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IBC - Case Laws
Showing 41 to 60 of 9149 Records
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2024 (11) TMI 732
Quashing of e-auction of 31.01.2024 - Seeking consideration of the Scheme submitted by the Appellant - Rejection of the application, thus preferred by the Appellant, whereby his prayer to declare the e-auction conducted on 31.01.2024 as null and void - confirmation of sale of the Corporate Debtor, as a going concern in favour of the Successful Bidder - rejection of prayer for consideration of the Scheme of Arrangements proposed by him under Section 230 of the Companies Act, 2013, without considering its merits - contravention of Section 230 (1) of the Companies Act, 2013 - HELD THAT:- With enactment of IBC, the process of Insolvency Resolution has been fast tracked and therefore, the significance of Section 230(1) in addressing the issue of insolvency / sickness has diminished.
The follow up process which has been provided under Sub Section (1) of Section 230, would only be necessary to be complied with when the process of Compromise or Arrangement, as envisaged under the Companies Act, 2013, becomes necessary and needs to be carried out. But, that would be only in a situation, when there is a failure on the part of the Liquidator in his attempt to sustain the functioning of the Corporate Debtor as a going concern, as sufficient provisions have been provided under the I & B Code, 2016, and the IBBI (Liquidation Process) Regulations, 2016. Further, Regulation 2B under the Liquidation Regulations provides for Compromise / Arrangement within a limit of 90 days from the date of Order of Liquidation. The intent behind such provision is to give a chance for Compromise / Arrangement, before resorting to competitive bidding process for sale of the Corporate Debtor in the manner laid down in Regulation 32 of the said Regulations. In that light, it is only one more instrument in the hand of the Liquidator to keep the Company under Liquidation as a going concern.
More important and relevant for the purposes of the instant case, would be the provisions contained under Regulation 32A, which provides for that, where the Committee of Creditors, has recommended the sale of the Corporate Debtor, under Clause (e) or (f) of the Regulation 32 or where the Liquidator is of the opinion that the sale of the Corporate Debtor under 32(e) or 32(f) will maximize the value of the Corporate Debtor, he shall endeavour to sell under such clauses - while taking action under Chapter 6 of Liquidation Process Regulations, dealing with realizations of assets of the Corporate Debtor, selling the Corporate Debtor as a going concern, will have to be the first priority for the Liquidator, in order to meet the objective of the I & B Code, 2016, i.e. the Corporate Debtor is to be kept, as a going concern after resolution of the insolvency.
As far as the objection raised by the learned counsel for the Appellant with regards to the non-compliance of Clause 12 of Schedule I of the IBBI (Liquidation Process) Regulations, 2016, during the bid process is concerned, it is seen that the same has been taken into consideration by the learned Adjudicating Authority, by recording that minor discrepancies which might have chanced in the process due to inadvertent omission, will not have a very vital bearing over the entire proceedings of e-auctioning, which was held particularly when the Corporate Debtor was being sold as a going concern, and such the inadvertent errors or omissions ought to be ignored when it does not defeat the very object of the provisions contained under the said Regulations 2016 - as it has been reflected by the learned counsel for the Respondent No. 1, that as a consequence of conclusion of the e-auction process, the Successful Bidder, is now in the helm of affairs of the Corporate Debtor and he is operating the Corporate Debtor as a going concern. Accordingly, no cause as such prevails for the purposes of the appellant in the instant appeals.
Appeal lack merits and the same are accordingly dismissed.
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2024 (11) TMI 731
Liquidation of the Corporate Debtor as approved by the Committee of Creditors - whether the CoC with 100% vote share could have directly proceeded for liquidation of the Corporate Debtor without taking any steps for resolution of the Corporate Debtor? - whether in the given factual matrix there were good reasons for the CoC to initiate liquidation of the Corporate Debtor in the exercise of its commercial wisdom? - whether the Adjudicating Authority had failed to apply its mind in passing the impugned order approving the proposal of the CoC to initiate liquidation?
HELD THAT:- The power given to the CoC to take decision for liquidation is of a wide amplitude which can be exercised immediately after constitution of the CoC. In terms of the statutory construct of IBC, it is therefore not required for the CoC to complete all the steps relating to resolution of the Corporate Debtor prior to the liquidation of the Corporate Debtor and any interpretation to the contrary would clearly be antithetical to the spirit of Section 33(2) and Explanation appended to it wherein the legislature has consciously used the words “any time” for liquidation even before inviting resolution plans - the legislative fiat of Section 33(2) read with the explanation clause empowers the CoC for deciding to initiating liquidation even before inviting resolution plans.
Whether there were good and cogent grounds noticed by the CoC to recommend liquidation or whether their reasoning was flawed and ex-facie arbitrary? - HELD THAT:- It is found that the health of the Company was not favourable for revival. In such circumstances, the CoC had come to the conclusion that there were no positive signs for revival and that there were no good grounds to prolong the process of CIRP. This decision of the CoC was taken keeping in view the financial position of the Corporate Debtor and does not reflect any arbitrariness.
It was also noticed by the CoC that the RP had furnished a long list of documents required to comply with the various formalities for conducting CIRP and in particular to prepare the IM. Though the RP had sent several communications to the suspended management of the Corporate Debtor for handing over the records including custody of assets, no reply had been received from the suspended management. However, the suspended management could only provide the Pan Card details only. It is pertinent to note that the suspended Director was under arrest and out on temporary bail during the 1st CoC meeting and hence the CoC committed no mistake in concluding that he would not be always available for giving the information for preparation of IM - the scenario was dim for coming up with a holistic and comprehensive IM sans which the issue of Form-G becomes a meaningless exercise. Accordingly, the second CoC meeting after due deliberations had decided not to publish Form- G.
CoC’s decision to liquidate cannot be looked upon as abrupt and hasty or arbitrary. The contention of the Appellant that the decision of the CoC to liquidate the Corporate Debtor as arbitrary therefore lacks merit. The only grounds on which a liquidation order passed under Section 33 can be challenged are on grounds of material irregularity or fraud as provided under Section 61(4) of the IBC.
The commercial wisdom of the CoC in deciding whether an entity can be revived or the debtor can be restructured or the Corporate Debtor needs to be liquidated being a business decision of the CoC needs to be accorded primacy - It is a well settled proposition of law that the Adjudicating Authority has been bestowed with limited jurisdiction as specified in the IBC while dealing with matters relating to resolution and liquidation of the Corporate Debtor and cannot enter upon adjudicating into the merits of a decision taken by the CoC with requisite majority in its commercial wisdom to liquidate a corporate debtor.
Thus, no infirmity is found in the order of the Adjudicating Authority approving the decision of the CoC to liquidate the Corporate Debtor - there are no good ground to interfere with the impugned order passed by the Adjudicating Authority at the instance of the Appellant - there is no merit in the appeal. The Appeal is dismissed.
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2024 (11) TMI 730
Admission of Section 95 application filed by the State Bank of India against the Appellant the Personal Guarantor - debt and default to the personal guarantor - report the application has been admitted under Section 100 - Respondent contended that all facts pertaining to the limitation relevant dates and pleadings for extension of limitation were made in the application itself - Time limitation.
Whether the application is barred by time or not? - HELD THAT:- It is well settled that even if there is no plea raised regarding limitation, the court is to oblige to examine the question of limitation before proceeding further in an application - pleadings made by the State Bank of India clearly contains the extension of limitation under Section 18 of the Limitation Act when the pleadings are on the record which provide for extension of limitation no error can be said to be committed by Adjudicating Authority in admitting Section 95 application against the personal guarantor. The application filed under Section 95 was not barred by limitation and on this ground no error can be found.
Admission of application - HELD THAT:- The notice of demand was clearly given to the Personal Guarantor. The submission of the Appellant that after the said notice further fresh notices were required for filing Section 95 application does not appeal here. When by the notice guarantee was invoked by the bank, bank was entitled to initiate proceedings and present is the case where bank is claiming extension of limitation under Section 18 thus it is not satisfied that invocation of guarantee was to be repeatedly done by the bank before filing the application under Section 95. When the application under Section 95 is well within time the said ground cannot be a ground to interfere with order impugned.
There are no error in order of Adjudicating Authority admitting Section 95 of the application - The Appeal is dismissed.
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2024 (11) TMI 729
Challenge to Judicial propriety of the Impugned Order - Resolution Professional has rejected the claim of the Applicants, in its entirety - HELD THAT:- When the Appeal after the exchange of the pleading was taken up yesterday, it was pointed out by the Learned Counsel for the Respondent, that during the period of pendency of the Appeal, the order of liquidation had already been passed by the Learned Adjudicating Authority on 19.02.2020. Thus, in fact the Respondent Counsel contended, that owing to the passing of the order of liquidation, the instant appeal for all practical purposes has been rendered infructuous until or unless the challenge is given by the Appellant to the order of 19.02.2020 appointing the liquidator. The matter was debated upon yesterday and was carried forward today for arguments.
The only liberty sought from this Tribunal is with regard to the aspect of limitation which is self-contained under section 42 of I & B Code, which obviously will be dealt by the NCLT, in consonance of the provisions contained under section 238. Subject to the above liberty of preferring an Appeal under section 42 of I & B Code, the Company Appeal would stand dismissed as having been rendered infructuous.
Appeal dismissed.
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2024 (11) TMI 728
Tenability of Affidavit of Rejoinder filed by the Financial Creditor - HELD THAT:- Along with the Rejoinder documents which were sought to be filed by the Financial Creditor were financial statement of the Corporate Debtor and OTS related documents. There are no reason to interfere with the order by which above documents has been accepted on record. The mere fact that the said documents were not referred to in the Section 7 application cannot disentitle the Financial Creditor to bring on record the said documents when plea was raised in the Reply by the Corporate Debtor that application is barred by time.
The power of the Court to accept the rejoinder and document is not being questioned. When the issue of limitation is raised, it is duty of the Court to decide the question of limitation even if no defence is raised and for deciding the question of limitation party are at liberty to file relevant documents. When the Corporate Debtor questioned the application as barred by time, it was open for the Financial Creditor to bring on record the relevant documents claiming acknowledgment of the Corporate Debtor.
There are no error in the order of the Adjudicating Authority accepting Rejoinder on record - appeal dismissed.
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2024 (11) TMI 727
Implementation and viability of the Resolution Plan - Section 31, and Section 30, sub-section (2) (d) as well as Regulation 38(3) of the IBBI (CIRP) Regulations - HELD THAT:- The requirement of the law is that the Plan contains provision for effective implementation. It is not the case that Plan does not contain effective provision for implementation. The Adjudicating Authority in the impugned order specifically noticed the provisions of the Resolution Plan, which provides for implementation. It is not the case that there are no provisions in Resolution Plan for effective implementation. The submission of the Appellant that in view of lapse of more than five years and the deterioration of the financial status of the Corporate Debtor, the Plan is no more implementable, cannot be accepted as a ground to withdraw from the Resolution Plan. It is further relevant to notice that before the Hon’ble Supreme Court in Ebix Singapore, the SRA has raised similar contentions, including that position has changed manifestly in relation to the financial conduct of Educomp.
It is reflected from the record that an affidavit was filed on 22.09.2023 before the Adjudicating Authority by RP stating that CD is a going concern. The RP, who has been running the Corporate Debtor after initiation of CIRP, has stated in the affidavit that the CD is a going concern - The Adjudicating Authority in paragraph 35, as extracted above has noticed that revenue for the year 2021-22 reflects the impact of the pandemic Covid-19 and it was further noticed that revenue of the CD could rise to Rs.40 million in the year 2021-22. There are no substance in the submission of the Appellant that Corporate Debtor was not a going concern.
Insofar as, feasibility and viability of the Resolution Plan is concerned, the feasibility and viability of a Resolution Plan is in the domain of commercial wisdom of CoC. The Plan having been found feasible and viable and approved by the CoC, the Appellant cannot ask the Adjudicating Authority to enter into feasibility and viability of the Plan.
Thus, no valid grounds are raised by the Appellant, before the Adjudicating Authority to reject the Application filed by the RP for approval of the Resolution Plan - No error has been committed by the Adjudicating Authority in allowing IA No.195 of 2018 and approving the Resolution Plan.
There is no merit in the Appeal. The Appeal is dismissed.
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2024 (11) TMI 676
Maintainability of petition filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 - legality of filing of petition under Section 95 of the Insolvency Code by the appellant - petitioner was a partnership firm registered under the Partnership Act, 1932 - Ministerial versus Adjudicatory - whether respondent No.1-Registrar could enter into realm of adjudication? - HELD THAT:- The conceptual and jurisprudential distinction between ministerial act and judicial act or administrative function and adjudicatory function came to be analysed elaborately, lucidly and pertinently by the Supreme Court in JAMAL UDDIN AHMAD VERSUS ABU SALEH NAJMUDDIN AND ANR. [2003 (2) TMI 509 - SUPREME COURT]. Though slightly in different context, what was delineated and laid down by the Supreme Court provides a guidance to address the controversy involved in this case. It was in the context of presentation of election petition under Section 81 of the Representation of the People Act, 1951 that the Supreme Court discussed the difference between the ministerial function and adjudicatory function and further that by which authority and at which stage such functions, both of different kinds, could be performed.
The gist of the plea raised by the appellant was the petition should have been presented either before the Designated Election Judge or the Chief Justice of the High Court and that having not been done, the petition was liable to be dismissed without trial. The Supreme Court considered the question as to whether the High Court was competent to frame rule for making provision for receiving the election petitions presented to the High Court under Section 81 of the Representation of the People Act. It is in that context that the Supreme Court elucidated the difference between ministerial act and adjudicatory act. It was observed, “By no stretch of imagination can it be said that the "presentation" of an election petition is part of the "trial" of an election petition”.
The Supreme Court in Jamal Uddin Ahmad observed that the judicial function entrusted to a Judge is inalienable and differs from administrative or ministerial function which can be delegated for once whereof may be secured through authorisation.
The status in the nature of duty discharged by respondent No.1-Registrar at the time of receiving the petition under Section 95 of the Code, satisfies the above tests. The Registrar has no discretion, but to receive and register the application once the procedural requirements are fulfilled.
Registering Petition, a Ministerial Act - HELD THAT:- The Registrar of NCLT is necessarily part of the administrative segment of the Tribunal. As an administrative staff, the office of the Registrar would receive the applications filed under Section 95 of the Code along with the documentations presented therewith. The function of receiving the petitions which are filed or presented is a procedural stage. It is an administrative or ministerial function - The examination of the petition on merits for its maintainability or any such other stand point of merit, is foreign and alien at such stage. The aspect whether the petition presented with the Registrar is maintainable, is a part of merit and it necessarily travels in the realm of judicial function. The Registrar is not entitled to look into this aspect.
There will be gainsaying that the Registrar of NCLT acting to receive the applications under Section 95 of the Code which was the stage of filing of the application, acts administratively. The function of registering the applications filed under Section 5 of the Insolvency Code is a ministerial function and a procedural act. This stage does not store any adjudicatory process - Application of judicial mind towards merits has no place in discharge of a ministerial or clerical function. For the Registrar, it is not permissible at the time of registering the petition which is filed by the debtor or creditor.
The case as pleaded by the applicant-appellant in its application under Section 95 of the Insolvency Code filed before the NCLT had definite adjudicatory element and demonstrable adjudicatory trappings.
Jiwrajka Finally Answers [2024 (1) TMI 33 - SUPREME COURT] - HELD THAT:- The issue as to whether when the adjudicating function commences under the Insolvency and Bankruptcy Code, 2016 could be said to be no longer res integra in view of the judgment of Supreme Court in Dilip B. Jiwrajka. The Supreme Court stated therein as to when the adjudicatory function of adjudicatory authority commences. It was held that adjudicatory function of adjudicatory authority commences under Part III of the Code, 2016 after submission of a recommendatory report by the resolution professional. In challenging the constitutional validity of Section 95 to Section 100 of the Code, 2016 which was negatived by the Supreme Court, the same nature of submissions were advanced on behalf of the petitioners before the Supreme Court - Inasmuch as without judicial intervention for adjudication, there would operate an automatic interim moratorium, for the resolution professional would be appointed who would seek from the guarantor and would examine the information received and then submit report.
Adjudicatory Stage Subsequent - HELD THAT:- It is an inescapable conclusion that even the stage when the resolution professional functions together the information to prepare the report to be submitted to the adjudicatory authority-NCLT, the adjudicatory stage does not reach and no adjudication of rights of the parties takes place. Therefore, it could not be said at any stretch of imagination that the Registrar, NCTL, while accepting or receiving the petition under Section 95 of the Code, 2016 has any adjudicatory permission, much less such power, or that at such stage of filing petitioner, adjudication can take place in any manner whatsoever.
Moratorium A Statutory Effect - HELD THAT:- If for the reason of filing Section 95 application, other proceedings initiated by the rival party in relation to the subject matter are slowed down or affected in their progress or stand postponed for some period, then it could not be complained that the invocation of law or remedy in law by other party amounts to abuse of process of law. A litigant is entitled to employ all legal means in pursuit to its right to legal adjudication and availment rights in that regard. This negates the submission on the part of the respondent-original petitioner that the filing of Section 95 application by the applicant had an effect of protracting and postponing the arbitral proceedings.
Prayers Misconceived - HELD THAT:- It is therefore clear that the stage of filing application under Section 94 or Section 95, is too preliminary a stage to perceive and conceive any adjudicatory attribute at that stage. The Registrar of the NCLT would receive and register the petition. Thereafter, the subsequent provisions from Sections 96 to 100 of the Code would operate. The resolution professional would examine the application as to whether it satisfies the requirements of Section 94 or 95, as the case may be, to recommend the acceptance or rejection of the application by submitting a report - it is impossible to conclude that the Registrar at the stage of receipt of the petition filed under Section 94 or 95 of the Code by the debtor or creditor, which is a stage even prior to Section 97 and 99 of the Code can decide on the maintainability of the petition by entering into merit and thus the realm of adjudication.
The issue examined is only as to whether at the stage of receipt of the petition under Section 95, the Registrar, NCLT- respondent No.1, has power and jurisdiction to decide on the maintainability of such application and whether by adjudicating merits on that score at that stage, the petition could be rejected by the Registrar - All such questions of merits fall within the domain of adjudicating authority-the NCLT to be considered at the appropriate stage when the report of the resolution professional is forwarded to it.
The judgment and order of learned Single Judge dated 6th March 2024 passed in writ petition No.26977 of 2023, allowing the petition, is hereby set aside - Appeal allowed.
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2024 (11) TMI 675
Dismissal of application of the Appellant under Section 9 of the Insolvency and Bankruptcy Code, 2016 - application under Section 9 was not admitted on the grounds of pre-existing dispute as the material supplied by the Operational Creditor was from a tainted source - HELD THAT:- In the facts and circumstances of the case it is undisputed that the Corporate Debtor was demanding NOC from the Operational Creditor, through various emails and legal notice to enable him to register the copyright of TVC, which the Operational Creditor has failed to provide. Clause 26 of the Terms and Conditions stipulated in the proforma invoice, without any exception, state that “LKSS or Producer will provide the necessary NOC or any other paper which may require for the IP registration to the Client.”. The Appellant Operational Creditor has failed to provide the NOC and the Corporate Debtor was unable to register the copyright.
It is noted that the dispute was real and genuine, and not moonshine or feeble, and is supported by evidence, and also that the Corporate Debtor, despite having made substantial payment as advance, had not used the TVC in absence of copyright. The correspondence and dispute regarding issuance of NOC is prior to the issuance of notice under Section 8 of the IBC, and thus, qualifies to be treated as “pre-existing dispute”, which is a valid ground for rejection of application under Section 9 of the IBC.
The Ld. NCLT had rightly rejected the application under Section 9 of the IBC and we do not find any merit in this appeal - The appeal is accordingly dismissed.
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2024 (11) TMI 674
Challenge to proceeding under Section 9 of I & B Code of 2016 - direction to Respondent to settle the balance claim of the Petitioner/Appellant herein within three months - HELD THAT:- The appellant has disputed the quantification of the amount payable, by the respondent and has contended that, the full amount as per the claim raised under Section 8 demand notice under I & B Code, 2016 has not been remitted and that the amount deposited is on the basis of the order of MSEFC dated 13.09.2021, which does not appropriately satisfy the demand raised by the appellant in Section 8 demand notice.
Since there is a dispute in respect of the size of the claim between the Appellant and the Respondent, and if the Appellant feels that the directions given by the Hon’ble NCLT, in its order dated 31.03.2021 to the respondent to settle the claim of the Appellant within three months has not been complied with, the Appellant can very well approach the Ld. NCLT with an appropriate application to redress his grievances including determination of the amount that needs to be paid by the Respondent for which the Ld. NCLT has already granted liberty.
Since the issue involves consideration of evidence and facts, and also scrutiny of documents to arrive at the balance amount to be paid to the Appellant and also consideration of the order dated 13.09.2021 of MSEFC, Chennai Region, it is best done at the level of Hon’ble NCLT, Bengaluru Bench, which has itself left it open for the Appellant to re-approach it, to raise his grievances if, he is dissatisfied with the amount, which has been paid by the Respondent - The issue of determination of amount is still left wide open to be decided by the Hon’ble NCLT.
The appeal lacks merit and the same is accordingly ‘dismissed’.
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2024 (11) TMI 673
Violation of principles of natural justice - Propriety of the impugned order - ex-parte order - order rendered without providing an adequate opportunity of hearing - HELD THAT:- The contentions of the Appellant that, his application preferred under section 60(5) of the I & B Code to be read with the rule 49(2) of the NCLT rules, should have been taken up for consideration and for decision prior to IA(IBC)/202/2023 is un-called for, for the reason being that the CIRP proceedings as initiated by the order of 12.04.2023 has already been given effect to, and moratorium contemplated under section 14 of the I & B code, 2016 has already been enforced. Further, the fact that the Corporate Debtor had already vacated the premises about four years back and that the inferences drawn upon the inspection of the records as available with the RoC, and as per the share allotment letter of 08.01.2018 pointed to the need for considering the application under section 19(2) of the Code, on a priority basis so as to facilitate CIRP proceedings already ordered to be carried out in a move effective manner.
The dismissal of the application preferred by the appellant, being IA(IBC)204/2023, on the ground that no adjudication on merits is required to be made on the said application, because of the order passed on IA No. 202/2023, is absolutely justified, because section 60(5) will not have a superseding effect to the provisions contained under section 19(2) to be read with section 14 of I & B code, 2016 for the purpose of effective conduct of CIRP proceedings.
The order passed on IA No.204/2023 cannot be said to be an ex-parte order, contrary to the claim of the Appellant for the reason being that according to the Appellant's own case, a counsel was engaged by him, who did not file vakalathnama or counter affidavit and in the absence of there being any effective assistance being provided by the Appellant herein to the Learned Adjudicating Authority, the Learned Adjudicating Authority, by order of 29.08.2023, directed the matter to be proceeded ex-parte.
There are no merits in the appeal and the same would accordingly stand ‘dismissed’.
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2024 (11) TMI 672
Admission of Section 9 petition against the Corporate Debtor - initiation of Corporate Insolvency Resolution Process - dispute of dues - pre-existing disputes which were wrongly overlooked by the Adjudicating Authority - whether payment to the Operational Creditor was due from the Corporate Debtor giving rise to an operational debt? - whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt having already become due and payable? - whether the said operational debt exceeds the threshold level and is an undisputed debt?
HELD THAT:- The Operational Creditor has placed material on record which shows that in response to their email dated 17.12.2020 as placed at page 929 of Appeal Paper Book (APB), the Corporate Debtor in their reply email dated 21.12.2020 as placed at page 927 of Appeal Paper Book clearly admitted that they had made total imports of about USD 70 million during the period from 2016 to November 2020 against which they had paid only USD 57 million to the Operational Creditor. It was however contended by the Corporate Debtor that the Adjudicating Authority had not taken cognisance of the fact that the alleged balance confirmation dated 03.03.2021 was issued on the insistence of the Operational Creditor with the limited purpose of disclosure.
The Corporate Debtor had admitted the operational debt and held adverse cash-flow to be the cause for non-payment of the operational debt and as such no dispute with the Operational Creditor was attributed for non-payment of the same - The tone and tenor of the email clearly shows that that the Corporate Debtor while admitting the debt had shown their commitment to participate with the Operational Creditor in building their brand presence in India thereby showing that there was no dispute between the parties on the business dealings.
The contention of the Corporate Debtor that only part of the debt has been admitted by the Corporate Debtor does not hold ground as long as the admitted debt which has been admitted is clearly above the prescribed threshold limit of Rs 1 cr. The Corporate Debtor has duly admitted the outstanding debt and default which is a valid and proper admission in the eyes of law. In the attendant facts and circumstances, no error was committed by the Adjudicating Authority in admitting the application for initiating CIRP.
It is noticed that even at the stage of notice of dispute, the Corporate Debtor has only mentioned about some agreement of 04.10.2016 and subsequent agreement of 01.09.2018 while there is no mention of the agreement of 21.07.2015. It is therefore a misleading statement made by the Corporate Debtor that the agreement of 21.07.2015 finds mention in the Notice of Dispute - In the present case, the Adjudicating Authority went ahead to ignore the disputes between the parties while admitting the Section 9 application.
Thus, no material has been placed on record by the Corporate Debtor to show that they had categorically rejected the outstanding dues claimed by the Operational Creditor prior to issue of demand notice. There is no evidence of any outright denial of the liability to pay which has been placed on record by the Corporate Debtor. Furthermore, it is noticed that Corporate Debtor while admitting the outstanding debt had also admitted in the same breath that they were working to promote the global presence of the Operational creditor in India which affirms that there were no differences between them with regard to the agreement basis which they were conducting their business operations - no real preexisting dispute is discernible. There is no good ground to establish any real and substantial pre-existing dispute which can thwart the admission of section 9 application against the Corporate Debtor. The Adjudicating Authority therefore does not appear to have committed any error in holding that all requisite conditions necessary to trigger CIRP under Section 9 stands fulfilled.
The Appellant has defaulted in the payment of operational debt which amount had clearly become due and payable above the threshold limit, and further in the absence of any credible or plausible pre-existing dispute, it is found that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and initiating CIRP.
There are no merit in this Appeal - Appeal is dismissed.
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2024 (11) TMI 671
Dismissal of application for refund of payment made, under protest, towards pre-CIRP electricity dues by the Successful Resolution applicant (SRA) to the Respondent, for the restoration of the Corporate Debtor’s electricity connection, in order to revive the Corporate Debtor in terms of, and in compliance with, the Resolution Plan - scope of Section 60(5)(c) of the IBC - HELD THAT:- The submissions made by the Respondent cannot be agreed upon as the Resolution Plan related to revival of sugar crushing factory located in Distt. Parbhani, Maharashtra. Admittedly a sugar crushing factory is operational generally for six months in a year during the crushing season from November to April and during this time electricity connection is crucial for the operation of its factory as without it the factory could not operate and may come to a standstill.
The correspondence would rather reveal there was no option left for the appellant except to adhere to the demands raised by the Respondent lest the Respondent would not provide electricity in the coming sugar cane crushing season. Thus the payment of pre-CIRP dues by the appellant was paid under protest and under protection of the order of the Ld. NCLT and thus it related to the revival of the Corporate Debtor in terms of the Resolution Plan and to the Insolvency Resolution Process, hence the claim for refund of such amount is a matter which can be adjudicated under Section 60(5)(c ) of the IBC.
In Tata Power Western Odisha Distribution Ltd (TPWODL) & Anr Vs Jagannath Sponage Pvt Ltd, [2023 (9) TMI 1071 - SC ORDER] and further in Southern Power Distribution Company of Andhra Pradesh Ltd Vs Gavi Siddeswara Steels (India) Pvt Ltd and Another [2023 (9) TMI 664 - SC ORDER], the Hon’ble Supreme Court held the power distribution company cannot insist on the payment of arrears for the purpose of the restoration of the electricity connection and such a matter would fall within the ambit of Section 60(5)(c) of the IBC.
It is crucial to note the Respondent without having filed any claim during the CIRP or having challenged the Resolution Plan is trying to benefit from its own default. The Resolution Plan provided for the payment of the Operational Creditors at an amount which was around 7% of the admitted claim. If the Respondent had filed its claim as an operational creditor it would have received rs.10.5 lakhs but today the Respondent had received Rs.2.11 crores towards the pre-CIRP dues - the Respondent cannot be permitted to benefit from its own failure to file the claim and coercing the appellant to pay pre-CIRP dues for restoring the electricity. Even if the payment was not made by the appellant under protest and so was made only because of compulsion due to the coming season then also the Respondent was barred from seeking arrears of the amount that stood extinguished by operation of law as a precondition for restoring the appellants’ electricity connection.
Thus, it is evident the issue is squarely covered by Tata Power [2023 (9) TMI 1071 - SC ORDER] and Southern Power Distribution Company [2023 (9) TMI 664 - SC ORDER] and pertains to a dispute arising out of the non-compliance of the Respondent of para 30 of order dated 07.11.2019 whereby the NCLT had directed the restoration of all approvals and licenses. The present matter thus falls under Section 60(5)(c ) of IBC since it relates to the insistence of the Respondent for payment of pre-CIRP amounts that stood extinguished by way of the Resolution Plan.
The impugned order is set aside - Appeal allowed.
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2024 (11) TMI 616
Maintainability of eviction application - direction to CD to vacate two office spaces in the White House Property in Delhi - main contention of the appellant is that impugned order is completely unreasoned and non-speaking in nature and only a part of the application has been decided - principles of natural justice - whether CoC can take a decision to hand over the property in possession of CD to third parties and whether AA has powers to allow such advice of CoC? - HELD THAT:- There is an absolute bar on recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.
It is seen from the extract of minutes of the 6th CoC that the CoC was seeking legal opinion from the advocate regarding vacation of the registered office, and till then the voting with respect to the same could not be done. It was further discussed that in view of applications filed by Nobel Dealcom and Sincere Securities before the AA, the RP should appear and take necessary steps. It is clear from the above, that there was no final decision of the CoC with proper voting, with regard to vacation of the registered office of the CD.
The CoC does not appear to have taken a decision about vacation of registered office even in the 6th CoC meeting after which RP gave a statement in Court that the property is not required to be held based on which AA passed the impugned order. CoC at this stage also stated that they are in process of seeking legal opinion and till such time voting on the agenda could not be done. It is clear from the above that the decision to release the property by the RP was his own decision, which was not confirmed by CoC. The submission of CoC at this stage, that such decision was taken with 100% voting right does not seem to be based on records.
The moratorium under Section 14 binds the AA also by the use of the word “shall by order declare moratorium for prohibiting all of the following” inter alia meaning that it is a mandatory action on the part of AA. The AA should have first examined, whether it is possible to allow such applications in view of express provisions in Section 14 (1) (d) even if such applications are supported by CoC. Prima facie the Code does not seem to provide such discretion to AA. In any case AA should have examined the issue in detail with regard to provision of Section 14 (1) (d) before passing a nonspeaking order merely on the basis of consent of RP to release of property based on application by owner/lessor.
The order of AA in the I.A No. 1083 filed by Respondent No.2 and I.A. No. 1082 filed by Respondent No. 3 to 4 has been passed on the prayer of owner/lessor. The RP has only supported the contention of Respondents No. 2 to 4. The AA has not examined the maintainability of such application by owner/lessor in view of express provision under Section 14 (1) (d) of the Code - appellant has locus to file this appeal - the case remanded back to the AA to examine and decide the issues in a comprehensive manner including the application of the appellant in I.A. No. 1412 of 2023 preferably within four weeks - appeal allowed.
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2024 (11) TMI 554
Disqualification of Director of the Financial Creditor to sign the Section 7 Application - Rejection of Application under Section 7 signed by Vinod Sachdeva, Director of the Airwill Infracon and also Director in the Airwill JKM Infrastructure Pvt. Ltd. (the Financial Creditor herein) - Appellant submits that Infracon Company has been struck off on account of non-filing its Financial Statement for last 3 years, which attracts the disqualification of the Directors under Section 164 - HELD THAT:- The basis of the submission of the Appellant that Airwill Infracon has not filed Financial Statement for continuous last 3 years hence the Directors have become disqualified does not commend us. Further for applicability of Section 164(2), essential condition is that the Company has not filed Financial Statement or Annual Return for any continuous period of 3 Financial Years. The Company Airwill Infracon has been incorporated on 26.02.2014 and last date of filing of Balance Sheet was mentioned as 31.03.2015. In the Reply which has been filed by Financial Creditor to the I.A.5670/2023, the Financial Creditor has clearly pleaded that said condition as contemplated under Section 164(2)(a) cannot also be attracted since there can be no default for filing of Financial Statement of 3 continuous Year. Company having been struck off on 08.08.2018.
The submission of the Counsel for the Appellant is that in event, disqualification under sub-Section (2) of Section 164, the Office of Director becomes vacant in all the Companies other than the Company which is in default under the sub-Section (2). The Counsel for the Appellant contended that in view of the default committed by Airwill Infracon not filing the Financial Statement under sub-Section (2) of Section 164, the Office of the Director of all the Companies including Financial Creditor, where Vinod Sachdeva is the Director shall be vacated. It is relevant to notice that proviso has been inserted by Act of 01/2018 with effect from 07.05.2018. There are two reasons for which the said submission advanced by the Appellant cannot be accepted.
The default under Section 164(2) has neither been proved nor is the basis of striking off the Airwill Infracon as was contended by the Counsel for the Appellant.
There is no Applicability of Section 167(1) proviso to hold the Vinod Sachdeva as disqualified in the Airwill JKM Infrastructure Pvt. Ltd., the Financial Creditor. On the date of filing the Section 7 Application, Airwill Infracon had already been struck off, and the Vinod Sachdeva could not continue as Director of the Company Airwill Infracon having been dissolved, but that shall have no effect on continuance of Vinod Sachdeva as Director in Airwill JKM Infrastructure Pvt. Ltd. Vinod Sachdeva was fully competent to file Section 7 Application and swear Affidavit in support of Section 7 Application.
There are no error in the Order of the Adjudicating Authority in rejecting the application filed by the Corporate Debtor. There are no merit in any of the Appeals - Appeals dismissed.
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2024 (11) TMI 553
Dismissal of Section 95 application filed by the Appellant without appointing a Resolution Professional and without following the statutory process as per the Insolvency and Bankruptcy Code - principle of waiver - HELD THAT:- The Adjudicating Authority has not appointed even the RP as contemplated under Section 97 in the IBC and proceeded to hear the objections raised by Personal Guarantor and dismissed Section 95 application. The judgment of the Hon’ble Supreme Court in Dilip B. Jiwrajka’s case [2024 (1) TMI 33 - SUPREME COURT] delivered on 09.11.2023, i.e. much before filing of IA No.5501 of 2023, need to be noticed. The law declared by the Hon’ble Supreme Court in Dilip B. Jiwrajka’s deals with entire statutory process and the nature of jurisdiction of the Adjudicating Authority to be exercised in proceedings of personal insolvency. The judgment in Dilip B. Jiwrajka was delivered by the Hon’ble Supreme Court in a batch of writ petitions, in which writ petitions, various provisions of the IBC from Sections 95 to 100 were challenged. In the above context, the Hon’ble Supreme Court had occasion to deal with scheme of the IBC; the submissions made on behalf of the parties and analysis of IBC and principles of natural justice.
Principle of waiver - HELD THAT:- Hira Lal Patni vs. Sri Kali Nath [1961 (5) TMI 58 - SUPREME COURT], was a case where there was an issue raised regarding the lack of jurisdiction by the Court granting the decree. The present is not a case where either of the parties are raising any issue regarding lack of jurisdiction of the Adjudicating Authority in deciding Section 95 application. The Adjudicating Authority has jurisdiction to decide Section 95 application as per the scheme of the IBC. The question of waiver with regard to jurisdiction of Adjudicating Authority to decide the application cannot be pressed into service in the present case.
Waiver is always related to some consideration on the basis of which a party consciously abandons the existing legal right. In the present case, neither any consideration is proved, nor there is any conscious abandonment of any of its rights by the Appellant. Hence, the submission of learned Senior Counsel for the Respondent that Appellant is precluded to raise the ground to challenge the order of the Adjudicating Authority on the ground of waiver, is misconceived.
The Adjudicating Authority committed error in considering the objections raised by the Respondent on the merits of the application under Section 95 filed by the Central Bank of India at the stage when RP was not even appointed. The Adjudicating Authority proceeded to enter into adjudicatory issues, which can be taken by the Adjudicating Authority only at the time of hearing of section 95 application under Section 100, as is now the law declared by the Hon’ble Supreme Court in Dilip B. Jiwrajka’s case.
The order passed by Adjudicating Authority is set aside - appeal allowed.
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2024 (11) TMI 552
Refund of security amount - adjustment of security amount in the claim - HELD THAT:- On looking into Clause 8 of the Claim Form, in the claim itself the security amount was adjusted i.e. said amount was set off.
The Adjudicating Authority has referred to judgment of Hon’ble Supreme Court in Bharti Airtel Ltd. and Another vs. Vijaykumar V. Iyer and Others [2024 (1) TMI 187 - SUPREME COURT], which was a case of the CIRP. However, the judgment which has been extracted itself indicate that set off of account on mutual dealing is permitted under Regulation 29. It is submitted that the Adjudicating Authority has erred in observing that the amount set off by PVVNL against anticipated claim cannot be permitted. The present is not a case of anticipated claim but the claim filed by the Appellant is with adjustment of security claim. The view of the Adjudicating Authority that there could not have been set off/ adjustment of the claim by the Appellant cannot be approved.
The direction of the Adjudicating Authority to pay Rs.1,15,33,600/- could not be sustained. The Appeal is partly allowed.
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2024 (11) TMI 551
Classification of the Security Deposit as Financial Debt or Operational Debt - Security Deposit made by the Appellant with the Corporate Debtor for the purpose of the lease deed - whether the RP’s treatment of the claim made by the Appellant in respect of the Security Deposit made in pursuance of the Lease Deed in the category of ‘Other Creditor’ is justifiable in the facts of the present case? - HELD THAT:- The Security Deposit claimed by the Appellant is clearly a claim within the meaning of IBC. Now that it is noted the statutory construct of IBC and the provisions of the Lease Deed, it is required to examine the contention of the Appellant that they deserve to be treated as Financial Creditor and their claim of Security Deposit to be treated as financial debt qua the Corporate Debtor.
The essential elements of financial debt in the context of Section 5(8) of IBC is inclusive of debt alongwith interest which disbursal must be against consideration for time value of money and also includes anything which is equivalent to the money that has been loaned as long as commercial effect of borrowing or profit is discernible. It is a well settled proposition of law as laid down by the Hon’ble Apex Court in Pioneer Urban Land and Infrastructure Ltd. v. Union of India [2019 (8) TMI 532 - SUPREME COURT] that any debt to be treated as financial debt, there must happen disbursal of money to the borrower for utilization by the borrower and that the disbursal must be against consideration for time value of money.
The Adjudicating Authority has returned the finding that the Appellant did not fall in the category of a “financial creditor” nor the alleged transaction of Security Deposit fell within the ambit of “financial debt” in terms of the statutory provisions enshrined in Section 5(7) and 5(8) of the IBC. The above findings of the Adjudicating Authority have been predicated on the terms of Lease Deed entered between the Appellant and the Corporate Debtor.
From the records and documents, the intent of the two parties was that the Security Deposit was a corpus amount of four months of lease rent kept on hold with Corporate Debtor which would be refundable to the Appellant without interest on termination of lease and after deducting dues arising on account of unpaid lease rent, utility charges and damages caused to property, if any, other than normal wear and tear. It is clear, therefore, that Security Deposit was never disbursed or deposited against consideration for time value of money. Only in the event of failure to refund the Security Deposit from the date such refund was due that the deposit was to be returned with interest of 18%. It was bereft of all elements of commercial borrowing. The essential elements in the principal clause of Section 5(8) of the IBC pertaining to financial debt was therefore not satisfied. Clearly therefore, the present transaction was not disbursement for time value of money and does not fall within the canvas of financial debt as defined under Section 5(8) of the IBC.
From a plain reading of the definition of “operational debt”, it is clear that it must relate to a claim which is confined to either of the four categories viz. provision of goods, services, employment and Government dues. It may be pertinent to add here that the expression “services” has not been defined in the IBC and has to be interpreted in a broad and purposive manner. The sum of Security Deposit made in the facts of the present case which was given in the form of advance by the Appellant to the Corporate Debtor for prospective occupation of the leased premises on rent, this deposit was in the nature of advance for use of the premises - the impugned order in not treating the Appellant as an Operational Creditor suffers from legal infirmity and the same cannot be supported.
The Security Deposit was in the nature of operational debt. The categorisation followed by the RP by placing the Appellant in the category of ‘Other Creditors’, cannot be agreed upon. Since the ingredients of operational debt stands satisfies, and includes all those provide or receive operational services from the Corporate Debtor. The Appellant in the present factual matrix should be accorded the status of an operational creditor.
The RP is directed to admit the claim of the Appellant as an Operational Creditor and Appellant be allowed to substitute Form-C as already filled up with Form-B - appeal disposed off.
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2024 (11) TMI 550
Admission of Section 7 Application filed by the Financial Creditor - application barred by Section 10A of the Insolvency and Bankruptcy Code (IBC) or not - fresh cause of action for filing the Section 7 Application - HELD THAT:- It is already noticed that default was committed by the Corporate Debtor on 21.12.2017 & 29.06.2018, when accounts of the Corporate Debtor was declared by Lenders as NPA. Assignment was made in favour of the Financial Creditor in the Year 2019. Financial Creditor agreed to settle and restructure the dues of the Corporate Debtor on 26.04.2019, which was also not honoured and, hence the default was also committed prior to 10A period.
In any view of the matter, Section 7 Application having been founded on the basis of default committed after Consent Decree dated 29.08.2022 was passed, Default cannot be pegged on 10A period when Application under Section 7 is founded on the basis of Consent Decree dated 29.08.2022.
The observation made by this Tribunal in Samrat Restaurant’ Vs. `Brewcrafts Micro Brewing Pvt. Ltd. [2024 (10) TMI 399 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB] was in facts of the said case and has no bearing in the fact of the present case where a Consent Decree was passed by the DRT. It is not the case of the Appellant that no default was committed by the Corporate Debtor in terms of the Consent Decree dated 29.08.2022.
Thus, the Adjudicating Authority did not commit any error in admitting Section 7 Application filed by the Financial Creditor. The Section 7 Application was in no manner hit by Section 10A of the IBC.
There is no merit in the Appeal - The Appeal is dismissed.
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2024 (11) TMI 484
Suspension of AFA pending adjudication of the show cause notices - Restoration of Authorization for Assignment -validity of Clause 23A provided in the Schedule to the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 - Clause 23A of the Bye-Laws of ICSI Institute of Insolvency Professionals - It was held by High Court that 'The suspension of the petitioner’s AFA is legal as it is the consequence of initiation of disciplinary proceedings against him. The same is duly provided by Clause 23A of the 2016 Regulations and the Bye-Laws in that regard.'
HELD THAT:- It is not required to issue notice in the present special leave petition and, hence, the same is dismissed.
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2024 (11) TMI 483
Appropriate Forum - Maintainability of petition or remedy is to approach the Debt Recovery Tribunal (DRT) - petitioners raised the grievance that despite the debt of the corporate debtor having been restructured and resolution plan being approved by the CoC, of which the respondent no. 1/IOB was the signatory, the proceedings are still continuing before the learned DRT - HELD THAT:- Unhesitatingly, the petitioner is approaching this Court for a relief which cannot be entertained since the matter is already pending before the learned DRT. The plea by the learned counsel for the petitioners that the decision by the Supreme Court in the case of Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd and Ors. [2023 (10) TMI 48 - SUPREME COURT], is binding on the right of redemption to the borrower requiring thirty days’ clear notice in terms of Section 13 (8) of the SARFAESI Act read with Rule 8 (6) of the Rules of 2002 and the publication of sale notice under Rule 9 (1) is an issue that must be addressed before the learned DRT. Likewise, whether the subject property/mortgaged property is agriculture in nature and thus exempted from the dragnet of the SARFAESI Act in terms of section 31 (i) is a plea that too be addressed before the learned DRT.
There is some merit in the plea of the learned senior counsel for the petitioner that the decision in the case of Lalit Kumar Jain v. Union of India [2021 (5) TMI 743 - SUPREME COURT] was one wherein it was held that the approval of the resolution plan under Section 31 of the IBC would not automatically discharge a guarantor from his obligations, and yet at the same time, in view of the fact that the resolution plan has been accepted by the NCLT vide vide judgment dated 11.06.2024, the issue that arises for consideration is since the entire debt of the borrower has been restructured in the resolution plan, and certain conditions are attached to the assenting and dissenting secured creditors, whether the respondent no. 1 bank can proceed under the SARFAESI Act considering the overriding effect of the proceedings under the IBC in terms of section 238 of the IBC. The bottom line is all the aforesaid issues should be addressed before the learned DRT, which is the competent forum for now.
The present writ petitions are disposed of with a direction that the learned DRT, Delhi shall consider the aforesaid objections raised by the petitioners while deciding the securitisation application in accordance with law.
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