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IBC - Case Laws

Showing 441 to 460 of 9418 Records

• 2024 (8) TMI 1152
  

  Prayer for for extension of period of Pre-Package Insolvency Resolution Process (PPIRP) for 60 days has been rejected - whether maximum time period of 120 days provided for completion of process is mandatory and on completion of the time period, the PPIRP has to be terminated and after 90 days in event, the Resolution Plan was not approved, RP has to file an Application for termination of the proceeding?

  HELD THAT:- Section 54D and Section 54N which we have noted above clearly indicates that termination of PPIRP happens after an Order is passed by the Adjudicating Authority. The statute makes one thing clear that there is no concept of automatic termination of PPIRP after expiry of 120 days. No exception, can be taken for providing 120 days of completion of PPIRP. Since all IBC process have timelines, which have its own importance. Completion of process in a timeline has its own object and purpose - the Application which was filed by the RP before the Adjudicating Authority was on the strength of resolution passed by the CoC in its 3rd CoC Meeting held on 30.04.2024. The CoC, in its 3rd CoC Meeting has noticed that revised base Resolution Plan submitted by the Corporate Debtor is under consideration of the CoC.

  The Hon’ble Supreme Court had occasion to consider the said second proviso in `Committee of Creditors of Essar Steel India Ltd.’ [2019 (11) TMI 731 - SUPREME COURT]. The second proviso which provided for mandatory completion of CIRP within 330 days came for consideration before the Hon’ble Supreme Court in the above case and Hon’ble Supreme Court has struck down the word “mandatorily”. It was held by the Hon’ble Supreme Court that in appropriate case even after 330 days, Adjudicating Authority or Appellate Tribunal can extend the period - The above Judgment of the Hon’ble Supreme Court clearly indicates that where legislature provided for mandatorily completion of CIRP within 330 days the word “mandatory” was struck down and it was held that in appropriate cases, Adjudicating Authority shall have jurisdiction to extend the time beyond 330 days.

  On looking into the provisions of Section 54D, it is clear that the provision does not contemplate any automatic termination of the PPIRP, the provision contemplates for filing of an Application by RP seeking termination of the process. The discretion of the Court is very well contemplated in the Scheme of the Statutory Scheme and Adjudicating Authority is free to exercise its statutory discretion while ordering termination of the proceeding. Thus, even if period of 120 days has been passed and the question of termination of proceeding comes for consideration before the Adjudicating Authority. Adjudicating Authority on sufficient reason can refuse termination and the proceeding and extend the period, which shall be within its jurisdiction. The Adjudicating Authority has taken the view in the Impugned Order that when the Resolution Plan is not approved within 90 days, RP was obliged to pray for termination of the proceeding and after expiry of 120 days, proceedings have to be terminated.

  The Adjudicating Authority committed an error in rejecting the Application filed by the Appellant for extension of PPIRP for 60 days.

  The impugned order is set aside - appeal allowed.

  ---

• 2024 (8) TMI 1110
  

  Pr-existing dispute or not - whether in the instant case any preexisting dispute exists which would not allow initiation of Section 9 proceedings under the Code against the Appellant / Corporate Debtor/ Corporate Debtor?

  HELD THAT:- It is not found that the claim of an operational creditor is undisputed and the operational debt remains unpaid.

  The Corporate Debtor received goods from Respondent No. 1 / Operational Creditor and has an outstanding debt exceeding Rs. 1 lakh - The Appellant / Corporate Debtor’s claims of a pre-existing dispute due to the GST raids and alleged fake invoices are not substantiated with material on record as the correspondence and proceedings involving the GST authorities do not constitute a genuine preexisting dispute between the Corporate Debtor and Respondent No. 1 / Operational Creditor concerning the operational debt.

  The Appellant / Corporate Debtor's contentions that the company is solvent and the matter should be resolved through civil proceedings or arbitration are not relevant to the initiation of CIRP under the IBC.

  The appeal lacks merit as the Appellant / Corporate Debtor failed to demonstrate a pre-existing dispute as required under Section 9 of the IBC. The Adjudicating Authority rightly admitted the application filed by Respondent No. 1 / Operational Creditor and initiated the CIRP against the Corporate Debtor.

  Appeal dismissed.

  ---

• 2024 (8) TMI 1109
  

  Admission of Section 95 petitions filed by Alchemist Asset Reconstruction Company Limited-Financial Creditor - denial of natural justice to the Appellant by the Adjudicating Authority - invocation of Deed of Guarantee of the PG stood circumscribed by the Put Option Agreement or not - entitlement to object to the Assignment Agreement between RBL/original lender and Respondent No.1.

  In the facts of the present case, whether there has been denial of natural justice to the Appellant by the Adjudicating Authority? - HELD THAT:- The application of principles of natural justice requires to be determined in the background of the facts and circumstances of each case as there is no one-size fits all formula. Having said that, we need to also appreciate the background in which the Adjudicating Authority decided to reserve the matter for orders. It is significant to note that the Adjudicating Authority while reserving the matter for orders observed that the that RP had filed its report under Section 99 of IBC “long back” and the matter at hand was “old” - the statutory provisions of IBC under Section 100 provides for only 14 days time to the Adjudicating Authority to adjudicate on the admission or rejection of Section 95 application from the date of submission of the Report of the RP. In view of such stringent timelines provided under the IBC for initiation of Insolvency Resolution Process under Chapter-III of the IBC, prima facie, the Adjudicating Authority cannot be faulted in the given circumstances for having proceeded with reserving the matter for orders after giving the Appellant due liberty to file further written submissions.

  In view of the time-bound nature of IBC proceedings, there are no infirmity in the endeavour made by the Adjudicating Authority to expedite disposal of the present Section 95 application rather than prolong the matter.

  The matter remanded back to the Adjudicating Authority would be a time-consuming process and frustrate the time-lines set under IBC.

  Whether the invocation of Deed of Guarantee of the PG stood circumscribed by the Put Option Agreement? -Whether the Appellant-PG was entitled to object to the Assignment Agreement between RBL/original lender and Respondent No.1? - HELD THAT:- No prior consent of PG or any intimation was given to the PG about the Assignment Agreement. Since PG had given guarantee to the original lender/RBL and not to Respondent No 1, therefore, no action can be initiated against the PG. It is also canvassed by the Appellant that the Assignment Agreement was entered into to overcome the ramifications of the Put Option Agreement and aimed at securing an unfair advantage to Respondent No.1 to fabricate claims against the PG. It has been asserted that the Adjudicating Authority has failed to appreciate that the Assignment Agreement was not executed in good faith.

  The Deed of Guarantee entered between the original lender and PG is an independent, distinct and a special contract which has to be construed on its own terms. The terms of the Deed of Guarantee are therefore extremely material as the invocation of the guarantee had to be purely in accordance with the terms of guarantee. It is clear from the reading of the clauses contained in Deed of Guarantee that guarantee was given by the PG in unequivocal terms and the guarantee amount was to be paid by the guarantors without demur or objection once the guarantee was invoked - In the letter invoking the guarantee, it was clearly stated that the Corporate Debtor had not performed its obligation of debt repayment. It is an admitted fact that the Corporate Debtor did not discharge the debt. It is a settled position in law that under Section 128 of the ‘Indian Contract Act’, the liability of the surety is coextensive with that of principal debtor unless it is otherwise provided by the contract.

  This legal precept has been laid down by the Hon’ble Supreme Court in the matter of Maharashtra State Electricity Board, Bombay Vs. Official Liquidator, High Court, Ernakulam and Anr. [1982 (10) TMI 134 - SUPREME COURT]. In the present case, once the principal borrower failed to discharge the debt, the liability of the guarantor got triggered on the invocation of guarantee. By virtue of this Deed of Guarantee, the PG was therefore mandatorily obliged to honour its guarantee.

  The Adjudicating Authority did not commit any error in holding that the right of the Respondent No.1 to recover money from the PG emanates from the terms of the Deed of Guarantee which were not in any manner obliterated, overwhelmed or superseded by the Put Option Agreement with the latter having its own sphere of operation. The liability of the PG was purely dependent on the terms of the Deed of Guarantee which was independent of the Put Option Agreement - Once the Assignment Deed was duly executed and registered, the Respondent No.1 by operation of law was substituted in place of the original lender in all actions for realisation of the debt vis-à-vis the Corporate Debtor. The legal position recognising the rights of an Asset Reconstruction Company to act in furtherance of assignment of debt as a valid legal right is no longer res integra. That being so, the borrower or the guarantor has no locus or right to challenge any such assignment.

  This Bench is of the considered view that the liability of the Appellant as surety being coextensive with that of the principal debtor in terms of the Deed of Guarantee and the Respondent No.1 having stepped into the shoes of the original lender pursuant to the Assignment Deed executed in its favour and Appellant having failed to show that debt of the principal borrower stands extinguished and having failed to honour the guarantee obligation despite invocation of personal guarantee, no error has been committed by the Adjudicating Authority in the impugned order admitting Section 95 application.

  There is no merit in the Appeal - Appeal dismissed.

  ---

• 2024 (8) TMI 1058
  

  CIRP - VAT / Sales Tax dues - Treatment of claims as Secured claims vis-a -vis Unsecured claims - Rejection of application of appellant to treat its claim as Secured Creditor during the liquidation under waterfall arrangement as stipulated in Section 53 of IBC - it was held by NCLAT that 'the Respondent classified remaining admissible outstanding dues as Unsecured debts. The Adjudicating Authority, therefore, also passed the Impugned Order accordingly based on Resolution Plan put up for approval by CoC through the Respondent' - HELD THAT:- There are no error in the view taken by the National Company Law Appellate Tribunal.

  Appeal dismissed.

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• 2024 (8) TMI 1057
  

  Seeking protection under Section 218 of the Companies Act, 2013 - as interim relief it is prayed for re-appointment as Secretary of the Club - submission which was advanced before the NCLT by the Appellant was that the termination was in violation of Section 218(1)(b) of the Companies Act and no employee could be removed from the Club without prior approval of the Tribunal - HELD THAT:- It is clear that only intent and object of the Appellant is to seek protection under Section 218 of the Companies Act and get reappointed as Secretary. The said issue of protection under Section 2018 having already been pronounced by the NCLT, which order has not been interfered with by this Tribunal or the Hon’ble Supreme Court, subsequent applications CA-88/2023 and CA-34/2024 are nothing but re- agitation of the issues which has already been raised by the Appellant and rejected. Appellant has given much emphasis on non-decision of CA-88/2023 and CA-34/2024 inspite of order of this Tribunal passed on 10.08.2023 and 11.01.2024. As noticed above, on 10.08.2023, this Tribunal has observed that in view of the fact that application has been filed under Section 218 of the Companies Act, the Tribunal shall endeavour to dispose of the application at an early date. Subsequently, another IA was filed being IA No.194 of 2024, which was disposed of by this Tribunal by order dated 11.01.2024.

  The Court who is in control of the proceedings has right to conduct the proceedings in orderly manner and resist attempt of the litigants who tend to raise repeatedly unconnected issues. In the present case it is noticed that the Appellant has been making submissions time and again with regard to CA-88/2023 and CA-34/2024 with regard to entitlement of protection under Section 218 of the Companies Act. Appellant very conveniently in entire appeal has not referred to earlier order of the NCLT dated 25.03.2021 where application under Section 218 was filed and in which no relief was granted of setting aside his termination or permitting his continuance.

  Thus, no grounds have been made to interfere with the order dated 05.04.2024 passed by the NCLT. Appeal is dismissed.

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• 2024 (8) TMI 997
  

  Initiation of CIRP - authentication of default as contemplated in Regulation 21, not taken - information of default not filed with the information utility - it was held by NCLAT that 'There are no substance in any of the submissions raised by the Counsel for the Appellant to interfere with the impugned order of the Adjudicating Authority' - HELD THAT:- There are no reason to interfere with the order of the National Company Law Appellate Tribunal - appeal dismissed.

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• 2024 (8) TMI 996
  

  Entitlement to file an appeal as an Independent Director in the Corporate Debtor - aggrieved person regarding acceptance of claim of the financial creditor or the quantum of financial credit admitted or not - it was held by NCLAT that 'The claim, as well as constitution of CoC with voting share as per claim, was in the knowledge of appellant from the very beginning. There are no fault in the RP’s admission of claim of Respondent No. 2'.

  HELD THAT:- There are no reason to interfere with the impugned order - appeal dismissed.

  ---

• 2024 (8) TMI 910
  

  Oppression and mismanagement - wrongful infusion of money - Corporate Debtor along with other family owned business entities were in nature of quasi-partnership or not - equal representation in the BoD - casting vote is privilege of the Chairman of the BoD or can be done away by the Adjudicating Authority as done in the Impugned Order.

  HELD THAT:- The lack of probity or equity would be more relevant factors in the cases of “oppressions”. This will further imply that intention behind of the action taken by the Corporate Debtor or person in charge of the company would also be relevant factor to look into such allegations of “oppression of mismanagement” - the oppressive actions are taken by the majority of shareholders which are pre-judicial to the minority members of the company. In the present case, it is already noted that both the Appellants and the Respondents are holding equal shareholding of 50:50 as such there is no majority shareholders. It is primarily the issue of control of the management of the Corporate Debtor.

  Whether such appointment or non appointment of the Director on BoD can be cause of “oppression and mismanagement”? - HELD THAT:- It is already noted that the act of “oppression and mismanagement” should be pre-judicial to a member of the company and not against the director of the BoD. Technically and legally speaking the appointment and removal of directors cannot be treated as act of “oppression and mismanagement”.

  The principles of quasi-partnership is not foreign to the concept of the Companies Act, 2013. For the purpose of grant of relief, the principles of quasi- partnership had been applied even in a public limited company. It is held that the true character of the Company and other relevant factors should be considered to decide the true factor of ‘quasi-partnership’ - the reasoning given by the Appellant No. 2 that he was getting old to run the affairs of the company are contradicted by himself after assuming the charge of Chief Operating Officer of the company. It clearly reflects that the intent was to oust (Respondent No. 1) and his family from the management and to have full control of the company by his family members.

  The casting vote were invoked only 2015 onwards when dispute arose between the parties and subsequently majority of such casting votes were used for benefits of the Appellants rather than for the company. It is appreciated that the disqualification of both the directors of company i.e., Appellant No. 2 and Respondent No. 1 would have rendered company without any director which is not permissible - the Adjudicating Authority took decision to remove the casting vote in these extraordinary circumstances which created company imbalance by one set of 50% shareholders taking all decisions for their own benefits and denying any right to other 50% shareholders. Based on the strength of the shareholding one can legitimately expect to have representation and say in the BoD of the company if otherwise eligible under Companies Act, 2013.

  Appeal dismissed.

  ---

• 2024 (8) TMI 855
  

  Violation of principles of res judicata as provided under Section 11 of the Code of Civil Procedure, 1908 - Suppression of relevant facts from the CoC - discrepancy in examining financial capability and eligibility of a Joint Resolution Applicant, [PRA] Mr. Sushant Chabbra, who is a former director of the Corporate Debtor and also a director in Unitech Machines Limited, a company undergoing CIRP proceedings - disposal of the assets of Corporate Debtor without the approval of CoC - executing lease agreement with the Prospective Resolution Applicants with respect to assets of Corporate Debtor without the approval of CoC - Review of order by Disciplinary Committee - Disciplinary Committee can sit in appeal against its own order or not.

  HELD THAT:- In the first round, when the Petitioner was confronted with Mr. Sushant Chabbra’s suspension, he responded by saying that since Corporate Debtor was registered under the Micro, Small and Medium Enterprises Development Act, 2006, in 2007, the ineligibilities under Clause (c) and (h) of Section 29A of the Code were not applicable and, thus, Mr. Sushant Chabbra is eligible to be a Joint Resolution Applicant.

  Subsequently, it came to light that the MSME certificate furnished by Petitioner stood cancelled on 22nd December, 2017 and, thus, it emerged that Corporate Debtor was not an MSME as on the date of commencement of CIRP, i.e., 04th July, 2019. Considering the date of initiation of the CIRP proceedings of Corporate Debtor, the criteria for classification of an enterprise as MSME would have to be governed by the provisions of Ministry of MSME Office Memorandum (OM) F. No. 12(4)/2017-SME dated 08th March 2017, as per which gross block for investment in plant and machinery as shown in the audit accounts were taken into account - It can be seen that that investment in plant and machinery in the three years preceding the commencement of CIRP was more than INR 10 crores. Therefore, in terms of Ministry of MSME Office Memorandum dated 08th March, 2017, Corporate Debtor was not an MSME.

  In light of the new information received by IBBI, in the opinion of the Court, the foundation of the Second SCN is based on a different issue altogether. Thus, Petitioner’s thrust of arguments that SCN is only a mirror copy of the First SCN and the principles of res judicata would apply, is not appealing. The concerns with respect to Mr. Chabbra’s eligibility as dealt with pursuant to the Second SCN were not raised in the First SCN. One of the main functions of IBBI is to investigate the conduct of its registered Insolvency Professionals. Cancellation of Corporate Debtor’s MSME certificate and non-disclosure by Petitioner of Avoidance Application against Mr. Sushant Chabbra comprises of new information that ought to be dealt with by IBBI de novo - Petitioner’s contention that the Second SCN is passed on the same cause of action as the First SCN, in the opinion of the Court, is devoid of merit.

  Non-compliance of Section 30(2) of the Code - HELD THAT:- Section 30(2) of the Code places an obligation upon the Resolution Professional to confirm that the Resolution Plan does not contravene any provisions of law and requires the Resolution Professional to examine the mandatory compliances before submitting the Resolution Plan for approval by the CoC. Section 29A aims to prevent those persons from gaining control of the Corporate Debtor from persons who have contributed to the defaults of the Corporate Debtor. Since there is an explicit bar under Section 29A of the Code, prohibiting the suspended board of directors of the Corporate Debtor to submit a Resolution Plan for the Corporate Debtor, Petitioner as a Resolution Professional cannot escape the liability of failure to carry out due diligence. Therefore, Petitioner’s contention before the Disciplinary Committee that due to non-availability of complete data, he was not able to ascertain MSME status of Corporate Debtor, cannot be accepted - Petitioner’s lack of due diligence in exercising its statutory obligations ought to be dealt with in accordance with the framework provided under the law.

  The determination made by Respondent that Petitioner has contravened the provisions of the Code and its Regulations, in the opinion of the Court, is after due consideration of all the relevant material placed before them.

  The Court finds no ground to interfere in the said decision and accordingly, the present petition is dismissed.

  ---

• 2024 (8) TMI 854
  

  Admissibility of Section 7 application - novation of the contract - non-invocation of the subsequent guarantee - HELD THAT:- In the sanction letter, clause 4 clearly mentions that all existing securities in the captioned facilities will continue to be the security for the existing facilities with the revised repayment schedule. It was further mentioned that the said securities will also cover the fresh FITL facility opened to part the interest on the captioned working capital facilities. Thus, the sanction letter dated 09.09.2020 was fully covered by existing securities which included the guarantees dated 22.08.2015 and 18.11.2016.

  Part-IV of the Section 7 Application, Cash Credit, Term Loan, FITL and Cash Credit Adhoc are the facilities for which with regard to amount disbursed default was claimed. Admittedly, for Cash Credit and Term Loan, Guarantees dated 22.08.2015 and 18.11.2016 are very much covering the said Cash Credit, Term Loan and for sanction of Adhoc Cash Credit and FITL. Sanction letter as extracted above clearly indicate that the existing securities shall cover.

  The Consortium Agreement which was executed on 06.11.2020 between the parties clearly mentions that it was not to affect existing securities. There are no novation of contract between the parties. Disbursement made pursuant to sanction made in the year 2013 and the guarantees issued by the corporate guarantor on 22.08.2015 and 18.11.2016 are still continuing and binds the corporate guarantor to discharge the debt. Subsequent to disbursement, Adhoc Limit and FITL sanctioned on 26.12.2019 and 09.09.2020 are also covered by the existing securities - the invocation of guarantee on 06.03.2023 by the Bank was right invocation which obliges the corporate guarantor to clear the dues.

  It is relevant to notice that there is no submission of the Appellant that no amount is due. Debt and default is not even contested. Appellant sought to get over his liabilities on the ground that contract is novated and there is no liability of the corporate guarantor.

  There are no error in the order passed by the Adjudicating Authority admitting Section 7 application. There is no merit in the Appeal - appeal dismissed.

  ---

• 2024 (8) TMI 795
  

  Permission to withdraw application filed u/s 9 of the Insolvency and Bankruptcy Code, 2016 - Appellant challenging the order contends that the Adjudicating Authority committed error in not granting liberty to the Appellant to file a fresh Application - HELD THAT:- The present is a case where the Adjudicating Authority due to reasons recorded in the judgment has refused permission to grant leave to file a fresh Application under Section 9. More so, while in the IBC proceedings, it cannot be held as a matter of right that the Applicant is entitled to withdraw the Application filed under Section 9 at any stage and pray for liberty to file afresh.

  IBC is a process in which timeline has importance and from the facts of the present case, it is clear that an objection was raised by the Corporate Debtor and an IA was filed, making allegations against the Appellant, that the Appellant placed on record false evidence pertaining to Demand Notice - the Adjudicating Authority permitted the Appellant to file pursish for withdrawal.

  Thus, no error has been committed by the Adjudicating Authority in permitting withdrawal of the Application, while denying liberty to file fresh Application, once again - the imposition of cost of Rs.50,000/- was not necessary - appeal dismissed.

  ---

• 2024 (8) TMI 794
  

  Approval of Resolution Plan - lifting of attachment by Enforcement Directorate over the assets of the Corporate Debtor - Section 32A of the IBC - HELD THAT:- Through, Section 32-A, the legislature have authoritatively spoken of the terminal point whereafter the powers under the PMLA would not be exercisable. The events which trigger its application when reached would lead to erection of an impregnable wall, which cannot be breached by invocation of the provisions of the PMLA. The Adjudicating Authority has missed the clear pronouncement by the Delhi High Court in Rajiv Chakraborty [2022 (11) TMI 600 - DELHI HIGH COURT] with regard to Section 32A.

  The Appellant has relied on judgment of the Bombay High Court in Shiv Charan [2024 (3) TMI 136 - BOMBAY HIGH COURT], where the Bombay High Court has held that NCLT does not lack jurisdiction to use its judicial discretion to adjudicate upon the release of the attachment.

  The Hon’ble Supreme Court had occasion to consider the challenge to Section 32-A in the Writ Petition filed in the Hon’ble Supreme Court under Article 32 in the judgment of Manish Kumar vs. Union of India and Anr [2021 (1) TMI 802 - SUPREME COURT]. In the above judgment challenge to Section 32-A was repelled and while repelling the challenge to Section 32-A, the Hon’ble Supreme Court examined the legislative scheme of Section 32-A - Hon’ble Supreme Court has clearly held that Section 32-A has been engrafted in the legislation, which is a legislative scheme and if legislature thought that immunity be granted to the Corporate Debtor or its property, it hardly furnishes a ground for this Court to interfere. In paragraph 326, it has been emphasized that the extinguishment of the criminal liability of the Corporate Debtor is apparently important to the new management to make a clean break with the past and start on a clean slate.

  Thus, the Adjudicating Authority erred in not extending the benefit of Section 32-A, subsection (2) to the Resolution Applicant, who was entitled to protection under Section 32A of the IBC.

  The SRA is entitled to relief of extension of benefit of protection of Section 32-A to lift the attachment by Enforcement Directorate over the assets of the Corporate Debtor - appeal allowed.

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• 2024 (8) TMI 727
  

  Rejection of prayer for quashing the invitation of Expression of Interest (“EoI”) dated 25.04.2022 issued by Respondent No.1 – Financial Creditor - error in the Assignment Agreement executed by Respondent no.2 or not - It is submitted that EoI for selection of new operation and maintenance contractor does not amount to any breach of Section 14(1)(d) of the IBC - HELD THAT:- On looking into the Facility Use Agreement entered between Corporate Debtor and Respondent No.2, it is clear that the Appellant has been handed over the substations (switchyards) for operation and maintenance and there is a clear Agreement between the parties that notwithstanding the Corporate Debtor operating, maintaining and usage of Facility, the ownership of the Facility shall remain solely with Respondent No.2. Except for the right to operate, maintain and use the Facility, the Corporate Debtor will have no right whatsoever in the ownership of the Facility. We have also extracted Clause 2.2.(d) of the Facility Agreement dated 12.08.2013.

  There can be no dispute that Facility has been handed over to the Appellant for operation and maintenance. Further, Respondent No.2 was also obliged to provide access to representative of the Corporate Debtor for operating and maintenance, but the mere fact that the Appellant has been permitted to use the Facility for operation and maintenance, cannot lead to conclusion that the Corporate Debtor is in occupation of the Facility and there is any breach of Section 14(1)(d). Section 14(1)(d) of the IBC prohibits recovery of any property by an owner or lessor, where such property is occupied and in possession of the Corporate Debtor. The present is not a recovery of the Facility by owner or lessor, who is Respondent No.2 herein. Further, the Facility is neither in occupation, nor in possession of the Corporate Debtor, since the Corporate Debtor has been appointed as operating and maintenance contractor

  The Adjudicating Authority has considered the various Clauses of the Facility Agreement and has rightly come to the conclusion that the EoI issued by Respondent No.1 to appoint another operating and maintenance contractor, cannot be interfered with.

  The fact is not disputed that the Corporate Debtor is not paying the facility use charges and is trying to set off the same against the claim against Respondent No.2. It is due to the non-payment of facility use charges, Respondent No.2 is unable to service the debt, causing an event of default for which Respondent No.1 has already initiated proceedings under the SARFAESI Act, 2002 against Respondent No.2.

  Thus, no error has been committed by the Adjudicating Authority in rejecting the Application filed by the Appellant - there are no merit in the Appeal - appeal dismissed.

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• 2024 (8) TMI 671
  

  Application for intervention/impleadment and objections - exercise of power under Article 142 of the Constitution of India - HELD THAT:- Application for intervention/impleadment and objections to the consent terms have been filed by M/s. A.M. Patel Infrastructure Pvt. Ltd. It is accepted at the Bar that M/s. A.M. Patel Infrastructure Pvt. Ltd. claims to be an operational creditor, but its claim has not been accepted by the liquidator, which is pending adjudication. An application under Section 66 of the IBC has been filed for avoidance of transaction, which has not yet been adjudicated.

  The company, namely, Virtue Infra and Entertainment Private Limited will stand revived - The proceedings pending before the National Company Law Tribunal will be treated as disposed of.

  Appeal disposed off.

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• 2024 (8) TMI 670
  

  Seeking Section 9 application - whether payment in respect of the ten invoices raised by the Operational Creditor were time barred? - whether there was any substance in the contention of the Corporate Debtor that there was a preexisting dispute surrounding the debt claimed by the Operational Creditor?

  Time limitation - HELD THAT:- It is the case of the Corporate Debtor that even taking into account the date of the 10th invoice which was 02.02.2017, the claim against it stood barred on 01.02.2020 which pre-dated the filing of Section 9 application which happened to be 04.03.2020. Hence all the 10 invoices, except the 11th invoice no. 77, stood time barred. It is well acknowledged that the period of limitation for an application under Section 9 of IBC is undisputedly three years as prescribed by the Limitation Act. Since the date of default is the starting point for counting of limitation and such date of default having been specifically shown as 25.07.2016 in Part IV by the Appellant in respect of these 10 invoices, the limitation period of filing of Section 9 application clearly expired on 24.07.2019 while the Section 9 application was filed on 04.03.2020 - the Adjudicating Authority did not commit any error in holding that the first ten invoices relied upon by the Appellant as the basis for their Section 9 application were all time-barred claims on which the incidence of debt and default could not be predicated.

  Pre-existing dispute - HELD THAT:- Despite having received the payment, it is clear that the Appellant has tried to misrepresent the total outstanding amount as Rs. 75.38 lakhs as due and payable under the 11th invoice no. 77 dated 31.01.2019 in Part-IV of the Section 9 application. Even on seeing the reply of the Corporate Debtor to the Section 8 Demand Notice, it is noticed that the amounts claimed by the Appellant have been disputed by the Respondent - the Adjudicating Authority rightly applied the ratio of Innoventive judgement supra in deciding whether the amount under 11th invoice had become due and payable or not and basis that appreciated the existence of a pre-existing dispute in respect of the said invoice and factorising the same rejected the Section 9 application. Given the conspectus of facts in the present case, it is clear that the first ten invoices were clearly time-barred and the 11th invoice no. 77 stood disputed even before the issue of demand notice - the Adjudicating Authority did not commit any error in rejecting the Section 9 application.

  There are no good grounds to interfere with the impugned order - appeal dismissed.

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• 2024 (8) TMI 669
  

  Invocation of Performance Bank Guarantee - Jurisdiction of order restraining the Appellant from encashing the Performance Bank Guarantee - applicability of moratorium u/s 14 of IBC - HELD THAT:- The basis of Judgment of the Adjudicating Authority is that Performance Bank Guarantee is not unconditional and sufficient ground has not made out by the Appellant to prove the fault on the part of Corporate Debtor, hence the Guarantee could not be invoked.

  The issue as to invocation of Performance Bank Guarantee during the period of Moratorium is now well settled.

  Reference made to the Judgment of the Hon’ble Supreme Court in the matter of STATE BANK OF INDIA VERSUS V. RAMAKRISHNAN AND ANR. [2018 (8) TMI 837 - SUPREME COURT], where Hon’ble Supreme Court has noticed the amendment made in Section 14(3) and has also noted the Report of the Insolvency Law Committee dated 26.03.2018 in consequence of which amendments were made in Section 14(3). The Committee in its Report has opined that Assets of the surety are separate from those of the Corporate Debtor and proceeding against the Corporate Debtor may not be seriously impacted by the actions against Assets of third parties like sureties.

  Thus, it is well settled that Section 14 in no manner impact the right of the Appellant to invoke the Bank Guarantee during pendency of the Moratorium and in the present case, it was during currency of the Moratorium 30.10.2019, the Guarantee was invoked. The observation made by the Adjudicating Authority that reading of Clauses of Performance Bank Guarantee does not give the impression of it being unconditional.

  There is no dispute between the parties that Mechanical Completion Certificate, the date for Mechanical Completion as per the Contract was 23.08.2018 and Certificate was issued as specifying the date of Mechanical Completion as 31.01.2019 - When the Contractor does not complete the Contract within the period specified, it cannot be said that Contractor has complied the terms and conditions of the Contract. In the letter invoking the Bank Guarantee, it was clearly stated by the Appellant that Contractor has not perform his obligation in accordance with the Contract was advised of such failure and did not cure the failure within the time period allowed for in the Contract. When it is an admitted fact that Contractor did not complete the Contract as per the Mechanical Completion Certificate it is not open to hold that there is no default on the part of the Contractor.

  The Adjudicating Authority committed an error in allowing the Application filed by the RP of the Corporate Debtor for restraining the Appellant, the State Bank of India and other Bank who has given counter Guarantee to invoke the Bank Guarantee. Order passed by the Adjudicating Authority, thus is unsustainable.

  Appeal allowed.

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• 2024 (8) TMI 668
  

  Dissolution of Corporate Debtor - Section 54 of the Insolvency and Bankruptcy Code, 2016 r.w Regulation 45 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - HELD THAT:- On perusal of the application and documents annexed with it, it is found that the applicant has not annexed Final report and Sale certificate with the application therefore this Adjudicating Authority listed this matter for clarification on 04.06.2024. In compliance of order dated 04.06.2024, applicant filed clarification affidavit.

  It is observed that the liquidator has obtained a report from the Auditor by way of Independent Auditor’s Report wherein the draw down of receipts and payments are mentioned. By way of email he has forwarded to a list of recipients for information and has in its report stated that the same has been forwarded for information. However, neither the email states that in view of the report he proposes to dissolve the entity and file before this authority this application, nor has he convened a meeting of the SCC to propose a dissolution under Sec 54 of IBC 2016.

  This application cannot be considered and needs to be reverted back with the directions to the liquidator to convene a meeting of SCC and place his proposal and submit a fresh application based on the advice of SCC - Application rejected.

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• 2024 (8) TMI 524
  

  Condonation of delay in filing the appeal - whether the period from 08.06.2023 to 03.01.2024 need to be excluded by extending the benefit of Section 14 of the Limitation Act? - Whether the Appellant is entitled for benefit of Section 14 of the Limitation Act? - HELD THAT:- In M.P. Steel Corporation [2015 (4) TMI 849 - SUPREME COURT], the Hon’ble Supreme Court has held that for invoking Section 14, the Application should not be guilty of negligence, lapse or inaction and further there should be no pretended mistake intentionally made with a view to delaying the proceedings or harassing the opposite party. The present is a case where one of the ingredients as laid down by the Hon’ble Supreme Court in Consolidated Engineering Enterprises is not being fulfilled, i.e., “failure of the prior proceeding was due to defect of jurisdiction or other cause of like nature”. It has been held that all the ingredients as noted in the judgment of the Hon’ble Supreme Court need to be fulfilled.

  The judgment in State Bank of India vs. Visa Steel Ltd. [2021 (3) TMI 631 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] clearly hold that while computing the period of limitation under Section 61, sub-section (2), time spent in prosecuting the legal remedy need to be excluded. There cannot be any quarrel to the above preposition laid down in the above case. Whereas, the question in the present case is as to whether condition precedent required for applicability of Section 14, are fulfilled in the facts of the case or not? - The above judgment clearly hold that while computing the period of limitation under Section 61, sub-section (2), time spent in prosecuting the legal remedy need to be excluded.

  Thus, no case has been made out to extend the benefit of Section 14 of the Limitation Act for excluding the period from 08.06.2023 to 03.01.2024. The Appeal having been filed with the delay of 209 days, and the delay being beyond the condonable period of 15 days, IA No.2256 of 2024 field for condonation of delay of filing the Appeal, is rejected.

  Appeal dismissed.

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• 2024 (8) TMI 477
  

  Declarations of the petitioner as Wilful Defaulter by the Identification Committee as well as the Review Committee - Liability of the personal guarantor post-assignment of debt under the approved Resolution Plan - whether the NBFC, simultaneously with the original financial creditor/bank, can recover the debt from the guarantors? - HELD THAT:- The answer is a resounding “No”, since the Resolution Plan itself contemplates that the assignment, including the security interests, in favour of the NBFC is confined only to the CD-company, categorically excluding the guarantors. In fact, it is further clarified in the Resolution Plan that it does not deal at all with personal guarantors or corporate guarantees given by other persons than the company.

  The personal guarantors, being excluded from the purview of the Resolution Plan, are by default also excluded from the assignment of the right to recover debt in favour of the assignee.

  Insofar as the surviving liability for the debt is concerned, the same is retained by the financial creditors, including the respondent no.1-bank herein, to be exercised in respect of the guarantors only - The CD is absolved by operation of law in terms of the Resolution Plan and the assignee of the debt never gets any right to recover the debt from the guarantors, since the guarantors are excluded from the Resolution Plan as well as from the process of assignment itself.

  The debt survives only between the financial creditors/bank and the guarantors - the argument of the petitioner that its liabilities are transferred to the assignee is not borne out by the Resolution Plan and the corresponding provisions of the IBC.

  There is an element of continuity in the liability of the borrower to repay the debt. Seen from such perspective, a borrower may very well make good the loan taken by it even subsequent to the classification of its account as NPA, thereby regularizing the account - By a logical corollary, the converse is also true, that is, if the borrower, despite having the means, fails to repay the loan and continues the violations as envisaged in Clause 2.1.3 read with Clause 2.2 of the Master Circular, there is no bar in declaring the borrower and the other entities contemplated in the Master Circular as Wilful Defaulters.

  Petition is allowed on contest, thereby setting aside the impugned decision dated December 30, 2022, whereby the Review Committee confirmed the decision of the Wilful Defaulter Identification Committee that the petitioner is a Wilful Defaulter under the RBI Master Circular dated July 1, 2015.

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• 2024 (8) TMI 407
  

  Statutory construct of IBC post issue of demand notice by the Operational Creditor as laid down in Section 9 of IBC - whether payment to the Respondent No. 2 was due from the Corporate Debtor? - whether a default has been committed by the Corporate Debtor in respect of payment of such debt and whether there was any pre-existing dispute surrounding the debt?

  HELD THAT:- From a plain reading of the statutory provisions, it is clear that the existence of dispute and its communication to the Operational Creditor is statutorily provided for in Section 8. In the present case, it is an undisputed fact that Section 8 demand notice was issued by the Operational Creditor- Respondent No. 2 on 20.06.2018 and in response a notice of dispute was also raised by the Corporate Debtor on 29.06.2018.

  Besides attributing a grave charge against Respondent No. 2 for bankrupting SPIN, the Corporate Debtor had effectuated revision of the role, responsibilities and salary compensation of Respondent No. 2. More significantly, the disputes raised in these letters are central to the payments claimed by Respondent No. 2 and had a bearing on the computation of outstanding dues arising out of the hand written agreement of 18.09.2013 which has been the bone of contention between the two parties. These disputes, raised prior to demand notice, were germane to deciding whether there was a debt and if the debt was disputed by the Corporate Debtor. The present is therefore not a case where there is an undisputed debt for which Corporate Debtor can be brought under the rigors of CIRP. Triggering the drastic consequences of CIRP on the Corporate Debtor on the basis of debt and default which is mired in pre-existing disputes, in our considered view, is not acceptable.

  It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication into the disputes between the parties regarding operational debt. In terms of the Mobilox judgement [2017 (9) TMI 1270 - SUPREME COURT], all that the Adjudicating Authority was required to do was to see whether any notice of dispute was raised by the Corporate Debtor and take a call on the plausibility of these disputes which in the present facts of the case the Adjudicating Authority has hopelessly failed to do. Disputes once raised and found plausible, they require detailed consideration which is beyond the ambit of the Adjudicating Authority since IBC only provides for summary proceedings. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor.

  The Adjudicating Authority committed serious error in admitting Section 9 application. The impugned order initiating CIRP of the Corporate Debtor is set aside. The Corporate Debtor is released from the rigours of CIRP with immediate effect. The Resolution Professional shall however be paid his fees/expenses by the Appellant. The Registry is directed to take appropriate action without any delay to refund the amount which was deposited by the Appellant in Fixed Deposit Receipt in pursuance of the interim order of this Tribunal dated 10.11.2023.

  Appeal allowed.

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