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IBC - Case Laws
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2024 (11) TMI 482
Refund of amount deposited as part of a settlement under the MoU - maintainability of Application filed by the Appellant under Section 60(5) of the Insolvency and Bankruptcy Code - HELD THAT:- From the facts brought on the record, it is clear that insofar as dues of JDECL is concerned, 12A Application was filed which was allowed by the Adjudicating Authority approving the 12A and the CIRP of JDECL thus came to be closed. Entire debt of the Financial Creditor with JDECL was ₹3 Crores, which CIRP stood closed and entire debt also discharged. MoU also indicates that ₹25 Lakhs was to be paid with regard to debt of Corporate Debtor on execution of MoU and rest of the payments were made within 4 years as per the schedule given in revised MoU as noted above. No further payment with regard to dues of Corporate Debtor could be paid since the Resolution Plan could not be approved by the Adjudicating Authority, although CoC has approved the Resolution Plan for the Corporate Debtor.
The Adjudicating Authority has returned a finding that Application was not maintainable under Section 60(5), which findings have been questioned before this Tribunal by the Counsel for the Appellant and are supported by submission of Counsel for the Respondent. In the facts of the present case, we are of the view that Application filed by Appellant was maintainable under Section 60(5)(c) since the questions arose out of are in relation to the Insolvency Resolution of the Corporate Debtors, UCL and JDECL - out of ₹3,25,00,000/-, amount of ₹3 Crores was paid to clear the debt dues of JDECL whose CIRP stood closed by allowing the Application under Section 12A. Thus, the CIRP was successfully closed of JDECL by payments of the entire debt, there is no question of refund of amount out of ₹3 Crore which culminated in the closure of the CIRP of JDECL. Promoter/Director who succeeded in closure of the CIRP on payment of entire dues cannot be heard in saying that although CIRP is closed but amount paid to the CoC be refunded to them.
The amount of ₹3,25,00,000/- consist of two payments (i) ₹3 Crores for 12A Application under JDECL and ₹25 Lakhs for approval of the Plan of UCL. The CIRP of JDECL having been closed by allowing 12A Application, the said amount becomes non-refundable. The Appellant which is none else then entity brought into existence by Promoter/Directors and investors to resolve the debt of JDECL and Corporate Debtor cannot take double benefit, i.e., (i) closing of CIRP of JDECL by satisfaction of the entire debt and asking again the refund of the amount which was paid for closure of CIRP of JDEC. The prayer of the Appellant thus to refund amount of ₹3 Crores is dishonest, unjust and has rightly been rejected. However, the amount of ₹25 Lakhs which was paid on signing of the MoU and the approval of the Resolution Plan of Corporate Debtor could not take place, we are of the view that amount of ₹25 Lakhs needs to be refunded to the Appellant by the Financial Creditors, Respondent No. 2, herein.
The Impugned Order of the Adjudicating Authority dated 26.07.2022 need to be modified only to the extent that the amount of ₹25 Lakhs which was paid by the Appellant on signing of MoU dated 07.08.2020 towards Resolution Plan of Corporate Debtor need to be refunded to the Appellant. Rest of the Order of the Adjudicating Authority is affirmed - appeal allowed in part.
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2024 (11) TMI 481
Replacement of Resolution Professional - HELD THAT:- In the present case, from the facts which have been brought on the record, it is clear that the RP prior to filing of Section 94 application, has been representing the Corporate Debtor and the Personal Guarantor, before the Delhi High Court as a Counsel for the Corporate Debtor and the Personal Guarantor. Formation of opinion by the Financial Creditor on the ground that RP, who has represented the Corporate Debtor and the Personal Guarantor in the dispute between parties arising out of the same debt, cannot be said to be an irrational ground, to form an opinion under Section 98.
Hence, the Financial Creditor filed an application for replacement of the RP. The scheme of Section 98, does not require that a particular ground has to be proved by debtor or creditor seeking replacement of the RP. The submission of the learned Counsel for the Appellant that Section 94 gives a vested right to the debtor to initiate insolvency resolution process either personally or through RP, hence, the said vested right cannot be taken away.
Section 94, sub-section (1) is a provision, which permits a debtor to initiate insolvency resolution process. Thus, the debtor is fully entitled to initiate the insolvency resolution process, either personally or through RP. The Appellant, thus, was fully entitled to initiate the insolvency resolution process through RP, as was done in the present case. But, the stage under Section 98 sub-section (1) is subsequent to appointment of RP under Section 97 - Hence, Prabhat Ranjan Singh, was appointed by the Adjudicating Authority by order dated 06.12.2023 as per Section 97 of the IBC.
The Adjudicating Authority did not commit any error in allowing the application filed by the Financial Creditor for replacement of the RP - there are no error in the order impugned - Appeal is dismissed.
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2024 (11) TMI 480
Condonation of delay of five days in filing of the Appeal - sufficient cause for delay or not - HELD THAT:- The delay in filing of the Appeal is only five days and sufficient explanation was given by the Appellant/ Applicant. The Appeal has been filed by the Resolution Professional (RP), who is living in Mumbai and in the application, it was pleaded by the RP that due to health ailments, he was unable to seek timely legal advice in filing the Appeal and further it is stated in paragraph (ii) (e) that one of the annexures filed in the Company Petition No.696 of 2020 was dim and an endeavour was taken to file clear and legible copy, for which certain time was taken.
There are sufficient cause has been shown for condonation of five days delay in filing of the Appeal. Delay condonation application allowed.
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2024 (11) TMI 479
Admission of Section 9 application - Corporate Debtor failed to make repayment of its dues - debt and default on the part of the Corporate Debtor qua the Operational Creditor - pre-existing dispute surrounding the operational debt or not - HELD THAT:- The tone and tenor of both the Notice of Disputes clearly manifested existence of dispute prior to the date of the Section 8 demand notice basis which the present Section 9 application has been filed. This constitutes sufficient foundation of genuine pre-existing disputes between the two parties. The reply to demand notice captures the essence of these disputes and therefore the requirements of Section 8(2)(1)(a) stood fulfilled. The application filed by the Operational Creditor under Section 9 has been hit by Section 9(5)(ii)(d). It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt.
In the present factual matrix, the defence raised cannot be viewed as moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the behest of the Operational Creditor.
The Adjudicating Authority therefore clearly fell in error in admitting the Section 9 application while turning a blind eye to the Notice of Disputes which clearly establishes that there were serious differences between them in the nature of real pre-existing disputes.
The ratio of Naresh Sevantilal Shah judgment [2021 (1) TMI 759 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI] which has been relied by the Adjudicating Authority to set the cut-off date of the date of issue of first demand notice for taking cognisance of the notice of dispute is not applicable in the present case since in that case, the first Demand Notice had been followed by filing of a Section 9 application before the Adjudicating Authority which was dismissed on technical grounds because Operational Creditor had made an incorrect claim - In the present case, no Section 9 application was filed after issue of first Demand Notice. Hence reliance on Naresh Sevantilal Shah judgment is misplaced because the facts therein are clearly distinguishable.
The Adjudicating Authority committed serious error in admitting Section 9 application in the facts of the present case. The Impugned Order dated 30.10.2023 initiating CIRP of the Corporate Debtor and all other orders pursuant to Impugned Order are therefore set aside. The Corporate Debtor is released from the rigours of CIRP with immediate effect - Appeal allowed.
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2024 (11) TMI 478
Rejection of Section 9 Application - debt has become due and payable or not - dispute over payment of outstanding dues between the Appellant and the Respondent - HELD THAT:- There is no dispute between the Parties regarding the acceptance of bid of the Appellant for providing for e-Auction solutions.
The Corporation has after Letter dated 08.02.2023 has again sent a same request to the Department on 14.02.2023 and 28.02.2023. It is clear that on basis of RFP between the Parties and Clause 3 of the Agreement Certification by the TPA was required for release of the quarterly bill. The Corporation on account of non-receipt of any Report or any Certification from TPA did not make any payment. The present is not a case where Corporation has defaulted in making payment to the Appellant. However, the payment could not be made in accordance with the RFP and Agreement between the Parties where payment was to be released after certification by TPA. The above indicates that there may be lapse of the Government of Goa in not appointing TPA so that TPA can verify the release of the quarterly payments to Appellant, but that cannot be a reason for put the Corporate Debtor in Insolvency by admitting Section 9 Application filed by the Appellant.
On account of the lapse of Government of Goa in appointing TPA and non-payment of the dues of the Corporate Debtor, Appellant was free to avail the Clause 19 of the Agreement, but in the facts of the present case, when in spite of recommendation by Corporation to the DOIT to permit payment of 75% of the amount it is not the case that any sanction was granted by Department to pay the Appellant - the finding of the Adjudicating Authority agreed upon that no default can be said to have been committed by the Corporation so as to put it into Insolvency. When the RFP and Agreement provides a particular mode and manner of payment, non-payment by Appellant is a plausible contention raised by the Respondent in opposing Section 9 Application.
There are no ground in the Appeal to interfere with the Order of the Adjudicating Authority rejecting Section 9 Application - present is a case which shows that Appellant has been put to prejudice on account of inaction in terms of the RFP and Agreement between the Parties. Appellant is still free to avail his remedy for payment of its outstanding dues in accordance with the Agreement between the Parties - appeal dismissed.
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2024 (11) TMI 477
Acsertainment of unspent balance and security deposit payable to the subscribers and make provisions for the same in the resolution plan - payment of statutory dues - HELD THAT:- It appears that it having not filed a claim, a direction was sought that RP should ascertain the unspent balance and security deposit payable to the subscribers and make provisions for the same in the Resolution Plan and further direction was sought to allow the payment of statutory dues amounting to Rs.85,10,000/- to the Applicant. The above were the only two prayers made in the application. The RP has filed an affidavit in reply. The RP in the reply affidavit has pleaded that Resolution Plan has already been approved by the CoC. It is pleaded by the RP that the Applicant has not filed any claim inspite of letter written by the RP to the Applicant on 03.07.2019, asking the Appellant to file claim for any outstanding dues for period prior to CIRP. It was pleaded that Applicant cannot seek refund of any monies under an application filed before the Tribunal without following the due process prescribed under the Code.
The payment towards the disincentive as imposed by the Appellant was liability of the Corporate Debtor, which remained outstanding on the date of commencement of the CIRP. Hence, the said amount has to be paid as per the Resolution Plan, in accordance with the IBC process. The prayer of the Appellant as made in IA 88 of 2020, which is levied as disincentive, dehors the IBC process, cannot be accepted. The Adjudicating Authority has rightly treated the liabilities as ‘operational debt’. The learned Counsel for the Appellant has further contended that amount of security deposit, balance of post-paid subscribers and unspent balance of prepaid subscribers of the company are held in trust by the Corporate Debtor and they are not part of the assets of the Corporate Debtor, hence the said amount are to be returned.
There are no error in the order of the Adjudicating Authority, accepting the said outstanding dues as ‘operational debt’, to be paid as per the provisions of the Resolution Plan.
The learned Counsel for the Appellant has relied on judgment of the Gujarat High Court in Baroda Spg. & Wvg. Mills Co. Ltd. vs. Baroda Spg. & Wvg. Mills Co-operative Credit Society Ltd. & Ors. [1975 (4) TMI 61 - HIGH COURT OF GUJARAT] and a judgment of Madras High Court in Kodak Ltd. vs. South Indian Film Corporation [1937 (1) TMI 18 - MADRAS HIGH COURT] in support of his submission that beneficial ownership in the balance security deposit and unspent balances of prepaid subscribers are the amounts held by the CD only under a constructive trust. In the above case, the Gujarat High Court had occasion to consider Sections 456, 511 and 530 of the Companies Act. In the facts of the above case, the amount, which was in the hands of the company, which came to it by way of deductions from the wages and salary payable to its employees, on the requisition of the society, of which the employees were the members.
There is no material on record to accept the submission of the Appellant that the said amount of security deposit balances of post-paid subscribers and unspent balances of prepaid subscribers be accepted as CIRP cost. There is no foundation laid in the application, which was filed by the Appellant before the Adjudicating Authority regarding the CIRP cost and the submissions, which are sought to be advanced in these Appeal(s), cannot be accepted, it being not founded on any relevant materials.
There are no grounds have been made out to interfere with the impugned order in these Appeal - appeal dismissed.
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2024 (11) TMI 410
Adjustment of Performance Bank Guarantee (PBG) towards the first tranche payment - Non-payment of Airport dues - Non-payment of Workmen and Employees’ dues - Achievement of Effective Date - Non-fulfilment of Conditions Precedent.
Whether the Conditions Precedent were fulfilled by Respondent No.1/SRA and the Effective Date was fixed at 20.05.2022? - HELD THAT:- The order of the NCLT dated 22.06.2021 approving the Resolution Plan had fixed the Effective Date as the 90th day from the Approval date, which was subject to a maximum extension of another 180 days. It consciously removed the ambiguity that plagued Clauses 7.6.2 and 7.6.4 respectively for the precise reason & with the idea that the Effective Date should not be endlessly postponed. Agreeing to such an erroneous proposition would mean that the Effective Date would never be achieved as long as the parties are litigating before the Courts and the SRA would be absolved of taking the implementation under the Resolution Plan further. The NCLAT had declined to stay the order of the NCLT dated 13.01.2023 which held that all the Conditions Precedent were fulfilled. Further, on a perusal of the impugned order, it is evident that the NCLT and NCLAT rendered concurrent findings of fact that the SRA had fulfilled all the Conditions Precedent. In other words, it was repeatedly declared by different fora that the Effective Date was frozen on 20.05.2022 and the obligation of the SRA to implement the Resolution Plan was absolute.
To contend that its hands were tied since the Conditions Precedent were still being challenged before this Court is nothing but a reflection of its mala fide intention on the part of the SRA to not fulfil its obligations in accordance with the Resolution Plan under the garb of pendency of litigation. Such an undue delay cannot be permitted, especially in light of the intention of the IBC, 2016 to ensure a successful and time-bound revival of the Corporate Debtor. This places a higher obligation on the SRA to act in an expeditious manner.
Whether the NCLAT could have directed the Performance Bank Guarantee (PBG) to be adjusted against the first tranche payment which was to be made within 180 days of the Effective Date? - HELD THAT:- The NCLAT proceeded on an incorrect understanding of Regulation 36B(4A) and its First Explanation. Regulation 36B(4A) does not state that if the Resolution Applicant, after approval, fails to implement the PBG, then it shall stand forfeited. Instead, what the Regulation actually states is that the performance security shall stand forfeited, if the resolution applicant of such a plan, after its approval by the Adjudicating Authority, “fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule”. It is not the failure to implement the performance security i.e., the PBG, that is dealt with in this Regulation but the consequence of the failure to implement “the Plan” by the SRA.
The duration of the performance security that has been specified in the RFRP is given under Clauses 3.13.2 and 3.13.8 of the RFRP which categorically states that the PBG shall be kept alive until the Resolution Plan has been completely implemented. This is the duration which is referred to in Explanation I to Regulation 36B(4A) - irrespective of whether Clause 6.4.4 expressly or impliedly provided for the PBG to be adjusted, such a provision would create a dissonance with Clause 3.13.9 of the RFRP which has also been made binding on the SRA through Clauses 7.3 and 9.4 respectively of the Resolution Plan. Therefore, such an adjustment should not be allowed in the facts of the present case.
The existing insolvency framework does not provide any scope for effecting further modifications or withdrawals of the Resolution Plan approved by the CoC, at the behest of the successful resolution applicant, once the plan has been submitted to the adjudicating authority. The submitted Resolution Plan is binding and irrevocable as between the CoC and the successful resolution applicant in terms of the provisions of the IBC, 2016 and the 2016 Regulations as well - there is absolutely no scope for modification of the terms of a Resolution Plan which has received the imprimatur of the Adjudicating Authority, be it by the Adjudicating Authority itself, the CoC or the SRA.
The conditions imposed on the SRA under the Lender’s Affidavit and the Resolution Plan were one and the same, the only difference being that the Appellants had offered not to press issues relating to the compliance of the Conditions Precedent and grant of extensions/exclusions along with offering to withdraw the Company Appeal and the Appeals pending before this Court.
The PBG of Rs. 150 Crore could not have been allowed to be adjusted with the first tranche payment of Rs. 350 Crore. Non-compliance of the SRA with the order of this Court has led to a dereliction of its obligations to implement the Resolution Plan.
Whether the non-implementation of the Resolution Plan by the SRA necessarily leads to the consequence of liquidation as under Section 33(3) of the IBC, 2016? - HELD THAT:- The impugned order of the NCLAT nowhere caps the Airport Dues to a maximum of Rs. 25 Crore. Moreover, such a mention of Rs. 25 Crore is plainly absent in its observations regarding Airport Dues. All that is mentioned is that “The payment of Airport Charges has to be made as per the Resolution Plan when the implementation of the plan commences as per the Resolution Plan”. It is in this regard that Clause 6.4.1(j) provides that if the CIRP costs exceed the current estimates, then they will be paid as per “actuals” in compliance with the provisions of the IBC and as a consequence, the pay-outs towards the other creditors would be reduced proportionately to account for such additional CIRP costs. This would be subject to a minimum payment of liquidation value to the Operational Creditors and Dissenting Financial Creditors of the Corporate Debtor and subject to a maximum of Rs. 475 Crore. Therefore, the Resolution Plan, too, does not contemplate the CIRP costs to be strictly subject to a maximum of Rs. 25 Crore. To accept such a contention of the Appellants would be to misinterpret the observations made in the impugned order.
The SRA not having infused the first tranche payment of Rs. 350 Crore as per Clause 6.3.1(g) and S. No. 11 of the Implementation Schedule under Clause 7.7 within a period of 180 days from the Effective Date and within the multiple extensions granted therefrom, has defaulted on its obligation towards the payment of CIRP costs (which include airport dues) under Clause 6.4.1 as well - by not infusing the first tranche payment of Rs. 350 Crore as per the Implementation Schedule of the Resolution Plan, the SRA has breached the terms of the Resolution Plan which required a minimum liquidation value of Rs. 113 Crore to be paid towards the Workmen and Employees’ Dues as well. Moreover, both the Provident Fund and Gratuity Dues amounting to Rs. 226 Crore should also have been paid by the SRA as per the order dated 21.10.2022 of the NCLAT in fulfillment of its obligations, which it failed to do.
Whether there were sufficient grounds before the NCLAT to hold that Respondent No.1/SRA had contravened the terms of the approved Resolution Plan and that the Corporate Debtor must be directed to be liquidated under Section 33(3) of the IBC, 2016? - HELD THAT:- At this stage of the implementation of the Resolution Plan, it is no longer viable for the SRA to submit that the Resolution Plan shall automatically stand withdrawn according to Clause 7.6.4 of the Resolution Plan and upon, such withdrawal, the members of the SRA in the MC shall resign, the remaining members of the MC shall assume absolute control of the Corporate Debtor and all the amounts infused by the SRA would be refunded. This is especially so, since the Conditions Precedent were declared to be fulfilled and the Effective Date was achieved on 20.05.2022. The consequence of the failure to implement the Resolution Plan in terms of Clause 9.4 of the Resolution Plan and Clause 3.13.7(iii) of the RFRP is that the Appellants are entitled to invoke the PBG automatically without any reference to the SRA. Therefore, it is directed that the PBG may be invoked by the Appellants in accordance with the terms of the Resolution Plan.
Whether the timely implementation of the Resolution Plan is also one of the objectives of the IBC, 2016? - HELD THAT:- Rule 15 of the NCLT and NCLAT Rules, 2016 grants power to the NCLT and NCLAT respectively, to extend the time limits for doing any act which have been fixed, either by the rules or by an order, as the justice of the case may require. However, such power must not be exercised mechanically without any application of mind. An extension on the strict timelines fixed under the resolution plan must be done by adequately weighing the period of extension sought with the consequences of such extension on the continued implementation of the Resolution Plan. After all, such a discretion cannot be exercised to the detriment of the resolution plan and its implementation itself - The feasibility and practicability of the resolution plan adjudged by the “commercial wisdom” of the CoC might no longer remain in cases where incessant extensions are granted by the NCLT and NCLAT under their discretionary powers.
The discretion in extending the time limits fixed under the Resolution Plan must be exercised in a much more circumspect manner, especially in cases such as the present, which pertains to the aviation sector, wherein timely resolution and revival of the Corporate Debtor is all the more crucial since the sector operates in such a way that a continuous flow of cash is required to maintain the company in a position of status quo.
Since the Resolution Plan is no longer capable of being implemented, we must ensure that at least liquidation remains as a “viable” last resort for the Corporate Debtor and its creditors. Being mindful of the underlying objective that “Time and Speed are of the essence under the Code” and to prevent the frustration of this objective, we have thought fit and necessary to exercise our plenary powers under Article 142 and direct the Corporate Debtor into liquidation in the manner as laid down in the IBC, 2016. Granting this relief to the Appellants would not run counter to the timelines and predictability that is central to IBC - it would not be necessary for the parties to again approach the Adjudicating Authority for a determination under Section 33(3) of the IBC, 2016 on the ground that the provisions of the approved Resolution Plan have been contravened.
The impugned order passed by the NCLAT is perverse and unsustainable in law. It has led to further complications. As a result, the appeals succeed and are allowed. The impugned order passed by the NCLAT is set aside.
Appeal allowed.
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2024 (11) TMI 409
Waterfall Mechanism - Appeal filed by the Appellant, the Suspended Director, under Section 61 of the Insolvency and Bankruptcy Code, 2016 against the Order passed by the Hon’ble National Company Law Tribunal (Adjudicating Authority), New Delhi - Appellant contends that the Liquidator had failed to form his independent opinion about the existence of the preferential transaction - HELD THAT:- The Liquidator had got a Transaction Audit Report made, which had various findings, and in one such finding it was noted that Rs. 3,67,900/- had been paid to the Suspended Director i.e. Alok Tripathi and was found to be a preferential transaction. The Adjudicating Authority has rightly noted that the Appellant/ Mr Alok Tripathi was put in a beneficial position when aforesaid payment was made against his unsecured loan as in terms of the provisions of Section 53 of the Code, the secured Creditors and workmen get precedence over unsecured Creditors against the payment of dues
It is to be noted that even if any amount was payable to the Appellant/ Mr Alok Tripathi qua its outstanding unsecured loan could have staked his claim before the Liquidator and could have got his share in terms of the provisions of Section 53 of the Code. It is worth noting that the Adjudicating Authority noted that the Liquidator shall look into the claim of the amount of the Appellant/ Mr Alok Tripathi while distributing the assets/funds/properties of the Corporate Debtor as per the waterfall mechanism under Section 53 of the Code.
When the Liquidator has got a Transaction Audit Report done and basis that has come to a conclusion that this is a preferential transaction, after which he filed an I.A. before the Adjudicating Authority, in such conditions, the submissions of the Appellant that the Liquidator has not formed an opinion, cannot be agreed upon - Appeal dismissed.
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2024 (11) TMI 352
Maintainability of fresh application under Section 11(6) of the Arbitration and Conciliation Act, 1996, when no liberty to file a fresh application was granted by the High Court at the time of withdrawal of the first application - time limitation of fresh application under Section 11(6) of the Act, 1996 filed by the respondent on 09.12.2022 - entitlement for benefit of Section 14 of the Limitation Act - condonation of delay in filing the fresh arbitration application under Section 11(6) of the Act, 1996.
Whether a fresh application under Section 11(6) of the Arbitration and Conciliation Act, 1996 is maintainable when no liberty to file a fresh application was granted by the High Court at the time of withdrawal of the first application? - HELD THAT:- Undoubtedly, an application under Section 11(6) of the Act, 1996 is not a suit and hence will not be governed stricto-sensu by Order 23 Rule 1 of the CPC. However, in a number of decisions, this Court has extended the principle underlying Order 23 Rule 1 to proceedings other than suits on the ground of public policy underlying the said rule. The appellant has submitted that in view of the aforesaid decisions, there is no reason why the principles of Order 23 Rule 1 should not be extended to an application for appointment of arbitrator under Section 11(6) of the Act, 1996.
The principles of Order 23 Rule 1 are extended to proceedings other than suits with a view to bring in certainty, expediency and efficiency in legal proceedings. However, at the same time, it must also be kept in mind while extending the principles to legal proceedings other than suits that the principles are not applied in a rigid or hyper-technical manner.
In the case of Vanna Claire Kaura v. Gauri Anil Indulkar & Ors. [2009 (7) TMI 1401 - SUPREME COURT] the applicant filed a Section 11(6) application before the High Court of Bombay. A dispute was raised that the application was not maintainable as the agreements were in the nature of international commercial arbitration agreement under the Act, 1996 and the application for appointment would only lie before the Chief Justice of India. Accordingly, the applicant withdrew the Section 11 application and filed a Section 11(6) application before this Court. The subsequent application was opposed inter alia on the ground that arbitration was invoked by notice dated 14.03.2006 and was thereafter abandoned with the withdrawal of the petition from the High Court. Hence, the second application without the leave of the High Court would not be maintainable. However, this Court, negatived the objections against the application and proceeded to appoint the arbitrator.
Coming to the facts of the case at hand, both the applications under Section 11(6) of the Act, 1996 were filed seeking adjudication of the dispute which arose on 02.02.2014 upon refusal of the appellant to pay the dues of the respondent. The first application under Section 11(6) was filed on 16.02.2018 and was subsequently withdrawn unconditionally on 01.10.2018. After a gap of more than four years, the respondent filed a subsequent application under Section 11(6) before the High Court on 09.12.2022 which came to be allowed by the impugned order - the respondent did not withdraw the first arbitration application because of some defect which would have led to its dismissal. It is also clear from the order dated 01.10.2018 of the High Court permitting the respondent to withdraw the application that neither any liberty was sought by the respondent nor the court had granted any liberty to file a fresh arbitration application - it can be said without any doubt that the respondent took a calculated risk of abandoning the arbitration proceedings to maximise the chances of succeeding in the IBC proceedings.
Thus, in the absence of any liberty sought by the respondents from the High Court at the time of withdrawal of the first arbitration application, the fresh Section 11 petition arising out of the same cause of action cannot be said to be maintainable.
A petition under Section 11(6) of the Act, 1996 is not a proceeding merely seeking the appointment of an arbitrator. It is in reality a proceeding for appointing an arbitrator and for commencing the actual or real arbitration proceedings.
Whether the fresh application under Section 11(6) of the Act, 1996 filed by the respondent on 09.12.2022 is time-barred and if the respondent is entitled to the benefit of Section 14 of the Limitation Act? - HELD THAT:- In the case at hand, the respondent invoked the arbitration clause vide a notice dated 09.07.2016. Since there was no response to the said notice by the appellant, the respondent filed an application for appointment of arbitrator before the High Court under Section 11(6) of the Act, 1996 on 16.02.2018. Subsequently, it abandoned the application to pursue proceedings under the IBC - the first application under Section 11(6) filed on 16.02.2018 was well within the prescribed limitation period of three years for filing such applications. However, even assuming that the second application under Section 11(6) is not barred by the principles underlying Order 23 Rule 1, the same was required to be filed within a period of three years from the expiry of one month from the date of receipt of the notice invoking arbitration by the appellant. This period of three years came to an end in August, 2019. The second application under Section 11(6) came to be filed by the respondent much later on 12.12.2022 and is clearly timebarred.
The High Court fell in error in holding that an application under Section 9 of the IBC and an application under Section 11(6) of the Act, 1996 are filed for seeking the same relief. While the relief sought in the former is the initiation of the CIRP of the corporate debtor, the relief sought in the latter is the appointment of an arbitrator for the adjudication of disputes arising out of a contract.
Whether the delay in filing the fresh arbitration application under Section 11(6) of the Act, 1996 can be condoned under Section 5 of the Limitation Act? - HELD THAT:- The period of limitation to file an application under Section 11(6) of the Act, 1996 is governed as provided in Article 137 of the Schedule to the Limitation Act, that is, three years. It is observed that the benefit available under Section 14 of the Limitation Act will also be available in respect of applications made under Section 11(6) of the Act, 1996. Thus, in the absence of any specific statutory exclusion, there is no good reason to hold that the benefit under Section 5 of the Limitation Act cannot be availed for the purpose of condonation of delay caused in filing a Section 11(6) application.
In Deepdharshan Builders Pvt. Ltd. v. Saroj, Widow of Satish Sunderrao Trasikar [2018 (11) TMI 1867 - BOMBAY HIGH COURT], the Bombay High Court held that Section 5 of the Limitation Act would apply to an application filed under Section 11(6) of the Act, 1996.
Similarly, the Delhi High Court in Yogesh Kumar Gupta v. Anuradha Rangarajan [2007 (2) TMI 714 - DELHI HIGH COURT] had observed that in view of Section 43 of the Act, 1996, Section 5 of the Limitation Act would be applicable to applications filed under Section 11(6) of the Act, 1996.
The benefit under Section 5 of the Limitation Act is available in respect of the applications filed for appointment of arbitrator under Section 11(6) of the Act, 1996. Further, the requirement of filing an application under Section 5 of the Limitation Act is not a mandatory prerequisite for a court to exercise its discretion under the said provision and condone the delay in institution of an application or appeal. Thus, the only question that remains to be considered is whether in the facts of the present case, the respondent could be said to have made out a case for condonation of delay in instituting the fresh Section 11(6) application.
The legislative intent of expeditious dispute resolution under the Act, 1996 must also be kept in mind by the courts while considering an application for condonation of delay in the filing of an application for appointment of arbitrator under Section 11(6). Thus, the court should exercise its discretion under Section 5 of the Limitation Act only in exceptional cases where a very strong case is made by the applicant for the condonation of delay in filing a Section 11(6) application.
The appeal filed by the appellant is allowed and the impugned order passed by the High Court of Bombay is hereby set aside.
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2024 (11) TMI 297
Violation of principles of natural justice - Appellant was not given an opportunity of hearing - termination of Insolvency Resolution Process of Personal Guarantor and discharging the RP - HELD THAT:- Section 106 contemplate Report of RP on Repayment Plan. Section 105 required the Debtor to prepare in consultation with the RP Repayment Plan. As per Section 106, the Report which requires to be submitted within 21 days from the last date of submission of claims under Section 102. The facts brought on the record indicates that there has been no communication from the Appellant after 24.08.2022. No Repayment Plan having prepared by the Debtor or submitted, no Proceeding for convening of the Meeting of Creditors or conduct of Meeting could take place.
The Adjudicating Authority took the view that when the Repayment Plan has not been received, the effect and consequence of rejection of Plan has to ensue by virtue of Section 115. The Application I.A. 449/2024, which was filed by RP, and the Prayers made thereunder were in accordance with Statutory Scheme under Section 115. Repayment Plan having not been submitted by Debtor, natural consequence was Creditors to file an Application for Bankruptcy under Chapter IV - The present is the case where Appellant right from very beginning has been challenging every action of the Adjudicating Authority and acts of Resolution Professional unsuccessfully. Appellant has never submitted any Repayment Plan to be finalised by the RP.
From the facts and sequence of the event which has been brought on the record, it is clear that at no point of time, subsequent to receiving request from the RP for submitting a Repayment Plan, Appellant raised any grievance or filed any proceeding before the Adjudicating Authority, raising his grievances and grounds for not being able to submit a Repayment Plan. The Appellant kept silence for years together and when consequential Order under Section 115 has been passed by the Adjudicating Authority, he is raising grievance of not being heard by the Adjudicating Authority.
Regulation 19 refers to filing of Repayment Plan by RP and Repayment Plan has to be submitted within 120 days from the Resolution Process commencement date. Resolution Process commencement date is 16.06.2022 and 120 days came to an end in the Year 2022 itself. Copies of the documents filed before the Adjudicating Authority which was required to be given to the Guarantor as contemplated in Regulation 19(2) relates to the documents which are filed along with the Report submitted by RP under 106 & 112. In the present case, when Repayment Plan has not been submitted by Debtor, nor was finalised by the RP and no Report has been submitted by RP to the Adjudicating Authority, the question of submitting or giving any documents along with the Report regarding Repayment Plan does not arise, hence, Regulation 19 is not applicable in the facts of the present case nor Appellant can rely on Regulation 19.
In the Appeal also Appellant has not been able to show any substantial ground to interfere with the Order impugned, except on harping on the argument that he was not given opportunity - there are no ground to interfere with the Impugned Order passed by the Adjudicating Authority - appeal dismissed.
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2024 (11) TMI 214
Approval of the Resolution Plan - grievance put forth by the Appellant is with regard to the Appellant not being informed about the auction proceedings which were initiated at behest of the RP, thus, depriving it of its participation in the said proceedings - HELD THAT:- It has come on record and stands admitted that the Resolution Plan had already been implemented and the dues as found payable under the Resolution Plan have been disbursed to the concerned parties. As regards the Appellant is concerned, the amount was disbursed vide Demand Draft dated 22.10.2020 which has been received and accepted by the Appellant. Leading to the dismissal of the appeal vide impugned Judgment dated 14.02.2022.
Having perused the record while bearing in mind the extensive observations made by 3-Judge Bench of this Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA & OTHERS [2019 (11) TMI 731 - SUPREME COURT], and its reiteration by numerous subsequent decisions of this Court such as the EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED & ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED & ORS. [2021 (9) TMI 672 - SUPREME COURT], the present is not in a position to accept the claim of the Appellant as sought to be made and put forth in these appeals.
The Orders dated 05.10.2020 and 27.11.2020, as have been passed by the NCLT and approved by the NCLAT vide its impugned Judgment dated 14.02.2022, do not call for any interference in the present Appeals.
The appeals being devoid of merit, stand dismissed.
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2024 (11) TMI 213
Seeking to place a settlement proposal under Section 12A of IBC before the Committee of Creditors - permission for withdrawal and suspension of the Corporate Insolvency Resolution Process - denial to Appellant yet another opportunity to submit a Section 12A proposal when the resolution plan of the SRA is at the stage of consideration by the Adjudicating Authority - Appellant failed to show bonafide in their previous settlement/withdrawal proposals - Appellant contends that Section 12A of IBC read with CIRP Regulation 30A provides scope for submission of multiple settlement proposals particularly when the resolution plan of the SRA has not attained finality - whether the Adjudicating Authority could have precluded the consideration of the 12A proposal of the Appellant by the CoC on the ground that the resolution plan was under consideration of the Adjudicating Authority?
HELD THAT:- 80.22% of the CoC members had already voted against the settlement proposal dated 08.02.2020 of the Appellant. The 8th CoC meeting had also concluded that the 12A proposal is not feasible or commercially viable. The settlement proposal, therefore, stood clearly rejected by the CoC pursuant to deliberations in the 8th and 9th CoC meetings.
It is equally significant to note that around the same time when the settlement proposal dated 08.02.2020 of the Appellant had been rejected, Respondent No. 3 had submitted their resolution plan dated 24.01.2020 with the RP. The resolution plan along with the Addendum as submitted by the Respondent No. 3 was approved by the CoC in the 8th CoC meeting held on 06.02.2020 with 80.84% voting share. The result of the voting was circulated to the CoC on 14.02.2020 and the 9th CoC meeting had noted the approval of the resolution plan of the SRA with CoC having voted with 80.84% in favour of the plan. It is the case of the Respondents that once the resolution plan has been accepted by the CoC, it becomes binding and irrevocable as between the CoC and the SRA.
This Tribunal took special notice of proviso to Regulation 30A of the CIRP Regulations and the intendment of this proviso after noticing that Regulation 30A has been substituted by Notification dated 25.07.2019 to give effect to the provisions of Section 12A.
In the present facts of the case, it is noticed that the CoC in its deliberations in the 8th and 9th CoC meetings had already put their stamp of approval on the resolution plan. Such opinion expressed by the CoC after due deliberations in the meetings through voting represents collective business decision and constitutes an expression of the CoC’s commercial wisdom. And it is here that primacy of the commercial wisdom of the CoC comes into play.
Thus, the suspended management cannot insist, impose or force the consideration of its settlement proposal by the CoC when the CoC in the exercise of its business decision has categorically decided against considering any such proposal from the Appellant. The decision of CoC is a business decision taken in the exercise of their commercial wisdom which is clearly not amenable to judicial review and hence the Adjudicating Authority committed no error in not issuing any directions to the CoC to consider the settlement proposal.
Time is a crucial facet of IBC proceedings and such proceedings cannot be subjected to indefinite delay as that would defeat the object of the statute. In the present facts of the case, it is found that it has been more than 5 years since the Corporate Debtor was admitted into CIRP and nearly 4 years since the resolution plan of the SRA was approved by the CoC in 2020. Therefore, 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 and has also rejected with majority voting the settlement plan given by the Appellant, no error has been committed by the Adjudicating Authority in disallowing further opportunity to the Appellant to submit a Section 12A proposal.
The impugned order does not warrant any interference - The Appeal is dismissed.
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2024 (11) TMI 212
Maintainability of application - time limitation - application contested on the ground that it is barred by the limitation as prescribed under Article 137 of the Limitation Act, 1963 - HELD THAT:- The Tribunal has committed a patent error in examining the issue of limitation in respect of the petition filed under Section 7 by the Appellant. There is no dispute that all the accounts of the Respondent were declared NPA on 31.03.2015 and the application was filed by the Appellant for the resolution of an amount of Rs. 158.83. It is also not in dispute, as it has emerged from the record, that a sum of Rs. 2.65 Cr. was paid by the CD in the month of December, 2016 in the loan account which means that the Respondent had acknowledged its liability in the month of December, 2016, in terms of Section 18 and 19 of the Act, hence, the limitation would start again from the date of acknowledgement i.e. December, 2016 and will continue for three years up to December, 2019.
The Respondent having acknowledged the debt in the month of December, 2016, during subsistence of period of limitation, would start the period of limitation again from Dec, 2016 and shall give a fresh period of three years to the Appellant to count the limitation to file the application under Section 7 i.e. from December, 2016 to December, 2019 whereas the application under Section 7 was filed in the year 2018 much before the expiry of the period of limitation.
These findings have not been challenged by the Respondent by way of an appeal and has attained finality against the Respondent. Even otherwise, there are no error in the aforesaid findings recorded by the Tribunal.
The present appeal is found to be meritorious and the same succeeds. The impugned order is hereby set aside. The matter is remanded back to the Tribunal - appeal allowed by way of remand.
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2024 (11) TMI 211
Maintainability of application - initiation of CIRP - condonation of delay in filing petition u/s 7 of IBC - It was averred in the application that at the time of filing of petition, no application for condonation of delay was filed as it is alleged that the OBC at that time was under the bonafide impression and belief that the CP was filed well within the period of limitation - HELD THAT:- The Tribunal held that Section 5 of the Act shall apply to the application filed under Section 7 or 9 of the Code but while referring to a decision of the Hon’ble Supreme Court in the case of B.K Educational Services Pvt. Ltd. Vs. Parag Gupta And Associates [2018 (10) TMI 777 - SUPREME COURT] held that “the right to sue, therefore, accrues when a default occurs and that if the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where in the facts of the case Section 5 of the Act may be applied to condone the delay in filing such an application”.
The Tribunal has also held that the Appellant cannot be permitted to take the plea of bonafide belief that the limitation for filing the application, filed under Section 7, would start from 01.12.2016 when the Code came into being and became enforceable. The Tribunal has also discussed in its order about the liberal approach of the Court in condoning the delay but it was held that if mandatory provision is not complied with and that delay is not sufficiently, satisfactorily and convincingly explained then the delay cannot be condoned on equitable or sympathetic grounds alone.
There are no merit in the present appeal for the purpose of interference and hence, the same is hereby dismissed.
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2024 (11) TMI 133
Suspension of petitioner’s registration as an Insolvency Professional for a period of two years - procedural irregularities in the conduct of the e-auction by the petitioner as a Liquidator - HELD THAT:- There is no serious grievance raised in the challenge to the order passed by the DC on the premise that the principles of natural justice had been breached. After the show cause notice was issued to the petitioner, he was granted due opportunity to reply and after granting him an opportunity of oral hearing which the petitioner availed, the impugned order came to be passed. The investigation reports that were called by the IBBI have been referred to in paragraph 2 of the show cause notice and the said reports were annexed as Annexures “A” and “B” thereto. Once it is found that the impugned action has been taken after duly complying with the principles of natural justice, the limited scope available for examining the impugned order would be on the touchstone of perversity and irrationality.
Since the show cause notice is based principally on the order passed by the NCLT on 2nd March 2023 as upheld by the NCLAT vide order dated 4th July 2023, it would be necessary to refer to the said orders. Before the NCLT, Interim Application No.927 of 2022 came to be filed by a bidder praying that the notice of sale of assets dated 2nd April 2022 be set aside. A grievance was raised that while the notice of sale of assets was dated 2nd April 2022, the e-auction was scheduled on 8th April 2022. In the light of the short time-frame fixed for conducting the e-auction, the bidder challenged the same. The reply filed by the petitioner in his capacity as Liquidator was considered.
On the aspect of proportionality, it was urged on behalf of the petitioner that the suspension of registration for a period of two years was excessive and unwarranted. It cannot be said that the suspension of the petitioner’s registration for a period of two years in the facts of the present case is in any manner excessive or disproportionate. The basis on which the action of suspension has been taken being the adjudication undertaken by the NCLT and thereafter the order passed by the NCLAT which has attained finality, the DC was within its jurisdiction in prescribing the requisite penalty. The conduct of the petitioner has been found to be questionable and hence his registration has been suspended.
It may be noted that despite such suspension of registration, the petitioner is not completely barred from continuing his ongoing assignments. The DC has left it to the discretion of the Committee of the Creditors / Stake-holders Consultation Committee to take a call as to whether the existing assignments of the petitioner can be continued - It is not that the suspension of the petitioner’s registration for a period of two years is disproportionate, warranting interference.
There are no scope whatsoever to interfere with the impugned order dated 30th January 2024 suspending the registration of the petitioner for a period of two years. The impugned order does not suffer from any perversity whatsoever nor is it irrational or disproportionate.
There are no merit in the challenge as raised to the order dated 30th January 2024 passed by the DC - The writ petition stands dismissed.
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2024 (11) TMI 132
Validity of the order admitting petition filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 - precise grievance of the Appellant is that the Financial Creditor has given various dates of default i.e. in column II of Part IV the date of default has been mentioned as 20.02.2020 and in the same column it is mentioned that the default has been committed since January, 2020 - whether the recall notice dated 06.11.2020 by which a period of 15 days was given to the CD to pay off the defaulted amount has to be considered to be the date of default as 21.11.2020 to hold that the application filed under Section 7 is hit by Section 10A of the Code?
HELD THAT:- The loan was advanced by the FC to the CD in two tranches, based on the agreement to which both the parties were bound, Clause 5.1.1 of the agreement deals with the dues to be repaid by the CD in which schedule 1 of the agreement states that due date shall be as per the repayment schedule and schedule 2 and repayment schedule in schedule 2 reproduced hereinabove, clearly shows the due date of the amount of instalment etc. There is no dispute that the amount of instalment was to be paid on monthly basis. The CD did not pay the monthly instalment from Jan, 2020 which was due to be paid on 20th Jan, 2020 rather it was paid in month of Feb, 2020 but without the penal interest, therefore, the entire amount due was not paid - The CD cannot be permitted to take advantage of the fact that the FC had issued a notice of recall dated 06.11.2020, giving 15 days time, to the CD to pay the same and to calculate the date of default as 21.11.2020 which falls within the cut off period of Section 10A because issuance of recall notice, in pursuance of the clause 10.3 of the agreement, was on the occurrence of any of the events of default, which had already occurred in the month of January or at the most February. It does not mean that the default has occurred with the issuance of recall notice as the notice was a consequence of the occurrence of default and it was a procedural step for recalling of the entire loan amount.
The argument raised by the Appellant has no legs to stand because the default had occurred in the month of Jan, 2020 partly when the amount of penal interest was not paid and fully when the entire amount was not paid in Feb, 2020. Section 10 A postulates that the CIRP cannot be initiated either under Section 7, 9 or 10 if the default occurs during the cut of period i.e. 25.03.2020 to 25.03.2021. In the present case, Section 10A would not apply because the date of default occurred much prior to 25.03.2020.
There are no merit in the present appeal and the same is hereby dismissed.
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2024 (11) TMI 62
Jurisdiction of Adjudicating Authority in cancelling a General Power of Attorney (PoA), a registered instrument - scope of residuary jurisdiction - approval of Resolution plan - HELD THAT:- On noticing the relevant clauses of the Development Agreement and the Power of Attorney executed in favour of the Appellant, it is amply clear that the Appellant in the PoA was nothing but nominee of the corporate debtor and Appellant being suspended director of the corporate debtor was treated as nominee of the corporate debtor for the purpose of facilitating the developers. The developers being corporate debtor, PoA was not executed in an individual capacity of the appellant nor gave any right to the subject land. When the Resolution Plan submitted by the SRA is approved and the corporate debtor is being taken over by the SRA, the development of property and all other steps as per the Resolution Plan has to be taken by the SRA - Appellant who was contemplated to extend its co-operation as nominee of the corporate debtor in developing the property is now taken a stand to create obstacles in revival of the corporate debtor to carry out function by the SRA who now takes over the corporate debtor after approval of the Resolution Plan.
Hon’ble Supreme Court in GUJARAT URJA VIKAS NIGAM LIMITED VERSUS MR. AMIT GUPTA AND ORS. [2021 (3) TMI 340 - SUPREME COURT] has held that the residuary jurisdiction conferred by statute may extend to matters which are not specifically enumerated under a legislation.
When PoA which was given for a particular purpose to the Appellant as nominee of the corporate debtor and Resolution Plan is approved by the CoC of the corporate debtor, the approval of the Resolution Plan is in commercial wisdom of the CoC and in event, the Resolution Plan declare the PoA which was given in favour of the Appellant as nominee of the corporate debtor as cancelled, the said clause of the Resolution Plan cannot be allowed to be challenged by the Appellant nor Appellant was given any rights in the subject property so as to assert any right. The endeavour of the Appellant is nothing but creating obstacles in revival of the corporate debtor in which he was suspended director - the imposition of cost of Rs.1 lakh that application was filed by the Appellant is nothing but a vexatious and dishonest attempt.
Approval of Resolution Plan - Appellant referring to Clause 8.4 of the Resolution Plan sought to contend that the Resolution Plan was conditional and contingent which could not have been approved - HELD THAT:- The law is well settled that the Resolution Plan which is approved by the CoC cannot be allowed to be withdrawn and any clause which contemplate withdrawal of the plan is unenforceable. Law in this case is settled by the Hon’ble Supreme Court in EBIX SINGAPORE PRIVATE LIMITED VERSUS COMMITTEE OF CREDITORS OF EDUCOMP SOLUTIONS LIMITED & ANR., KUNDAN CARE PRODUCTS LIMITED VERSUS MR AMIT GUPTA AND ORS. AND SEROCO LIGHTING INDUSTRIES PRIVATE LIMITED VERSUS RAVI KAPOOR RP FOR ARYA FILAMENTS PRIVATE LIMTIED & ORS. [2021 (9) TMI 672 - SUPREME COURT].
In view of the clarification issued by the Hon’ble Supreme Court, the submission advanced on the basis of clause 8.4 by the Appellant terming the Resolution Plan as un-implementable and conditional cannot be accepted. Present is not a case where any violation of Section 30(2) has been even alleged by the Appellant. The Hon’ble Supreme Court has laid down time and again that the jurisdiction of the NCLT and NCLAT is limited jurisdiction to see as to whether the Resolution Plan is in compliance of Section 30(2). Judgment of the Hon’ble Supreme Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK & OTHERS [2019 (2) TMI 1043 - SUPREME COURT] is referred. Appellant has not been able to point out any other ground on the basis of which approval of the Resolution Plan can be faulted.
There are no ground to interfere with the order dated 09.08.2024 passed by the Adjudicating Authority approving the Resolution Plan submitted by the Respondent No.2 - there are no merit in the appeals.
Appeal dismissed.
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2024 (11) TMI 61
Conditionality of LoIs issued by the RP with the approval of the CoC - not in conformity with the resolution plan and addendum submitted by the SRA - infirmity in the impugned order ordering liquidation of the Corporate Debtor or not - HELD THAT:- The SRA never objected at any stage upto the 28th CoC meeting to making the resolution plan subject to the prospective orders to be passed by the Adjudicating Authority. Instead the SRA requested the CoC to issue him a LoI. However, after the LoI was circulated to the SRA for his perusal and acceptance on 24.05.2021 by email, it is at this stage that the SRA through his Advocate on 29.05.2021 raised preliminary objections to the LoI being conditional for being subjected to the prospective orders of the Adjudicating Authority. This shows that the SRA was well aware before seeking the LoI from the CoC that the LoI was to be subject to the outcome of hearing dated 21.01.2021. Hence it becomes clear that it was an after-thought on the part of the SRA to raise the bogey of conditional LoI.
It is already noticed that the SRA was informed by the RP on 10.05.2021 of the result of the e-voting and asked to provide three sets of hard copies of the finally approved resolution plan including the Addendum - The RP again sent a communication on 12.05.2021 to the SRA to include conditions at Clause 7.10.6 and Clause 12.6.1 which SRA had missed out through they were a part of the resolution plan with the Addendum.
Clearly these conditionalities cannot be held to be a surprise for the SRA as these alleged conditionalities were discussed and deliberated in the CoC meetings and it was clear to all the participants including SRA that these conditionalities were integral to the resolution plan of the SRA - it is also noticed that the RP had addressed the reply to the SRA on 31.05.2021 reiterating that the condition under LoI had been subsisting since the 23rd CoC meeting which letter encapsulated all decisions taken in previous meetings of CoC wherein the Appellant was present. In these meetings dated 01.03.2021, 10.03.2021, 29.04.2021 and 21.05.2021, CoC had raised both the issues of the prospective order of the Adjudicating Authority as well as the requirement to correct the resolution plan.
In the present case once CoC had approved the resolution plan, the SRA stood precluded from raising any observations to the conditions stated in the LoI as these were not alien to the resolution plan as submitted by the SRA which was approved by the CoC. Present was not a case of conditional and addendum LoI but a case where the SRA was vacillating in accepting the LoI and not wanting to put his skin in the game by baselessly alleging that the LoI was conditional. The Adjudicating Authority rightly refused to entertain the objections of the SRA to the conditions in the LoI since withdrawal or modification of resolution plan after approval by the CoC is not permissible in law.
The timely and quick resolution of stressed assets is key to the successful working of IBC. The outer limit of CIRP of 330 days had also expired and yet formal acceptance of the resolution plan by SRA was nowhere in sight because of deliberate procrastination on the part of the SRA. Further, delay was diluting the value of the assets. In such circumstances, opting for liquidation was the best option available before CoC. Thus, there are no infirmity in the decision of the Adjudicating Authority to approve the liquidation of the Corporate Debtor.
Since the CoC is statutorily empowered to decide on the liquidation of the Corporate Debtor at any time before the confirmation of the resolution plan. This decision is a collegiate, commercial wisdom of the CoC which is not subject to judicial review except for ensuring that the resolution plan meets the requirements of the IBC and related Regulations. The paramount supremacy of the commercial wisdom of CoC has been upheld in a catena of judgments by the Hon’ble Supreme Court. The Explanation to Section 33(2) of IBC makes it amply clear that the CoC is entitled to take a final call, to liquidate the Corporate Debtor prior to affirmation of the resolution plan by the CoC.
There are no good grounds to allow the three appeals. The Appeals being devoid of merit stand dismissed.
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2024 (11) TMI 16
Challenge to approval of the Resolution Plan - HELD THAT:- The entire admitted claim in question for provident fund and gratuity having been paid in the Resolution Plan, there are no ground to interfere with the order of the Adjudicating Authority of approving the Resolution Plan.
The jurisdiction of the NCLT and NCLAT while considering the Plan approved by the Committee of Creditors (“CoC”) has a limited jurisdiction. The remit of the jurisdiction is to examine as to whether the Plan is in compliance of Section 30, sub-section (2) of the Insolvency and Bankruptcy Code, 2016 (IBC). Judgment of the Hon’ble Supreme Court in K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK & OTHERS [2019 (2) TMI 1043 - SUPREME COURT] is referred in this context, where the Hon’ble Supreme Court held 'The opinion on the subject-matter expressed by them after due deliberations in CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the “commercial wisdom” of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable.'
The gratuity and provident fund having been admitted in full and paid in full in the Resolution Plan, compliance of provisions of IBC are fully met. There are no error has been committed by the Adjudicating Authority in approving the Resolution Plan.
There are no grounds to interfere with the impugned order. The Appeal is dismissed.
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2024 (10) TMI 1552
Dissolution of the Corporate Debtor - direction for conducting a transaction audit - It is submitted that CoC, who resolved to file application for dissolution instead of a liquidation, since neither the CD has the assets, nor there are any amount available to bear the cost of liquidation - HELD THAT:- In the present case, the Adjudicating Authority has not exercised its jurisdiction in allowing the application filed by the CD for dissolution referring to Section 54 of the IBC and Regulation 14 of the Liquidation Regulations. The scheme of the IBC clearly provides that dissolution is a step subsequent to the Corporate Debtor having been completely liquidated. In the present case, the liquidation proceedings have not been undertaken and resorting to Section 54 could not have been taken as per the scheme of the IBC. The facts of the present case indicate that CIRP has been completed without any Plan having been received, inspite of Form- G published twice. The Adjudicating Authority did not pass any order for liquidation, which could have been passed under Section 33, sub-section (1). Thus, the CIRP having been unsuccessful and no liquidation order having been passed, recourse to Section 54, could not have been taken by the RP.
In the present case, the RP could have intimated the Registrar of Companies for striking off the name of the Company. In the facts of the present case, where company is not carrying on any business and there are no assets of the Company, dissolution of the Company under Section 54, is a step, which could have been taken as per the statutory scheme of the IBC. This Tribunal’s judgment in Shyson Thomas [2023 (6) TMI 102 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI] was a case where Adjudicating Authority exercising its jurisdiction has directed for dissolution by allowing the application - In the present case, the Adjudicating Authority had rejected the application, relying on the provisions of Section 54 of the IBC and Regulations 14 of the Liquidation Regulations.
CoC has decided not to make any contribution towards the liquidation process and liquidation, hence, was not directed. In the present case, CoC consisted of sole Financial Creditor, who had initiated the CIRP against the CD. When the entity, who has initiated the CIRP is not ready to proceed any further and CIRP period having already come to an end, no further steps were required in the CIRP of the Corporate Debtor and RP could have closed the matter by intimating the Registrar of Companies for striking off the name of Company from the Register of the Companies.
The impugned order dated 11.06.2024 directing for carrying out transaction audit, is set aside - Appeal disposed off.
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