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IBC - Case Laws
Showing 501 to 520 of 9418 Records
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2024 (7) TMI 762
Distribution of provident fund dues - waterfall mechansim - distribution of provident fund dues in accordance with Section 36(4)(iii) of the Code or in accordance with Section 53 of the Code? - treatment of the various components of claims of the EPFO (the Respondent herein) i.e., contribution under Section 7A, interest under Section 7Q and damages under Section 14 of the EPF Act - PF dues in terms of EPF Act or not - costitution of liquidation estate - HELD THAT:- The sum due to any workmen or employee from provident fund, pension fund and gratuity fund are not to form the assets of liquidation estate - the EPFO Authorities have been given powers to determine the amount due from the employer under the provisions of the EPF Act, or the pension scheme or insurance scheme as the case may be under Section 7A of the EPF Act.
From section 14B of the EPF Act, it is noted that the EPFO Authorities hae been given powers to recover damages in case of employer’s defaults in payment of any contribution to the fund. There is no pre-conceived formula regarding what damages should be fixed under Section 14B of the EPF Act and the same has been left to the discretion of the EPFO Authority to determine the damages in facts of each case - it becomes clear that the EPFO Authorities have powers to levy damages. It is also significant to note that damages is in relation to non- payment or delayed payment of contribution under Section 7A of the EPF Act by the employer (the Corporate Debtor herein) therefore, the damages in a sense is to be treated as extended part of the contribution.
The Hon’ble Supreme Court of India in Sunil Kumar Jain v. Sundaresh Bhatt [2022 (4) TMI 888 - SUPREME COURT] held that the dues of the gratuity and pension shall be governed by Section 36(4) of the Code. It is reiterated that Section 36(4)(ii) of the Code specifically excludes "all sums due to any workman or employee from the provident fund, the pension fund and the gratuity fund", from the ambit of liquidation estate assets. Therefore, Section 53(1) of the Code cannot be made applicable to such dues, which are to be treated outside the liquidation estate assets under the Code. Section 36(4) of the Code has clearly gives protection to workmen's dues under provident fund, gratuity fund and pension fund which are not to be treated as liquidation estate assets and the liquidator cannot claim over such dues.
This Appellate Tribunal in the case of State Bank of India v. Moser Baer Karamchari Union, [2019 (8) TMI 915 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] also examined the question of whether gratuity fund, provident fund and pension fund should be included as part of liquidation estate by including the same for payments under the waterfall mechanism under Section 53 of the Code. In this case, the Liquidator denied payment of the said funds in a preferential manner and had included the same for payment under the waterfall mechanism prescribed under Section 53 of the Code whereas the workers union claimed dues cannot be part of the waterfall mechanism under Section 53 of the Code - It was decided that the dues are to be paid to the workmen/employees on priority, without reference to or waiting for distribution of liquidation assets as per the waterfall mechanism under Section 53 of the Code.
There are no merit in the appeal. The appeal deserved to be dismissed and stand dismissed.
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2024 (7) TMI 761
Approval of Resolution Plan - redetermination of claim of Pegasus - HELD THAT:- The Hon’ble Supreme Court in M/S. TULIP STAR HOTELS LIMITED & ANR. VERSUS MR. ANISH NIRANJAN NANAVATY & ANR. [2024 (5) TMI 1449 - SC ORDER] has clarified that reworking/ verification in terms of the order dated 22.11.2023 may not have any impact on the Resolution Plan or its implementation.
The Hon’ble Supreme Court has also held that re-working/ verification in terms of order dated 23.11.2023 has no effect on the Resolution Plan. The said observation are equally applicable to the reverification by the Pegasus, which was also done and placed before the CoC in its 32nd Meeting. The Appellant, who is shareholder and promoter of the Corporate Debtor and related party, has not been proposed any amount in the Resolution Plan. The submission of the Appellant that redetermination of Pegasus ought to have been complied by RP before proceeding further, needs no further consideration, since Pegasus itself on 27.11.2023 after the order of this Tribunal on 21.11.2023, has requested the RP to redetermine its claim @ 14.85%. The RP was fully entitled to redetermine any claim on account of any subsequent facts or materials, hence, the RP did not commit any error in redetermining the claim of Pegasus, which was made on its own request and ultimately, the Adjudicating Authority vide its order dated 26.04.2024 passed in IA No.5606 of 2023 has approved the said reverification.
There are no error in the orders passed by Adjudicating Authority - Adjudicating Authority having found the Resolution Plan in accordance with the statutory scheme of the Code, has not committed any error in approving the Resolution Plan - appeal dismissed.
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2024 (7) TMI 693
Interpretation of statute - whether the “Certified Copy”, so prescribed for the purposes of preference of an Appeal, could be taken up as a substitute to the “Certified Free Copy”, provided under Rule 50 of the Rules to the parties concerned? - HELD THAT:- The issue came up for consideration, before this Tribunal in MUNAGALA ROJA HARSHA VARDHINI VERSUS VARDHANSMART PRIVATE LIMITED [2024 (3) TMI 1333 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL CHENNAI] and this question was quite elaborately dealt with by this Tribunal by the Bench of Three Members, wherein, Para 12 onwards the Court has dealt with as to what would be the factors to determine the Certified Copy, in pith and substance mean for the purposes of preferring of an Appeal, under Section 61 of the I & B Code, 2016.
The issue was laid to rest, by the Three Member Bench while drawing its implication from the Judgment of V. Nagarajan V. SKS Ispat [2021 (10) TMI 941 - SUPREME COURT (LB)] where the Three Member Bench of this Tribunal, had answered the aforesaid question after dealing with the various Authorities that, in those cases where the Appellant before the NCLAT, has not applied for a Certified Copy, as prescribed under Section 76 of the Evidence Act, to be read with Rule 2 (9) of the NCLT Rules, after raising a demand and payment of the Requisite Fee, the Free Copy of the Impugned Order will not be treated as to be as good as a Certified Copy, contemplated under Rule 22 (2) to make the Appeal maintainable.
Since, the necessity of filing of an Appeal, along with the Certified Copy and the distinction between the “Free Copy” and the “Certified Copy”, as to the basis for filing of an Appeal has already been decided, by the larger Bench of this Tribunal, in that eventuality and in the light of the Chandra Prakash Judgment, the reference is answered accordingly, since, the principle of Limitation has already been settled that the Appeal would lie on the basis of the Certified Copy of the Judgment, and not on the basis of Free Copy. Hence, the reference is answered accordingly.
Holding thereof the Free Copy provided under Rule 50 of NCLT Rules, 2016, cannot be treated as to be a Certified Copy referred to under Rule 22(2) of NCLAT Rules, 2016, and the Free Copy will not satisfy to be a Certified Copy, as defined under Section 2(j) of the NCLT Rules, to be read with Section 76 of the Evidence Act.
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2024 (7) TMI 692
Validity of Resolution Plan - classification of the Appellant's Claim - Locus to challenge the Resolution plan approved by CoC, as the Appellant is an individual member of Financial Creditor - genuine homebuyer or a speculative investor - HELD THAT:- From the definition of the Code of Homebuyers as Financial Creditors as contained in Section 5(8)(f) along with two explanation along with definition of ‘Allottees’ and ‘Real Estate Projects’ as contained in Section 2(d) and 2 (zn) of the RERA Act, 2016, it is clear that any allotee who has paid the amount in the Real Estate Project shall be deemed to be Financial Creditor and the said amount paid to Real Estate Developers will be treated having commercial effect of the borrowing - The Code or the RERA Act, 2016 do not differentiate anywhere between the Homebuyers who purchase units for his own consumption or the Homebuyers or unit purchaser who purchase the multiple units for commercial purposes.
It becomes clear that whether the homebuyer/ allottee is genuine homebuyer or genuine allottee or speculative homebuyers/ allottee but if he has paid the money for acquisition of such properties or given the advance, such allottee/ homebuyer shall be treated as Financial Creditor in terms of Section 5(8)(f) of the Code . Hence, the pleadings of the Respondent No. 2 in this regard that the Appellant is speculative investor will not affect the rights of the Appellant to be treated as the Financial Creditors.
From judgment of Essar Steel India [2019 (11) TMI 731 - SUPREME COURT], it is clear that once the CoC approves the Resolution Plan by the requisite majority, the same cannot be challenged by any individual unit buyer/ homebuyer like the Appellant in the present appeal - This makes absolutely clear that the Resolution Plan may provide different categories of creditors and different payment schemes, as seen in the present case which is valid and legally enforceable. The ratio of the above judgment is very explicit and clear and therefore we find that the Appellant has no locus in the present appeal to challenge the Resolution Plan or his classification in category 4 of the Resolution Plan on his own as individual homebuyer/ allottees.
There are no merit in the appeal. The appeal devoid of any merit stands dismissed.
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2024 (7) TMI 625
Issues involved:
1. Consideration of a Resolution Professional under the Insolvency and Bankruptcy Code as a public servant under the Prevention of Corruption Act.
Detailed Analysis:
1. The main issue before the court was whether a Resolution Professional under the Insolvency and Bankruptcy Code should be considered a public servant under the Prevention of Corruption Act. The counsel for the petitioner argued that this question required consideration, highlighting that a similar issue was pending before the court in another case. The Court acknowledged the significance of this matter and decided to issue notice on the issue, with a returnable date set for four weeks.
2. During the proceedings, it was brought to the Court's attention that the complainant, represented by Mr. Ram Niwas Buri, was a party in the proceedings before the High Court. As a result, the complainant was ordered to be impleaded as respondent No.2 in the case. This procedural step was taken to ensure all relevant parties were included in the legal proceedings and had the opportunity to present their arguments before the Court.
Overall, the judgment focused on the specific legal question of whether a Resolution Professional falls within the definition of a public servant under the Prevention of Corruption Act. The Court's decision to issue notice on this issue and implead the complainant as a respondent demonstrates a commitment to thorough and fair legal proceedings, ensuring all relevant parties are heard before a final decision is reached.
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2024 (7) TMI 624
Rejection of section 7 application - initiation of CIRP - Principles of estoppel.
Whether reliance by the Adjudicating Authority to Section 10 of CPC for taking the view that Section 7 Application, which is subsequent proceeding need to be stayed is correct view in law? - HELD THAT:- Section 238 of the IBC as extracted above, gives overriding effect to the proceedings under Section 7. Thus, despite the provision of Section 10 of CPC, the proceedings under Section 7 has to be proceeded with. The clear intendment of the statute is that the provisions of the Code shall have effect, notwithstanding anything inconsistent therewith in any other law for the time being in force. Even if for argument sake, it is accepted the provisions of Section 10 CPC will be attracted, the clear intendment of the statute is that proceedings under the IBC shall have effect. Insolvency resolution of the Corporate Debtor has to be detected at the earliest and remedial measures are to be taken to bring back the Corporate Debtor on its feet - in view of the overriding provision of Section 238, the proceedings under Section 7 shall not be barred by any proceeding initiated under Section 19. As noted above, Section 19 proceedings are for the purpose of recovery of dues by the Bank and Section 7 proceedings are for insolvency resolution of the Corporate Debtor. Both proceedings covers entirely different field and rejection of proceedings under Section 19 by DRT on 17.06.2022 cannot operate as any bar for Application under Section 7.
The determination of default in DRT proceedings, which is pending in Calcutta High Court can have relevance for the purposes of Section 19 Application, but cannot be said to be a reason to hold the proceedings under Section 7 barred, as has been held by the Adjudicating Authority.
The Hon’ble Supreme Court in Employees Organisation vs. Jaipur Metals & Electricals Ltd. [2018 (12) TMI 674 - SUPREME COURT] clearly held in the above case that petition under Section 7 is an independent proceeding, which is unaffected by pendency of proceedings in other Court, which may be filed by the same Company.
The order of DRT dated 17.06.2022 and the proceedings under Section 19, which are still inconclusive, cannot be a ground to hold Section 7 Application as barred. The Adjudicating Authority committed error in holding Section 7 Application as barred in view of the order dated 17.06.2022 passed by DRT - order of Adjudicating Authority dated 21.03.2023 is unsustainable. Appeal allowed.
The Company Petition is revived before the Adjudicating Authority, to be considered afresh in accordance with law.
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2024 (7) TMI 560
Suit for recovery - application filed u/s 9 of IBC - interest @ 24% is calculated from the date of default till the date of filing suit - HELD THAT:- The argument raised by Respondent No. 1 appears to be attractive but in view of the statement made by Respondent No. 1 while appearing in the suit which is already captured in the early part of this order, Respondent No. 1 himself stated that he has received part payment of Rs. 34,00,000/- from the Appellant herein and after giving credit to the said payment, an amount of Rs. 61,18,217/- was remaining which includes principal amount of Rs. 23,70,417/- and interest of Rs. 37,37,710/- @18% p.a. Since, Respondent No. 1 itself has claimed the interest @ 18% which too has been granted by the Hon’ble High Court in its judgment decree dated 14.12.2022, therefore, it does not lie in his mouth to claim interest @ 24% on the balance amount.
The contention of the Appellant and the calculation submitted by him by way of a chart which is already referred to above is accepted, that the remaining amount to be claimed by Respondent No. 1 is less than Rs. 1 Cr. which does not meet the criteria of the threshold, therefore, the application filed under Section 9 of the Code is not maintainable.
The appeal is thus allowed and the impugned order is set aside though without any order as to costs - appeal allowed.
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2024 (7) TMI 559
Maintainability of appeal - initiation of CIRP - Respondent had defaulted in payment of the instalments of the loan - Existence of debt and default - Application hit by Section 10A of the IB Code basis the default date being 15.12.2020.
Maintainability of the Appeal - HELD THAT:- The fresh application complies with this directive, correcting earlier technical errors and accurately reflecting the default date. Therefore, there was no bar on the Appellant to file a fresh application before the Adjudicating Authority against same debt and against the same corporate debtor. And thus the Appeal is maintainable on at least this ground.
Admission of Debt and Default by Respondent - HELD THAT:- The Respondent has explicitly admitted to borrowing funds from the Appellant and defaulting on repayment post-September 2020. Additionally, the Respondent acknowledged that initiating the Corporate Insolvency Resolution Process (CIRP) would be beneficial, supporting the Appellant's case for insolvency proceedings.
Changing of default date - Allowable or not? - HELD THAT:- The Appellant, SIDBI, has clearly demonstrated that the Respondent, Sambandh Finserve Private Limited, has ongoing defaults on its loan repayments. Each missed installment constitutes a fresh default, as evidenced by the statement of accounts. This ongoing failure to meet repayment obligations justifies the initiation of insolvency proceedings - it is clear that each failure of the Respondent to pay an instalment in terms of the repayment plan could be treated as a fresh default in payment of the loan amount.
Interpretation of Section 10A vis-a-vis Admissibility of Fresh Default - HELD THAT:- In the present case, there is a clear case of debt and default, which has been admitted by the Respondent in its Counter Affidavit before the Adjudicating Authority - in the judgment of the Hon'ble Delhi High Court in KOTAK MAHINDRA BANK LTD. VERSUS ANUJ KUMAR TYAGI [2015 (12) TMI 1903 - DELHI HIGH COURT], it was held that the "the fact that that the respondent failed to adhere to the schedule of repayment, would not deprive the right of the appellant to treat each breach as a fresh cause of action" and that "the right to sue would occur, each time when, there is a default in payment of an EMI on its due date." Therefore, it supports the case of the Appellant that each failure of the Respondent to pay an instalment in terms of the repayment plan could be treated as a fresh default in payment of the loan amount.
The material on record (namely the Statement of Account) in the instant case clearly shows that apart from default in 10A period, it was also occurring beyond threshold independently after 25.03.2021 which is beyond the suspension period - each default of the Respondent in non-payment of instalment and interest thereon amounts to fresh cause of default and event of default as per the General Conditions of the Loan Agreement and it could be a sufficient ground to file fresh application. Therefore, in situations of fresh default as in the present case, wherein the default is occurring after the 10A period, insolvency proceedings under section 7 of the IBC are justified.
This Tribunal is of the view that the Appellant, SIDBI, has established a clear case of continuous defaults by the Respondent, Sambandh Finserve Private Limited, post the suspension period of Section 10A of the IBC. The Respondent's admission of debt and default and the consistency of the default date of 10.07.2021 in the fresh application substantiate the Appellant’s claim - The application under Section 7 of the IBC filed by SIDBI for Corporate Insolvency Resolution Process deserves to be admitted against the Respondent, Sambandh Finserve Private Limited - Appeal allowed.
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2024 (7) TMI 389
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - rent to the Operational Creditor/Respondent No. 1 as per lease deed - operational debt - whether a default has been committed by the Corporate Debtor in respect of payment of such operational debt having already become due and payable and whether the said operational debt exceeds an amount of Rs. 1 lakh and is an undisputed debt?
HELD THAT:- The Operational Creditor had been consistently pressing for release of their outstanding amount while there is nothing on record to show that the Corporate Debtor objected or controverted the claims raised by the Operational Creditor prior to the issue of Section 8 Demand Notice.
Respondent No.1 agreed upon that in accordance with the judgement of this Tribunal in Jaipur Trade Expo Centre [2022 (7) TMI 241 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], it is well settled that payment of license fee for use of leased premises for business purposes is clearly an operational debt. A conjoint reading of Sections 5(20) and 5(21) of IBC also clearly establishes that tenancy and lease rent dues fall in the category of operational debt as defined under Section 5(21) of IBC.
It was the sole responsibility of the Lessee to pay the conversion charges. In view of the above, the contention of the Corporate Debtor that in their email of 18.01.2018 they had raised the omission committed on the part of the Operational Creditor does not stand to reason. There are no cogent reasons to disagree with the Adjudicating Authority that this email constitutes a feeble ground to establish a pre-existing dispute - prima facie it is an undisputed fact that the legal notice dated 22.10.2019 was served after the filing of the Section 9 application and therefore cannot qualify as a pre-existing dispute. This lends credence to the contention of the Operational Creditor that this legal notice was served as an after-thought with mala fide intention to raise a spurious defence to evade the liability to clear the outstanding rentals.
Pre-existing dispute or not - HELD THAT:- Since the matter became a ‘Non-Starter’, the mediation application stood closed. In such circumstances, the claim made by the Corporate Debtor that the commercial civil suit was pending in the Tis Hazari Court lacks foundation. Furthermore, when HFPL on their own accord refused to participate in the mediation process, it cannot now embark on the argument that the mediation application signifies pre-existing dispute. Therefore, neither of the two commercial suits can be construed to be a pre-existing dispute.
The Corporate Debtor has defaulted in the payment of operational debt above the prescribed threshold level which amount had clearly become due and payable, and further in the absence of any pre-existing dispute, it is found that no error has been committed by the Adjudicating Authority in admitting the application under Section 9 of IBC and initiating CIRP. The interim stay on the CIRP process granted by this Tribunal on 16.03.2023 stands vacated.
There is no merit in the appeal - appeal dismissed.
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2024 (7) TMI 388
Maintainability of section 7 application - effect of approval of Resolution Plan in the CIRP of the Principal Borrower on the guarantee which was given by the Corporate Debtor to ICICI Bank - HELD THAT:- In the present case are concerned with claim of discharge of a Guarantor consequent to approval of Resolution Plan under the I&B Code.
It is to be noted that the judgment of the Hon’ble Supreme Court in Lalit Kumar Jain [2021 (5) TMI 743 - SUPREME COURT] has also been subsequently relied and reiterated by the Hon’ble Supreme Court. Reference made to judgment of Hon’ble Supreme Court in Maitreya Doshi vs. Anand Rathi Global Finance Ltd. & Anr. [2022 (9) TMI 1012 - SUPREME COURT] wherein in Hon’ble Supreme Court has quoted the judgment of Lalit Kumar Jain vs. Union of India [2021 (5) TMI 743 - SUPREME COURT] holding that the approval of a resolution plan in relation to a Corporate Debtor does not discharge the guarantor of the Corporate Debtor.
In recent judgment of Hon’ble Supreme Court in Ajay Kumar Radheyshyam Goenka vs. Tourism Finance Corporation India Ltd [2023 (3) TMI 686 - SUPREME COURT] where question arose for consideration as to whether for approval of Resolution Plan by virtue of Section 31 process Section 138 of NI Act cannot be continued.
From the facts brought on the record, it is clear that when Corporate Guarantee was invoked by the ICCI Bank on 16.10.2017 debt of more than Rs.218 Crore was due on the Principal Borrower. Initiation of proceeding against the Principal Borrower for admitted claim of Rs.294,51,35, 655/- itself proves that debt of the Principal Borrower was more than Rs.218 Crores. According to own case of the Appellant, upfront cash has been proposed of only Rs.2,06,00,000/- and rest amount of Rs.273,38,49,866/- was to be paid in preference shares - the submission of the Appellant that the guarantee dated 10.08.2016 stood terminated and unenforceable, cannot be accepted - there are no substance in this submission.
The Adjudicating Authority after considering all relevant aspects of the matter has admitted the Section 7 application against the Corporate Guarantor, in which there are no infirmity - there is no merit in the appeal - appeal dismissed.
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2024 (7) TMI 387
Initiation of CIRP u/s of IBC - debt or default on the part of the Corporate Debtor - unilateral suo-moto cancellation of the settlement agreement - winding up of the Corporate Debtor u/s 433 (e) and 433 (f) and Section 434 r/w Section 439 of Companies Act, 1956 - HELD THAT:- It is noted that the requisites of a novation may include elements like an agreement of all the parties to a new contract, the extinguishment of the old obligations, and the validity in supersession of old contract by the new contract, however, in the present case no such specific clauses exist. We also note that the Settlement Agreement dated 27.08.2019 was only with regard to disposal of the mortgaged properties of the Corporate Debtor.
It is understood that if the contract is altered in material particulars to change its essential character, the modified contract must be read as doing away with the original contract but if the modified contract has no independent contractual force, no new contract comes into play. There are no such wording in settlement agreement dated 27.08.2019.
It is found that in case of Manohur Koyal vs. Thakur Das Naskar [1888 (1) TMI 2 - CALCUTTA HIGH COURT], the plaintiff sued the defendant to recover Rs. 1100 due on a bond and after the due date of the bond, the plaintiff agreed to accept from the defendant, in satisfaction of the bond, Rs. 400/- in cash and a fresh bond for Rs. 700/-. The defendant failed to pay the Rs. 400 and to give the fresh bond of Rs. 700/-. In a suit by the plaintiff to recover the amount of original bond, the defendant contended that the subsequent agreement was a novation. It was held that Section 62 did not apply, as the subsequent agreement was made after the breach of the original contract, and that the defendant having failed to perform satisfactorily which he had promised to give, remained liable on the original, contract. This case is similar to facts of the present appeal and is found to be applicable.
It is found that the existing rupee term loan as well as foreign currency loan assigned by registered assignment deeds remain valid which are relevant documents to establish debt and default - the loans were sanctioned somewhere in 1996 i.e., almost 28 years back and the last assignment deed was signed in favour of the Respondent No. 1 on 16.04.2008 i.e., 16 years back and even after decades, the litigation has been continuing and no recovery could be affected by the original financial creditors or the present Respondent No. 1 in whose favour the assignment deed was signed almost 16 years back. This state of affair is found to be unusual and alarming.
There are no merit in the appeal. The appeal deserved to be dismissed and stand dismissed.
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2024 (7) TMI 386
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - debt and default by the Corporate Debtor qua the Respondent No.1 - whether the default amount crossed the prescribed threshold limit of Rs. 1 cr under Section 4 of IBC? - violation of principles of natural justice - HELD THAT:- It goes without saying that real and effective opportunity to hear is one of the critical quotients of the tenets of natural justice. On seeing material on record, we find that the Appellant did not appear before the Adjudicating Authority on multiple occasions, following which the Adjudicating Authority had directed paper publication of the notice so that the contesting party is put on notice. The notice was duly published in two newspapers on 01.04.2022 but in spite of that, the Appellant failed to remain present before the Adjudicating Authority until the matter was set exparte and reserved for orders. In the given facts of the case, it is satisfying that adequate notice was given to the Appellant to appear before the Adjudicating Authority to present their case.
The justification proffered now by the Appellant to explain their absence is that there was a demise in the family. Even if we give the benefit of this explanation to the Appellant, this ground cannot hold good for having been absent on 18 occasions each time when the matter was fixed for appearance and hearing - there is force in the contention of the Respondent no. 1 that when the Corporate Debtor also had other Directors on the Company, it is left unexplained why the others could not have pursued the matter before the Adjudicating Authority. Thus, this story of demise of a close relative to explain their absence from appearing before the Adjudicating Authority at a time when the matter was listed for hearing on 18 occasions lacks merit and is an eyewash which deserves scant regard.
When the Appellant failed to participate in the proceedings before the Adjudicating Authority despite reasonable opportunity having been afforded to the Appellant, the impugned order cannot be said to have been vitiated on grounds of violation of the principles of natural justice.
This brings to the basic question of debt and default and at the outset it is referred to the guiding principles propounded by the Hon’ble Apex Court in the case of Innoventive Industries Limited v. ICICI Bank [2017 (9) TMI 58 - SUPREME COURT] on admission or rejection of an application filed under Section 7 of the IBC. It is well settled that under the ambit of Section 7 of the IBC, the Adjudicating Authority is to only determine whether a default has occurred and whether the debt, which may still be disputed, was due and remained unpaid. The moment the Adjudicating Authority is satisfied that a default has occurred and the amount of default is more than the prescribed amount under Section 4 of the IBC, the application is to be admitted unless it is incomplete.
It is trite law that under the IBC once a debt which becomes due or payable, in law and in fact, and if there is incidence of non-payment of the said debt in full or even part thereof, CIRP may be triggered by the financial creditor as long as the amount in default is above the threshold limit. Once the Adjudicating Authority is subjectively satisfied that there is a debt and a default has been committed by the Corporate Debtor and the Section 7 application is complete in all respects, the Adjudicating Authority in the exercise of summary jurisdiction has to admit the Section 7 application.
On the question as to whether debt and default was adequately demonstrated before the Adjudicating Authority, basis the records made available before it, the Adjudicating Authority has rightly concluded that it was satisfied with the evidence and material produced before it by the Respondent no.1 to prove that a debt had arisen; that a default has occurred and the default is above the threshold limit of Rs. 1 crore. This is a case where all the pre-requisites for filing a Section 7 stood fulfilled and the Adjudicating Authority cannot be held to have committed an error in admitting the Corporate Debtor into CIRP for having defaulted in repaying a financial debt which was above the threshold limit.
The Adjudicating Authority did not commit any error in admitting the Section 7 application and bringing the Corporate Debtor into the fold of CIRP. The impugned order does not warrant any interference. There is no merit in the Appeal - Appeal is dismissed.
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2024 (7) TMI 385
CIRP - Liability of appellant, being the purchaser of the asset, for past dues of the electricity of the Corporate Debtor (CD) - obtaining a new electricity connection on payment of statutory dues except for the past dues - HELD THAT:- In the case of Paschimanchal Vidyut Vitram Nigam Ltd. [2023 (12) TMI 256 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], this Court has reiterated its view that the past dues cannot be claimed for the purpose of grant of new electricity connection.
It is pertinent to mention that this Court in the case of Paschimanchal has also made a reference to the same clause of due diligence which is there in the sale certificate issued to the Appellant because in that also the property was sold on ‘as is where is, as is what is, whatever there is and without recourse basis’ and framed the question that “electricity dues of the CD who underwent insolvency resolution process/liquidation process can still be insisted against the Successful Resolution Applicant/Successful Auction Purchaser is not res integra?”. The decision in the case of Telangana State Southern Power Distribution Company Ltd. & Anr. Vs. Srigdhaa Beverages [2020 (6) TMI 37 - SUPREME COURT], has also been distinguished in this case and also observed that 'This Tribunal took view that when the Corporate Debtor is sold in the liquidation proceeding, Corporate Debtor cannot be burdened by any past or remaining unpaid outstanding liabilities.'
There is a patent error in the approach of the Adjudicating Authority in dismissing the application of the Appellant, therefore, the present appeal succeeds and the impugned order is hereby set aside though without any order as to costs - Petition allowed.
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2024 (7) TMI 320
Nature of debt - financial debt or not - Financial Creditor or not - whether the decree from the Hon’ble Bombay High Court qualifies as a financial debt under Sections 5(7) and 5(8) of the IBC in the facts of the instant case?.
Nature of debt - HELD THAT:- The IBC defines financial debt as a debt along with interest, if any, with disbursement against consideration for the time value of money - the Hon’ble Supreme Court's decision in M/s Orator Marketing Pvt. Ltd. Vs. M/s Samtex Desinz Pvt. Ltd. [2021 (8) TMI 314 - SUPREME COURT] has also clarified that interest is not a necessary component for a debt to be considered financial, broadening the interpretation of financial debt. It was held that stipulation of the payment of interest is not a condition precedent to qualify as a financial debt.
The threshold for initiating Section 7 proceedings exists even if interest is not considered as noted in Hon’ble Supreme Court's decision in M/s Orator Marketing Pvt. Ltd. Vs. M/s Samtex Desinz Pvt. Ltd. (supra) wherein it was held that interest is not a necessary component for a debt, and therefore the Appellant doesn’t have grounds on this count. In the instant case the Respondent is a decree holder and as per the definition of financial debt and legal precedents we cannot ignore it to be interest.
The arguments of the Appellant that the Respondent has not produced any agreement for the amount claimed by it, which is a sine qua non for falling under Section 5(8) of the IBC, 2016 as the amount paid by the Applicant was not borrowed against the payment of interest nor the claim of the Applicant comes within the meaning of Section 5(8)(d) of the said IBC, 2016, cannot stand the scrutiny of the definition of debt and also the legal precedents.
Procedural and Formal Defects - HELD THAT:- The Appellant has also raised concerns about procedural defects, including incorrect forms and disclosures by the IRP. However, such procedural issues do not fundamentally alter the nature of the debt or the status of the creditor.
The decree from the Bombay High Court, supported by the underlying transaction involving bills of exchange and dishonoured cheques, constitutes a financial debt under the IBC - Respondent No. 1 qualifies as a Financial Creditor - The procedural defects cited by the Appellant do not significantly undermine the validity of the claim under Section 7.
Appeal dismissed.
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2024 (7) TMI 319
Dismissal of application of the Appellant under Section 9 of the Code - pre-existing dispute regarding the machine's performance before service of demand notice - Supplier's breach of contract - delayed delivery and defective machine.
Whether a pre-existing dispute, as argued by the Respondent, existed between the parties before the demand notice was served; basis which the NCLT dismissed the application under Section 9 of the IBC?
HELD THAT:- The Respondent has provided sufficient evidence of this dispute, including documented communication with the Supplier about the machine's defects and delayed delivery. The documented communication between the Respondent and the Supplier shows that the Respondent had consistently raised concerns about the machine’s performance well before the Appellant served the demand notice. It is clear that there was in fact a genuine and bona-fide pre-existing dispute before the (defective/improper) service of the demand notice dated 19.05.2021. The existence of these disputes is substantiated by emails, requests for returns, and settlement discussions.
Significant weight is put on the documented communication between the Respondent and the Supplier concerning the machine's performance issues. These communications, predating the demand notice, demonstrate a genuine dispute regarding the functionality of the machine.
In light of the documented pre-existing dispute concerning the machine's performance, the Adjudicating Authority's decision to dismiss the application is upheld. The Appellant's arguments regarding service of the demand notice and the arbitration clause are immaterial given the presence of a pre-existing dispute.
Appeal dismissed.
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2024 (7) TMI 318
Rejection of section 7 application - Section 7 application filed by Appellant rejected as barred by Section 10A of the IBC - HELD THAT:- The Hon’ble Supreme Court in C Shivkumar Reddy v. Dena Bank [2021 (8) TMI 315 - SUPREME COURT] held that there is no bar in law to the amendment of pleadings in an application under Section 7 of the IBC, or to the filing of additional documents. There cannot be no quarrel to the above preposition of law laid down by the Hon’ble Supreme Court in the above case. Present is a case where application which was filed by the appellant and date of default mentioned therein clearly fell in Section 10A period and no satisfactory explanation was given by the appellant to permit amendment in the date of default in the application.
The present is not a case where any clarification or explanation is sought to be offered for date of default 05.09.2020 mentioned in Section 7 application. The date of default in itself is sought to be changed as 01.04.2021 without there being any reason or cause.
Section 10A is a beneficial provision to extend certain protection to the corporate debtor during the COVID period. The said benefit cannot be allowed to be taken away indirectly, in event the appellant is permitted to amend the date of default which amendment is not supported by any justifiable cause or reason. Adjudicating Authority did not commit any error in rejecting the application of the appellant for change in date of default. After rejection of application of amendment, the Adjudicating Authority did not commit any error in rejecting Section 7 application as barred by Section 10A - Section 10A clearly mandated that no application can ever be filed with regard to default which has committed during 10A period. Counsel for the Appellant further sought to contend that default is a continuous default and hence, application under Section 7 could not have been said to be barred by Section 10A.
The Adjudicating Authority has after considering all the aspects of the matter has rightly refused the amendment application and rejected Section 7 application filed by the appellant - there is no merit in the appeal - appeal dismissed.
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2024 (7) TMI 317
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operatioal Creditors - time limitation - Effect of winding up petition.
Whether limitation would come to a hold on account of the order passed on 29.03.2016 by the Hon’ble High Court of Calcutta in a petition under Section 433 and 434 of the Act, 1965 filed by the Appellant on 19.02.2016 and it would start to run again on account of order passed by the Hon’ble Supreme Court on 04.10.2019 in the case of Duncans Industries Limited [2019 (10) TMI 301 - SUPREME COURT]? - HELD THAT:- In the earlier part of this order, while referring to the facts of this case, that the petition for winding up was disposed of by the Hon’ble High Court vide its order dated 29.03.2016 only on the ground that by virtue of notification dated 28.01.2016 which came prior to the filing of petition under Section 433 and 434 of the Act, 1956 on 19.02.2016, it was required that in order to take any legal action against the Respondent, the consent of the central government was necessary. However, despite the order dated 29.03.2016 in which the liberty was granted to the Appellant to take recourse in accordance with law, no such application was filed by the Appellant to the Central Government for the purpose of taking its consent to pursue its remedy or recovery of the debt against the Respondent. The Respondent has solely relied upon a decision of the Hon’ble Supreme Court in the case of Duncans Industries Ltd. in which the Appellant and the Respondent were not a party, therefore, it has no bearing at all.
There is hardly any error in the impugned order for the purpose of interference because the Adjudicating Authority has also held that there was ample time with the Appellant to seek prior consent of the Central Government for the purpose of taking action against the Respondent in accordance with law.
There are no error in the impugned order which requires any interference - the present appeal is held to be without any merit and the same is hereby dismissed.
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2024 (7) TMI 271
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - financial creditors - existence of debt and default or not - Stamping of Promissory Note.
Existence of debt and dispute or not - HELD THAT:- The primary requirement for admitting an application under Section 7 of the IBC is the existence of a debt and default. The Appellant has presented several documentary evidence like Loan Agreement dated 01.10.2018, Unsecured Demand Promissory Note dated 01.10.2018, Independent Audit report by N.R. Panchal & Co and also record of information utility authenticated by NeSL on 22.08.2023 - argument of the Respondent-CD that the loan amount of Rs.70,00,000/- was for general Corporate purposes and was in nature of business loan and not a financial loan as explained under Section 5(8) of the Code is not borne out from the facts and the loan agreement itself and cannot be accepted - the evidences presented by the Appellant, including the balance sheet and the 'Record of Default', unequivocally establishes the debt and default.
Stamping of Promissory Note - HELD THAT:- It is evident that, the debt and default are clearly established by the material on record in the form of the Loan Agreement, the Audit Report and also Record of Default (Form D) from the Information Utility (NeSL) taken together, as was examined in earlier part of the Appraisal.
This Appellate Tribunal finds that the Adjudicating Authority erred in dismissing the application under Section 7 of the IBC. The existence of debt and default has been clearly established, and the procedural requirements have been met by the Appellant. The issue of stamping does not outweigh the substantive evidence of debt and default - impugned order set aside - appeal allowed.
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2024 (7) TMI 198
Admission of Section 95 application filed by the Financial Creditor - Personal Guarantor of the Corporate Debtor - date of default - time limitation - it was held by NCLAT that 'There are no error in the order passed by the Adjudicating Authority admitting Section 95 application. There is no merit in the appeal'.
HELD THAT:- It is not required to interfere with the impugned judgment and order passed by the National Company Law Appellate Tribunal, New Delhi. The appeal is, accordingly, dismissed.
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2024 (7) TMI 197
Contempt petition - Determination of Resolution Professional (RP's) fees and expenses - jurisdiction of the Adjudicating Authority to determine the fees and expenses - Regulation 33(2) of CIRP Regulations 2016 - HELD THAT:- The submission of the Appellant that the Adjudicating Authority has no jurisdiction to proceed for computation of fee and expenses, not agreed upon. When the Appellate Tribunal vide its order dated 11.12.2019 has specifically directed in paragraph 19 that Financial Creditor is liable to pay the CIRP cost and fees which was to be reported to the Adjudicating Authority and which was to be determined, the Adjudicating Authority has ample jurisdiction to proceed to examine the entitlement of the fee and expenses.
The direction of the Appellate Tribunal has been substantially complied by the Adjudicating Authority by determining the fee and expenses. The order passed by this Appellate Tribunal on 11.12.2019 is final and binding between the parties and the Financial Creditor cannot escape from liability to pay fee and expenses.
Adjudicating Authority has determined the fee of Rs. 1,00,000/- per month totalling Rs. 7,30,000/- which we are of the view that need to be paid by the Financial Creditor. CIRP expenses has also been approved for Rs. 2,41,512/- which finds approval - However, the direction issued in paragraph 15.3 is uncalled for and is set aside.
The Appellant is liable to pay the amount of Rs. 7,30,000/- plus Rs. 2,41,512/- minus any amount if already paid which payment shall be made to the RP within four weeks from today by a Bank Draft or by R.T.G.S payment - Appeal disposed off.
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