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IBC - Case Laws
Showing 41 to 60 of 9622 Records
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2025 (6) TMI 199
Violation of principles of natural justice - preferential transactions under Sections 43 and 44 of the Insolvency and Bankruptcy Code - submission of the Appellant the order is ex-parte cannot be accepted since notices were issued on the application and the Appellants have filed their reply - HELD THAT:- The Adjudicating Authority has categorically held in Para 4.3 the transactions were not made in ordinary course of business. It is relevant to notice that with regard to one transaction where there was explanation, in Para 3.3, it was held to be not covered under Section 43. The Appellant being related party and payments were made from the Corporate Debtor’s account to the Appellant during the look back period, there are no error in the finding of the Adjudicating Authority that payments were not in the ordinary course of business.
Conclusion - The payments made to related parties during the look back period were preferential transactions under Section 43 of the I&B Code, not exempt under the ordinary course of business exception, and must be refunded to the Corporate Debtor. The procedural contention of ex-parte order was rejected.
There is no merit in the Appeals. Appeals are dismissed.
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2025 (6) TMI 198
Seeking a dissolution under Section 54 of the IBC, 2016 - sale of assets of the corporate debtor (CD) was made as a slump sale or as a sale of assets individually - HELD THAT:- When the statute requires endeavour to sell the CD as a going concern and adjudicating authority has observed that decision of the stakeholder’s consultation committee to sale as slump sale was against the objective of the IBC, by making which observation the adjudicating authority has rejected the application for dissolution of the CD filed by the liquidator, no exception can be taken to the order of the Adjudicating Authority.
In the facts of the present case, the orders passed by adjudicating authority rejecting the dissolution application as well as application for liquidator to recall the order granting relief and concession thus need no interference in the exercise of appellate jurisdiction by this Tribunal.
Conclusion - The purchaser's entitlement to reliefs and concessions stands, the sale is effectively a going concern sale, and the liquidator's applications for dissolution and recall of reliefs are rightly rejected.
The order of the adjudicating authority affirmed - appeal dismissed.
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2025 (6) TMI 197
Validity of sale conducted by the Financial Creditor under the SARFAESI Act, 2002, after the commencement of the Corporate Insolvency Resolution Process (CIRP) and during the moratorium period under Section 14(1)(c) of the Insolvency and Bankruptcy Code (IBC) - amendment to Section 13(8) of the SARFAESI Act - HELD THAT:- In the present case, Nagpur Nagrik Sahakari Bank Ltd. issued various public notice for auction and in pursuance of the auction notice issued on 17.11.2019 the successful bidder has submitted its bid on 02.12.2019. Successful bidder after receipt of sale confirmation made the payment on 17.12.2019. The submission which was relied by the Adjudicating Authority of the Suspended Director for allowing the application was that sale was not completed till 03.02.2020, and since CIRP was admitted on 21.01.2020 the sale is in violation of Section 14(1)(c) of the Code.
This Tribunal in its judgment Pratibha Industries Limited [2025 (4) TMI 519 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI] has considered the effect of an amendment of Section 13(8) of the SARFAESI Act, 2002, and this Tribunal in the above case had held that relationship between the parties i.e. mortgager and mortgagee for the purposes of redemption exist till date of issuance of notice of sale and in the present case notices for auction under Section 13(8) were issued much prior to commencement of the CIRP.
Appeal allowed.
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2025 (6) TMI 196
Dismissal of application under Section 94(1) of the Code by the Adjudicating Authority as not maintainable - whether the Respondent’s claims persisted post-auction or evaluating compliance with Code’s procedural mandates for personal guarantor insolvency? - HELD THAT:- The guarantee agreement dated 23.09.2013 is stated to be continuing and binding personal guarantee on the part of the Appellant in favour of the Respondent. The guarantee agreement, clause 2, further stated that the guarantee is an additional and without prejudice for any security for application which bank may have from the personal guarantor on the principal borrower and for which of rights and remedies in respect of are reserved. The Clause 3 of the guarantee deed categorically mentioned that the guarantee shall be continuing guarantee and shall not be considered as wholly or partially satisfied or exhausted by any payment from time to time made to the bank or any statement of any account or reason of account being created or any other at any time or from time to time. This clause 3 further states that guarantee shall continue in force notwithstanding the discharge of the principals by operation of law. It is noted that similar rights have been accrued in favour of the Respondent bank in clause 4, 5, 6 etc.
From this, it becomes very clear that the Respondent has absolute right to invoke the guarantee agreement signed by the Appellant despite any operation of law and other factors.
Explanation (b) of Section 19 of the Limitation Act,1963 states “debt” does not include money payable under a decree or order of a court. Thus, we note that the term “debt” in the context of Section 19 of the Limitation Act,1963 specifically excludes any money that is payable under a decree or order of a court. In other words, if a court has already passed a decree or order directing the payment of a certain amount, such an amount is not considered a “debt” for the purposes of Section 19 of the Limitation Act,1963 - the amount was recovered by the Respondent Bank due to auction of mortgaged property as a result of decree passed by Debt Recovery Tribunal-II, Ahmedabad. Thus, in terms of Explanation (b) of Section 19 of the Limitation Act,1963, this recovery would not considered as Debt and therefore does not impact/enhance limitation period as pleaded by the Appellant. In fact, this goes against the cause of the Appellant.
Conclusion - The default by the Corporate Debtor and subsequently notice to Appellant invoking the bank guarantee are undisputed. We also note that the bank has issued guarantee which is in nature of continuing and unconditional guarantee which has been legally invoked by the Respondent Bank. It is further observed that the DRT proceedings are under the Recovery of Debts and Bankruptcy Act, 1993. It is reiterated that the action based on to decree passed by the DRT was in respect of the mortgaged property held by the Respondent. Hence, it cannot be case of the Appellant that such recovery shall extend the limitation for personal guarantee given by the Appellant. The argument therefore submitted by the Appellant are not tenable.
There are no error in the Impugned Order. The Appeal devoid of any merit stand rejected.
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2025 (6) TMI 126
Confinement of CIRP to a single project, 'Spaze Arrow' - admission of Section 7 Application filed by Respondents - it was held by NCLAT that 'Considering the facts and circumstances, which have been brought on the record by the parties, are of the view that at this stage, it is not persuaded to pass an order, confining the CIRP to only one Project, i.e. Spaze Arrow, as prayed in the Application filed by the Appellant/ Applicant.'
HELD THAT:- The view taken by the National Company Law Appellate Tribunal (NCLAT) that the order under Section 7 of the Insolvency and Bankruptcy Code, 2016 cannot be confined only to one project of the Corporate Debtor (CD).
The appeal is dismissed.
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2025 (6) TMI 125
Maintainability of petition - existence of an alternative remedy - Challenge to recovery notice dated 05.10.2021 issued by the respondent, wherein interest under Section 7Q and damages under Section 14B of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 were levied - HELD THAT:- The IBC, 2016 is a comprehensive and self-contained legislation intended to facilitate the revival of corporate debtors through maximisation of asset value and resolution of claims in a time-bound manner. The Hon’ble Supreme Court, in Embassy Property Developments Pvt. Ltd. v. State of Karnataka, [2019 (12) TMI 188 - SUPREME COURT], has held that High Courts ought to refrain from exercising jurisdiction under Article 226 in matters falling within the purview of the NCLT/NCLAT, except in exceptional circumstances, namely: i. where the liquidator or authority acts wholly without jurisdiction; ii. where there is a blatant violation of the principles of natural justice; or iii. where the action is manifestly arbitrary or actuated by mala fides.
Conclusion - The IBC, 2016 being a complete code providing for a specialised adjudicatory mechanism, the writ petition filed by the petitioner bypassing such framework is held to be not maintainable.
The writ petition stands dismissed on the ground of maintainability.
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2025 (6) TMI 124
Legitimate fees of Liquidator - ex-Liquidator is entitled to fees under Regulation 4(3) of the IBBI (Liquidation Process) Regulations, 2016, based on the amount realized during the liquidation period, including sales revenue generated from running the Corporate Debtor as a going concern or not - Liquidator fee was not decided by COC - waterfall mechanism - HELD THAT:- It is to be noted that both in amended as well as unamended provisions the fees payable to the Liquidator shall be as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation. For further clarification with respect to “other liquidation cost” as noted in Regulation 4(2)(b), IBBI issued another circular on 28.09.2023.
The Appellant has tried to argue that it is incorrect to hold that the entire operational expenses incurred during the going concern period (eg, purchase of raw materials, salaries, utilities, etc) constitute “liquidation costs” under Regulation 2(1)(ea), without offsetting the substantial sales revenue generated during that period. It claims that the true cost of keeping the CD as a going concern is the net operational loss, ie, operational costs minus sales revenue, not the gross expenses alone. It also claims that by including the gross expenditure without adjusting for income grossly inflates the liquidation cost and misrepresents the actual economic burden on the estate. There are no ambiguity in the above clarifications in the IBBI circular that, since these four new components are paid in priority to payment to stakeholders as per Section 53 of the Code by virtue of it being liquidation cost under Section 53(1)(a), these newly added components were always part of the liquidation cost irrespective of the date of commencement of liquidation process.
The Appellant has relied upon the decision of Hon’ble Supreme Court in PD Aggarwal and Ors vs State of UP and Ors [1987 (6) TMI 393 - SUPREME COURT], wherein it was observed that there is no cavil with the proposition that the government has the power to make and amend rules giving retrospective effect. Nevertheless, such retrospective amendments cannot take away the vested rights, which have accrued, and the amendments must be reasonable and conform to the provisions of the Constitution. The Appellant claims that he is, therefore entitled to have his fee determined in accordance with Regulation 4(3), based on realisations and liquidation cost as understood prior to 25.07.2019. This judgment is of no avail to the Appellant as we had noted earlier that there was no ambiguity in the above clarifications in the IBBI circular that since these four components are paid in priority to payment to stakeholders as per Section 53 of the Code by virtue of it being liquidation cost under Section 53(1)(a), these newly added components were always part of the liquidation cost irrespective of the date of commencement of liquidation process.
The main contention of Appellant before this Appellate Tribunal as well as NCLT has been that his entitlement to fee cannot be based only on the sale of Asset (car which was sold for ₹ 2,60,000/-), but should also include realizations from the sale of goods during the period the Corporate Debtor was being run as a going concern. Appellant has also stated that he has affected the sales of goods amounting to ₹ 78,47,31,773/- during the Corporate Debtor being run as a going concern, upon which he is entitled to fee as a percentage, as provided in Regulation 4(3). To support his contention, the Appellant also relied upon the Circular dated 28.09.20234 issued by IBBI, and strongly relied upon Clause 2.1 of the said Circular, where the phrase ‘amount realised’ was explained in the said IBBI Circular.
It was brought to notice that the Division Bench of Hon'ble High Court of Bombay in Amit Gupta Vs. Insolvency anal Bankruptcy Board of India & Anr. [2024 (4) TMI 241 - BOMBAY HIGH COURT] had struck down Clause 2.1 and Clause 2.5 of the IBBI Circular dated 28.09.2023 as being ultra vires the IBBI (Liquidation Process) Regulations, 2016, and the IBC, 2016, which has been relied heavily by the Appellant. Thereafter, IBBI vide their circular dated 18.04.2024, has also partially modified their earlier circular dated 28.09.2023 and has withdrawn para 2.1 and 2.5 of their original Circular dated 28.09.2023. Thereafter, the very basis of the argument of the Appellant has been struck down.
The Appellant relies on KL Tripathi vs State Bank of India, [1983 (10) TMI 232 - SUPREME COURT] Narinder Nath vs Union of India, [1996 (1) TMI 482 - SUPREME COURT] and claims that the law is well settled that a court or tribunal, while exercising powers post-remand, cannot travel beyond the confines of the remand order. The Impugned Order, therefore, deserves to be set aside on this ground alone.
In the present case, where Liquidator fee was not decided by COC, the Applicant was entitled to fee as a percentage of amount realised net of liquidation cost as per Regulation 4 of IBBI (Liquidation Process) Regulations, 2016. And the Applicant shall be paid on realisation of entire assets of the CD as per Section 53 (3) of the IBC.
The Appellant had sought determination of his fee under Regulation 4(3), which permitted computation on the basis of realisations net of liquidation costs. In the facts and circumstances of the case, we find that the Sales realization of ₹ 78.47 crs are significantly less than the liquidation cost of ₹132 crs, and nothing remains as realization for which any fees can be paid in terms of Regulations 4 of the Liquidation Regulations. Therefore, we find that the Applicants’ claim for fees amounting to Rs,188,02,261/- is not tenable under Regulation 4 read with 2(1) (ea) of the Liquidation Regulations read with section 5(16) of the IBC and we don’t find any infirmity of order of the Adjudicating Authority.
Conclusion - In the present case, where Liquidator fee was not decided by COC, the Appellant was entitled to fee as a percentage of amount realised net of liquidation cost as per Regulation 4 of IBBI (Liquidation Process) Regulations, 2016, which is found to be not payable. The alternative prayer of the appellant that a fair and reasonable basis may be laid for computing the Appellant's fees for the services rendered, which may be identical with the fees paid to the Appellant and his team during CIRP Is not tenable.
Nothing is found payable to the Liquidator as Liquidator’s fees. Appeal is dismissed.
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2025 (6) TMI 30
Time limitation - Maintenance of status quo as on date with regard to the Liquidator-Respondent No.1 - de-reserving of earlier order for judgement and pronouncement challenging removal of Respondent No.1-Liquidator - HELD THAT:- It lies within the jurisdiction of this Tribunal under proviso to Section 61(2) of IBC to condone delay when appeals are filed after expiry of a period of 30 days as long as such delay does not exceed 15 days if the Tribunal is satisfied that there was sufficient cause for the delay. In the present facts of the case, the impugned order dated 28.03.2025 was uploaded on the website on 01.04.2025. Even if it is held that the clock of limitation started ticking from 28.03.2025, the 45 days period available under proviso to Section 61(2) of IBC is seen to end on 12.05.2025. Since this application was filed on 12.05.2025, the application was filed well within the period of limitation - there are no reason to hold that the delay in filing was wilful or by design on the part of the Appellant.
Untenability of the continuance of the status quo order - HELD THAT:- In terms of the statutory construct of IBC read with VL Regulations, there is no need for obtaining any approval of the Adjudicating Authority for the appointment or replacement of the Liquidator engaged for the purposes for voluntary liquidation. Nor is there any need for the Director and Shareholder of the Corporate Debtor to communicate any reason for removal of a Liquidator.
Even when the Corporate Debtor had replaced the first Liquidator by Respondent No.1-Liquidator, the same procedure prescribed under Regulation 5 of VL Regulations was followed. Dissatisfied with the performance of Respondent No.1-Liquidator for reasons of acting in an opaque and non-cooperative manner, the Board of Directors passed a resolution on 28.02.2025 replacing Respondent No.1 as Liquidator because of “misconduct, lack of transparency and breach of the Liquidator’s statutory duties”. This resolution for replacement was thereafter ratified by the EGM on 17.03.2025. The same Board Resolution replaced Respondent No.1-Liquidator with a new Liquidator-Respondent No.6. It is therefore unambiguously clear that the Respondent No.1-Liquidator already stood replaced before the orders directing the maintenance of status quo was passed by the Adjudicating Authority on 28.03.2025.
There are force in the contention of the Appellant that the Adjudicating Authority by the impugned order directing the continuance of Respondent No.1 as Liquidator on the Corporate Debtor acted in violation of the statutory framework of IBC. Moreover, when the statutory provisions provide an enabling framework to the Directors and Shareholders of the Corporate Debtor to replace the Liquidator “wherever required”, the Adjudicating Authority did not have the jurisdiction to force status quo upon the Corporate Debtor for continuing with Respondent No.1 as the Liquidator.
The Appellant has vehemently contended that the grounds on which this order of 29.04.2025 de-reserved the final order on the removal application were purely procedural grounds which lack basis. More importantly, it is found that while reserving the order in the Removal Application, the Adjudicating Authority on 02.04.2025 had clearly noted that “the Respondent No.2 who is resident Indian who has signed the vakalatnama himself with respect to Respondent No.2 that can be taken on record.” - if while reserving the order on 02.04.2025, the Adjudicating Authority had taken a conscious decision to proceed basis the vakalatnama and other documents produced by the present Appellant, it remains unexplained why after a gap of 27 days, the Adjudicating Authority suddenly turned volte face and de-reserved the same order by questioning the compliances on the part of Respondent No.2 to 5. Facts concerning the Affidavits and Letters of Authority etc. of the Respondent Nos 3 to 5 were already in the full knowledge of the Adjudicating Authority and only after taking due cognisance of these, it had reserved the judgment. Thus, the impugned order of 29.04.2025 and the earlier order of 02.04.2025 are in contradiction of each other.
Conclusion - i) The Adjudicating Authority lacked jurisdiction to interfere with the removal of the voluntary liquidator once the Corporate Debtor complied with the prescribed procedure under Section 59 and VL Regulations. ii) The status quo order is untenable and vacated to uphold the statutory right of the Corporate Debtor to replace the liquidator and proceed with voluntary liquidation. iii) The de-reservation on procedural grounds is improper without addressing the substantive maintainability of the removal challenge. The Adjudicating Authority must prioritize the core jurisdictional issue. iv) The appeal was timely filed and delay, if any, is condoned in the interest of justice. v) The outgoing liquidator must cooperate and hand over all relevant documents and information to the new liquidator as per statutory mandate.
The impugned order dated 28.03.2025 directing status quo order with regard to the Liquidator-Respondent No.1 is vacated - appeal alowed.
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2025 (6) TMI 29
Dismissal of Restoration Application filed by the Appellant - non-appearance of the petitioner on the date of hearing - HELD THAT:- The Appellant has relied upon the Dilip B. Jiwarjika vs. Union of India & Ors. The Hon'ble Supreme Court in the said matter while upholding the constitutional validity of Section 95 to 100 has held that the interim moratorium under Section 96 is for the protection of the interest of the guarantors.
There is no doubt that Section 96 provides interim protection to the debtor from further legal proceeding and the Appellant was enjoying the interim protection for long time but it was incumbent upon him to provide a repayment plan which has not happened in this case. It is argued by the Appellant that it was very well interested in submitting the repayment plan upon initiation of Insolvency Resolution Process and on 08.07.2024 the Adjudicating Authority was only to consider the report filed by the Resolution Professional - it is noted that it is the responsibility of the Appellant who has to work out a repayment plan and that he does it proactively and that can happen only if the Appellant is present in the proceedings. With three absents in the court proceedings on frivolous grounds, there is no proactiveness and initiative on the part of the Appellant.
It is found that for finalizing a repayment plan it is important that the legal proceedings are pursued diligently and in a vigilant manner. The Appellant has been very casual in his approach. Appellant has been absent for last three hearings which shows that the applicant was not interested in pursuing the matter further. And was trying to abuse the process of law by misusing the moratorium available to him under Section 96 of the Code. Furthermore, no satisfactory explanation has been provided by the Appellant for his non-appearance in the restoration application - the Appellant does not deserve any protection and restoration application needs to be dismissed for reasons as discussed herein.
Conclusion - i) The dismissal of the Section 94 petition for non-appearance is justified. ii) The Restoration Application is rightly dismissed for failure to demonstrate sufficient cause and due to the petitioner's dilatory conduct.
There are no infirmity in the orders of the Adjudicating Authority in dismissing the restoration petition in both the related Appeals - the Appeals against dismissal of the restoration application are hereby dismissed.
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2025 (6) TMI 28
Admission of section 7 application - application is filed within the limitation period or not - existence of debt and default to meet the criteria of Section 7 Application or not.
Whether the present application is filed within the limitation period? - HELD THAT:- The submission of the Appellant that JAL having undertaken the liability to clear the debts and defaults of JCCL, hence, JCCL has no liability and no application was maintainable against JCCL, also does not commend. Restructuring was a mechanism to discharge the entire dent of JAL and JCCL. Admittedly, restructuring has failed and neither the debt of JAL, nor the debt of JCCL have been discharged. Initiation of CIRP proceedings against JAL cannot be a ground to contend that no proceedings can be initiated against JCCL. JCCL has also given its securities for obtaining the various facilities from the SBI between 2012 to 2015. The Financial Creditor can always invoke the securities given by JCCL to realise the debt. The Financial Creditor has never shown the debt of JCCL to be transferred to the JAL in its Financial Statements and the fact that JAL and JCCL in their Financial Statements have treated the debt to be discharged, is not binding on the Financial Creditors.
The Hon’ble Supreme Court had occasion to consider Section 62 of the Indian Contract Act United bank of India vs. Ramdas Mahadeo Prashad & Ors. [2003 (11) TMI 333 - SUPREME COURT], which judgment has been relied by learned Counsel for the SBI. In the above case, a MoU was signed by the parties of the original contract and it was contended that in view of the MoU, the earlier contract stood novated - Ultimately, the Hon’ble Supreme Court held in paragraph 9 that non-compliance with the terms and conditions of the MoU by the respondents and a party in breach can hardly seek to enforce contract.
Whether there is existence of debt and default to meet the criteria of Section 7 Application? - HELD THAT:- In the present case, conditions of MRA itself are not fulfilled and furthermore in the MRA, the JCCL was not even the party. The above judgment of the Hon’ble Supreme Court does not in any manner comes to the aid of the Appellant. The Adjudicating Authority after considering all the relevant facts and circumstances, has come to the conclusion that debt and default on the part of the CD – JCCL is proved. When the debt and default is proved, the admission of Section 7 Application against JCCl, cannot be faulted. There are no error in the order of the Adjudicating Authority admitting Section 7 Application.
Conclusion - Section 7 Application filed by SBI against JCCL was maintainable and rightly admitted by the Adjudicating Authority. The debt and default on the part of JCCL were established, the restructuring plan and MRA failed due to non-implementation of essential conditions, including creation of security interest, and the claim of novation was rejected.
Appeal dismissed.
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2025 (6) TMI 27
Breach of moratorium - payments made by the Appellant after commencement of CIRP - whether there was any infirmity in the impugned order directing the reversal of the impugned transactions by the Appellant and Respondent No. 2 to 6 to the assets of the Corporate Debtor? - HELD THAT:- The moratorium becomes enforceable from the date the CIRP application is admitted or as indicated in the said order. The provisions of moratorium inter-alia provides for a stand-still period during which Financial or Operational creditors cannot resort to individual debt enforcement action in respect of debts which had accrued during the period prior to commencement of CIRP proceedings. Once moratorium has been declared upon the admission of Sections 7, 9 or 10 application, it is not open for any Financial or Operational creditor to recover any amount from the account of the Corporate Debtor except by filing claims through the resolution framework. A logical corollary that follows is that the suspended management of the Corporate Debtor is also strictly prohibited from directly or indirectly deploying the funds of the Corporate Debtor unilaterally, without the authorisation of IRP, to clear any dues of any Financial Creditor or Operational Creditor.
The Appellant has not denied having made these RTGS and cheque payments to Respondent Nos. 2 to 5. There is no averment contained therein that these payments had either been authorised by the IRP. The ostensible reason attributed for making these payments was that these payments were made in the ordinary course of business to run the day to day affairs of the Corporate Debtor as a going concern and had been made before IRP could take charge. The other ground cited was that even if the powers of the Board of Directors stood suspended, it did not suspend the actions of the officers of the Corporate Debtor.
It is a well-settled principle of interpretation of statutes that the meaning of the language employed by the legislature in a statutory provision has to be given effect to in terms of the plain wordings of the statute. This precludes any scope for altering the meaning of the language contained in the statute. On a plain reading of the language employed in Sections 13(1) and 14 of IBC, it is unequivocally clear that it is statutorily mandated that on the admission of a Corporate Debtor into CIRP by the Adjudicating Authority alongwith orders for appointment of IRP, the Adjudicating Authority shall by an order declare a moratorium - Once moratorium is declared, the suspended management of the Corporate Debtor has to willy-nilly and mandatorily abide by this clear and express provision contained in the IBC statute and cannot raise grounds of exception to the applicability of Section 14(1)(b) of IBC. Merely by advocating the criticality of clearing payments in the ordinary course of business to make the Corporate Debtor continue running as a going concern cannot constitute sufficient mitigating circumstances for not giving effect to the statutory provisions of moratorium as contained in Section 14.
Conclusion - It is abundantly clearly that an amount of Rs 11.01 Cr. was unauthorisedly transferred from the account of the Corporate Debtor to Respondent Nos. 2 to 5 after commencement of CIRP proceedings of the Corporate Debtor by way of nine RTGS payments and three cheque payments in clear breach of moratorium by the Appellant and Respondent No.6.
There are no error in the impugned order holding the Appellant and Respondent Nos. 2 to 6 to be jointly and severally liable to refund the said amount to the account of the Corporate Debtor - appeal dismissed.
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2025 (6) TMI 26
Prayer for direction to the SRA to implement the revised resolution plan within 2 months - statutory timeline of one year under Section 31(4) of the Insolvency and Bankruptcy Code (IBC) for obtaining necessary approvals had been complied with by the SRA or not - HELD THAT:- The present is a case where there was no requirement obtaining any prior approval prior to approval of the resolution plan, however, under Section 31(4) all regulatory approval are to be obtained within a period of 1 year. When the approvals have not been obtained by SRA, who is under obligation to obtain the approval, it is not open to the SRA to contend that he could not obtain approval due to reason A or reason B. The fact remains that regulatory approval has not been obtained within a period of 1 year from passing the order approving the resolution plan. The fact remains that regulatory approval have not been obtained within a period of 1 year from the passing of the order, and even within a period extended by the NCLT by impugned order dated 08.12.2023, i.e.by 08.02.2023. There was sufficient ground to hold the plan has not implemented the application for liquidation, which is pending consideration before the adjudicating authority need to be proceeded.
Hon’ble Supreme Court in the judgement in Ebix Singapore Private Ltd. Vs. Committee of Creditors of Educomp Solutions Limited & Anr. [2021 (9) TMI 672 - SUPREME COURT] has held that terms of the resolution plan contain commercial bargain between the CoC and the resolution applicant and there is also intention to create legal relations with binding effect. It was also held that structure of the IBC confers legal force on the CoC approved resolution plan. The issue in the above case which came for consideration before the Hon’ble Supreme Court was as to whether after approval of the resolution plan by the CoC, whether the resolution plan can be allowed to be withdrawn by the resolution applicant by filing an application in the NCLT. In the above case, NCLT has allowed the application filed by the resolution applicant for withdrawal of the resolution plan, which gave rise to the appeal before this Tribunal, as well as before the Hon’ble Supreme Court.
Conclusion - The resolution plan was approved by the adjudicating authority on 03.02.2022. The period of one year prescribed under Section 31(4) of the IBC for obtaining necessary approvals has long elapsed. The appellant having failed to obtain the necessary regulatory approvals within the statutory timeline, the resolution plan has not been implemented.
Thus, no grounds have been made out to interfere with the impugned order dated 08.12.2023. The appeal is dismissed.
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2025 (6) TMI 25
Dismissal of application filed under Section 9 of the IBC, 2016 - dismissal of first appeal only on the ground that earlier two applications filed by the same operational creditor against different Corporate Debtors were dismissed by two different Benches of the same Tribunal - dismissal of second appeal only on the ground that the main petition bearing CP (IB) 998 (ND) 2020) filed by the Operational Creditor (appellant in the first appeal) has been dismissed.
HELD THAT:- The Tribunal has not deliberated upon the facts given in IB-998(ND)/2020 and the evidence and has simply relied upon earlier decisions dated 15.11.2021 and 14.09.2023 which are against different CD’s which has no nexus with the facts of the present case because in the case decided on 15.11.2021, the Tribunal has noticed that there was communications between the parties dated 23.04.2018, 04.10.2018 and 24.10.2018, relied upon by the Corporate Debtor, which were prior to the issuance of demand notice dated 11.12.2019 in which the Corporate Debtor had raised a dispute about quantum of debt due and payable by the Corporate Debtor, therefore, there was an issue of pre-existing dispute.
In the case decided on 14.09.2023, the court has noticed the contention of the corporate debtor that there are communications of fraud and forgery made by the Corporate Debtor but the Tribunal has held that it is not expected to ascertain the veracity of documents produced and dismissed the application.
For the purposes of holding that there is a similarity in the case setup by the appellant in the first appeal with the two cases decided on 15.11.2021 and 14.09.2023, it was incumbent upon the Tribunal to have referred to the facts of all the three cases in detail.
Secondly, the application filed under Section 9 has to be decided on its own facts because the court has to find out as to whether the defence taken by the corporate debtor is sufficient for the purpose of dismissal of the application or the same is only moonshine defence.
Conclusion - i) The impugned order dismissing the Section 9 application solely on the basis of prior dismissals is set aside. ii) The impugned order dismissing the punitive application without a speaking order is set aside.
The impugned order in both the appeals is set aside and the matter is remanded back to the Tribunal with a direction to decide the lis between the parties afresh by passing a speaking order. The parties shall appear before the Tribunal on 21.07.2025 - Petition allowed by way of remand.
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2025 (6) TMI 24
Admissibility of a Section 7 application under the Insolvency and Bankruptcy Code, 2016 against a Corporate Debtor - case of appellant is that Corporate Debtor is a viable company and should not have been initiated into CIRP - whether the Corporate Debtor is a viable company which entitles the Corporate Debtor to be covered under the ratio of Vidarbha Industries Power Ltd. - HELD THAT:- After going through all the facts of the case, especially the financial status of the Appellant as Promoters of the Corporate debtor and the reason the Appellant sought invoking protection of Vidarbha Industries Power Ltd. case, it is not convinced with the same.
There are no adequate resources available with the Appellant, which could have been utilised by the Appellant as Promoters of the Corporate Debtor to settle the Financial Creditors including the Respondent No. 1 & 3.
It is also worthwhile to note that the project was to be completed in the year 2014 and even in the current year of 2025, the towers are yet to be completed along with other facilities and dues of NOIDA Authority are still to be paid. The contesting Respondent i.e., IndusInd Bank Limited/ Respondent No. 1 herein as well as Intervenor Homebuyers who constitute the CoC have also refuted the claims of the Appellant.
Conclusion - The Corporate Debtor is not financially viable or solvent to avoid CIRP initiation; The Adjudicating Authority rightly admitted the Section 7 petition; The Appellant's reliance on Vidarbha Industries Power Ltd. is misplaced.
There are no error in the Impugned Order - appeal dismissed.
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2025 (6) TMI 23
Termination of the Corporate Insolvency Resolution Process ("CIRP") of the Corporate Debtor by the Adjudicating Authority - sufficient funds were available to repay the Operational Creditors - Correctness of decision of the CoC to decline the proposal for acceptance - dragging on with the CIRP proceedings and in the process incurring an exorbitant expenditure towards CIRP cost was arbitrary and unsustainable or not - HELD THAT:- From the deliberations of the seventh CoC meeting, it becomes clear that RCPL has only raised doubts and questions on ITNL’s locus and standing with respect to the settlement proposal but cleverly skirted to address the more relevant and pertinent question as to why the Operational Creditors were unwilling to claim their dues when it was being fully repaid. When sufficient fund was already available with the Corporate Debtor to liquidate the debt of the Corporate Debtor, there are no cogent reasons offered by the Operational Creditors in declining to accept their entire admitted claim and closing the CIRP.
The Adjudicating Authority has relied on the judgment of Hon’ble Supreme Court in the matter of E.S. Krishnamurthy Vs Bharath Hi-Tech Builders (P) Ltd. [2021 (12) TMI 683 - SUPREME COURT] wherein it has been clearly held that ultimate purpose of IBC is to facilitate insolvency resolution so as to put the Corporate Debtor back on its feet so as to ensure revival and continuance of the Corporate Debtor.
At a time when there was Rs 7 Cr. in the bank account of the Corporate Debtor while the total claim of the Operational Creditors was merely Rs. 26 lakhs, there was no reason for continuing on with the CIRP proceeding. When 100% of the admitted debt of the CoC was being satisfied and yet not being accepted by CoC members, the Adjudicating Authority had not committed any mistake in inferring that there was some other hidden motive on the part of the Operational Creditors to continue with the CIRP.
It is well settled that IBC is a beneficial legislation intending to bring back the Corporate Debtor on its feet without letting the value of the assets of the Corporate Debtor suffer a beating. Hence CIRP proceedings against the Corporate Debtor, when pursued coercively or mindlessly, it becomes violative of the quintessential spirit of the insolvency resolution framework. In the present facts of the case, when the Corporate Debtor had sufficient finances in its kitty and was indubitably in a position to wipe off and repay the operational debt qua the three Operational Creditors who are the only members of the CoC and full liability was proposed to be discharged, there seems to have been no rational basis for the Operational Creditors to decline from accepting their outstanding dues. What comes to notice is stubborn reluctance on the part of CoC members to accept the repayment of the operational debt, making it clear that the three Operational Creditors who constituted the CoC were trying to scuttle the resolution of the Corporate Debtor and more interested in pushing the Corporate Debtor into insolvency rather than salvaging the Corporate Debtor from the perils of corporate death - The RCPL with majority stake in the CoC has been trying to take undue advantage of the situation and was being actuated by some other ulterior and dubious motives which had nothing to do with insolvency resolution. This amounts to misuse and abuse of the provisions of IBC. Based on the totality of circumstances, it is convinced that the intent behind continuing of the CIRP proceedings by the Operational Creditor was clearly for reasons other than insolvency resolution.
Whether the RP was working in collusion with RCPL and CoC in dragging on with the CIRP proceedings and in the process charging hefty fees and ballooning the CIRP costs? - HELD THAT:- What needs to be seen is whether the RP who is supposed to run the Corporate Debtor as a prudent business person by preserving the all-round interests of all stakeholders lived up to that role appropriately without any arbitrary personal gain. It is an undisputed fact that for an admitted debt of Rs 26 lakhs, the CIRP was allowed to drag on for a four and half years. In contrast to a paltry sum of Rs 26 lakhs of admitted debt, the CIRP cost had inflated to Rs 73 lakhs which was three times the admitted debt of the CoC which on the face of it shows that the Corporate Debtor was burdened with unnecessary and exorbitant expenditure. The CIRP cost had clearly mounted on account of the fees of the RP which was increased from Rs 1,00,000/- to Rs 2,00,000/- per month in the fourth CoC meeting held on 20.03.2020. We also find that the RP had continued to charge fees even when the CIRP had remained stayed from 05.08.2020 to 16.03.2021. The Adjudicating Authority had also relied on the judgment of this Tribunal in Indus Ind Bank Ltd. Vs Rajendra K Bhuta [2022 (4) TMI 1657 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI] wherein it was held that the fee of RP cannot be charged for the duration of a stay on CIRP.
The impugned order had not committed any infirmity in directing that RP was to receive only remuneration of Rs 50,000/- per month totalling Rs 21.45 lakhs besides directing the refund of the excess amount of remuneration paid to the RP.
As the admitted dues of the Operational Creditors when squared off against the liability of proportionate CIRP costs to be borne by the CoC, a balance amount had become recoverable from the CoC and no dues in respect of the admitted claim of the CoC members survived, the Adjudicating Authority has rightly terminated the CIRP of the Corporate Debtor.
Conclusion - i) The termination of CIRP was justified due to the availability of sufficient funds to repay Operational Creditors and the refusal of CoC members to accept repayment, indicating misuse of the insolvency process. ii) The RP's charging of fees during the CIRP stay period was unlawful, and the overall remuneration was disproportionate to the admitted debt, warranting reduction. iii) The Adjudicating Authority's directions for CoC members to proportionately bear CIRP costs were appropriate given the misuse of Corporate Debtor's funds.
Appeal dismissed.
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2025 (6) TMI 22
Approval of Resolution Plan - No locus standi to raise objections in the ongoing CIRP - Whether, Mr. Kairav Anil Trivedi appointed as Interim Resolution Professional by the Adjudicating Authority vide CIRP order dated 05.10.2021 was lawfully appointed as Resolution Professional by the CoC in accordance with the Regulations or not? - Whether the CoC dissented the appointment of Mr. Kairav Anil Trivedi working as Interim Resolution Professional of the Corporate Debtor being appointed as Resolution Professional of the Corporate Debtor or approved his appointment as Resolution Professional in the First CoC Meeting? - Whether conduct of Mr. Kairav Anil Trivedi the Interim Resolution Professional of Corporate Debtor has been fair, reasonable and in accordance with the provisions of the Code and Regulations or acted in arbitrary and pre-judicial manner as alleged by the Appellant? - HELD THAT:- The IBBI who is the regulator for Resolution Professionals as per the Code, has categorically held Respondent No. 1 as guilty in the present case and debarred the Respondent No. 1 for six months. It is also a fact that the Respondent No. 1 filed a Writ Petition and obtained ad-interim relief from the Hon’ble High Court of Bombay. However, it is consciously noted that the Hon’ble High Court of Bombay gave interim relief to the Respondent No. 1 only on one limited technical ground that whether Mr. Ravi Mittal who signed final disciplinary order acted as whole time member (WTM) or chairman of IBBI. In fact, the Hon’ble High Court of Bombay did not comment on any aspect of merit based on IBBI finding, holding Respondent No. 1 to be involved in misconduct in the present case.
It is found that one of ground in the present appeal is violation of CIRP Regulations No. 28 i.e., transferring assets of the Corporate Debtor during CIRP without consent of CoC by signing MoU with SIPL, again alleged to be a related party of Corporate Debtor. In the quoted case of Parental Drug which is an independent case in relation to the present appeal, the Respondent No. 1 has been found guilty of violation of Regulation as well as Section 28(1)(h) (for obtaining prior approval of CoC in certain cases) and IBBI, the regulator has debarred the Respondent No. 1/ Mr. Kairav Anil Trivedi for a period of two years.
Thus, based on wholistic reading of several cases instituted against the Respondent No. 1/ Mr. Kairav Anil Trivedi, there are merit in the arguments of the Appellant and find Respondent No. 1 involved in misconduct which has also been investigated and confirmed by IBBI.
What has been stand of CoC on CIRP Process? - HELD THAT:- The CoC is trying to justify that the Right2Vote document was erroneously created which caused confusion. It is found that the additional affidavit dated 28.03.2022 filed by Canara Bank in support of IA 247 of 2022 before the Adjudicating Authority, where the CoC made several allegations against the Respondent No.1 are quite contrary to new affidavit dated 29.07.2024 - The CoC has now tried to justify their action in their affidavit dated 29.07.2024 merely on the ground that the right to vote document was erroneously created and is the cause of all fall outs.
It is found that the new affidavit dated 29.07.2024 filed by the CoC before us as convincing and we rather find it in complete contrast with the factual position presented before the Adjudicating Authority, in additional affidavit dated 28.03.2022 in IA No. 247 of 2022, hence it is unable to accept the reasoning given by the CoC in the present affidavit dated 29.07.2024. The bank management may like to review whole process involved to safeguard public money of hundreds of crores of rupees.
Whether the MoU signed with the SIPL was in accordance with provision of the Code and the Regulations or otherwise. Whether Mr. Kairav Anil Trivedi violated any of the laid down provisions in approving and signing the said MoU? - HELD THAT:- The CoC is vested with the authority to oversee the work of Interim Resolution Professional / Resolution Professional and need to specifically approve actions that could impact the Corporate Debtor's financial health requiring the CoC's prior approval like the transfer of rights or financial or operational debts under material contracts, except when carried out in the ordinary course of business. This provision ensures that the Interim Resolution Professional /Resolution Professional cannot make significant changes to the Corporate Debtor's financial or contractual arrangements without the informed decision and approval of CoC - the Respondent No. 1 signed the said MoU with SIPL in violation of the provisions of the Code and the CIRP Regulations.
Whether the contractor of Haridwar plant of the Corporate Debtor i.e., SIPL was related party of the Corporate Debtor? - Whether Mr. Kairav Anil Trivedi brought out misleading facts before CoC? - HELD THAT:- The Respondent No. 1 signed MoU with SIPL violating provision of the Code and Regulations - the SIPL was related party of the Corporate Debtor and Respondent No. 1 gave misleading facts to the CoC in 2nd CoC meeting.
Whether, material irregularities, if any, by Interim Resolution Professional /Resolution Professional while taking approval from the Adjudicating Authority will affect the fate of approved Resolution Plan? - HELD THAT:- If a material irregularity is established, the Adjudicating Authority is empowered under the Code to take corrective measures. Such measures may include setting aside decisions taken during the CIRP, directing an investigation into the conduct of the resolution professional, or imposing sanctions on the parties involved. We are conscious that the Adjudicating Authority has limited scope for rejecting a Resolution Plan under Section 31 of the Code and cannot unnecessarily interfere with the “commercial wisdom of CoC”. However, it may not mean that the Adjudicating Authority cannot look into any relevant aspect before approving the Resolution Plan proposed by the CoC. The Adjudicating Authority can reject a plan, if it does not meet the requirement of the Code or Regulations or it violate the Code or Regulations. The Resolution Plan has to be in compliance with Section 30 of the Code.
The Hon’ble Supreme Court of India, time and again has stipulated that the commercial wisdom of the CoC is supreme and cannot be interfered as held in catena of judgements including, K. Shashidhar Vs. Indian Overseas Bank & Ors. and Committee of Creditors of Essar Steel India Ltd. Vs. Satish Kumar Gupta [2019 (11) TMI 731 - SUPREME COURT]. While the Adjudicating Authority cannot interfere with the CoC’s commercial decisions, it needs to ensure that the procedure followed by the CoC and/or Resolution Professional is in accordance with the Code and Regulations. Any significant procedural lapses may be a ground for rejection.
The Hon’ble Supreme Court of India has emphasised regarding indispensability of procedural safeguards as an integral component of a just, legal ordered must be given its due weight, especially as procedural requirements are not mere formalities to be circumvented for expediency but substantive protections designed to ensure fairness and transparency.
Conclusion - i) There was no formal and proper appointment of Mr. Kairav Anil Trivedi as Resolution Professional of the Corporate Debtor by the CoC. ii) The CoC did not approve the Respondent No. 1/ Mr. Kairav Anil Trivedi as the Resolution Professional in 1st CoC meeting.
Appeal disposed off.
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2025 (5) TMI 2006
Maintainability of application filed u/s 9 of the Insolvency & Bankruptcy Code, 2016 - existence of pre-existing dispute or not - Appellant did not reply to the demand notice issued u/s 8 of the Code - HELD THAT:- The issue of pre-existing dispute goes to the root of the application filed under Section 9 of the Code because if it is established that there was a pre-existing dispute before filing of the application under Section 9 then the same is not maintainable and has to be dismissed.
While holding that the Tribunal has committed an error in ignoring the emails/ letters exchanged between the parties before the notice issued under Section 8 of the Code on 08.05.2023 which according to the Appellant shows that there was a pre-existing dispute and according to the Respondent that there was no such pre-existing dispute but these letters could not have been ignored by the Learned Tribunal only the premise that since the Appellant failed to file reply to the notice issued under Section 8 of the Code and also the reply to the petition under section 9 was filed belatedly therefore, there the communication between the parties cannot be take seriously.
The main petition is hereby restored and is remanded back to the Learned Tribunal to be decided in accordance with law, after taking into consideration the emails/ letters exchanged between the parties before 08.05.2023 when the notice under Section 8 was issued - Appeal allowed by way of remand.
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2025 (5) TMI 2005
Release of the professional fee and Corporate Insolvency Resolution Process (CIRP) expense - invocation of Rule 11 of NCLT Rules, 2016 - non-speaking order - violation of principles of natural justice - HELD THAT:- It is satisfied that the impugned order is totally non-speaking which deciding the application of the appellant in which she has prayed for payment of the amount due to her on account of services rendered.
In such circumstances, it would be just and expedient that the impugned order be set aside and the matter is remanded back to the Ld. Tribunal with a direction to decide it again after giving reasons in the order as to why the appellant is not entitled to Rs. 93,78, 920/- as prayed for.
Appeal allowed by way of remand.
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2025 (5) TMI 2004
Categorisation of creditor - Operational Creditors or secured creditor - government dues accrued on the basis of assessment under the GVAT Act and CST Act pertaining to the year 2009-11 and 2014-16, before the date of CIRP and having been upheld in appeal, dismissed in the year 2019 - whether by virtue of the order passed under Section 48 of the GVAT Act a charge is created on the property of the CD by way of operation of law in view of the law laid down by the Hon’ble Supreme Court in the case of Rainbow Papers [2022 (9) TMI 317 - SUPREME COURT]?
HELD THAT:- In the case of Rainbow Papers, the Hon’ble Supreme court has held that the CoC which might include financial institutions and other financial creditors cannot secure their own dues at the cost of statutory dues owed to any government or governmental authority or for that matter any other dues.
In view of Section 48 of the GVAT Act a charge was created on the property of the CD by way of operation of law in favour of the Appellant as a result of which the Appellant is entitled to be treated as secured creditor under Section 53 of the code.
The resolution plan is in violation of the statutory provisions and is directly hit by the judgement of the Hon’ble Supreme court rendered in the case of Rainbow papers as it is clearly a case of material irregularity, in terms of Section 30(2) of the Code.
The matter is remanded back to the Adjudicating Authority to take further action in accordance with law - Appeal allowed - The parties are directed to appear before the Tribunal on 30th May, 2025.
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2025 (5) TMI 2003
Initiation of legal proceedings against the Personal Guarantors, by any other Financial Creditor, at the stage when the moratorium has been imposed under Section 96 of the I & B Code, 2016 - HELD THAT:- Whenever an Appellate Tribunal is called upon to answer or judicially scrutinize an order passed under a statute, it has had to confine itself to the grounds taken and the arguments extended by the counsel for the parties. At the stage of exercising the Appellate jurisdiction of scrutinizing the judicial propriety of orders passed by the Ld. NCLT, the Appellate Tribunal is not required to traverse into the conduct of the party to the proceedings before the Tribunal.
The view expressed by the Tribunal in the impugned order dated 13.12.2024 rejecting the proceedings drawn under Section 95 of the I & B Code, 2016, by the Appellant because of the embargo created due to Section 96 of the I & B Code, 2016, do not suffer from any apparent error of fact and law.
The grievance of the Appellant is that he has been denied to file an application under Section 95 of the I & B Code, 2016, because another application under Section 95 of the I & B Code, 2016, has already been filed and the interim moratorium is in place. In normal circumstances, once orders are passed under Section 100, either admitting or rejecting the said application, the grievances will be addressed. If the application gets admitted, he can file his claims with the Resolution Professional. If it is rejected, he can file his own Section 95 application.
Conclusion - The legal actions already initiated against a Personal Guarantor under Section 95 of the I & B Code, 2016, with an interim moratorium in place under Section 96, preclude any other Financial Creditor from initiating fresh proceedings during the moratorium.
The Ld. Adjudicating Authority to hereby requested to expedite the said proceedings. Apart from this, the ‘appeal’ lacks ‘merit’ and the same is accordingly ‘dismissed’.
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