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IBC - Case Laws
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2024 (2) TMI 974
Rejection of valuation report obtained by the RP from its valuers and direct him to consider the valuation reports dated 21.12.2022 given by Mr. Anil Kumar Saxena and Ms. Aditi Aggarwal - seeking appointment of fresh valuer to ascertain a fair value and liquidation value of the assets of Group Housing Society Known as IRIDIA in the matter of M/s Horizon Buildcon Pvt. Ltd. - HELD THAT:- The Resolution Professional in the CIRP proceedings, appointed two valuers under Section 35 of the CIRP Regulations and the two valuers have submitted their valuation reports. There being difference of more than 10% in the valuation of two valuers, a third valuer was appointed. After completion of the valuation exercise, resolution plan was placed before the CoC for consideration. The CoC approved the Resolution Plan and application has already been filed by the Resolution Professional for approval of the plan before the Adjudicating Authority.
Reliance placed on judgment of Hon’ble Supreme Court in Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Professional of ACIL Ltd. & Anr. [2023 (11) TMI 910 - SUPREME COURT]. In the said case, after approval of the Resolution Plan question of valuation was sought to be raised and the Adjudicating Authority has directed for valuation, which order was set aside by the Hon’ble Supreme Court. The said judgment fully supports the submission of learned counsel for the Respondent.
Thus, no error has been committed by the Adjudicating Authority in rejecting application filed by the Appellant - Appeal is dismissed.
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2024 (2) TMI 973
Maintainability of appeal - time limitation - whether the Appeal is within condonable period or it is beyond condonable period?
Submission of the Appellant is that when the Hon’ble Supreme Court has observed that Appellant to avail remedy of Appeal before the NCLAT within time it meant that from the said date, within 30 days, Appeal should be filed and Appellant having filed within 30 days, it is within time.
HELD THAT:- On looking into the order of the Hon’ble Supreme Court passed in HIMANSHU BATTISH & ANR VERSUS TODAY HOMES NOIDA PRIVATE LIMITED & ANR. [2023 (7) TMI 1370 - SC ORDER], last line of the order mentions “the period from the date of filing of the special leave petitions till today would stand excluded for the purposes of filing of the appeals.” Thus what was intended by the Hon’ble Supreme Court is that period during which SLP was pending before the Supreme Court, should be excluded. Hon’ble Supreme Court was not pronouncing on the limitation for filing the present appeal on that date since the Appeal was not even filed and when we read the above line of the Hon’ble Supreme Court it is clear that what was permitted was exclusion of the period during which the said SLP was pending. Even after exclusion of the said period, the present Appeal is filed beyond 15 days after expiry of the limitation and further clarification application which was filed by the Appellant has also been dismissed on 01.12.2023 by the Hon’ble Supreme Court.
The delay in filing the Appeal cannot be condoned which is beyond condonable period as provided under Section 61(2) of the Code. The appeal has been filed beyond 15 days after expiry of limitation, the appeal cannot be entertained.
The Appeal being barred by time is dismissed.
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2024 (2) TMI 972
Maintainability of section 9 application - initiation of CIRP - existence of pre-existing disputes between the parties prior to the issue of demand notice issued under Section 8 of the Code by the Respondent No. 1 to the Corporate Debtor on 16.08.2019 or not - arbitration case pending before the Hon’ble High Court of Delhi has any impact on Section 9 application under the Code by the Respondent No. 1 which is subject matter of the present appeal before this Appellate Tribunal or not - work completion certificate dated 09.05.2019 was rightly relied upon by the Adjudicating Authority or not.
Whether there were any pre-existing disputes between the parties prior to the issue of demand notice issued under Section 8 of the Code by the Respondent No. 1 to the Corporate Debtor on 16.08.2019? - HELD THAT:- It is noted that prior to issue of demand notice, no formal letter has been written by the Corporate Debtor to the Respondent No. 1 regarding raising any specific disputes on aspect of quality and quantity of work executed under the contracts. In this connection, reply dated 29.08.2019 filed by the Corporate Debtor to demand notice is noted. From the said reply, it seems that the Corporate Debtor has referred to various communications and Minutes of Meeting (in short ‘MoM’), wherein the Corporate Debtor is stated to have raised the issues regarding slow progress of work, non-mobilisation of adequate manpower etc. In fact, the Corporate Debtor in demand notice 8 has referred to several e-mails and letters regarding their concerns about slow progress of work and thereby invoking clause 33 of GCC for termination of contract which, however was withdrawn and original contract was reinstated.
From the letter dated 22.01.2016 written by the Corporate Debtor to the Respondent No. 1, it is seen that letter was written on “mobilisation work” w.r.t. progress of the work and nowhere any other aspect of disputes have been mentioned. In the response to the same, the Respondent No. 1 replied the Corporate Debtor vide e-mail dated 23.01.2016, refuting the content and indicating action taken to mobilise resources and further raised the issue regarding pending payments to be released by the Corporate Debtor to the Respondent No. 1. This was followed with the communication from the Corporate Debtor on 23.01.2016, giving outcome of discussion with the Respondent No. 1 relating to payment to be made by the Corporate Debtor and mobilisation of manpower and tools and plants to be made available by the Respondent No. 1. The content of the letter was confirmed by the Respondent No. 1 vide their letter dated 25.01.2016 and finally the Corporate Debtor withdrew the termination letter.
The issue was regarding release of payment by the Corporate Debtor and in turn mobilisation of resources especially manpower and tools and plant by the Respondent No. 1 for which the termination letter was issued and subsequently withdrawn - No issue raised by the Corporate Debtor regarding quality or quantity of services resulting into pre-exiting disputes hence, on the contention of the Appellant that the work was terminated indicates pre-existing disputes, there are no much substance to this argument of the Appellant. In fact, the termination letter was withdrawal by the Corporate Debtor and original contract was restored.
Thus, this Appellate Tribunal do not find any error in the finding of the Adjudicating Authority on the aspect of pre-existing dispute.
Whether the arbitration case pending before the Hon’ble High Court of Delhi has any impact on Section 9 application under the Code by the Respondent No. 1 which is subject matter of the present appeal before this Appellate Tribunal? - HELD THAT:- The Corporate Debtor raised issues regarding slow progress and less mobilisation of manpower, tools and plants whereas in reply to the Corporate Debtor, the Respondent No. 1 has been categorically stated that due payment in order to mobilise resources at site has not been paid by the Corporate Debtor. Hence, what is to be seen here whether delay was on account of only one party and whether such delay effected the project - It is also needed to factor into consideration if finally, project was completed to satisfaction of the Corporate Debtor and whether the same was accepted by the Corporate Debtor without any caveats and qualification. In the instant appeal it is noted carefully that the Corporate Debtor issued the completion certificate (already discussed in detailed by us earlier) without any reservation and to full satisfaction to the Corporate Debtor. In such background, the alleged delay during course of execution of contracts, cannot be treated as an issue which may adversely affect rights of the Operational Creditor under Section 9 of the Code - the position on delay/ slow progress during contract period clarified accordingly.
Whether, the work completion certificate dated 09.05.2019 was rightly relied upon by the Adjudicating Authority? - HELD THAT:- The completion certificate was unqualified and without raising any issue regarding quality or quantity or progress of the work by the Respondent No. 1. Merely the fact that the certificate was issued at the request of the Corporate Debtor, the existence and validity and impact of the same cannot be denied at this stage by the Corporate Debtor. Thus, the work completion certificate was rightly taken into consideration by the Adjudicating Authority in their analysis and there are no error on the same.
There are no error in the Impugned Order - appeal dismissed.
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2024 (2) TMI 914
Scope and ambit of Section 29A (c) of IBC - Disqualification to submit the Resolution Plan under Section 29A (c) of the IBC - Decision of Resolution Professional (“RP”) and Committee of Creditors (“CoC”) to declare the Appellant as disqualified under Section 29A rejected - eligibility to file a Resolution Plan under Section 29A(c) of the IBC - transfer of 100% of shareholding by the Appellant in its subsidiary.
Whether Section 29A, sub-section (c) disqualify only those persons who were in management and control of the Corporate Debtor at the time when Corporate Debtor’s account was declared NPA or the persons/ entity, which is in control of the management of the Corporate Debtor at the time of submission of Resolution Plan can also be held ineligible under Section 29A, sub-section (c)? - HELD THAT:- The RIPL being 100% subsidiary of the Appellant, it cannot be held that the Appellant was exercising any management or control over the Corporate Debtor through its subsidiary RIPL. By amendment made in Section 29A by Act 26 of 2018 in Section 29A, sub-section (c), the words “at the time of submission of resolution plan has an account”, declared that ineligibility has to be seen under Section 29A at the time of submission of Resolution Plan. In the present case, date of submission of Resolution Plan by the Appellant is 04.06.2018.
The learned Counsel for the Appellant placed reliance on the judgment of the Hon’ble Supreme Court in Arcelormittal India Private Limited vs. Satish Kumar Gupta and Ors. [2018 (10) TMI 312 - SUPREME COURT]. In Arcelormittal, the Hon’ble Supreme Court had occasion to examine the validity of Section 29A of the IBC - The observations made by the Hon’ble Supreme Court in Arcelormittal in paragraph 60, makes it clear that, those who were at a reasonably proximate point of time before the submission of Resolution Plan were in control of the affairs of the Corporate Debtor and they have arranged the affairs, as to avoid paying off the debts of the non-performing asset, such persons must also be held to be ineligible to submit a Resolution Plan.
The persons in the management and control of the affairs of the Corporate Debtor, who led the Corporate Debtor to slip into NPA and persons, who are in the management and control of the affairs of the Corporate Debtor in the close proximate of time, before the submission of Resolution Plan, who failed to pay the debt of the Corporate Debtor, are also ineligible - it is satisfying that narrow interpretation of Section 29A (c) put by learned Counsel for the Appellant, cannot be accepted. Thus, the submission of the Appellant that since the Appellant was not in control and management of the Corporate Debtor admittedly on 31.05.2013, when the Corporate Debtor’s account declared as NPA, he cannot be held to be ineligible under Section 29A, cannot be accepted. The relevant date for examining the ineligibility is the date of submission of Resolution Plan.
Thus, Section 29A, sub-section (c) does, not only disqualify, those who were in management and control of the Corporate Debtor at the time when its account was declared NPA, but also disqualifies those, who were in management and control of the Corporate Debtor and in close proximity of time, before submission of Resolution Plan, who failed to clear the debts of the Corporate Debtor.
Whether as per Second MoU dated 23/28.03.2016 entered between the Appellant, Corporate Debtor and Athena Group, the Appellant can be held to be in control and management of the Corporate Debtor with effect from the date of execution of the MoU? - Whether transfer of 100% of shareholding by the Appellant in its subsidiary RIPL on 22.09.2017 was a sham transaction? - Whether the Adjudicating Authority committed error in holding Appellant, disqualified, to submit the Resolution Plan under Section 29A (c) of the IBC? - HELD THAT:- MoU cannot be read to mean that management and control was to be given to the Appellant only after investment of 51% of equity shares by the Appellant. The investment and running of the Company, are two different aspects, which were captured by the MoU and management and control of the Corporate Debtor was given to the Appellant, which is clear from various clauses as noted above. Thus, as per second MoU, the Appellant has to be held to be in control of the management of the Corporate Debtor from the date of execution of the MoU, i.e., 23/28.03.2016 - It is to be noted that it is the Indian Bank, who filed the Application under Section 7, which led to CIRP of the Corporate Debtor. Thus, the Appellant had every opportunity and right to clear the debt of short-term loan, which led to insolvency and the Appellant, who was in management and control of the Corporate Debtor, cannot be heard in saying that it has no opportunity to clear the debt in the proximate time of commencement of CIRP.
On the question as to whether the transaction entered on 22.09.2017, under which the Appellant came to have transferred the 100% shareholding to the RIPL, the Adjudicating Authority has considered the issue in detail and recorded that the said transfer was made after the filing of Section 7 Application by the Financial Creditor and was six days before the order was passed initiating the CIRP. The transaction was carried on in cash consideration of Rs.1 lakh, which is despite the fact that the Appellant had given loan of Rs.328 Crores to RIPL.
The shareholding was transferred to only two persons, i.e., Mr. K. Vijaybhaskar and C. Vijay Kumar, who were all Directors and Officials of NEC and C. Vijay Kumar was also related. The Adjudicating Authority after considering all materials including the Balance Sheets/ Financial Statements etc. of RIPL has come to the finding that transaction dated 22.09.2017 was a sham transaction - the view of the Adjudicating Authority is agreed upon that transaction of shares to RIPL on 22.09.2017 was a sham transaction with the object to claim that Appellant has nothing to do with RIPL.
The Appellant was very much in control of the Corporate Debtor as per the MoU dated 23/28.03.2016.
The Adjudicating Authority did not commit any error in holding the Appellant disqualified under Section 29A, sub-section (c) of the IBC. The order of the Adjudicating Authority rejecting the Application of the Appellant has been passed after considering all relevant materials and submissions of the parties - there are no error in the order passed by the Adjudicating Authority warranting interference - appeal dismissed.
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2024 (2) TMI 913
Rejection of approval Plan - CIRP - One of the reasons given by the Adjudicating Authority for rejection is that the claim of Income Tax Department of dues to be paid has not been proposed - HELD THAT:- In the facts of the present case, the Resolution Professional may convene a meeting of the CoC for consideration of the proposal as contained in paragraphs 5 and 6 of the Affidavit of SRA as extracted above, as an Addendum to the resolution plan which was approved by the CoC. The Resolution Professional may place the Addendum for approval and make a fresh application for approval of the plan along with the Addendum, if any, in accordance with the law.
The order is set aside - appeal disposed off.
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2024 (2) TMI 873
Extension of the CIRP period of the Corporate Debtor by 60 days - Directing Issuance of fresh Form-G in the CIRP of the Corporate Debtor - CoC had already decided against this course of action - HELD THAT:- Despite lapse of four years, no resolution had fructified so far. Inspite of issue of Form G on five occasions, no viable resolution plans had cropped up compelling the CoC to recommend liquidation of the Corporate Debtor. However, on an application filed by the Appellant seeking consideration of their Resolution Plan, the Adjudicating Authority taking note that the object of the IBC is to rescue the Corporate Debtor in distress allowed the consideration of the Resolution Plan of the Appellant on 16.01.2023. The subsequent decision of the Adjudicating Authority on 08.02.2023 to recall its order of 16.01.2023 was set aside by this Tribunal. This Tribunal on 25.04.2023 taking note of the fact that Resolution Plan of the Appellant was already submitted and the majority member of the CoC holding 86% share had expressed its no objection to consider the same, allowed consideration of the Resolution Plan of the Appellant.
The decision of the CoC not to issue fresh Form-G has been also canvassed by the Learned Counsels of the Appellant, RP and Union Bank of India. It has been contended by them that fresh publication of Form-G would run counter to the stringent time lines prescribed by the IBC for completion of the CIRP process - when a resolution plan has already been received by the CoC and the CoC in the exercise of its commercial wisdom has decided to only consider this plan, allowing other potential resolution applicants by the Adjudicating Authority to paradrop afresh at this stage when CIRP period is over and that too contrary to the deliberations of the CoC cannot be countenanced.
Ultimately it is the commercial wisdom of the CoC which operates to approve what is to be the best resolution plan. The Adjudicating Authority with the limited powers of judicial review available to it cannot substitute its views with the commercial wisdom of the CoC. In view of the above, the Adjudicating Authority has committed an error in directing the issuance of fresh Form-G while allowing the extension of the CIRP by 60 days when the CoC had deliberated at length on this issue and had decided against the option of having other potential resolution applicants from joining the fray.
That part of the impugned order is set aside wherein the Adjudicating Authority has directed the RP to invite fresh expression of interest through wider publication of Form-G - that part of the impugned order is affirmed wherein the period of CIRP has been extended by 60 days - application disposed off.
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2024 (2) TMI 872
Rejection of section 7 application - Existence of financial debt or not - status of allottee for sale of plots (real estate project) - what is the nature of transaction between the parties whether the transaction can be held to be financial debt within the meaning of Section 5(8) of the Code? - HELD THAT:- On accepting the submission of the Appellant that appellant is an allottee, application under Section 7 was required to be complied with the provisions of Section 7(1) as amended by Act 1/2020, thus Application has to be filed by not less than 100 of such creditors in a class or not less than 10% of total number of such creditors. Appellant having not filed the application as allottee has not even pleaded that the Application under Section 7 which was filed on 29th July, 2021 fulfils the conditions as provided in section 7(1) thus even if we accept that Appellant as an allottee within the meaning of Section 2(d) of the RERA, there being no compliance of Section 7(1), the Application under Section 7 cannot succeed on the ground that Appellant is an allottee in the Real Estate Project. Thus the submission of the Appellant that Appellant is an allottee does not render any benefit to the Appellant and on the said submission the application filed as an allottee cannot be admitted and was liable to be rejected due to non-compliance of Section 7(1) of the Code.
Submission of the Appellant that transaction in question falls within the definition of Section 5(8)(f) of the Code - HELD THAT:- All transactions which are covered under Section 5(8) which has to be treated as a financial debt, has to be necessarily disbursal against the consideration for the time value of money. Agreement entered between the parties was for sale and purchase of the land on consideration fixed in the agreement i.e. 21,000 per sq. m. The Appellant who was to bring allottees in whose favour the leases were to be executed by the Respondent, it was open for the Appellant to sell the land at any price i.e. even higher to the amount fixed between the parties and the excess amount on which any lease is executed by the Respondent shall be treated as commission of the Appellant - The transaction was thus clearly transaction for sale and purchase of the assets and it cannot be said that disbursal was for time value of money. The transaction between the parties does not fall under Section 5(8)(f) of the Code - also held that application filed by the Appellant cannot be sustained under Section 7 as an allottee of the real estate project as the Appellant being allottee of Real Estate Project thus under Section 5(8)(f) claim of the Appellant as Real Estate Project allottee is unsustainable.
The Adjudicating Authority in the Impugned Order has come to the conclusion that transaction as described in MoU / Agreement to Sale / Addendum is essentially in the form of arrangement of selling, marketing , promoting and bringing prospective allottees to the Respondent Radiant Hotels Pvt. Ltd. The Adjudicating Authority has also rightly come to the conclusion that obligation of payments of money under the agreement of sale by no stretch of imagination can be construed as a financial debt - the finding of the Adjudicating Authority while rejecting the application filed under Section 7 of the Code agreed upon.
Thus, no error has been committed by the Adjudicating Authority in rejecting the Section 7 Application filed by the Appellant. There is no merit in the Appeal - The Appeal is dismissed.
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2024 (2) TMI 871
Rectification of defects in section 7 application - ambit of a Power of Attorney - Home Buyers - NCLT rejected the application for initiation of CIRP - the authorization letters from the appellants were not attested by an advocate or notary - It is the version of the Appellants, as per Section 7(5) of the Code, the Adjudicating Authority/Tribunal should have granted an opportunity to Appellants, to rectify the defects in the Application - HELD THAT:- Under Part IV of Application under the Head, particulars of Financial Debt, of the ‘Applicant’, the total amount of debt granted it was mentioned that a total financial debt of Rs.1,27,05,10,277 (Rs. One hundred and twenty seven Crores five lakhs ten thousand two hundred seventy seven only) was the due sum defaulted, as the Respondent/corporate debtor have cumulatively defaulted the financial debt, paid by the Applicants/Financial Creditors/Allottees towards the purchase of their respective Units.
The Appellants in Section 7 Application had mentioned the amount claimed in default as Rs.191,65,13,949/- (Rupees One hundred ninety one crores sixty five lakhs thirteen thousand nine hundred forty nine only). The Default, according to the Appellants, was continuing as soon as, since the year 2016. Further, it was mentioned that the Default was committed by the Respondent/Corporate Debtor as soon as since the years 2016 (being the latest date of Default committed by the Corporate Debtor as per the Agreement). The maximum time, in accordance with the agreement of the Applicant/Allottees for delivering the possession was mentioned as 2016. Also that the Default is continuing even till date, as the construction of Project was not complete and the possession was not handed over.
This Tribunal, keeping in mind of the prime fact that in Law, there is no Estoppel against Statute, to raise all Factual and Legal issues / contentions in a Legal Proceedings before the Competent Forum, at this stage, without delving deep into the merits of the matter nor expressing any opinion, one way or the other on the controversies / disputes centring around the Case, permits the Appellants to raise all Factual and Legal Pleas.
This Tribunal, based on Fair Play, Good Conscience quite in the fitness of things, remits back the petition for a de novo enquiry to be conducted, by the Adjudicating Authority/Tribunal and to proceed with the matter by providing opportunity of hearing to both parties, by adhering to the principles of natural justice and to proceed further on merits, and to dispose of the petition in a fair, just and in an unbiased manner, by passing a reasoned speaking order in a dispassionate manner, dealing with the issues/points so raised and to render a finding in accordance with Law and in the manner known to Law, of course, uninfluenced and untrammelled with any of the observations made by this Tribunal, in this Appeal.
Appeal disposed off.
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2024 (2) TMI 774
Rejection of Resolution Plan - No proper consideration of the plan submitted by the Appellant even though he has submitted the EMD of Rs.1 Crore after the order dated 30.09.2022 - HELD THAT:- The minutes of 8th CoC meeting held on 08.10.2022 has been brought on the record. In the 8th CoC meeting, the Appellant as a Director of the Suspended board was also present. The CoC took note of the order dated 30.09.2022 an EMD of Rs.1 Crore submitted by the Appellant on 02.10.2022. Under the Agenda Item No.5, it was noticed that the CoC members requested the Appellant to explain the plan submitted by him. The Appellant has explained his plan.
First submission of the Appellant that the plan submitted by the Appellant was not duly considered by the CoC is not found correct. A perusal of the minutes of the 8th CoC meeting and 9th CoC meeting as extracted above clearly indicate that the plan of the Appellant was duly considered. In the minutes, it was also noticed that the Appellant had proposed sale of the Calcutta factory in which State Bank of India had a charge. Thus, all aspects of the plan including the plan value of Appellant as well as Respondent No.16 were in the knowledge of the CoC and were deliberated before voting - the Resolution Plan was approved by the CoC after due consideration. It is well settled that the commercial wisdom of the CoC in approving the Resolution Plan is not open to judicial review and there are very limited ground to interfere with the decision i.e. only when the plan is in violation of any statutory provision like Section 30(2) of the Code.
The submission of the Appellant that Swiss Challenge Method was not adopted with regard to plan of the Appellant also need no consideration. Swiss Challenge Method was adopted between Respondent No.5 and Respondent No.16 when the plan of the Appellant was not compliant and Respondent No.16 was declared as H-1. Thus, when plan of the Appellant was directed to be considered by the Adjudicating Authority on 30.09.2022, plan of the Appellant came for consideration in the 8th and 9th CoC meeting. Adoption of Swiss Challenge Method is enabling provision which can be adopted by the CoC. No infirmity can be found in the consideration of the plan of the Appellant if CoC did not adopt any Swiss Challenge Method.
The plan submitted by the Appellant have been duly considered and voted upon which could not muster the requisite vote, there is no error in the order passed by the Adjudicating Authority allowing IA No. 1330 of 2022 approving the Resolution Plan.
Appeal dismissed.
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2024 (2) TMI 736
Rejection of application seeking a direction to the Resolution Professional to include the Appellant in the Committee of Creditors (CoC) and also to provide voting rights to the Applicant/ Appellant - The appellant, a foreign financial lender, extended loans to the Corporate Debtor - Appellant is a related party of the Corporate Debtor or not - HELD THAT:- Appellant has nothing to do with day to day functions of the Corporate Debtor, appointment of staff and employees of the Corporate Debtor or any of the day to day functions. The Adjudicating Authority again committed error in treating actions of Rembert Biemond as actions of Appellant. The Adjudicating Authority observed that Rembert Biemond is Managing Director of the Appellant - It is already noticed that when there are more than one Managing Director, functions on behalf of the Appellant can be carried out at least by two Managing Directors. Present is not a case that there is any evidence that two Managing Directors did any action which may suggest or indicate participation in the policy making process of the Corporate Debtor, therefore, finding of the Adjudicating Authority with regard to Section 5(24)(m)(i) is without any basis and cannot be sustained.
The Adjudicating Authority failed to notice that Rembert Biemond is in the Board of Director of the Corporate Debtor since 2017 when he was nominated by a foreign investor of the Corporate Debtor and Rembert Biemond was not nominated by the Appellant in the Board of Corporate Debtor. Hence, the whole observation is fallacious. In spite of pleading of the Appellant that there was no material to suggest essential technical information were received by the Appellant or were given by the Appellant to the Corporate Debtor. No finding has been returned referring to any material. Appellant was only Financial Creditor who has extended loan to the Corporate Debtor. There being neither any pleading regarding provision of essential technical information to, or from, the Corporate Debtor nor any proof, there was no occasion to come to the conclusion that condition under Section 5(24)(m) were fulfilled - The conclusion of the Adjudicating Authority were wholly baseless.
The Adjudicating Authority having not accepted the Appellant being related party on the basis of Section 5(24)(d) and holding of related party only on the basis of Section 5(24)(h) and (m), which already found that Section 5(24)(h) and (m) are not attracted, there are no substance in submission of learned counsel for the IRP that Appellant is a related party.
The Adjudicating Authority committed error in holding the Appellant as a related party and rejecting application filed by the Appellant - the impugned order set aside - appeal allowed.
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2024 (2) TMI 735
Scope of duty of RP - Seeking acceptance of the claims which had been rejected by the Resolution Professional - Proof of services provided and debts - RP did not convey any confirmation nor was any query raised until in response to a letter sent to the RP seeking status of his claims - it is contended by Appellant that the RP on his own had never requested the Appellant to provide further information or documents - whether the process and manner of treatment of the claims by the RP in respect of the claims filed by the Appellant is violative of the provisions of the IBC? - HELD THAT:- The RP had made it clear, time and again, that due to want of documents in support of their claims, the RP was unable to verify the claims of the Appellant. However, the Appellant failed to comply to the persistent request of the RP for documents. It was pointed out by the Learned Counsel for the Respondent that apart from unilaterally sending a composite invoice, the details of the services provided were not adequately explained by the Appellant except for enclosing a set of random snapshots of television news which find place at page 78-83A of the APB as against the scope of work claimed by the Appellant to be one which included generating positive stories, crisis management, tracking competitor news, overall media management etc. A glance at the proof of services provided on the other hand shows that it contained few newspaper advertisements on a film promotion.
There are substance in the contention of the RP that not only were these media clippings skeletal and sketchy but that they were all issued on a single day while the invoice submitted was in respect of services performed for a period which was spread over more than one year.
Examining the validity/sustainability of any contractual agreement including its formatting etc lies outside the purview of the charter of duties and responsibilities of the RP. In fact, determination of the tenability/validity of a contractual agreement falls in the realm of a civil dispute and therefore outside the scope and jurisdiction of both the Adjudicating Authority and the Appellate Tribunal. Be that as it may, this does not prevent the RP from seeking additional information from any creditor to substantiate his claims.
In the present case, the Adjudicating Authority after considering in detail the entire facts and circumstances and material on record has rightly come to the conclusion that the claims submitted by the Appellant could not have been admitted in the CIRP of the Corporate Debtor. This inadequacy of documents to substantiate their claims by the Appellant has been noticed by the Adjudicating Authority in the impugned order - It is quite clear from the sequence of events in the present facts of the case that the RP had been consistently pointing out that he is not in a position to verify the claims due to want of documents substantiating the claims.
There are no incidence of wilful negligence, or deliberate stone-walling of the claims on the part of the RP in dealing with the claim preferred by the Appellant. The Adjudicating Authority is agreed upon that the RP was well within his rights to exercise the discretion of seeking additional information from the Appellant and for which purpose he gave reasonable opportunity. The RP had made earnest and credible effort to verify the claims submitted by the Appellant and his conduct stands in sharp contrast to rather lacklustre effort by the Appellant in providing information to substantiate his claim. Thus, the bona-fide and fairness of the RP cannot be doubted.
There are no error on the part of the Adjudicating Authority in affirming the conclusion drawn by the RP that the hindrance faced by him in deciding the claim of the Appellant was squarely on account of failure on the part of the Appellant to hand over proof of alleged services - there are no cogent grounds which warrants any interference in the impugned order - appeal dismissed.
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2024 (2) TMI 681
Approval of the Resolution Plan - Financial Creditor or Operational Creditor - Status of Greater Noida - commercial wisdom of the COC is not justiciable - despite lapse of seven months between the date of filing its claim in January, 2020 and the date of approval of the plan in August 2020, the appellant took no steps against the RP for not taking a decision on its claim - Recall Application is maintainable or not - barred by time limitation or not - resolution plan put forth by the resolution applicant met the requirements of sub-section (2) of Section 30 of the IBC read with Regulations 37 and 38 of the CIRP Regulations, 2016 or not.
Whether in exercise of powers under sub-section (5) of Section 60, the Adjudicating Authority (i.e., NCLT) can recall an order of approval passed under sub-section (1) of Section 31 of the IBC? - HELD THAT:- A Tribunal or a Court is invested with such ancillary or incidental powers as may be necessary to discharge its functions effectively for the purpose of doing justice between the parties and, in absence of a statutory prohibition, in an appropriate case, it can recall its order in exercise of such ancillary or incidental powers.
In a recent decision in UNION BANK OF INDIA (ERSTWHILE CORPORATION BANK) VERSUS DINKAR T. VENKATASUBRAMANIAN & ORS. [2023 (7) TMI 209 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], a fivemember Full Bench of NCLAT held that though the power to review is not conferred upon the Tribunal but power to recall its judgment is inherent in the Tribunal and is preserved by Rule 11 of the NCLT Rules, 2016. It was held that power of recall of a judgment can be exercised when any procedural error is committed in delivering the earlier judgment; for example, necessary party has not been served or necessary party was not before the Tribunal when judgment was delivered adverse to a party. It was observed that there may be other grounds for recall of a judgment one of them being where fraud is played on the Court in obtaining a judgment.
In the case on hand, the recall application was filed by claiming that,- (a) the appellant was not informed of the meetings of the COC; (b) the proceedings up to the stage of approval of the resolution plan by the Adjudicating Authority were ex parte; (c) the RP misrepresented that the appellant had submitted no claim when, otherwise, a claim was submitted of an amount higher than what was shown outstanding towards the appellant; and (d) there was gross mistake on part of the Adjudicating Authority in approving the plan which did not fulfil the conditions laid down in sub-section (2) of Section 30 of the IBC.
The grounds taken qualify as valid grounds on which a recall of the order of approval dated 04.08.2020 could be sought - the recall application was maintainable notwithstanding that an appeal lay before the NCLAT against the order of approval passed by the Adjudicating Authority.
Whether the application for recall of the order was barred by time? - HELD THAT:- As regards the plea that the recall application was barred by time, suffice it to say that I.A. No.344/ 2021 was filed on 6.10.2020 upon getting information on 24.09.2020 from the monitoring agency regarding approval of the plan. Likewise, I.A. No.1380/ 2021 was filed on 15.03.2021 immediately when suspension of the period of limitation for any suit, appeal, application or proceeding, between 15.03.2020 and 14.03.2021, was lifted in terms of this Court’s order in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [2021 (3) TMI 497 - SC ORDER] - there are no substance in the plea that the applications were barred by limitation.
Whether the resolution plan put forth by the resolution applicant did not meet the requirements of sub-section (2) of Section 30 of the IBC read with Regulations 37 and 38 of the CIRP Regulations, 2016? - HELD THAT:- The resolution plan did not meet the requirements of Section 30(2) of the IBC read with Regulations 37 and 38 of the CIRP Regulations, 2016.
The resolution plan fails not only in acknowledging the claim made but also in mentioning the correct figure of the amount due and payable. According to the resolution plan, the amount outstanding was Rs. 13,47,40,819/- whereas, according to the appellant, the amount due and for which claim was made was Rs. 43,40,31,951/- This omission or error, as the case may be, materially affected the resolution plan as it was a vital information on which there ought to have been application of mind. Withholding the information adversely affected the interest of the appellant because, firstly, it affected its right of being served notice of the meeting of the COC, available under Section 24 (3) (c) of the IBC to an operational creditor with aggregate dues of not less than ten percent of the debt and, secondly, in the proposed plan, outlay for the appellant got reduced, being a percentage of the dues payable. In our view, for the reasons above, the resolution plan stood vitiated. However, neither NCLT nor NCLAT addressed itself on the aforesaid aspects which render their orders vulnerable and amenable to judicial review.
The resolution plan did not specifically place the appellant in the category of a secured creditor even though, by virtue of Section 13-A of the 1976 Act, in respect of the amount payable to it, a charge was created on the assets of the CD. As per Regulation 37 of the CIRP Regulations 2016, a resolution plan must provide for the measures, as may be necessary, for insolvency resolution of the CD for maximization of value of its assets, including, but not limited to, satisfaction or modification of any security interest. Further, as per Explanation 1, distribution under clause (b) of sub-section (2) of Section 30 must be fair and equitable to each class of creditors. Nonplacement of the appellant in the class of secured creditors did affect its interest. However, neither NCLT nor NCLAT noticed this anomaly in the plan, which vitiates their order.
Under Regulation 38 (3) of the CIRP Regulations, 2016, a resolution plan must, inter alia, demonstrate that (a) it is feasible and viable; and (b) it has provisions for approvals required and the time-line for the same. In the instant case, the plan conceived utilisation of land owned by the appellant. Ordinarily, feasibility and viability of a plan are economic decisions best left to the commercial wisdom of the COC. However, where the plan envisages use of land not owned by the CD but by a third party, such as the appellant, which is a statutory body, bound by its own rules and regulations having statutory flavour, there has to be a closer examination of the plan’s feasibility - whether the resolution plan envisages necessary approvals of the statutory authority is an important aspect on which feasibility of the plan depends. Unfortunately, the order of approval does not envisage such approvals. But neither NCLT nor NCLAT dealt with those aspects.
As to what relief, if any, the appellant is entitled to? - HELD THAT:- Neither NCLT nor NCLAT while deciding the application /appeal of the appellant took note of the fact that,- (a) the appellant had not been served notice of the meeting of the COC; (b) the entire proceedings up to the stage of approval of the resolution plan were ex parte to the appellant; (c) the appellant had submitted its claim, and was a secured creditor by operation of law, yet the resolution plan projected the appellant as one who did not submit its claim; and (d) the resolution plan did not meet all the parameters laid down in sub-section (2) of Section 30 of the IBC read with Regulations 37 and 38 of the CIRP Regulations, 2016, we are of the considered view that the appeals of the appellant are entitled to be allowed and are accordingly allowed. The impugned order dated 24.11.2022 is set aside.
The order dated 04.08.2020 passed by the NCLT approving the resolution plan is set aside. The resolution plan shall be sent back to the COC for re-submission after satisfying the parameters set out by the Code - Appeal allowed.
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2024 (2) TMI 680
Settlement proposal under Section 12A of IBC - Resolution Plan already approved by the CoC - whether settlement proposal under Section 12A can be given at any stage even after approval of the Resolution Plan? - it was held by NCLAT that The application for approval of the Resolution Plan which has already been filed and pending consideration, the Adjudicating Authority ought to have considered and decided the Application for approval of the plan - 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 (2) TMI 679
Initiation of CIRP - NCLT admitted the application u/s 7 - period of limitation - case is that Section 7 application which was filed after 18 years in October 2019 was way beyond the prescribed limitation period of 3 years under Section 18 of the Limitation Act, 1963 and thus the petition stood barred by limitation - it was held by NCLAT that There are no error in the impugned order passed by the Adjudicating Authority admitting the Section 7 application - HELD THAT:- There are no reason to interfere with the impugned order dated 17 November 2023 passed by the National Company Law Appellate Tribunal - appeal dismissed.
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2024 (2) TMI 678
Insolvency process of the company called ‘SU-KAM’ which was initiated by the Adjudicating Authority - various disputes arose in the CIRP of the Corporate Debtor - no eligible resolution plan could be evolved - HELD THAT:- It is crystal clear that the sacrosanct intention behind this Code is to revive the Corporate Debtor from the shackles of the debt trap by protecting the Corporate Debtor from its own management and from a corporate death by liquidation.
The CoC is the pivotal body under the Code which is responsible for making decisions on various aspects i.e., whether a resolution plan should be adopted or not, whether the resolution plan should be adopted in the same form as presented to it or in a modified form and whether the attempt for the revival of the Corporate Debtor is made or not. The final decision on a resolution plan is taken by the CoC and for approval, a resolution plan is required to be voted in favour by not less than 66% of the voting share of the financial creditors, as per Section 30(4) of the Code. It is also relevant to point out that though the Resolution Professional is obligated to run the business of the Corporate Debtor as a going concern during the CIRP but as per Section 28(3) of the Code, he cannot take certain decisions relating to the management of the Corporate Debtor without prior approval of the CoC by a vote of at least 66% of the voting share.
It is crystallized that the entire CIRP is aimed at bringing the Corporate Debtor back on its feet and it is acknowledged that the appropriate disposition of a defaulting Corporate Debtor and the choice of solution, to keep the Corporate Debtor as a going concern or to liquidate it, is to be made by the financial creditors, who could assess the viability and may take decisions in terms of the existing liabilities.
It is undoubtedly clear that in this saga of the entire CIRP procedure, the protagonist is the CoC and the ‘commercial wisdom’ of the CoC acts like the ‘North Star’ for the resolution process and its participants. The ‘commercial wisdom’ of the CoC is the guiding light to every decision-making of the CoC in pursuance of the financial distress faced by the Corporate Debtor. The underlying idea behind this concept is to acknowledge the business acumen of the CoC as well as its keenness to arrive at a mutually satisfactory resolution since their own interests are entangled with the resolution process - this court shall now examine the need for a code of conduct for the efficient functioning of the CoC in the entire CIRP in light of the legislative mandate and bonafide objectives of the Code.
Code of Conduct for the CoC - HELD THAT:- It is reiterated that CoC, while discharging the crucial decisions under the Code, shall be bound by a certain code of conduct for the effective delivery of its duty as per the legislative intent of the IBC. The CoC, which effectively comes into the picture during the CIRP of the Corporate Debtor, cannot act dehors the bonafide objectives which the Code strives to achieve - A key element envisaged in the code of conduct for the CoC is adherence to the due process in decision-making. The concept of procedural due process involves various elements and one of the most fundamental ones is the Wednesbury principles of reasonableness.
The aim of administration proceedings is to rescue and rehabilitate insolvent but potentially viable companies. An Administrator is a person or persons appointed under Schedule B1 of the Insolvency Act, 1986 to manage the company’s affairs, business and property. On appointment, an Administrator becomes an officer of the court. The Administrator must generally perform his/her functions in the interests of the creditors as a whole. The Administrator is duty bound to follow the Statements of Insolvency Practice (SIP) which is a set of guidance notes issued to insolvency practitioners with a view to maintain standards by setting out required practice and harmonising practitioners’ approach to particular aspects of insolvency. The purpose of SIPs is to outline basic principles and essential procedures with which insolvency practitioners are required to comply.
The Adjudicating Authority has the authority to regulate the conduct of the CoC through powers of judicial review as formulated aforesaid to ensure that it is functioning as per the role and responsibilities delineated under the Code. The Adjudicating Authority maintains a supervisory role over the entire CIRP and is empowered under Section 60 of the Code to take action in any question relating to the insolvency proceedings.
As per the mandate of the IBC, the IBBI is entrusted with the responsibility of framing guidelines with respect to the insolvency professionals, insolvency professional agencies and information utilities and other institutions, in furtherance of the purposes of this Code. Section 196(1)(u) of the IBC also gives the mandate to the IBBI to perform any other function as may be prescribed - the respondent-IBBI has submitted that the IBBI notified a Discussion Paper on 27.08.2021 on various issues involving CIRP, including the code of conduct for the CoC. Comments were invited on that Discussion Paper and the IBBI is still in the process of framing guidelines. However, till date, there exists no code of conduct or guidelines framed by the IBBI for the effective functioning of the CoC.
Considering the significant role which the CoC plays in the entire CIRP and the sanctity of the ‘commercial wisdom’ of the CoC which is protected by the legislative mandate from unnecessary interference, there is a compelling need for the code of conduct/guidelines for the effective working of the CoC in order to fulfil the bonafide objectives of the Code. The need for a code of conduct assumes greater importance in light of the fact that once a decision is taken by the CoC, the aggrieved party is deprived of the legal remedies, except to a limited extent. Therefore, what attains significance is that the decision-making process should itself be infused with sufficient safeguards of reasonableness, fair-play, proportionality and adherence to the principles of natural justice.
The IBBI is directed to frame/finalise a code of conduct/guidelines in accordance with its stand set out in the instant case, principles mentioned hereinabove and as per other relevant considerations, within a reasonable period of time, preferably, within three months from the date of the passing of this judgment, for the effective functioning of the CoC, without diluting the sanctity of the ‘commercial wisdom’ of the CoC and the legislative intent of the IBC - Petition allowed in part.
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2024 (2) TMI 677
Admissibility of section 7 application - CIRP - existence of debt and default or not - whether the Adjudicating authority was right in admitting the application under Section 7 of the Code of the Respondent No. 1 or the application should have been rejected on the ground that there was no debt and default by the Corporate Debtor? - HELD THAT:- After declaring the account of the Corporate Debtor as NPA, by allowing the sanction or renewing ‘Holding on Operation’ with various cut-back portions of the Respondent No. 1 could not treated on part of any debt and default. It is opined that permission by the Respondent No. 1 such ‘Holding on Operations’ are being conducted as normal baking practices and does not give any right to the Corporate Debtor in denying the repayment of debt and default on such account have to be factored into consideration by the Adjudicating Authority. It is found from the Impugned Order that the Adjudicating Authority has gone into these aspects and thereafter correctly came to the conclusion of debt and default.
The total outstanding principals amount was Rs. 8.77 Crores and outstanding interest component were Rs. 3.61 Crores thus the total outstanding dues payable by the Corporate Debtor to the Respondent No. 1 was Rs. 12.38 Crores, which is more than the threshold limit of Rs. 1 Crore as provided in the Code for accepting the application filed under Section 7 of the Code - the Corporate Debtor has indeed acknowledged and confirmed the loans credit facilities availed by it from the Respondent No. 1.
There are no error in the Impugned Order - appeal dismissed.
Approval of the Resolution Plan which was favourably considered by the CoC and approved by the Adjudicating Authority - payment of Rs. 1 Crore over and above the admitted claims of the Respondent No. 2 which allegedly was done at the cost of the Shareholders of the Corporate Debtor i.e., Promoters - HELD THAT:- It is up to the Resolution Applicant who tries to revive the Corporate Debtor as per his own scheme and provide the amount in the Resolution Plan which should be sufficient to meet the CIRP costs, the payment to the Financial Creditors, Operational Creditors, Statutory dues, workmen dues employees dues and payment towards dues of the other creditors to the extent possible. Such Resolution Plan is submitted for consideration of the CoC which applies its commercial wisdom and send the same through the Resolution Professional for approval of the Adjudicating Authority.
The Resolution Plan has fairly distributed the amount and taken care of almost all Stakeholders strictly in accordance with the provisions of the Code - the Adjudicating Authority has carefully analysed various facts and laws while approving the Resolution Plan of the Respondent No. 3 including the aspect of payment of Rs. 1 Crore over and above the admitted claims for the Respondent No. 2.
There are no error in the Impugned Order. The appeal is devoid of any merit, therefore, it deserves to the dismissed.
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2024 (2) TMI 676
Right of counsel to communicate with the Court except by filing appropriate application(s) and affidavit(s) in the proceeding pending before the Court - Influencing the decision-making process. - interference with the judicial proceedings pending in the Court - HELD THAT:- The Hon’ble Supreme Court in its Judgment in O.P. Sharma & Ors. Vs. High Court of Punjab and Haryana [2011 (5) TMI 1123 - SUPREME COURT] had quoted Bar Council of India Rules which contains a duty to the Court by a professional. One of the rule 3 of Section 1 under heading “duty to the court” is relevant.
The proceeding before a Court or a Tribunal between the parties are proceeding which are conducted in the open court in a transparent manner. Both the parties are fully entitled to make their respective submissions, file their pleadings after serving the copy of the pleadings to other side. Justice P.B. Gajendragadkar, C.J. speaking on behalf of Constitution Bench in Naresh Shridhar Mirjakar and Ors Vs. State of Maharashtra and Ors. [1966 (3) TMI 77 - SUPREME COURT] had emphasised that it is well settled that in general all cases brought before the Courts whether Civil, Criminal or other must be heard in open court.
All proceedings have to be conducted before a Court or judicial tribunal, in open court which serves transparency and create confidence in public in the fairness, objectivity and impartiality of the justice as has been laid down by Supreme Court in the above case. It is due to above principal that private communication with the Judge by litigants or their advocates is forbidden. All the submissions, applications and affidavits and proceedings have to be filed in the Court for consideration of Court and no litigant or counsel is entitled to send any separate communication.
The Order impugned is an order by which both the Members recused themselves from the matters. The Order dated 09.01.2024 recusing by both the members is subject matter of the Appeal - the decision taken by both the members to recuse themselves from the matter cannot be interfered with in exercise of our appellate jurisdiction.
The President of the NCLT is master of roster. All administrative powers are vested with the President. It is always open for the Appellant or any aggrieved party to bring into the notice of the President on the administrative side to take appropriate measures with regard to the matter in question or for considering issuance of such order or direction as the President may deem fit and proper in accordance with law.
Thus, no purpose shall be served in entertaining this Appeal - appeal dismissed.
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2024 (2) TMI 675
Maintainability of Section 7 Application - threshold limit of 100 allottees for filing of Section 7 Application is not fulfilled in the Application - Financial Creditors have filed false, fabricated and forged documents and affidavits - Section 340 r/w Section 195(1)(b) of CrPC - HELD THAT:- Section 7 Application was filed by 143 Applicants on 11.10.2021. The Appellant was impleaded as Respondent No.3 in Section 7 Application, who opposed the maintainability of the Application on the ground that threshold limit as required under Section 7 of the Code is not fulfilled and the Application is not made by 100 valid allottees. The said objection raised by the Appellant was rejected by the Adjudicating Authority vide its order dated 21.10.2022, against which order Company Appeal (AT) (Insolvency) No.1478 of 2022 was filed by the Appellant, which was decided by this Tribunal on 17.11.2023 [2023 (11) TMI 782 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI]. In the Appeal, one of the issues framed was whether Section 7 Application filed by the allottees fulfils the threshold as prescribed under the IBC.
The Hon’ble Supreme Court in the case of Amarsang Nathaji [2016 (11) TMI 1658 - SUPREME COURT] has held that Court has to form an opinion that it is expedient in the interests of justice to initiate an inquiry into the offences of false evidence and offences against public justice and more specifically referred in Section 340(1) CrPC. The Adjudicating Authority has rightly not initiated proceeding under Section 340 of CrPC. In view of the facts of the present case, there are no error in decision of the Adjudicating Authority not to direct any action under Section 340(1) of the CrPC.
Penalty under Section 65 of the Code can be imposed when there is fraudulent or malicious initiation of proceedings. In the present case, the Applicants who are allottees in real estate project have filed the Application to protect their rights and it is not disputed that they are allottees of the project, which is developed by the Appellant. There is no ground to hold that initiation of Section 7 proceedings by allottees was fraudulent or malicious. Hence, no error has been committed by the Adjudicating Authority in rejecting the prayer of the Appellant to impose the penalty under Section 65.
The present is not a case that the Applications filed by the Appellant are rejected by the Adjudicating Authority on the ground of delay, rather the Adjudicating Authority has entered into the allegations and found the allegations not sufficient to grant any relief. Hence, the judgment of the Hon’ble Supreme Court relied by the Appellant in AJIT KR. BHUYAN AND ORS VERSUS DEBAJIT DAS AND ORS [2018 (10) TMI 2021 - SUPREME COURT], does not help the Appellant in the present case.
The Adjudicating Authority did not commit any error in rejecting IAs filed by the Appellant - The Adjudicating Authority has rightly observed that the intention of the Appellant is malifide and objections are only to delay the adjudication of Section 7 Application - there are no error in the impugned order, as no ground is made out to interfere with the order, the appeal is dismissed.
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2024 (2) TMI 623
CIRP - Approval of resolution plan - Entitlement to carry forward accumulated losses as per Section 79(2) of the Income Tax Act - Adjudicating Authority has issued direction to the Successful Resolution Application to approach the concerned statutory authority for the concessions - HELD THAT:- In event the Appellant is entitled for benefit of Section 79(2) to carry forward accumulated losses, it shall be open for the Appellant to file an appropriate application before the competent jurisdictional Income Tax Authority to claim the benefit - thus, no error has been committed by the Adjudicating Authority by directing the Successful Resolution Application to approach the concerned statutory authority.
In so far as, other reliefs and concessions, the Adjudicating Authority has allowed the application and direction has been issued in Para 13 and 14. In fact, virtually, the application has been allowed by the Adjudicating Authority, hence, there are no reason to entertain this Appeal challenging the second part of the order as contained in Para 14.
The directions are only for the purpose that the Corporate Debtor may carry on the business in accordance with law - there are no ground to interfere in the impugned order - appeal dismissed.
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2024 (2) TMI 622
Admission of section 7 application - initiation of CIRP against the Corporate Debtor - existence of debt and default or not - parties had reached an out of court amicable settlement - It is also been strenuously contended that the Financial Creditor has misused the provisions of IBC to use the Adjudicating Authority as a recovery forum - HELD THAT:- Having examined the terms and conditions of the Settlement Agreement, there are no hesitation in mind that the Settlement Agreement does not make any mention of any form of NoC to be provided by the Financial Creditor with respect to mortgaged properties or any release of security by the Financial Creditor before the payment of the settlement amount. The Settlement Agreement at Clause 3(ii)(b) makes it amply clear that the security was to be released only on payment of the entire settlement amount. Furthermore, when the security provided by the Corporate Debtor had been charged to the Financial Creditor to secure the loan facility, the Financial Creditor cannot be compelled to accede to issue of NoC for sale of these mortgaged properties prior to payment of debt and that too sans any such specific arrangement provided for in the Settlement Agreement.
When the Financial Creditor had repeatedly made it clear that they were strictly relying on the terms and conditions of the Settlement Agreement and that NoC would be released only after settlement amount was received, levelling of allegation by the Corporate Debtor that the Financial Creditor was responsible for their default is devoid of force and substance.
It is a well settled proposition of law that only two alternative courses of action are available to the Adjudicating Authority under Section 7(5) of the IBC which is to either admit the application under Section 7(5)(a) or reject the petition under Section 7(5)(b). The moment the Adjudicating Authority is satisfied that a default has occurred, the Application is to be admitted unless it is incomplete. 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 Financial Creditor to prove that a debt had arisen; that a default has occurred and the default is above the threshold limit of Rs. 1 crore. Since debt and default is clearly established, it is opined that there is no infirmity in the impugned order admitting the Section 7 application.
Thus, no error has been committed by the Adjudicating Authority in allowing the Section 7 application and admitting the Corporate Debtor into the rigours of CIRP - there are no reason to interfere with the Impugned Order - appeal dismissed.
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