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IBC - Case Laws
Showing 321 to 340 of 9149 Records
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2024 (6) TMI 51
Application filed by the Resolution Professional (RP) for approval of the Resolution Plan rejected - non-compliance of Section 30(2)(b) and Section 30 of IBC - HELD THAT:- The Adjudicating Authority can reject Resolution Plan only when it is in non-compliance of Section 30(2). From the observations made by the Adjudicating Authority in the impugned order, it is clear that apart from only bare observation that Plan does not confirm to Section 30(2), there are no reasons or material given as to how the plan can be said to be non-compliance of Section 30(2).
As observed with regard to Minutes and Documents which were not filed by RP, it was always open for the Adjudicating Authority to call for the relevant documents from the RP for examination of the same and rejection of the Plan on the ground that RP has not filed Information Memorandum, RFRP and certain Minutes of the CoC is clearly uncalled for - There are no consideration of materials or findings based on any material or facts regarding Plan being non-compliance of Section 30(2). In the facts of the present case, interest of justice be served in setting aside the impugned order passed by the Adjudicating Authority and reviving the application filed by the RP for fresh consideration.
To obviate the delay in disposal of the application, the Minutes and the Documents which have not been filed by RP, may be submitted by RP along with an Additional Affidavit before the Adjudicating Authority within two weeks from today.
Appeal allowed.
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2024 (6) TMI 50
Forfeiture of amount by the Committee of Creditors (CoC) led by the State Bank of India (SBI) - restarint by the CoC from implementing its Resolution Plan or not - Appellant contends that the forfeiture was unlawful and that the CoC’s actions were contrary to the terms of the Resolution Plan and the applicable regulations - Reference to IBBI.
On the Forfeiture of INR 10 Crores - HELD THAT:- Clause 12 of Section 5 of the Resolution Plan, particularly the belowmentioned highlighted portion, clearly brings out that the bank guarantee or equivalent performance security can be invoked and forfeited if the Resolution Applicant withdraws or fails to implement the plan without reasonable cause - In the present case, the CIRP was initiated on 11.04.2017. But the fact is that the CIRP of the Corporate Debtor was still going as on 24.01.2019 and the factum of default by the Appellant attained finality by way of the order PETER BECK AND PETER VERMOEGENSVERWALTUNG LTD. VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LTD. & ANR. ETC. [2022 (2) TMI 1443 - SC ORDER] of the Hon’ble Supreme Court. i.e. when the aforesaid Regulation was very much in force. The Appellant’s contention that this Regulation cannot be applied retrospectively, therefore, without merit, as the CIRP was ongoing when the Regulation came into effect, and the default was established while the Regulation was in force.
Irrespective of the fact whether Regulation 36B(4A) was applicable or not, the forfeiture Clause 12 of Section 5 of the Resolution Plan, as noted by us earlier, clearly provides for the forfeiture in such a situation and the argument of the Appellant, therefore, cannot be accepted.
The Appellant’s failure to provide valid bank guarantees in the internationally acceptable SWIFT format and the inability to meet the financial commitments as stipulated in the Resolution Plan constitute a clear violation of the terms agreed upon. Despite multiple extensions and opportunities provided by the CoC, NCLT and the NCLAT, the Appellant did not fulfil its obligations. This non-compliance justifies the forfeiture of the deposited amount under the provisions of the Resolution Plan and the CIRP Regulations.
On the Alleged Restraint by CoC - HELD THAT:- SBI addressed a letter to Banque de Luxembourg requesting the latter to renew the bank guarantee expiring on 30.08.2019. Banque de Luxembourg issued a letter to SBI refusing to renew the bank guarantee or honour the invocation of the bank guarantee, stating that the bank guarantee cannot be considered as a valid bank guarantee but as a ‘non-effective’ bank guarantee. Subsequently, the Respondent No 2 informed Appellant-Peter Beck to submit a valid and enforceable bank guarantee via SWIFT mode before 11.11.2019, the failure of which will be treated as a default. As a reply to which, Peter Beck sought return of its deposit stating that the sum of INR 10 crore was required to be returned as per applicable laws in respect of share application money, highlighting the fact that this remittance was never intended to be in lieu of the bank guarantee. To the contrary, Peter Beck had admitted in its emails dated 31.8.2019 that the amount deposited was in lieu of Bank Guarantee as evident from the Appellant’s email which is on record - the Appellant is approbating and reprobating on its stance qua the nature of INR 10 Cr. deposited with SBI.
On reference to IBBI - HELD THAT:- The Appellant had deposited INR 10 crores in place of the guarantee. It was availing legal remedies to redress its grievances at various levels. Furthermore, their security deposit of INR is being forfeited as per the AA’s orders. There are no sufficient cause for proceeding under Section 74(3) of the Code as the appellant had deposited INR 10 crores as part of the conditions of the implementation of the resolution plan and cannot be said to be wilfully not implementing the Resolution Plan. However, it is a different matter that it could not proceed further for reasons better known to them - Apart from the orders of forfeiture of INR 10 crs, there are no justification to proceed any further under Section 74(3) of the Code and make a reference to IBBI for taking action against the Appellant under this section.
The forfeiture of INR 10 Crores by the CoC, led by SBI and approved by the AA, was lawful and in accordance with the Resolution Plan and the CIRP Regulations. The Appellant’s failure to comply with the essential terms of the Resolution Plan, including the submission of valid bank guarantees and necessary financial commitments, warranted such forfeiture - there are no sufficient cause for initiation of proceedings in terms of Section 74(3) of the Code.
Appeal dismissed.
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2024 (6) TMI 19
Suspension of registration of the Petitioner herein for a period of two years - influencing registered valuers to change the value of the assets - prescribing non-refundable participation fee on prospective bidders for participating in the auction process at the time of submission of Expression of Interests (EOI) - Appointment of BDO Restructuring Advisory LLP - Paying excess fee to a support service called BRAL, in which the Petitioner was a partner.
Prescribing non-refundable participation fee on prospective bidders for participating in the auction process at the time of submission of Expression of Interests - HELD THAT:- This Court is inclined to accept the contention of the learned Counsel for the Petitioner inasmuch as the Petitioner has not acted in violation of any express contravention of any Regulations or Clauses. Material on record indicates that proviso to Schedule I-(1) (3) of the Regulations was not in force when the auction took place and the proviso to Schedule I-(1) (3) was issued in the year 2021 which is two years after the auction. Since the proviso prohibiting payment of fee for participation in the auction process was brought out only on 30.09.2021, the Petitioner cannot be found guilty of imposing non-refundable participation fee on prospective bidders more so when the reserve price of the assets which were to be sold was much more higher than the participation fee imposed on the prospective bidders for participating in the auction process - this Court is not inclined to accept the view taken by the Board that the Petitioner has violated any Code of Conduct under IP regulations.
Charge against the Petitioner for appointing unregistered valuers - HELD THAT:- This Court is of the opinion that though what the Petitioner has done is not in strict confirmation of the regulations, but this Court finds that the two persons, i.e. Mr. Manish Kaneria and Mr. Rakesh Narula, are registered valuers in their individual capacity - It is not the case of the Respondents that the valuation report given Mr. Manish Kaneria and Mr. Rakesh Narula in the name of their firm has not been accepted or that it has been questioned anywhere. It is also not the case that the valuers to whom Mr. Manish Kaneria and Mr. Rakesh Narula have further outsourced the work, are not registered valuers. No extra fees in the name of outsourcing the work and hiring additional valuers has been paid by the Board. The total fees which have been paid to the registered valuers includes all the work done for valuing the assets of the Corporate Debtor. This Court, therefore, does not find any serious infirmity in the decision taken by the Petitioner which would amount to gross misconduct on the part of the Petitioner.
Appointing BDO Restructuring Advisory LLP - HELD THAT:- A perusal of the records reveals that the Petitioner appointed BRAL for providing support services in the liquidation process of the Corporate Debtor. Undisputedly, the Petitioner is a partner in BRAL. The fee payable to the Liquidator is prescribed under Regulation 4 of the Liquidation Regulations. The facts of the case reveal that appointing BRAL, in which the Petitioner is a partner, is a calculated attempt on the part of the Petitioner to get more fees. The finding of the Disciplinary Committee that the Petitioner has not stated any criteria or basis for calculating fees of BRAL cannot be found fault with. The terms of appointment of BRAL are vague and there is no criterion for fixing its fees. The fact that the fees of BRAL, which was appointed by the Petitioner to provide support services to the Liquidator, exceeds the fees of the Liquidator is sufficient to show misconduct on the part of the Petitioner - The act of the Petitioner is contrary to the intent of the liquidation process. The facts of the case cries aloud that BRAL has not only been engaged to provide support services. The actual motive of the Petitioner behind appointing BRAL was to increase his own fee by circumventing Regulation 4 of the Liquidation Regulations. The fact that fees bill of BRAL has not been cleared does not absolve the Petitioner of the charge of misconduct and contravention of Liquidation Regulations - In view of the above, this Court is of the opinion that the finding of the Disciplinary Committee of the IBBI with respect to the charge of appointment of BRAL, in which the Petitioner himself is a partner, and paying more fees to it than what was paid to the Petitioner himself as the Liquidator of the Corporate Debtor, does not require interference.
This Court is of the opinion that the findings arrived at by the Board that the Petitioner is guilty of the last charge does warrant any interference, and therefore, this Court is not inclined to set aside the Order of suspension of the registration of the Petitioner. However, in view of the fact that out of 24 months of suspension, the Petitioner has already undergone 20 months of suspension, this Court is inclined to modify the punishment of suspension from a period of two years to the period already undergone.
The petition is disposed off.
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2024 (6) TMI 18
Admissibility of section 9 application - initiation of CIRP - existence of pre-existing disputes between the parties or not.
Pre-existing disputes - HELD THAT:- The issue of a pre-existing dispute is no longer res integra and has been elucidated and reiterated by the Hon’ble Supreme Court of India in Mobilox Innovations Pvt Ltd Vs Kirusa Software Pvt Ltd [2017 (9) TMI 1270 - SUPREME COURT]. The concept of pre-existing dispute has been elaborated in detail and the Hon’ble Supreme Court had observed 'Going by the aforesaid test of “existence of a dispute”, it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious.'
The observations of the Hon’ble Supreme Court with regards to a pre-existing dispute qualifies a pre-existing dispute to be a defence which is not spurious, mere bluster, plainly frivolous or vexatious. Thus it enjoins an obligation upon the Adjudicating Authority to arrive at a prima facie satisfaction that a dispute indeed exists with regards to quality or price, which in common parlance and in matters of civil jurisdiction, would be regarded as a triable issue of fact. However, it does not call upon the Adjudicating Authority to venture into the appreciation of the merit of pre- existing dispute and embank upon the adjudication of rival contentions of parties.
What was required to be observed was as to if from the material on record if there exist claims or counter claims in respect of amount to be paid and if the defence is not spurious or mere bluster. Even if no reply to the demand notice was given, it would have not precluded the corporate debtor to bring immediately before the Adjudicating Authority to establish a pre-existing dispute which would lead to rejection of Section 9 petition. Thus the underline rational with regard to a petition of pre existing dispute is clearly that as long as there are trivial issues of facts which requires consideration and adjudication, the same shall be recorded a pre-existing dispute to reject the petition filed under Section 9 of the IBC.
Admittedly CD also filed a petition under Section 9 of Arbitration and Conciliation Act before High Court being Arbitration Petition No.532/2022 which was prior in time to filing of petition under Section 9 and vide order dated 22.09.2022 the High Court of Calcutta with consent of all parties, including the operational creditor appointed an arbitrator to adjudicate upon all disputes between the parties - The fact the Operational Creditor had raised final bill of Rs.17,01,26,320/- upon the principal employer would show the joint measurements had taken place and it could establish an amount of Rs.17 crores approximately was due and payable for the work done by the Corporate Debtor under the sub-contract, which was admittedly awarded by the Operational Creditor to the Corporate Debtor.
There was a pre-existing dispute and hence such disputes cannot be decided in a summary procedure and thus petition under section 9 so filed by the Operational Creditor needs to be dismissed and is accordingly so directed.
Appeal allowed.
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2024 (5) TMI 1467
Maintainability of the fresh application filed under Section 94 of IBC, 2016 without challenging the earlier order dated 01.04.2024 vide which his earlier Application under section 94 of the IBC, 2016 was dismissed for non-compliance -HELD THAT:- The present petition filed by the Applicant/ Personal Guarantor is nothing but abuse of the process of law and has been filed only with an intention to misuse the Interim moratorium granted under section 96 of IBC, 2016, while mis-utilizing the interim moratorium for more than 3 years, which is only aimed at defrauding its creditors and delaying the recovery proceeding under SARFAESI Act, 2002 and other provisions of law.
Once the Applicant/ Personal Guarantor has chosen not to pursue the earlier Application filed under section 94, which was dismissed for noncompliance, the Applicant without filing an appeal against the order dismissing the said petition, could not have filed the present fresh petition under section 94.
The present Application is maintainable in the light of the order dated 28.02.2024 of this Tribunal, wherein liberty was granted to the Applicant/ Personal Guarantor to file a fresh application under section 94(1) IBC, 2016 as per law - not only the Applicant failed to comply with the directions of this Adjudicating Authority in complying with the provisions of Section 94(4) and 94(5) to make the Application complete but also did not challenge the order dated 01.02.2024 of this Adjudicating Authority. Hence, the order dated 01.02.2024 attained finality.
This Adjudicating Authority is sufficiently empowered to examine maintainability of an Application - present application dismissed.
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2024 (5) TMI 1466
Maintainability of the fresh application under Section 94 of the Insolvency and Bankruptcy Code (IBC), 2016 without challenging the earlier order dated 01.04.2024 vide which his earlier Application under section 94 of the IBC, 2016 was dismissed for non-compliance - HELD THAT:- The present petition filed by the Applicant/ Personal Guarantor is nothing but abuse of the process of law and has been filed only with an intention to misuse the Interim moratorium granted under section 96 of IBC, 2016, while mis-utilizing the interim moratorium for more than 3 years, which is only aimed at defrauding its creditors and delaying the recovery proceeding under SARFAESI Act, 2002 and other provisions of law.
Once the Applicant/ Personal Guarantor has chosen not to pursue an earlier Application filed under section 94, which was dismissed for noncompliance, the Applicant without filing an appeal against the order dismissing the said petition, could not have filed the present fresh petition under section 94.
The present petition is maintainable in light of the order dated 28.02.2024 of this Tribunal, wherein liberty was granted to the Applicant/ Personal Guarantor to file a fresh application under section 94(1) IBC, 2016 as per law - this Adjudicating Authority is sufficiently empowered to examine maintainability of an Application.
Present application dismissed.
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2024 (5) TMI 1450
Dismissal of an application of recall of an order - manipulation of books of account and siphoning of funds - fabrication of valuation report - HELD THAT:- The Ld. NCLT had rightly observed there was nothing on record to suggest Respondent No.7 was a necessary and proper party or was required to be summoned as a Respondent only for confirmation of his valuation report, when such valuation report in fact was never denied by the Respondents except it was required to be verified by the Statutory Auditors.
The orders dated 11.01.2024 and dt. 22.02.2024 does not warrant any interference by this Tribunal. There is no merit in the appeal - appeal dismissed.
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2024 (5) TMI 1449
Fixation of rate of interest at 14.85% per annum - HELD THAT:- There are no good ground and reason to interfere with the impugned judgment dated 21.11.2023 passed by the National Company Law Appellate Tribunal, fixing the rate of interest at 14.85% per annum. This determination has been made after considering several facts and taking a holistic picture.
It is clear that the Resolution Professional has to undertake the exercise to verify and compute the principal amount payable by the Corporate Debtor to the respondent no. 2 – Asset Reconstruction Company (India) Limited - the Resolution Plan has already been approved by the Committee of Creditors.
Appeal disposed off.
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2024 (5) TMI 1348
CIRP - Liquidation of corporate debtor - Refund of an amount with interest paid to prevent invocation of their Bank Guarantee - Failure to comply with the terms of the contract - jurisdiction under Section 42 of IBC - HELD THAT:- For the purpose of liquidation, the liquidator has some special powers which are significantly different from those of the RP. Under Section 36 the liquidator forms a liquidation estate where liquidator holds all the properties of Corporate Debtor as a fiduciary, for the benefit of the creditors. Another major function of the liquidator is the consolidation and verification of the claims submitted to him as has been prescribed by Section 35 of the IBC. After their appointment, the liquidator has to issue a public announcement within 5 days from the appointment in Form B of Schedule II of the Liquidation Regulations. The purpose of the public announcement is to call upon the creditors and other such persons to submit their claims in relation to the corporate debtor. After the receipt of the claims, the liquidator shall verify those claims submitted by the creditors and may also ask the creditors to submit any evidence in relation to their claims for the purpose of verification.
In the liquidation process, the liquidator has the power to reject claims raised and if a claim is rejected, a creditor can appeal against this decision to the Adjudicating Authority. After all the required claims have been admitted by the liquidator, he is required to determine the value of the claims for the purpose of distribution of the assets of the Corporate Debtor. This clearly entails the responsibility of more than merely collating claims but verification of claims and determination of their value.
No material has been placed on record by the Appellant which shows that the Corporate Debtor had on any earlier occasion denied making payments against the invoices raised by the Respondent. This gives sufficient room to believe that the Corporate Debtor was satisfied with the level of services performed by TCEL.
Coming to the issue of invocation of BG by the Corporate Debtor, it is the case of the Respondent that having duly performed their obligations arising out of their contract with the Corporate Debtor, and in the absence of any claim for defect or otherwise, action on the part of the RP to invoke the BG of Rs. 56.80 lakh was without any basis - The first chance that the Respondent got to recover the BG equivalent amount which was wrongfully retained by the Corporate Debtor was when the liquidation process commenced and the Respondent acted accordingly.
The liquidator is required to admit or reject a claim, basis documentary evidence. The liquidator is required to independently assess the merits of such claims based on the documents/evidence adduced by each such creditor - the Liquidator has tried to justify the wrongful invocation of BG by raising the feeble defence that the BG equivalent had been paid without any demur or protest which seems to be more of an after-thought to cover the action of the RP.
There are no hesitation in holding that the Respondent cannot be faulted in following the due process in filing its claim with the Liquidator. Furthermore, in the liquidation process, if a claim is rejected by the Liquidator, a creditor can appeal against this decision before the Adjudicating Authority. The Adjudicating Authority enjoys complete jurisdiction under Section 42 of the IBC to deal with the decision of the Liquidator rejecting the claim filed by the Respondent under Section 38 of IBC. This is in consonance with the statutory position set out under the IBC.
The Adjudicating Authority after perusing all material on record has rightly come to the conclusion while passing the impugned order that the Respondent is entitled to refund of Rs. 56.80 lakh being the amount of BG paid by it, alongwith the payment of Rs. 16.73 lakh due in respect of invoice dated 22.11.2017 and accordingly directed the Liquidator to accept these claims.
There are no reasons to interfere with the impugned order - appeal dismissed.
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2024 (5) TMI 1347
Initiation of CIRP - NCLT dismissed the section 9 application - Nature of debt - Operational debt under the IBC or not - existence of pre-existing dispute between the parties or not.
Nature of debt - HELD THAT:- The definition of "operational debt" under Section 5(21) of the IBC is analysed. This definition specifies a claim arising from the provision of goods or services. We find that while the LOI contemplated a future license agreement, the security deposit itself was not directly linked to any service rendered by Seaview.
The judicial precedent as cited by the Appellant in Consolidated Construction Consortium Limited v. Hitro Energy Solutions Pvt. Ltd. [2022 (2) TMI 254 - SUPREME COURT] also looked into. This judgement is only an authority for the proposition that the words "claim in respect of provision of goods or services" includes not only those who supply goods or services to corporate debtor but those who receive goods or services from the corporate debtor and the words “in respect of” must therefore not received a narrow interpretation but the claim must bear some nexus with the provision of goods or services - In the present case the Appellant has neither supplied goods nor services to the Corporate Debtor nor received goods or services from the Corporate Debtor. The said judgement is therefore of no assistance to the Appellant.
In the present case, no GST was payable or has been paid on the security deposit. In the present case, the security deposit was not an advance licence fee but deposit for ensuring that the Appellant entered into a license agreement. The same was not liable to be adjusted against any outstanding or future license fee. No services were rendered nor supplied either by the Appellant to the Respondent nor by the Respondent to the Appellant. On the contrary, the security deposit became liable to be forfeited on account of nonperformance of the obligation of the Appellant i.e. it's requirement to enter into a leave and licence agreement. Thus, this is not a case of supply of goods or services - the scope of "operational debt" under the IBC does not encompass situations like security deposits unrelated to any immediate service rendered.
Existence of Pre-Existing Dispute - HELD THAT:- The IBC mandates that an application under Section 9 is not maintainable if a pre-existing dispute exists between the parties. The presence of such a dispute must be assessed to determine the maintainability of the application - Given the substantial and documented disputes, it is clear that a pre-existing dispute exists. This aligns with the Supreme Court's guidance in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. [2017 (9) TMI 1270 - SUPREME COURT], where it was held that if a dispute exists and requires further investigation, the application under Section 9 cannot be maintained.
Appeal dismissed.
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2024 (5) TMI 1280
Liquidation of Corporate Debtor - CoC’s decision to liquidate was tainted with material irregularity and arbitrariness or not - it was held by NCLAT that 'The CoC has taken a commercial decision, basis their discussion within the lenders and also with the Appellant and they have come to a conclusion for liquidation of the CD. Commercial wisdom of the CoC has been exercised in a clear and forthright manner' - HELD THAT:- There are no reason to interfere with the impugned order dated 8 February 2024 passed by the National Company Law Appellate Tribunal - appeal dismissed.
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2024 (5) TMI 1279
Approval of the resolution plan - e-mail not considered - Challenge to issuance of EOI. - Appellant has not submitted any plan with regard to first EOI, appellant has participated in the second EOI.
Non-consideration of e-mail - HELD THAT:- The submission of the appellant that e-mail which was sent on 05.06.2023 has not been considered whereas documents submitted by SRA has been considered is belied from the record itself where the decision was taken to consider the plan exclusive of the submission dated 05.06.2023. Thus, there are no substance.
Challenge to issuance of 2nd EOI - HELD THAT:- After receipt of the plan, CoC took a decision to invite fresh EOI in pursuance of which appellant participated in the process and his plan was considered. It was open for the appellant to challenge the issuance of 2nd EOI which was never done. Further as submitted by counsel for the appellant, decision was taken by the CoC to invite fresh EOI as plan value was much below the liquidation value.
The appellant cannot be allowed to challenge the issuance of 2nd EOI on this ground - there are no error in the impugned order - appeal dismissed.
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2024 (5) TMI 1226
Refund claim - adjustment of an income tax refund with outstanding liability - set-off exercised by the Respondent, during the intervening period when the CIRP timeline period had expired and the liquidation order was passed - Violation of Moratorium u/s 14 of IBC or not - HELD THAT:- Merely on completion of permissible CIRP time-period, the CIRP process is completed and the effect of moratorium automatically ceases to exist, irrespective of whether the resolution plan is approved or liquidation order is passed, does not commend here - Even if the CIRP period is over with no resolution plan on the anvil and Adjudicating Authority was yet to pass the liquidation order, the creditor of the Corporate Debtor cannot avail of the benefit of set-off during this interregnum by claiming that moratorium had ceased to exist.
Whether the Respondent in the given factual matrix is liable to refund the amount which has been set off against income tax dues? - HELD THAT:- In this case, the set-off exercise undertaken by the Respondent preceded the liquidation orders, hence could not have been allowed by the Adjudicating Authority. It is also strenuously contended that the Income Tax Department cannot claim the status of a secured creditor - reference made to the judgement of the Hon’ble Apex Court in Bharti Airtel Ltd vs Vijaykumar V. Iyer [2024 (1) TMI 187 - SUPREME COURT] wherein after explaining the contours and different meanings that can be ascribed to the term ‘set-off’, it was held that set-off done at the behest of any entity against a company while undergoing CIRP is violative of the basic principles and provisions of IBC.
When it is settled law that Regulation 29 of the Liquidation Regulations does not apply to Part II of the IBC, there are no hesitation in holding that Regulation 29 comes into play only after the liquidation order is passed by the Adjudicating Authority and not at any moment earlier than that. Given this position, the Adjudicating Authority committed grave error to hold that moratorium had come to a halt during the period of vacuum from the expiry of the permitted CIRP period till passing of the liquidation order and that the Respondent was entitled to conduct the set-off exercise to realise security interest in terms of Section 52 of the IBC.
Admittedly, the Respondent had exercised the set-off by adjusting the tax refunds payable to the Corporate Debtor. This set-off clearly reduced the total kitty of funds available to the other creditors awaiting distribution as per the provisions of the IBC. The assets therefore available for distribution amongst the general body of creditors would thus stand reduced to the extent of the set-off while it would put the Respondent in a more beneficial position - the adjustment of the said amount of Rs 90 lakhs towards tax demands prior to liquidation amounted to a sort of recovery by the Respondent in violation of the moratorium and hence the Respondent is liable to return or pay the adjusted amount to the Corporate Debtor. Hence, this bench is of the considered view that there is a need to refund the amount in question to the Corporate Debtor.
The Respondent to refund the sum of Rs. 90,42,174/- which had been set-off against outstanding tax dues of the Corporate Debtor to the Liquidator within two weeks from the date of this order. The Respondent shall have the liberty to file their claim with the Liquidator for recovery of their dues in terms of the IBBI (Liquidation Process) Regulations, 2016 - Appeal allowed.
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2024 (5) TMI 1225
CIRP - NCLT admitted the application u/s 9 - Liability of Corporate Debtor for the outstanding dues claimed by the Operational Creditor - goods being delivered to and demand notices issued to M/s. Chirag Impex (HK) Ltd - validity of the debt and who truly owes the money - malpractices concerning customs duty and under-invoicing.
Whether in the facts of this case the Corporate Debtor can be held liable for the outstanding dues claimed by the Operational Creditor, despite the goods being delivered to and demand notices issued to M/s. Chirag Impex (HK) Ltd.? - HELD THAT:- Despite repeated reminders and a formal demand notice under Section 8(1) of the Insolvency and Bankruptcy Code, 2016 sent to known email addresses with no delivery failures, the Corporate debtor had failed to respond or dispute the invoices within the legal timeframe. The so called dispute being raised by the Appellant at this stage is based on the remarks of the Adjudicating Authority which are not at all pre-existing dispute - The link between the Corporate Debtor's director's son and Chirag Impex emails further undermines the Corporate Debtor's claims and suggests potential attempts to obfuscate the truth. This linkage cannot be ignored in assessing liability. The Corporate Debtor’s claims of a separate company, Chirag Impex, being responsible lack any credible evidence. The Operational creditor's documented trail directly contradicts this assertion.
Validity of the debt and who truly owes the money - HELD THAT:- The Operational Creditor presents a compelling case with documented evidence: signed sales contracts, bills of lading listing them as the shipper and the Corporate Debtor as the receiver, confirmation letters from the Corporate Debtor acknowledging receipt and satisfaction with the machines, and a formal demand notice sent but with no response from the Appellant. The creditor's documented trail, particularly the bills of lading and confirmation letters, appears strong. However, the Corporate Debtor’s allegations of Chirag Impex involvement and undervalued invoices tries to raise suspicion but are not convincing at all to treat them as a case of dispute - Despite repeated reminders and a formal demand notice under Section 8(1) of the IBC, the Corporate Debtor failed to respond or dispute the invoices within the legal timeframe, indicating the absence of a pre-existing dispute.
Allegations of Malpractices and Customs Duty Evasion - HELD THAT:- The alleged malpractices concerning customs duty and under-invoicing, while serious, do not negate the Operational Creditor’s claim. These issues are not being addressed by us and need be looked into separately through appropriate investigative channels. - Any issues related to alleged malpractices and customs duty evasion could be investigated separately through the appropriate legal channels and no orders passed onto that issue.
The evidence overwhelmingly supports the Operational Creditor’s claim for repayment from the Corporate Debtor. The Corporate Debtor has a clear legal obligation to fulfil their financial commitment as outlined in the signed contracts and documented transactions. The Adjudicating Authority’s orders to admit the Corporate Debtor into the Corporate Insolvency Resolution Process (CIRP) is upheld.
Appeal is dismissed.
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2024 (5) TMI 1153
Debt or Equity - Compulsorily Convertible Debentures which do not carry any obligation to repay - to be treated as debt or as equity, while admitting the claim under IBC - Waterfall mechanism.
Whether the Compulsorily Convertible Debentures which do not carry any obligation to repay should be treated as debt or as equity, while admitting the claim under IBC? - HELD THAT:- he Hon’ble Supreme Court in the said judgment of IFCI [2023 (12) TMI 129 - SUPREME COURT], upheld the decision of NCLT and NCLAT for treatment of CCD as equity - The Hon’ble Supreme Court noted that the very substratum of the submissions of the Appellant is that it has been left high and dry. If it’s investment is to be treated as equity, under the waterfall principle nothing will come its way. Thus, while other creditors benefit, the Appellant will not get anything.
The salient clauses of the DSA have been reproduced earlier. An examination of the DSA shows that the debentures issued to the Appellant were compulsorily convertible into equity and the only option to the Appellant was to get it converted to shares even prior to the stipulated period of 10 years, failing which the CCDs were to automatically convert into equity shares at the end of 10 years. There was no liability or obligation to repay the debt.
A convertible debenture can be regarded as “debt” or “equity” based on the test of liability for repayment. If the terms of convertible debentures provide for repayment of borrower’s principal amount at any time, it can be treated as a debt instrument but if it does not contemplate repayment of the principal amount at any time, that is, if it compulsorily leads to conversion into equity shares, it is nothing but an equity instrument. Respectfully following the judgment of the Hon’ble Supreme Court in the case of M/s IFCI Limited vs. Sutanu Sinha & Ors., [2023 (12) TMI 129 - SUPREME COURT], it is held that the compulsorily convertible debentures held by the Appellant are equity instrument and accordingly, we do not find any reason or justification to interfere in the impugned order of the Adjudicating Authority.
Appeal dismissed.
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2024 (5) TMI 1152
CIRP - Validity of admission of section 7 application - Violation of principle of natural justice - Denial of opportunity of the corporate debtor to file reply - error in misinterpreting the scope of Rule 49(2)
Denial of opportunity of the corporate debtor to file reply - HELD THAT:- Present is not a case where it can be said that the corporate debtor was prevented by any sufficient cause from appearing. Notice has been issued which was duly served. No cause is being showed by the appellant that they were prevented from appearing. Counsel appearing before the Adjudicating Authority and saying that he has recently engaged and has not filed the vakalatnama cannot be said that the corporate debtor was prevented by any sufficient cause from appearing. Corporate debtor has to blame himself for not appointing an Advocate to appear and make appropriate pleading before the Court. It is not a case advocate who appeared submitted that he shall file vakalatnama during the course of the day.
Interpretation and Application of Rule 49(2) of the NCLT Rules, 2016 - HELD THAT:- Rule 49 gives ample jurisdiction to the Adjudicating Authority to proceed for ex parte as corporate debtor does not appear. “Appearance” as contemplated under Rule 49(1) is appearance by the corporate debtor or by an authorised representative.
The financial creditor has also submitted that present is a case where debt and default is not even questioned since there is a consent decree passed by the DRT against the corporate debtor, hence, the appellant in this appeal is not making any submission on merits of the appeal although time was taken by the appellant on 31.01.2024 to file an additional affidavit so as to address the appeal on merits. It is noticed that during the oral submissions challenging the order rejecting the application under Rule 49(2), no submission has been advanced by the appellant on debt and default. In the facts of the present case and submission of the counsel for the parties, the present is not a case where this Tribunal may interfere with the impugned order in exercise of our appellate jurisdiction.
There is no merit in the appeal. The appeal is dismissed.
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2024 (5) TMI 1151
CIRP - VAT / Sales Tax dues - Treatment of claims as Secured claims vis-a -vis Unsecured claims - Rejection of application of appellant to treat its claim as Secured Creditor during the liquidation under waterfall arrangement as stipulated in Section 53 of IBC - HELD THAT:- The Appellant during the moratorium period could determine the tax, interest, fine or any penalty which is due, however, the Appellant could not enforce his claims for recovery or levy of interest on the tax due during the period of Moratorium. It has been brought out that the Claims of Assessment Orders passed during the moratorium under Section 14 & 33(5) of the Code, have been rightly considered and admitted as 'Unsecured' Operational Debt. It is significate to take into consideration that the Appellant vide its own letter dated 23.06.2023 acknowledged the fact that for A.Y. 2014-15, 2015-16 & 2016-17, the assessments were carried on during moratorium.
It has been brought to notice that the Appellant passed attachment orders on the property of the Corporate Debtor i.e., 16.10.2018 in alleged and contravention of Section 14 of the Code & Regulation therein, even after order dated 15.06.2023 passed by Adjudicating Authority whereby, the Appellant was directed to lift the attachment within ten days of receipt of such intimation from the Respondent, however, till date, the Appellant continues illegally and unlawfully attachment on the subject property of the Corporate Debtor.
The time period of 330 days prescribed in the Code is indicative and directory in nature and not mandatory. In fact, large number of cases, due is several reasons, are not able to be resolved within such stipulated period and if the contentions of the Appellant is accepted then the Resolution Process of the Corporate Debtor, in most of the cases, may not take off at all. Thus, the pleadings of the Appellant on this grand, stand rejected.
The Rainbow Paper [2022 (9) TMI 317 - SUPREME COURT] held that tax dues covered under section 48 of the VAT Act which clearly stipulate the Appellant’s right over the assets of the Corporate Debtor as first charge. This similar provisions, however, was not available in Gujarat Sales Tax Act and therefore, the tax claims were not treated as Secured Creditors. To the credit of the Appellant, he fairly concluded that this period was not covered in the ratio of Rainbow Paper.
Hence the Respondent classified remaining admissible outstanding dues as Unsecured debts. The Adjudicating Authority, therefore, also passed the Impugned Order accordingly based on Resolution Plan put up for approval by CoC through the Respondent - there are no infirmity in the Impugned Order on this account.
Appeal dismissed.
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2024 (5) TMI 1110
Approval of Resolution Plan - validity of proceeding of CIRP against the Corporate Debtor - Corporate Debtor having struck off from the Register maintained by Registrar of Companies - revival of struck off company - Impact of settlement agreements on the liability of the Corporate Debtor.
Validity of CIRP against a struck-off company - HELD THAT:- The company is now active in the Master Data of the Corporate Debtor in the records of the MCA, which has also been brought on record as Annexure-8 to the Additional Affidavit filed by the Resolution Professional. There are no substance in the submission of learned counsel on behalf of the Ex-Director of the Corporate Debtor that company having been struck off on 29.10.2019 the entire proceedings of the IBC need to be set aside. Company owed financial liability to the Financial Creditor and on default committed by the Corporate Debtor, Section 7 application was filed.
The liabilities of the company cannot be simply washed out by action of company of non-compliance of the provisions of Companies Act, non-filing of the relevant financial documents and other filings. If the submission is accepted of the Appellant that proceeding could not have been proceeded, the easiest thing for a company would be to get struck off to wash of its all liabilities, which submission cannot be accepted.
Non-acceptance of claims filed post-approval of the Resolution Plan - claims were filed after the Committee of Creditors (CoC) had already approved the Resolution Plan - HELD THAT:- The Tribunal upheld the Resolution Professional's decision not to accept these late claims and noted that an application seeking admission of the claim was dismissed on 16.08.2023, which was not further challenged.
Impact of settlement agreements on the liability of the Corporate Debtor - HELD THAT:- The submission of the Appellant that under the settlement agreement dated 18.06.2018 and 21.06.2018 it was Super Cassettes Industries Private Limited who has to make payment of Corporate Debtor is no more available to the Appellant since one of the parties i.e. the Financial Creditor has already nullified all the understanding in writing within four days from the said settlement. Thus, liability of the Corporate Debtor to discharge its financial debt continues. More so, admission of Section 7 application on the basis of debt and default has become final and in the proceeding regarding plan approval it is not open for the Ex-Director of the Corporate Debtor to contend that there is no debt owed by the Corporate Debtor. The submission of the Appellant that debt is to be paid by Super Cassettes Industries Private Limited is fallacious and cannot be accepted.
Thus, no grounds raised by the Appellant to interfere in the order dated 12.10.2023 approving the Resolution Plan.
Appeal dismissed.
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2024 (5) TMI 1002
Calculation of fees eligible to the liquidator - time period consumed by the Liquidator in the liquidation process, after considering the eligible exclusions granted by the Adjudicating Authority - exclusion of period of stay granted - it was held by NCLAT that 'The Adjudicating Authority erred in granting exclusion the period consumed in adjudication of subject IAs, instead of period consumed while auction was under stay.'
HELD THAT:- No interference is called for with the impugned order - Appeal dismissed.
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2024 (5) TMI 1001
CIRP - Compliance with provisions of Rule 28 of the National Company Law Tribunal Rules, 2016 - timely registration, numbering and disposal of applications filed under Section 94 and Section 95 of Insolvency and Bankruptcy Code, 2016 - extreme delay in compliance with objections and further delay in declining of matters for non-compliance - continuance of interim moratorium against the personal guarantors for an extremely unreasonable period of time - HELD THAT:- Rule 28 provides that once a document has been filed by a party, and the registry has scrutinized the documents and objections notified for compliance, the party ought to comply within seven days from the date of return (notification of the objections). In the event there is a failure to comply within seven days, then the document shall be placed before the Registrar who may pass appropriate orders.
The pendency of the applications under Section 94 and Section 95 indicate that the Rules are not being complied with in a timely manner - The Section 94 Applications were declined to be registered after being pending on e-filing number for a period of 339 days. The Section 95 Applications was declined to be registered after being pending on e-filing number for a period of 181 days. This indicates that the interim moratorium in these mentioned matters itself was lasting for the said period of time.
Considering that interim moratorium commences on e-filing of the applications, i.e., uploading of the document prior to any scrutiny, there is a possibility that parties who have had their applications declined due to failure to comply with the notices and timelines issued by Respondent No. 2, proceed to e-file their applications again. In such cases, the aggrieved persons have a remedy under Rule 63 of the NCLT Rules to prefer an appeal within the period stipulated. Any application which had earlier been dismissed and is refiled without resorting to the due process under law, ought not to be considered valid and shall not be considered as ‘filed’ for the purposes of Section 96 of the IBC. The same shall be ignored and no cognizance shall be taken of the same.
The present petition is disposed of.
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