all respects, the Adjudicating Authority in the exercise of summary jurisdiction has to admit the Section 7 application.
On the question as to whether debt and default was adequately demonstrated before the Adjudicating Authority, basis the records made available before it, the Adjudicating Authority has rightly concluded that it was satisfied with the evidence and material produced before it by the Respondent no.1 to prove that a debt had arisen; that a default has occurred and the default is above the threshold limit of Rs. 1 crore. This is a case where all the pre-requisites for filing a Section 7 stood fulfilled and the Adjudicating Authority cannot be held to have committed an error in admitting the Corporate Debtor into CIRP for having defaulted in repaying a financial debt which was above the threshold limit.
The Adjudicating Authority did not commit any error in admitting the Section 7 application and bringing the Corporate Debtor into the fold of CIRP. The impugned order does not warrant any interference. There is no merit in the Appeal - Appeal is dismissed.
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2024 (7) TMI 385
CIRP - Liability of appellant, being the purchaser of the asset, for past dues of the electricity of the Corporate Debtor (CD) - obtaining a new electricity connection on payment of statutory dues except for the past dues - HELD THAT:- In the case of Paschimanchal Vidyut Vitram Nigam Ltd. [2023 (12) TMI 256 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], this Court has reiterated its view that the past dues cannot be claimed for the purpose of grant of new electricity connection.
It is pertinent to mention that this Court in the case of Paschimanchal has also made a reference to the same clause of due diligence which is there in the sale certificate issued to the Appellant because in that also the property was sold on ‘as is where is, as is what is, whatever there is and without recourse basis’ and framed the question that “electricity dues of the CD who underwent insolvency resolution process/liquidation process can still be insisted against the Successful Resolution Applicant/Successful Auction Purchaser is not res integra?”. The decision in the case of Telangana State Southern Power Distribution Company Ltd. & Anr. Vs. Srigdhaa Beverages [2020 (6) TMI 37 - SUPREME COURT], has also been distinguished in this case and also observed that 'This Tribunal took view that when the Corporate Debtor is sold in the liquidation proceeding, Corporate Debtor cannot be burdened by any past or remaining unpaid outstanding liabilities.'
There is a patent error in the approach of the Adjudicating Authority in dismissing the application of the Appellant, therefore, the present appeal succeeds and the impugned order is hereby set aside though without any order as to costs - Petition allowed.
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2024 (7) TMI 320
Nature of debt - financial debt or not - Financial Creditor or not - whether the decree from the Hon’ble Bombay High Court qualifies as a financial debt under Sections 5(7) and 5(8) of the IBC in the facts of the instant case?.
Nature of debt - HELD THAT:- The IBC defines financial debt as a debt along with interest, if any, with disbursement against consideration for the time value of money - the Hon’ble Supreme Court's decision in M/s Orator Marketing Pvt. Ltd. Vs. M/s Samtex Desinz Pvt. Ltd. [2021 (8) TMI 314 - SUPREME COURT] has also clarified that interest is not a necessary component for a debt to be considered financial, broadening the interpretation of financial debt. It was held that stipulation of the payment of interest is not a condition precedent to qualify as a financial debt.
The threshold for initiating Section 7 proceedings exists even if interest is not considered as noted in Hon’ble Supreme Court's decision in M/s Orator Marketing Pvt. Ltd. Vs. M/s Samtex Desinz Pvt. Ltd. (supra) wherein it was held that interest is not a necessary component for a debt, and therefore the Appellant doesn’t have grounds on this count. In the instant case the Respondent is a decree holder and as per the definition of financial debt and legal precedents we cannot ignore it to be interest.
The arguments of the Appellant that the Respondent has not produced any agreement for the amount claimed by it, which is a sine qua non for falling under Section 5(8) of the IBC, 2016 as the amount paid by the Applicant was not borrowed against the payment of interest nor the claim of the Applicant comes within the meaning of Section 5(8)(d) of the said IBC, 2016, cannot stand the scrutiny of the definition of debt and also the legal precedents.
Procedural and Formal Defects - HELD THAT:- The Appellant has also raised concerns about procedural defects, including incorrect forms and disclosures by the IRP. However, such procedural issues do not fundamentally alter the nature of the debt or the status of the creditor.
The decree from the Bombay High Court, supported by the underlying transaction involving bills of exchange and dishonoured cheques, constitutes a financial debt under the IBC - Respondent No. 1 qualifies as a Financial Creditor - The procedural defects cited by the Appellant do not significantly undermine the validity of the claim under Section 7.
Appeal dismissed.
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2024 (7) TMI 319
Dismissal of application of the Appellant under Section 9 of the Code - pre-existing dispute regarding the machine's performance before service of demand notice - Supplier's breach of contract - delayed delivery and defective machine.
Whether a pre-existing dispute, as argued by the Respondent, existed between the parties before the demand notice was served; basis which the NCLT dismissed the application under Section 9 of the IBC?
HELD THAT:- The Respondent has provided sufficient evidence of this dispute, including documented communication with the Supplier about the machine's defects and delayed delivery. The documented communication between the Respondent and the Supplier shows that the Respondent had consistently raised concerns about the machine’s performance well before the Appellant served the demand notice. It is clear that there was in fact a genuine and bona-fide pre-existing dispute before the (defective/improper) service of the demand notice dated 19.05.2021. The existence of these disputes is substantiated by emails, requests for returns, and settlement discussions.
Significant weight is put on the documented communication between the Respondent and the Supplier concerning the machine's performance issues. These communications, predating the demand notice, demonstrate a genuine dispute regarding the functionality of the machine.
In light of the documented pre-existing dispute concerning the machine's performance, the Adjudicating Authority's decision to dismiss the application is upheld. The Appellant's arguments regarding service of the demand notice and the arbitration clause are immaterial given the presence of a pre-existing dispute.
Appeal dismissed.
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2024 (7) TMI 318
Rejection of section 7 application - Section 7 application filed by Appellant rejected as barred by Section 10A of the IBC - HELD THAT:- The Hon’ble Supreme Court in C Shivkumar Reddy v. Dena Bank [2021 (8) TMI 315 - SUPREME COURT] held that there is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents. There cannot be no quarrel to the above preposition of law laid down by the Hon’ble Supreme Court in the above case. Present is a case where application which was filed by the appellant and date of default mentioned therein clearly fell in Section 10A period and no satisfactory explanation was given by the appellant to permit amendment in the date of default in the application.
The present is not a case where any clarification or explanation is sought to be offered for date of default 05.09.2020 mentioned in Section 7 application. The date of default in itself is sought to be changed as 01.04.2021 without there being any reason or cause.
Section 10A is a beneficial provision to extend certain protection to the corporate debtor during the COVID period. The said benefit cannot be allowed to be taken away indirectly, in event the appellant is permitted to amend the date of default which amendment is not supported by any justifiable cause or reason. Adjudicating Authority did not commit any error in rejecting the application of the appellant for change in date of default. After rejection of application of amendment, the Adjudicating Authority did not commit any error in rejecting Section 7 application as barred by Section 10A - Section 10A clearly mandated that no application can ever be filed with regard to default which has committed during 10A period. Counsel for the Appellant further sought to contend that default is a continuous default and hence, application under Section 7 could not have been said to be barred by Section 10A.
The Adjudicating Authority has after considering all the aspects of the matter has rightly refused the amendment application and rejected Section 7 application filed by the appellant - there is no merit in the appeal - appeal dismissed.
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2024 (7) TMI 317
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operatioal Creditors - time limitation - Effect of winding up petition.
Whether limitation would come to a hold on account of the order passed on 29.03.2016 by the Hon’ble High Court of Calcutta in a petition under Section 433 and 434 of the Act, 1965 filed by the Appellant on 19.02.2016 and it would start to run again on account of order passed by the Hon’ble Supreme Court on 04.10.2019 in the case of Duncans Industries Limited [2019 (10) TMI 301 - SUPREME COURT]? - HELD THAT:- In the earlier part of this order, while referring to the facts of this case, that the petition for winding up was disposed of by the Hon’ble High Court vide its order dated 29.03.2016 only on the ground that by virtue of notification dated 28.01.2016 which came prior to the filing of petition under Section 433 and 434 of the Act, 1956 on 19.02.2016, it was required that in order to take any legal action against the Respondent, the consent of the central government was necessary. However, despite the order dated 29.03.2016 in which the liberty was granted to the Appellant to take recourse in accordance with law, no such application was filed by the Appellant to the Central Government for the purpose of taking its consent to pursue its remedy or recovery of the debt against the Respondent. The Respondent has solely relied upon a decision of the Hon’ble Supreme Court in the case of Duncans Industries Ltd. in which the Appellant and the Respondent were not a party, therefore, it has no bearing at all.
There is hardly any error in the impugned order for the purpose of interference because the Adjudicating Authority has also held that there was ample time with the Appellant to seek prior consent of the Central Government for the purpose of taking action against the Respondent in accordance with law.
There are no error in the impugned order which requires any interference - the present appeal is held to be without any merit and the same is hereby dismissed.
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2024 (7) TMI 271
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - financial creditors - existence of debt and default or not - Stamping of Promissory Note.
Existence of debt and dispute or not - HELD THAT:- The primary requirement for admitting an application under Section 7 of the IBC is the existence of a debt and default. The Appellant has presented several documentary evidence like Loan Agreement dated 01.10.2018, Unsecured Demand Promissory Note dated 01.10.2018, Independent Audit report by N.R. Panchal & Co and also record of information utility authenticated by NeSL on 22.08.2023 - argument of the Respondent-CD that the loan amount of Rs.70,00,000/- was for general Corporate purposes and was in nature of business loan and not a financial loan as explained under Section 5(8) of the Code is not borne out from the facts and the loan agreement itself and cannot be accepted - the evidences presented by the Appellant, including the balance sheet and the 'Record of Default', unequivocally establishes the debt and default.
Stamping of Promissory Note - HELD THAT:- It is evident that, the debt and default are clearly established by the material on record in the form of the Loan Agreement, the Audit Report and also Record of Default (Form D) from the Information Utility (NeSL) taken together, as was examined in earlier part of the Appraisal.
This Appellate Tribunal finds that the Adjudicating Authority erred in dismissing the application under Section 7 of the IBC. The existence of debt and default has been clearly established, and the procedural requirements have been met by the Appellant. The issue of stamping does not outweigh the substantive evidence of debt and default - impugned order set aside - appeal allowed.
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2024 (7) TMI 198
Admission of Section 95 application filed by the Financial Creditor - Personal Guarantor of the Corporate Debtor - date of default - time limitation - it was held by NCLAT that 'There are no error in the order passed by the Adjudicating Authority admitting Section 95 application. There is no merit in the appeal'.
HELD THAT:- It is not required to interfere with the impugned judgment and order passed by the National Company Law Appellate Tribunal, New Delhi. The appeal is, accordingly, dismissed.
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2024 (7) TMI 197
Contempt petition - Determination of Resolution Professional (RP's) fees and expenses - jurisdiction of the Adjudicating Authority to determine the fees and expenses - Regulation 33(2) of CIRP Regulations 2016 - HELD THAT:- The submission of the Appellant that the Adjudicating Authority has no jurisdiction to proceed for computation of fee and expenses, not agreed upon. When the Appellate Tribunal vide its order dated 11.12.2019 has specifically directed in paragraph 19 that Financial Creditor is liable to pay the CIRP cost and fees which was to be reported to the Adjudicating Authority and which was to be determined, the Adjudicating Authority has ample jurisdiction to proceed to examine the entitlement of the fee and expenses.
The direction of the Appellate Tribunal has been substantially complied by the Adjudicating Authority by determining the fee and expenses. The order passed by this Appellate Tribunal on 11.12.2019 is final and binding between the parties and the Financial Creditor cannot escape from liability to pay fee and expenses.
Adjudicating Authority has determined the fee of Rs. 1,00,000/- per month totalling Rs. 7,30,000/- which we are of the view that need to be paid by the Financial Creditor. CIRP expenses has also been approved for Rs. 2,41,512/- which finds approval - However, the direction issued in paragraph 15.3 is uncalled for and is set aside.
The Appellant is liable to pay the amount of Rs. 7,30,000/- plus Rs. 2,41,512/- minus any amount if already paid which payment shall be made to the RP within four weeks from today by a Bank Draft or by R.T.G.S payment - Appeal disposed off.
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2024 (7) TMI 196
Approval of the resolution plan of Successful Resolution Applicant (SRA) - incorrect valuation exercise - valuation contemplated under the relevant CIRP Regulations were duly followed or not by the RP - applicability of Section 29-A(f) of the IBC - HELD THAT:- Admittedly therefore, the Appellant was provided copy of the resolution plan as well as minutes of the CoC meeting and even allowed to attend the CoC meetings. Hence, the allegations raised by the Appellant of the RP not inviting the Appellant to attend the CoC meetings and not being provided with the resolution plan is frivolous and self-contradictory and therefore deserves scant regard. It is clear therefore that the Appellant has unjustifiably claimed that there has been statutory violations and irregularities in the valuation process conducted by the RP.
There are no reasons to disagree with the Adjudicating Authority that the alleged imposition of ban by SEBI on the promoters of the SRA does not hold good because the Securities Appellate Tribunal had set aside the orders of the SEBI - the SRA was eligible to submit the resolution plan for the Corporate Debtor. Thus, even on this count the Appellant has hopelessly failed to validate their contention of alleged irregularity.
When the CoC has approved the Resolution Plan by 100% voting share after considering its feasibility and viability, such decision of CoC is a commercial decision. There can be no fetters on the commercial wisdom of the CoC. It is settled law that commercial wisdom of CoC in approving the Resolution Plan is not to be interfered in the exercise of jurisdiction of judicial review either by the Adjudicating Authority or by this Tribunal in the exercise of its appellate powers - The Adjudicating Authority can reject the resolution plan only when there is noncompliance of Section 30(2) of IBC. There are no adequate grounds shown or material placed on record by the Appellant as to how the plan does not conform to Section 30(2) of IBC.
The Adjudicating Authority did not err in approving the resolution plan of the SRA - 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 - Appeal dismissed.
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2024 (7) TMI 195
Liquidation of Corporate Debtor - exclusion of time period of eighteen months for implementation of the resolution plan - extension of time for implementation of the resolution plan - scope of relevant clauses of the “Basic Assumptions” contained in the resolution plan - HELD THAT:- The Adjudicating Authority has been persuaded to believe that there has been a logjam in the whole resolution process due to the ongoing litigation which was jeopardising the interest of the Financial Creditor and hence in their considered view, liquidation order can be passed in these circumstances - The Adjudicating Authority while passing the impugned order has been clearly persuaded to conclude that implementation of the plan of the SRA was contingent upon the outcome of the litigation proceedings and/or vacation of stay order, and to avoid further jeopardy to the interests of the Financial Creditor arising out of the stalemate in the whole resolution process, liquidation was very much an exercisable option.
In the present facts of the case, the ad interim stay of the orders of the Hon'ble Delhi High Court by the Hon’ble Apex Court undisputedly continues to subsist. For this reason alone, indisputably the assets of the Corporate Debtor have not been effectively made over the SRA. That being the case, there is no doubt that the interim orders of the Hon’ble Supreme Court have led to a complete embargo and stalled the ongoing resolution proceedings.
Clause 8 of the 'Basic Assumptions' provides for discussion between the Appellant and RP and Respondent No. 2 regarding further course of action in case the plan is not implemented within 18 months. The discussion regarding the further course of action contemplated by the plan could only be interpreted to mean discussion regarding implementation of the plan and not liquidation of the Corporate Debtor. Merely, because extending the 18 months’ period would allegedly go against the commercial interests of the Financial Creditor is not a convincing and persuasive ground for the Respondent No. 2 to unilaterally press for liquidation without any deliberations and discussions with the other stakeholders.
On seeing the statutory construct of the IBC, it is Section 33 of the IBC which outlines the grounds for liquidation of a Corporate Debtor. In terms of Section 33(1)(a) of IBC, where the Adjudicating Authority, before the expiry of the CIRP period or maximum period permitted for completion of the CIRP under Section 12 of the IBC, does not receive a resolution plan under Section 30(6) of the IBC, initiation of liquidation can be allowed by Adjudicating Authority. This is not applicable in the present case since a resolution plan is already in place - Admittedly, in the present factual matrix, there is no such non-compliance or default or failure attributable on the part of the SRA in the plan implementation for the Corporate Debtor to be subjected to liquidation. There is nothing on record which have been placed by the Respondents to show any breaches on the part of the SRA in implementing the plan. Hence, Section 33(1)(b) of IBC is also not attracted.
In the present case, the implementation is yet to commence in view of the fetters placed by the ad interim stay orders of the Hon’ble Supreme Court for which no fault can be pinned on the SRA. Thus, when none of the pre-requisite conditions required to be fulfilled before undertaking liquidation process are met, in such circumstances, the Financial Creditor cannot use the forum of the Adjudicating Authority to force liquidation of the Corporate Debtor - It is also settled law that when a higher court grants a stay which stalls the implementation of the resolution plan, the said period can well be excluded from the time period given for implementation of the resolution plan.
The impugned order allowing liquidation of the Corporate Debtor set aside - the Adjudicating Authority directed to allow exclusion of time from 13.12.2021 sought for implementation of the resolution plan - appeal allowed.
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2024 (7) TMI 194
Maintainability of section 7 application - applicability of threshold introduced by Amendment Act 1 of 2020 of the IBC - requirement of application to be filed jointly by not less than 100 allottees under the same real estate project or not less than 10% of the total number of allottees, whichever is less - HELD THAT:- The Adjudicating Authority has correctly held that even a commercial space or unit allotted to Assured Returns Class of Creditors is also covered in the ambit of an ‘allottee’.
After taking notice of the judgement of this Tribunal in Nikhil Mehta [2017 (8) TMI 1017 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], the Adjudicating Authority has also correctly noted that this judgement has nowhere observed that assured returns class of creditors in a particular project do not come under the definition of ‘allottees’. The Adjudicating Authority has further held that in the facts of the present case, as per affidavit of the Corporate Debtor, the total number of allotted units in the Floreal Tower is 504 and 366 allottees therein fall under the Assured Returns Class of Creditors. Since the present Appellants happen to be part of the Assured Returns Class of Creditors, they continue to belong to the substratum of ‘allottees’ and therefore continue to be governed by the threshold limit prescribed under second proviso to Section 7(1) of IBC.
Since the present application was filed before the IBC Amendment Act 1 of 2020 had come into effect, consequently upon the amendment, as financial creditors who are allottees under a real estate project, the Appellants were required to meet the threshold criteria of not being less than 100 such creditors in the same class or not being less than 10% of the total number of creditors in the same class, whichever is less, to qualify to file Section 7 application against the Corporate Debtor. This parameter has clearly not been complied with thereby making the Section 7 application non-maintainable.
The Appellants cannot be said to go out of the definition of ‘allottees’ merely because they are part of MAR plan or that they should be treated in a different category wherein they are not required to comply with second proviso to Section 7(1). The Adjudicating Authority has correctly held that the Appellants continue to hold the status of ‘allottees’ and having filed Section 7 Application, they are mandatorily required to comply with second proviso to Section 7(1) of IBC.
There is no merit in the Appeal - The Appeal is dismissed.
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2024 (7) TMI 193
Maintainability of section 9 application - non-fulfilment of the prescribed threshold limit of Rs.1 crore - dispute of interest exists or not - clubbing of liability - HELD THAT:- The Corporate Debtor having refuted the claim of the Operational Creditor and also denied any liability towards interest payment, the claim regarding interest was clearly disputed. In the given facts and circumstances, we have no hesitation in holding that the Adjudicating Authority had correctly held that the amount of interest having been disputed, the said interest amount cannot be clubbed with the principal amount, thereby threshold criteria laid down under Section 4 of the IBC is not met.
The Adjudicating Authority while dismissing the Section 9 application has relied on two judgments of this Tribunal for not clubbing the interest amount on account of delayed payments with the principal amount.
Learned Counsel for the Appellant has relied on the judgment of this Tribunal in Prasat Agarwal Vs Parasrampuria and Ors. [2022 (7) TMI 835 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH] wherein it held that when interest of delayed payment is stipulated in the invoice, it will entitle the Operational Creditor for right to payment of interest amount along with outstanding principal amount. While there can be no dispute that when an amount of interest is agreed or statutory, the same shall be clearly part of the debt as long as the claim of interest is not disputed. In the present case, however, when the Corporate Debtor in its reply to Section 8 Demand Notice and reply to Section 9 application has clearly and categorically contested the levy of any interest amount and also denied to pay any such interest, this is not a case of payment of any mutually agreed interest. Hence, Prasat Agarwal judgment does not come to the aid of the Appellant as the distinguishing in that case was that the Corporate Debtor had not disputed the levy of interest unlike in the present case where the interest has been both disputed and denied.
The claim for interest being a disputed fact can only be adjudicated by a court of competent jurisdiction. Initiation of CIRP is certainly not an answer in the facts and circumstances of the case. The claim of interest being disputed, no error has been committed by the Adjudicating Authority in rejecting the application under Section 9.
The Adjudicating Authority has rightly rejected the Section 9 application of the Appellant. There is no merit in the Appeal - Appeal dismissed.
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2024 (7) TMI 192
Liquidation of Corporate Debtor - whether the Appellant has failed to implement the Resolution Plan approved by the Adjudicating Authority on 25.03.2024 and whether the company being not active, the Appellant could not infuse the share capital for payments to the creditors as per the Resolution Plan?
HELD THAT:- The Appellant after having failed to make infusion of any amount as per the Resolution Plan and make payment as per timelines has offered to deposit entire remaining amount of Rs.29.34 Crores into an Escrow Account, which deposit is also made subject of fulfilment of condition as noted.
The sequence of events indicate that the Successful Resolution Applicant has clearly failed to implement the Resolution Plan and the ground that fund cannot be infused since status of company was not made active is not sufficient to absolve the liability of the Appellant to implement the plan. It is also relevant to notice that the Resolution Applicant before the Adjudicating Authority at the time of approval of the plan has prayed for waivers which prayer was not granted by the Adjudicating Authority by order dated 25.03.2021.
When the Adjudicating Authority expressly refused to grant any reliefs and concessions, as prayed, the plan was to be implemented by the Successful Resolution Applicant and Appellant cannot be heard to say that unless the Registrar of Companies change the status of the Corporate Debtor into active implementation of plan cannot proceed further. It is also relevant to notice that when no waiver was granted to the Successful Resolution Applicant and there was no challenge to the order of the Adjudicating Authority approving the Resolution Plan, the order dated 25.03.2021 has become final and plan as approved by the Adjudicating Authority along with refusal to grant any waiver and relief was liability of the SRA to implement and it was binding on the SRA. The Adjudicating Authority in the impugned order has considered all the aspects of the matter. The Adjudicating Authority rightly observed that the applications filed by the Corporate Debtor clearly indicates the mindset of the SRA that the plan is conditional and it shall be implemented only after the status of the Corporate Debtor is updated on MCA Portal.
When the Resolution Plan has not been implemented by the SRA, there was no option left with the Adjudicating Authority except for direction for liquidation. The Adjudicating Authority has rightly passed the order for liquidation under Section 33 Sub-section (3) read with Section 33(1)(b) of the I&B Code. After directing for liquidation, the Adjudicating Authority has also not committed any error in dismissing different applications filed by the Appellant.
Present is a case where the Appellant’s case is that he having not been able to infuse the fund by share capital, the implementation of plan cannot begin, which submission has been noted and rejected - appellant is not entitled to any relief - appeal dismissed.
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2024 (7) TMI 118
Approval of Resolution Plan - Sustainability of different eligibility criteria fixed for association of allottees as compared to other Resolution Applicant - eligibility criteria for allottees association being registered prior to 03.01.2020 - locus on Crown Business Park Tower A Association to file appeal - correctness of Resolution plan mentioning unsold area - saleable area available to the Resolution Applicant - sale of car parking area - approval of Resolution Plan while keeping various applications filed by the allottees pending consideration - non- commitment of payment of assured amount by the SRA - denial to Cimco Project equal opportunity to submit a Resolution Plan vitiating the approval of the Resolution Plan submitted by SRA - no opportunity of hearing without passing the order - sufficient material irregularities committed by the Resolution Professional in conduct of the CIRP to justify by interference with the decision of the CoC to approve the Resolution Plan or not.
Whether the different eligibility criteria fixed for association of allottees as compared to other Resolution Applicant is unsustainable and violates the provisions of CIRP Regulations 2016? - HELD THAT:- The different eligibility criteria fixed for Association of Allottees as compared to other Resolution Applicants, does not violate the provisions of CIRP Regulations 2016 and is sustainable.
Whether the eligibility criteria for allottees association being registered prior to 03.01.2020 has no rational basis and was choosen only to oust the Crown Business Park Tower A Association, hence, deserves to be set aside? - HELD THAT:- The eligibility criteria for allottees of Association to be registered prior to 03.01.2020 has rational basis and cannot be set aside. More so, the Appellant in Company Appeal (AT) (Insolvency) No.431 of 2023, who claims to be Association of Allottees, neither filed any objections before the RP or filed any Application before the Adjudicating Authority, challenging the criteria or seeking liberty to file a Resolution Plan. They filed the Application before the Adjudicating Authority after one year and 10 months from the approval of the Resolution Plan by the CoC.
Whether Crown Business Park Tower A Association has locus to file Company Appeal (AT) (Ins.) No. 434 of 2023? - HELD THAT:- Admittedly, there are large number of Members of Association, who are not part of the CoC and the grievance raised is also on claims of large number of Members of the Association have not yet been admitted and kept under verification and further several applications filed by some of the Members, are still pending before the Adjudicating Authority. Looking to the various issues raised by the Appellant in Company Appeal (AT) (Insolvency) No.431 of 2023, it is opined that submission in the Appeal, needs to be considered on merits and the Appeal is not to be thrown out on the ground of locus - Crown Business Park Tower A Buyers Association has locus to file Company Appeal.
Whether the Resolution Plan which mentions 1 Lakh sq. ft. as unsold area depicts an incorrect figure since the addendum to Resolution Plan only mentions 83,940 sq. ft. as available area? - Whether no Resolution Plan could have been approved by the Adjudicating Authority without their being certainty regarding saleable area available to the Resolution Applicant which figure not being final the entire resolution plan deserves to be rejected? - HELD THAT:- It is SRA, who is responsible to take all loss and gain in the Project. We, thus, are of the view that present is a case where in view of the pending applications before the Adjudicating Authority, the Adjudicating Authority itself has directed the applications to be listed after approval of the Plan, no certainty with regard saleable area, could have been made, nor at the time of submission of Resolution Plan, there could have been certainty with regard to saleable area available to the SRA. The SRA, who is Association of Allottees, took the business decision and submitted a Plan for completing the Project on the basis of funds as delineated in the Plan and on the basis of source of funds as mentioned in the Plan - on the ground that Plan mentions 1,00,000 sq. ft as unsold area, which is not in accord with 83,940 sq. ft area mentioned in addendum, the Plan neither fails nor can be interfered with - the Adjudicating Authority took a conscious decision to consider the various IAs filed for acceptance of their claims, after approval of Resolution Plan, there was no certainty of saleable area, even on the date when Adjudicating Authority approved the Resolution Plan. Hence, no fault can be found with there being no certainty of the saleable area of which the SRA was well aware and took a risk to proceed with the Resolution Plan and implemented the same.
Whether there is no certainty with regard to saleable area available to the Resolution Applicant for raising fund in view of the pendency of the large number of applications filed by the allottees before the Adjudicating Authority? - Whether the Resolution Plan ought to have provided receivables from allottee of Rs. 62.95 Cr. as mentioned in the Information memorandum and the figures of Rs.36.66 Cr. only mentioned in Resolution Plan is incorrect figures? - HELD THAT:- It is true that there was no certainty with regard to saleable area available to the Resolution Applicant, in view of large number of applications filed by the allottees before the Adjudicating Authority, but that itself is not any ground to find fault with the Resolution Plan, specially, when the Adjudicating Authority itself has decided to decide the applications after approval of Resolution Plan - The Resolution Applicant providing for receivables of Rs.36.66 crores, cannot be said to be incorrect figure, it being calculated on the basis of area for which claims were accepted, i.e. area 4,26,240 sq. ft.
Whether Resolution Plan proposing to raise funds from sale of car parking @ of Rs.4 lacs is impermissible and the above source of funds was not available to the Resolution Applicants? - HELD THAT:- The RERA Act, 2016 covers under common areas, only the open parking area and in the present case, the SRA was dealing with covered parking, which is on different levels, was constructed on the expenditure of Rs.40 crores and Information Memorandum, clearly mentioned that open parking area was Zero - it is clear that the amount, which was mentioned in the Proposed Funding Plan for allocation of car parking slot, cannot be said to be wrongly included in the Funding Plan - Resolution Plan proposing to raise Rs.54.50 crores from sell of car parking space @ Rs.4,00,000/- was clearly permissible and the above source of fund was available to the Resolution Applicant.
Whether Adjudicating Authority erred in approving the Resolution Plan by the impugned order dated 21.02.2023 while keeping various applications filed by the allottees pending consideration? - HELD THAT:- The Adjudicating Authority consciously directed the applications to be listed after the approval of the Resolution Plan with clear undertaking by the SRA that SRA shall abide by all liabilities and claims, which are accepted by the Adjudicating Authority and bear the consequences. The course adopted by the Adjudicating Authority in the present case, looking into the enormous number of applications, cannot be said to be impermissible. When the SRA came forward with an undertaking that in event the Plan is approved, it shall abide by all subsequent orders, accepting any claim of the allottees, there are no error in approving the Resolution Plan and direction for listing of the applications subsequently.
Whether non- commitment of payment of assured amount of Rs.52.50 Cr. by the SRA is modification of the Resolution Plan? - HELD THAT:- The SRA has clearly contemplated under Clause 8.18.10, if there is any deficit/ shortfall, with regard to amount proposed in the Resolution Plan towards assured returns shall stand modified accordingly. Thus, payment of assured returns of Rs.52.50 crores was itself contemplated in the Plan to be modified in event of any deficit or shortfall. Thus, in event, in the implementation of Plan, the SRA is not able to pay the assured return of Rs.52.50 crores, due to any deficit or shortfall, there can be no modification of the Plan, rather to cover the deficit and shortfall from assured returns payable to the allottees, is part of the Resolution Plan - Non-commitment of payment of assured returns of Rs.52.50 crores by the SRA is not a modification of Resolution Plan.
Whether Cimco Project was denied equal opportunity to submit a Resolution Plan vitiating the approval of the Resolution Plan submitted by SRA? - HELD THAT:- Cimco Projects was well aware about refusal of its request for extension of time. Cimco Projects has filed the Writ Petition in Delhi High Court, which was ultimately dismissed as withdrawn. Despite extension of time granted to the Cimco Projects, on its request, no Resolution Plan was filed. Cimco Projects, having not filed any Resolution Plan despite extension of time, cannot be heard in complaining that it was not given ample opportunity to file the Resolution Plan. Cimco Projects is also party to preferential transaction application filed by the RP - Cimco Projects was granted equal opportunity to submit a Resolution Plan. It having sent its Expression of Interest, it was open for Cimco Projects to file the Plan in which it failed - Cimco Projects having been granted ample opportunity to submit a Resolution Plan, hence, the approval of Resolution Plan is not vitiated on the above ground.
Whether the Appellant- Amarjit Singh, Suspended Director was not given any opportunity in passing the order dated 23.02.2023 and his objection by IA No.5006 of 2021 was rejected without hearing the Appellant? - HELD THAT:- Application filed by the Appellant – Amarjit Singh, raising objection to the Resolution Plan was considered and was rejected. Hence, the submission that he was not given any opportunity/hearing or that his objections were not considered, cannot be accepted.
Whether there were sufficient material irregularities committed by the Resolution Professional in conduct of the CIRP to justify by interference with the decision of the CoC to approve the Resolution Plan? - Whether in these appeals sufficient grounds have been made out to interfere with the approval of the Resolution Plan? - HELD THAT:- The mere fact that in the funding of Plan certain saleable area was according to the Appellant, in excess was taken, hence, the entire area of 1,00,000/- sq. ft. was not available and the funding as contemplated was deficient, is not a sufficient ground to find any violation of provisions of Section 30, subsection (2). Further, it is noticed Clause 7.1 and 7.2 of the Resolution Plan, where the SRA has had made provisions for any deficiency and shortfall in the funds available. Thus, the SRA was conscious that even if there is shortfall in funding, there was backup Plan. Hence, on the ground that there was no certainty regarding saleable area available to the SRA and there was certain discrepancy regarding saleable area in the addendum to Informaton Memorandum and the Resolution Plan, is not a ground on which the approval of Resolution Plan can be interfered with by the Adjudicating Authority - approval of Resolution Plan by the CoC, being compliant of Section 30, sub-section (2), has rightly been approved by the Adjudicating Authority and no grounds have been made out in these Appeal(s) to interfere with the approval of Resolution Plan.
Whether, the Applicants who filed IAs in Company Appeal (AT) (Insolvency) NO.431 of 2023 are entitled for any relief in their Applications? - HELD THAT:- No reliefs can be granted in the IAs, which have been filed by the Applicant(s) as noted above except to pursue the Applications before the Adjudicating Authority.
Appeal disposed off.
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