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IBC - Case Laws
Showing 701 to 720 of 9152 Records
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2023 (12) TMI 958
Approval of Resolution Plan - Scope of the remand back proceedings - The Adjudicating Authority on 06.09.2022 while disposing off application u/s 30(6) allowed the Resolution Professional to accept new Resolution Plans from unsuccessful Resolution Applicants and even previously non-participating entities who may want to submit a Resolution Plan for the Corporate Debtor. - HELD THAT:- The opinion of all member of the CoC as were represented in meeting dated 13.12.2023 in the minutes of meeting was also noticed, no useful purpose shall be served in issuing notice to other members of the CoC for the purposes of this appeal - liberty reserved to any of the member of CoC who may feel necessity to file an application, if so advised.
The order of this Tribunal dated 09.02.2023 noticed, where this Court has disapproved the request to send matter again to CoC to reconsider the Resolution Plans. This Tribunal has directed the Adjudicating Authority to consider the plan approval application and decide the same within a period of three months. The impugned order has directed the matter to be taken before the CoC, which was not approved by this Tribunal in order dated 09.02.2023. Insofar as merits of the plan, it was to be examined by the Adjudicating Authority and take a decision in accordance with law. It is further observed that no purpose shall be served in prolonging the matter by the Adjudicating Authority by sending the matter to CoC and obtain opinion of CoC.
The order impugned is unsustainable and is set aside. In result of setting aside the impugned order all consequential actions are also unsustainable. Subsequent actions including meeting of CoC conducted in consequence to the impugned are set aside - appeal allowed.
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2023 (12) TMI 858
Allegation of Corruption against RP/IRP - whether the petitioner who is a 'Resolution Professional' is a public servant or not and thus, would be liable for the offence punishable under Prevention of Corruption Act? - Registration of impugned FIR in question against the petitioner consequent upon which the impugned remand order has been passed.
HELD THAT:- On a general perusal of the IBC, it appears that the IP has been given various roles, responsibilities and duties which would aid and assist the NCLT to either revive a Corporate Debtor by approving a resolution plan or to liquidate it as a last resort. Sections 18, 20 and 25 of the IBC refer to the various duties and functions of the IP which would extend to preserving the CD by stepping into the shoes of the management, appointing agencies if so required for the purposes of proper management of the CD, and managing its affairs. Sections 20 and 25 confer authority to the IP to enter into contracts on behalf of the CD or amend or modify the pending contracts; raise interim finance subject to Section 28 of the Code; issue appropriate instruction as may be necessary to keep the CD as a “going concern” apart from appointing accountants, legal or other professionals as may be necessary. It is also a responsibility of the IP under the IBC to preserve and protect the assets of the CD including the continued business operations of the CD.
Section 28 is a relevant provision which restricts, prohibits and curtails certain rights and duties of the IP as enumerated above, subject to the approval of the Committee of Creditors (CoC) - Section 21 of the IBC mandates formation of CoC by the IP, which decides on the ultimate fate of the CD viz., whether to resolve the insolvency or to liquidate the CD. According to Section 23, the IP shall conduct the Corporate Insolvency Resolution Process during the interregnum till a final decision is reached insofar as the fate of the CD is concerned.
Issue regarding 'public duty', 'public character' and 'public servant' - HELD THAT:- It is trite that every duty, even if has a colour of “public duty”, may necessarily not be of a character which is “public” in nature. There could be many instances where a role or a responsibility of an individual in a particular statute would assume the nature of “public duty” but sans the “Public Character” - it is not necessary that all duties which are broadly defined as “public duty” would encompass within itself “public character”. Merely because the IP is vested with certain roles, responsibilities and duties which could partake the nature of “public duties”, it is not a necessary conclusion or a definite inference that the same are being discharged in the nature of “public character”.
With the ever evolving laws and roles and duties cast upon various individuals under such enactments, the responsibilities of individuals and in some cases, institutions may have overlapping character and may be intertwined with “public duty” but that by itself would not be a legally determined benchmark to categorise all such individuals or institutions, as the case may be, as “public servants” for the purposes of Section 21 IPC or Section 2(c) PC Act, 1988. That too, when the Legislature appears to have deliberately omitted such individual or institution from such ambit. Thus, in the opinion of this Court, the Constitutional Courts would be loath in reaching such drastic conclusion, that too by process of judicial interpretation.
Codification of IBC - the need and historical perspective - HELD THAT:- The objective of the IBC was to consolidate or re-organize all such laws including to amend, if required, for the purposes enumerated in it. As such, it is clear that while codifying the IBC, the legislature had before it, the aforesaid Acts and all the relevant material to facilitate such codification - In fact, before such codification, the Government of India had constituted the Bankruptcy Law Reforms Committee, 2015 to study the entire gamut of the insolvency and the bankruptcy laws and make appropriate recommendations. The said recommendations were accepted and codified and promulgated as IBC, 2016.
Effect of section 232 and 233 of IBC - HELD THAT:- The omission in Section 232 was not inadvertent but a deliberate omission to not include IP within its ambit. It is trite that Courts would not interfere if the omission is deliberate since that would tantamount to legislating and supplying ‘casus omissus’ which is prohibited and not within the jurisdiction of the Courts - it is manifest, that the IP was not included within the ambit of Section 232 of IBC. As a necessary corollary, it can be safely inferred that the IP, according to the provisions of IBC as it stands today, was not considered to be a “public servant” by the legislature.
While examining the present legal issue is the promulgation of Securities and Exchange Board of India (Appointment of Administrator and Procedure for Refunding to the Investors) Regulations, in the year 2018, whereby the Administrator to be appointed ought to be an IRP registered with IBBI and who according to sub regulation (5) of Regulation 5 of the said Regulations, is deemed to be a “Public Servant” within the meaning of Section 21 of the IPC. If the Legislature had intended, at any point of time, even after IBC was codified in the year 2016 to include IP in Section 232 of IBC, the same could have been engrafted or inserted in Section 232 itself or elsewhere, in or about the time when the aforesaid SEBI Regulations were brought into effect in the year 2018. The same has not been done till now. This itself is a strong indicator and a clear pointer towards the fact that the omission to not include the IP within Section 232 is willful and deliberate and therefore, it cannot be a case of casus omissus.
Doctrine of Casus Omissus - HELD THAT:- The law in respect of the doctrine of ‘casus omissus’ is fairly well settled. The jurisdiction and authority conferred upon the Constitutional Courts is to interpret the law and not legislate. It is also fairly well settled that if a provision of law is misused and subjected to abuse of the process of law, it is for the legislature to amend, modify or to repeal it, if deemed necessary. The legislative ‘casus omissus’ cannot be supplied by judicial interpretative process - In the present case, as could be seen, Section 232 brooks no ambiguity nor is it repugnant to the aims and objects of the IBC.
Applicability or otherwise of section 2(c) of PC Act, 1988 - HELD THAT:- It is clear to this Court that despite having all the previous Acts on the instant subject like The Provincial Insolvency Act, 1909, the Insolvency Act, 1920, SICA 1985, RDDBFI Act 1994 and SARFAESI 2002 which were codified to form IBC and despite being aware of the roles and duties ascribed upon the individuals who were appointed by the Courts or Boards contained therein as Liquidators, Receivers and the like, and having all relevant materials before it, the Legislature, in its wisdom, thought it fit and prudent not to include IP as “public servant” and such non inclusion was, thus, a willful and deliberate omission. It is trite that what is not specified may not be readily inferred, particularly if the same would be penal in nature. In other words, any provision of law entailing penal consequences ought to be strictly construed and nothing specified therein should not be read in or filled up readily.
The omission to include IP in section 232 IBC is not inadvertent but a thoughtful, willful and deliberate one by the Legislature, and the Courts of law being empowered to interpret the same, ought not to legislate or supply casus omissus, which in any case is prohibited - Whether the IP is or is not a “public servant” according to IBC or PC Act 1988 or Section 21 IPC, 1860, is purely the domain of the Legislature and if required and necessitated, the legislature may carry out necessary amendments to the legislations.
In view of the analysis and the conclusions arrived at by this Court above, the need to make any observations/findings on facts would not arise in as much as the arguments on facts were predicated on the assumption of the Petitioner falling within the ambit and definition of a “Public Servant”, as stipulated in Section 2(c) of the PC Act, 1988 which has been held in the negative - an Insolvency Professional does not fall within the meaning of “public servant” as ascribed in any of the clauses of sub-section (c) of section 2 of the Prevention of Corruption Act, 1988.
Petition disposed off.
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2023 (12) TMI 857
Approval of Resolution Plan - treatment of claims as being inconsistent with the objectives of the IBC - whether, in the facts of the present case, the Appellants were entitled to any proceeds under the resolution plan at a time when the liquidation value payable to them as Operational Creditors is nil? - HELD THAT:- As per the law which exists as of date, the Respondent No.1 is agreed with, that the question with respect to payments to Operational Creditors under resolution plan as per the scheme of the IBC is no longer res-integra. The Appellants as Operational Creditors are entitled to the minimum entitlement as per Section 30(2)(b) of the IBC. There is no dispute that liquidation value of the Appellants in the present case is nil. That being so, we are not in a position to accept the submissions made by the Appellants that since nil amount has been allocated to them, the plan cannot be accepted. CoC in its commercial wisdom has decided not to allocate any amount to the other creditors while following the water fall mechanism as contained in Section 53 of the IBC. The Appellants have failed to point out any material irregularity or contravention of any provision of law by the CoC in approving the plan.
That being the case, 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 rejecting the resolution plan unless it is found to be contrary to the express provisions of law or there is sufficient basis which establishes material irregularity. There can be no fetters on the commercial wisdom of CoC and the supremacy of commercial wisdom of CoC has been reaffirmed time and again by the Hon’ble Supreme Court in a catena of judgements including K. SASHIDHAR VERSUS INDIAN OVERSEAS BANK & OTHERS [2019 (2) TMI 1043 - SUPREME COURT].
The resolution plan which has been approved by the Adjudicating Authority does not require any interference - there are no cogent reasons to interfere with the impugned order - appeal dismissed.
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2023 (12) TMI 856
Maintainability of Section 9 application - initiation of Corporate Insolvency Resolution Process (CIRP) - Corporate Debtor did not reply to the demand notice or send a notice of dispute - debt due and payable or not - default in payment of dues or not - pre-existing dispute between the parties or not - HELD THAT:- A plain reading of the Clause 17 of the work agreement, clearly shows that in terms of Clause 17 of the Agreement, payment was to be made to the Operational Creditor only after corresponding payment was received by the Corporate Debtor from HG Infra. There is nothing shown by the Operational Creditor to substantiate that payments had been received by the Corporate Debtor and had therefore become due for payment to them. Further, the Operational Creditor was required to raise a notice for claims within 14 days of the date of occurrence of event and since no such notice had been raised, it is clear that no payment was claimed by the Operational Creditor in terms of Clause 18 of the Agreement. Further the final payment to the Operational Creditor was subject to a “Taking Over Certificate” for the work which certificate is also not placed on record - the Adjudicating Authority committed no error in relying on these clauses of the Work Order Agreement to come to the conclusion that the Operational Creditor has failed to establish default on part of the Corporate Debtor in payment of the operational debt.
The Adjudicating Authority committed no error in concluding that the debit notes issued on grounds of defect in quality of services testifies the existence of a dispute.
It is amply clear that there exists a pre-existing dispute with respect to the quality of services provided by the Operational Creditor to the Corporate Debtor. Present is a case where it cannot be said that defence taken by the Corporate Debtor in their reply affidavit is a moonshine defence unsupported by any evidence. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational proceeding under IBC cannot be initiated at the instance of the Operational Creditor - 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.
The Adjudicating Authority did not commit any error in rejecting the Section 9 Application filed by the Appellant on the ground of pre-existing dispute. There is no merit in the Appeal - Appeal is dismissed.
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2023 (12) TMI 752
Territorial Jurisdiction - validity of declaratory decree to the effect that the purported Assignment Deed - permanent and mandatory injunction - HELD THAT:- This Court has no territorial jurisdiction to entertain the prayers of the plaintiff with respect to the assignment deed dated 03.02.2023, which is the fulcrum of the present suit. The contention of the plaintiff that it became aware of the assignment deed when it was filed as a document before the NCLAT, would not confer any jurisdiction for the purpose of Section 20 of the CPC.
Sections 63 and 231 IBC create a bar on the jurisdiction of the civil court in respect of any matter in which the NCLT and NCLAT has jurisdiction under the IBC and the adjudicating authority under the Code is competent to pass any order. Further, clause (c) sub-Section (5) of Section 60 of the Code vests the jurisdiction in NCLT to entertain and dispose of any question of priorities or any question of law or fact, arising out of or in relation to the insolvency resolution for liquidation proceedings. Therefore, the jurisdiction vested in NCLT while dealing with a resolution plan is of wide ambit and any question of law or fact in relation to the insolvency resolution has to be determined by the NCLT.
Ex-facie, the controversy sought to be raised in the present suit is a subject matter of proceedings before the NCLT/NCLAT. As such, the bar under Section 60 and Section 231 would squarely apply to the present suit.
In the circumstances, the plaint is returned, with liberty to the plaintiff to take appropriate remedies as may be available to him under law.
Application disposed off.
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2023 (12) TMI 688
Rejection of Section 9 application - rejection on the ground of pre-existing dispute - Appellant challenging the order contended that the debt was acknowledged by the Corporate Debtor even after Demand Notice - HELD THAT:- From the materials which are brought on the record, the Adjudicating Authority has referred to letter dated 04.02.2021 issued on behalf of the Corporate Debtor to the Operational Creditor, where replying to the email dated 30.01.2021 from the Operational Creditor it was stated that there is no liability to pay. It was stated in the letter that no charge is payable by the Company on the bill which was raised by the Operational Creditor. The letter dated 04.02.2021 is at page 243 of the paper book.
The Demand Notice was issued by the Operational Creditor on 08.02.2022 which Demand Notice was also replied on 18.02.2022 by the Corporate Debtor refuting the claim and the said notice dated 08.02.2022. The reply to notice dated 18.02.2022 is at page 249, where the Corporate Debtor has categorically stated that no amount is due. The letter dated 18.02.2022 is nothing but notice of dispute issued by the Corporate Debtor. The Adjudicating Authority has rejected the application on the ground of pre-existing dispute - thus, no error has been committed by the Adjudicating Authority.
Coming to the submission of learned counsel for the Appellant that there are certain acknowledgements contained in interrogatory issued in a civil proceeding, when there is clear statement in letter dated 04.02.2021 and reply to Demand Notice dated 18.02.2022 denying the payment of dues raised by the Operational Creditor, there are no reason to accept the submission that debt was acknowledged. No error has been committed by the Adjudicating Authority by rejecting Section 9 application.
There is no merit in the Appeal - Appeal is dismissed.
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2023 (12) TMI 687
Admission of section 9 application - Insurance Company has made payment to the Operational Creditor of its claim - third party liability - Liability of Corporate debtor to discharge its debt - preexisting dispute between the parties - HELD THAT:- All relevant documents pertaining to debt and default committed by the Corporate Debtor has been mentioned. The contract between the Operational Creditor and the Insurer was third party contract with which Corporate Debtor was not concerned. The emails were already sent by the Operational Creditor informing the Corporate Debtor that if payments were not made, claim shall be lodged before the Insurer. Thus, the Agreement with the Insurer by the Operational Creditor was communicated to the Corporate Debtor and it cannot be accepted that contract of the Insurer was concealed by the Operational Creditor.
The Hon’ble Supreme Court in in Economic Transport Organisation v. Oriental Insurance Company Limited [2010 (2) TMI 1264 - SUPREME COURT] even held that in case a subrogation, rights of the assured was not put to an end and assured can sue the wrongdoer and recover the damages for the loss.
The Hon’ble Bombay High Court in Rojee-tasha Stampings Pvt. Ltd. v. POSCO-India Pune Processing Centre Pvt. Ltd. and Anr. [2018 (4) TMI 164 - BOMBAY HIGH COURT] after hearing the parties held that third party cannot take shelter and disown its liability of a debt payable to the Company on the basis that insurance transaction has taken place between Respondent and its Insurer.
The Corporate Debtor cannot take benefit of the fact that Insurer had paid the claim to the Insured. By payment of the Insurance Company to the Operational Creditor of its claim, the Corporate Debtor cannot be absolved from its liability to discharge its operational debt - it is further noticed that Operational Creditor is under obligation to take proceeding to recover its dues and handover the amount to the Insurance Company and when Operational Creditor has filed Section 9 Application, it is not open for the Corporate Debtor to submit that Application deserves to be rejected, since the amount has been received by the Operational Creditor from the Insurance Company.
Section 9 Application is fully maintainable and the fact that Insurance Company has made payment to the Operational Creditor of its claim, cannot be a ground to reject Section 9 Application. The Corporate Debtor is still liable to discharge its liability of debt.
Preexisting dispute between the parties - HELD THAT:- When the Demand Notice was issued on 03.04.2019 by the Operational Creditor, it was thereafter on 06.04.2019 a reply email was sent by the Corporate Debtor raising all types of frivolous and moonshine defenses. In the reply, which was submitted by the Corporate Debtor, there is no mention of any correspondence between the parties prior to receipt of the Demand Notice. The facts as noted above, indicate that the dues were clearly acknowledged by the Corporate Debtor and several assurances were given for payment of 100% debt. For two years, assurances were given by the Corporate Debtor for clearing the entire outstanding, but only part payment was made on 01.08.2018 by the Corporate Debtor. Thus, the plea taken by the Corporate Debtor in its reply that there is pre-existing dispute is dishonest and moonshine plea. The goods having been received and amounts acknowledged, after two years, the Corporate Debtor cannot be allowed to say that there is pre-existing dispute for which there was no communication, although there were correspondence exchanged for long two years between the parties - Adjudicating Authority has rightly rejected the plea of pre-existing dispute raised on behalf of the Corporate Debtor.
The appeal is dismissed.
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2023 (12) TMI 686
Condonation of delay of 15 days in filing of the appeal - It is alleged that the impugned order was passed on 29.03.2023 and the appeal was filed on 11.05.2023 i.e. on the 45th day counted from the date when the order was passed - HELD THAT:- If the appeal is filed on 46th day then the application cannot be entertained by the Tribunal as it has been held that such delay cannot be condoned by resorting even to Article 142 of the Constitution of India. In such a scenario, when the timeline is so strict, it is always incumbent upon the person who wanted to challenge the order of the Adjudicating Authority before the Appellate Authority to remain vigilant regarding his rights to file the appeal. The legislature has provided only 30 days for this purpose and then granted 15 days window to file the appeal but by assigning a sufficient cause that too to the satisfaction of the Appellate Tribunal. In the present case, however, the sufficient cause is conspicuous by its absence as it would not be a sufficient cause to hold that the Appellant is a resident of Kerala and the appeal had to be filed at Chennai and the Advocate took time in drafting the appeal etc.
There is no merit in the present application and the same is hereby dismissed.
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2023 (12) TMI 610
Admission of claim by Resolution Professional - fixation of rent amount with 5% increase - HELD THAT:- In so far as the fixation of rent amount at Rs.1,09,448/- per month with 5% increase, it was decided in terms of the agreement and we see no ground to interfere with the said decision and the claim of the amount of Rs.1,71,875/- on the basis of the market value of the premises in question, the Corporate Debtor being in CIRP and the Corporate Debtor continuing being in occupation of the premises, the direction of the Adjudicating Authority to determine the rent as per the Agreement cannot be faulted.
Due to mere fact that no invoices were issued by the Appellant after April, 2018, the claim could not have been reduced, now the Adjudicating Authority has itself found the amount to Rs.1,09,448/- per month, the claim for the months in which Corporate Debtor was in occupation of the premises may be determined. In view of the order of the Adjudicating Authority the claim filed by the Appellant in Form B may be admitted by the Resolution Professional and the Resolution Professional shall modify the claim as per the direction of the Adjudicating Authority in Clause (b), Para 4 of the impugned order.
The appeal allowed in part to the extent that the claim in Form B is to be modified accordingly.
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2023 (12) TMI 609
Maintainability of Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - whether there is a pre-existing dispute on the basis of the submissions of both the parties and this has been dealt in detail by the Adjudicating Authority in his impugned order? - HELD THAT:- AA concluded that the respondent after the receipt of the statutory demand notice dated 11.02.2022 replied on 03.03.2022 raising a dispute. The Adjudicating Authority has gone into the circumstances of their business dealings, which was mainly basis oral arrangements and which cannot be fully substantiated and accordingly have come to the conclusion that the dispute raised by the respondent is plausible and not a patently feeble legal argument. Thus, when the Appellant received the reply to Section 8 demand notice raising a dispute, the Section 9 petition could not have been proceeded under I&B Code against the respondent.
The Adjudicating Authority concluded, that to determine the contention of the respondent that the Sale Order dated 02.03.2019 was placed by the Petitioner in pursuance to an oral agreement dated 05.04.2018, to decide whether private mediation was held and settlement was arrived therein and whether petitioner agreed to forfeit Rs. 4 crores security deposit by the respondent and to decide the genuineness of the invoices and Sale Orders relied by the respondent requires, further investigation is required which can be decided only after examining the witnesses. Accordingly, AA concluded that in this scenario pre-existing dispute is existing.
The inference by the Adjudicating Authority that there is a pre-existing dispute, cannot be faulted - there are no grounds to interfere in the order of the Adjudicating Authority for not allowing proceedings under Section 9 of I & B Code, 2016 - appeal dismissed.
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2023 (12) TMI 608
Rejection of claim by the Resolution Professional - true nature and content of Agreement dated 29.03.2019 - Agreement is a contract of guarantee under Section 126 of the Indian Contract Act, 1872 or not - Submission of the Appellant is that mere fact that the document dated 29.03.2019 is containing heading ‘Agreement’ is not decisive and its nomenclature is not decisive - HELD THAT:- There can be no dispute to the preposition that nomenclature is not decisive. To find out the nature of the document, it requires to be noted that the Agreement dated 29.03.2019 in light of Debenture Trust Deed which is the genesis of Agreement dated 29.03.2019 - the Debenture Trust Deed defines the Corporate Guarantee which was to mean that the Deed of Guarantee was to be executed by the Developer in favour of the Debenture Trustee in a form and manner acceptable to the Debenture Trustee - Security Provider can also be any other person apart from Obligors and Security Document include Corporate Guarantee and such other documents for creating such other Security as may be required by the Debenture Trustee from the Obligors. Security Documents, thus, both includes Corporate Guarantee, which has already been defined and other document for creating such other security as may be required.
There is no averment in the entire agreement that RIHPL is undertaking to guarantee to repayment of secured obligations by the Company. It is to be noted that Corporate Guarantee was already executed on 03.08.2018 on which date the Debenture Trust Deed was executed and in event the RIHPL was taking on its folds the entire lability of Principal Borrower as a Guarantor there ought to have been some indication in the Agreement.
The Resolution Professional having not admitted the claim of the Appellant and communicated its rejection, it is not necessary for us to enter into the submission of the Appellant that Committee of Creditor’s decision prima facie not accepting the claim of the Appellant was without jurisdiction. In any event, an application has already been filed by the Appellant before Adjudicating Authority questioning the decision - There can be no doubt that it is the Adjudicating Authority who is entrusted with jurisdiction to adjudicate all issues which arise out of the resolution process of a Corporate Debtor.
On reading the Agreement dated 29.03.2019 and look into the Clauses, it is clear that said Agreement was executed in reference to Clause 7.5(b) of the Debenture Trust Deed and the Agreement was only of for the purpose of creating additional security. The RIHPL being party to the Agreement dated 29.03.2019, the additional security as given under the Agreement can be enforced as per Clause 6 of the Agreement. Giving of additional security by Agreement dated 29.03.2019 cannot be read to mean that the Corporate Debtor has given any guarantee in reference to the secured obligations of the Obligors under the Debenture Trust Deed. The Agreement dated 29.03.2019 cannot be read as guarantee within the meaning of Section 126 of the Contract Act. The claim filed by the Financial Creditor was not limited to the extent of RIHPL security but entire amount under the Debenture Trust Deed was sought to be claimed in the claim form submitted by the Appellant.
The Resolution Professional did not commit any error in refusing to admit the claim of the Appellant - there are no good ground to interfere with the order of the Adjudicating Authority - appeal dismissed.
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2023 (12) TMI 571
Maintainability of section 7 application - initiation of CIRP - profit-sharing loan given by the Appellant to the Respondent - financial debt in terms of IBC or not - whether Appellant could claim the status of a Financial Creditor for the purposes of filing Section 7 application? - HELD THAT:- The Adjudicating Authority has returned the finding that the Section 7 application filed by the Appellant was not maintainable since the Appellant neither fell in the category of a “financial creditor” nor the alleged transaction fell within the ambit of “financial debt” in terms of the statutory provisions enshrined in the IBC. The above findings of the Adjudicating Authority have been predicated on the terms of Agreement entered between the Appellant and the Respondent. It has been held by the Adjudicating Authority that both parties being involved in the joint development of the subject property for which purpose they have entered into a collaborative agreement and hence the amount paid by the Appellant in terms of the financial arrangements outlined therein, is an investment for making profits which cannot be treated as a financial debt qua the Respondent.
A plain understanding of a joint venture is a combination of two or more parties/entities that seeks the development of any enterprise or project for profit and entails sharing the risks associated with its development. Applying the above to the facts of the present case, from a perusal of the terms and conditions of the Agreement, when read in a composite and holistic manner, it can well be said that the Appellant and Respondent had entered into a particular business arrangement of accomplishing development of the subject property in which they had agreed to pool their resources proportionately in an agreed upon ratio of 25:75 and in the process share the profits, losses and costs associated with it - There are unmistakable signs of reciprocal rights and obligations contained therein besides evidence of common participation as well as sharing of profits and losses in the construction and development of the subject property. This spirit of being profit-sharing partners is well engrained in the Agreement and therefore we are of the considered opinion that the Adjudicating Authority has committed no error in holding that the Appellant by virtue of the funds invested by them in terms of the Agreement cannot claim the status and benefits of a Financial Creditor as defined under Section 5(7) of the IBC.
The present transaction is in the nature of investment for profit and not disbursement for time value of money and hence does not fall within the canvas of financial debt as defined under Section 5(8) of the IBC. The essential elements of financial debt in the context of IBC consists of disbursal accompanied by consideration for time value of money. The terms and conditions of the Agreement between the Appellant and the Respondent makes it clear that the Appellant was a collaborator and not a financial creditor. There was no disbursement for time value of money by the Appellant within meaning of Section 5(8) of IBC. The Adjudicating Authority has correctly adverted to the real nature of the transaction between the parties to hold that the same cannot become the basis of filing a Section 7 application.
The findings of the Adjudicating Authority agreed upon that the Appellant is not a Financial Creditor in terms of Section 5(7) of IBC and that there was no financial debt in terms of Section 5(8) of IBC and hence the application under Section 7 of the IBC could not be entertained - there are no error in the impugned order.
Appeal dismissed.
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2023 (12) TMI 570
Replacement of the Appellant with another Resolution Professional - HELD THAT:- This Tribunal in a recent Judgment delivered in Kairav Anil Trivedi, IRP of Parenteral Drugs India Ltd. Vs. State Bank of India & Anr. [2023 (12) TMI 255 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] has examined the similar contentions raised on behalf of the Resolution Professional/IRP which was replaced by the CoC. In the said case, Resolution was passed by CoC on 06.10.2023 to replace the IRP with another RP which was approved by the Adjudicating Authority on 17.10.2023 which order was challenged by the IRP in this Tribunal.
The above judgment fully supports the submissions of the Counsel for the Respondents. When the Resolution has been passed by the CoC in accordance with the provisions of the IBC deciding to replace the IRP, IRP cannot be heard in questioning the resolution on the ground that present was not a case where IRP could have been replaced by another Resolution Professional.
Submission of the Appellant that in the Resolution dated 01st September, 2023 name of Anil Goel was mentioned whereas the Adjudicating Authority has approved the replacement with Resolution Professional- Ankit Goel - HELD THAT:- Suffice it to say that name of Ankit Goel was clearly mentioned in the Joint Lenders Meeting dated 28th August, 2023 when Joint Lenders Meeting decided to replace the Appellant with Ankit Goel. Further it was the Appellant who in the minutes dated 01st September, 2023 has mentioned Anil Goel. Registration No. of Ankit Goel and that of Anil Goel mentioned in the minutes is same as submitted by Learned Counsel for the Respondent. The mere fact that the name of RP who is to be appointed after replacement is spelled as Anil Goel instead of Ankit Goel in the minutes which was produced by the Appellant shall have no effect on the resolution for replacement and we do not find any merit in the above submission of the Appellant that although Appellant was decided to be replaced by Anil Goel but ultimate order is of Ankit Goel - there is no error in replacement of the Appellant by Ankit Goel as RP.
There are no error in the order passed by the Adjudicating Authority approving the Replacement of the Resolution Professional - there is no merit in the Appeal - the Appeal is dismissed.
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2023 (12) TMI 486
Admissibility of section 9 application - application filed under Section 9 by the Operational Creditor was an application filed in collusion with the Corporate Debtor or not - locus of Real Estate Regulatory Authority and Aquacity Consumer and Societies Welfare Society to file Company Appeal u/s 61 of IBC - Barter Agreement has already been declared as unfair practices by RERA - forged invoices - time limitation.
Whether Real Estate Regulatory Authority has locus to file Company Appeal challenging the order dated 05.08.2022 under Section 61 of the I&B Code? - HELD THAT:- RERA on various complaints received from the allottees in the year 2021 has registered proceedings against the Corporate Debtor. A show cause notice dated 09.09.2021 was issued to the promoter of the project Aakriti Aquacity under Section 7 of the 2016 RERA Act as to why allottees should not be refunded deposit amount and compensation need to be paid and why action cannot be taken to revoke the registration of the project Aquacity for non-compliance of the Orders. Reply was submitted by the Corporate Debtor in October, 2021. Investigation Report from Financial Advisor was also obtained which report mentioned that the amount received by the promoter has not been deposited in the prescribed bank account and order dated 28th January, 2022 was passed by RERA against the Corporate Debtor and its Directors Mr. Raju Soni and Mr. Hemant Kumar Soni.
In view of the sequence and events of the facts which took place and various proceedings drawn by RERA much prior to issuance of notice under Section 8 of the Code by the Operational Creditor, it is satisfied that Appeal filed by the RERA cannot be thrown out on the ground of locus. The RERA held to be aggrieved person within the meaning of Section 61 of the Code - the question has to be answered in affirmative holding that RERA has locus to file Company Appeal.
Whether Aquacity Consumer and Societies Welfare Society, Appellant in Company Appeal has locus to file Appeal within the meaning of Section 61 of the I&B Code? - HELD THAT:- Appellant being association of the home-buyers of Real Estate Project who has already initiated proceedings for direction of the interest of the home-buyers is aggrieved person within the meaning of Section 61 of the Code and the Appeal filed by the Appellant cannot be dismissed on the ground of locus - question answered in affirmative holding that Aquacity Consumer and Social Welfare Society has a locus to file an Appeal under Section 61 of the Code against the Order dated 05th August, 2022.
Whether the Corporate Debtor owed operational debt to the Operational Creditor on the basis of Barter Agreements and consequent invoices to enable the Operational Creditor to initiate proceedings under Section 9 of the I& B Code? - HELD THAT:- On the basis of Barter Agreement and consequent invoices, non-discharge of Barter Component by the Corporate Debtor shall not lead to any operational debt on basis of which payment of money can be demanded by the Operational Creditor from the Corporate Debtor. No operational debt was owed to the Operational Creditor in the facts of the present case hence initiation of proceedings under Section 9 by the Operational Creditor was contrary to the provisions of the IBC.
Whether the application under Section 9 filed by the Operational Creditor was filed in collusion with the Corporate Debtor to save the Corporate Debtor from carrying out its statutory obligations? - Whether invoices which were filed along with the Section 9 application by the Operational Creditor were manufactured and forged invoices prepared for the purposes of the case, which were not genuine invoices? - HELD THAT:- There was no Operational Debt due on the Corporate Debtor and the proceedings initiated by the Operational Creditor being wholly outside Section 8 and 9 of the Code, there are no necessity to enter into the above question for the purpose of the present case.
Thus, Application filed under Section 9 by the Operational Creditor alleging Operational Debt was non-maintainable since there was no operational debt on basis of which payment of money could have been demanded by the Operational Creditor from the Corporate Debtor on account of non-discharge of Barter Component by the Corporate Debtor. At best, the Applicant was entitled for claiming allotment of units as per the Barter Agreement between the parties for which it was open for the Operational Creditor to take such remedy as permissible. However, Section 9 Application was clearly not maintainable, the Adjudicating Authority committed error in admitting Section 9 Application without adverting to the real nature of the transaction between the parties, which is the very basis of the Section 9 Application, the Order of the Adjudicating Authority just is unsustainable.
The Order dated 05th August, 2022 admitting Section 9 Application set aside - appeal allowed.
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2023 (12) TMI 485
Doctrine of merger - Application for condonation of delay in filing of the Appeal - Preferential Transaction - Appellant contends that since the Appellant has already filed an application, the time taken during the period Application was pending should be excluded - by virtue of subsequent order dated 17th August, 2023, the earlier order shall merge and limitation should be counted from 17th August, 2023 or not? - HELD THAT:- The Judgment which has been relied by Learned Counsel for the Appellant in Ashok Tiwari [2023 (11) TMI 313 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] was case where Appeal was filed against the subsequent order dated 12th May, 2023 which was an order passed on application filed by the Appellant for rectification of the earlier order dated 15th February, 2023. The rectification application was decided on 12th May, 2023 and the Appeal which came for consideration before the Tribunal was considered against the subsequent order dated 12th May, 2023. Observations were made by the Court were in reference to that context. Present Appeal is not against the subsequent order i.e. 17th August, 2023 rather the present Appeal is against the earlier order dated 02nd May, 2023. Hence the Judgment of this Tribunal in Ashok Tiwari does not render any help to the Appellant.
In the case of DSR Steel Pvt. Ltd. [2012 (5) TMI 592 - SUPREME COURT], the Hon’ble Supreme Court was considering question of review application which review application was filed under the provisions of Electricity Act, 2003. There was power of review conferred on the commission as has been noticed in the Judgment of the Hon’ble Supreme Court. In the above context, the Hon’ble Supreme Court laid down preposition as noted in paragraph 25. Present is a case which is covered by Paragraph 25.3 of the above judgment where the Hon’ble Supreme Court has clearly held that even a case of rejection of review the original order has to be challenged within time stipulated by law and original decree not the order requesting the review can be taken for the purpose of limitation.
Present is not a case where there was any modification of the Order dated 2nd May, 2023 more so present is not a case of review because the Tribunal does not have jurisdiction to review its Judgment, in the clarification order issued on 17th August, 2023, it is opined that this Appeal having been filed beyond 15 days after expiry of the limitation and our jurisdiction to condone only 15 days hence the Delay Condonation Application is dismissed.
Appeal dismissed.
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2023 (12) TMI 444
Refund of amount which was received from Respondent towards fee of Liquidator and cost - Appellant challenging the impugned order submits that the Appellant charged fee for the period from 15.03.2022 to 17.02.2023 as per the provisions of Regulation 4(2)(a) read with Proviso to Regulation 2B(3) of the Liquidation Regulations, 2016.
HELD THAT:- Sub-clause (3) of Regulation 2B specifically provides that any cost incurred by the Liquidator in relation to compromise or arrangement shall be borne by the Corporate Debtor, where such compromise or arrangement is sanctioned by the Tribunal under sub-section (6) of Section 230 and whereas such cost shall be borne by the parties who proposed compromise or arrangement, where such compromise or arrangement is not sanctioned by the Tribunal under sub-section (6) of Section 230.
Whether the Scheme Proponent, who has submitted scheme for compromise and arrangement is liable to pay any liquidation fee, since in the present case, Liquidator is claiming a liquidation fee of Rs.23,01,000/- from the Scheme Proponent? - HELD THAT:- The provision of Section 34, sub-sections (8) and (9) is perused, which deals with fee of Liquidator for conduct of liquidation proceedings. The payment of fee, thus, has to be as per the statutory provisions under Section 34 sub-sections (8) and (9). Regulation 2B, which deals with ‘compromise or arrangement’ specifically provide for payment of cost incurred by the Liquidator in relation to compromise and arrangement - The sub-regulation (3) of Regulation 2B, makes it clear that Liquidator is entitled to receive the cost incurred by the Liquidator in reference to comprise and arrangement from the Corporate Debtor and from the Proponent of the Scheme. In case the compromise is sanctioned, the cost shall be borne by the Corporate Debtor and in case compromise is not sanctioned the cost shall be borne by the parties, who proposed compromise or arrangement. The statutory provision is, thus, clear that Liquidator can only claim cost incurred from the parties who proposed the compromise or arrangement.
A Scheme Proponent, who according to the Appellant is non-serious can be saddled with the cost, which may be a deterrent factor for any non-serious Scheme Proponent to submit a Scheme - the submission of the Appellant that Scheme Proponent should be saddled with liquidation fee is clearly contrary to the statutory scheme. Further, the definition of ‘liquidation cost’ as contained in Regulation 2(ea) clearly provides that cost incurred by the Liquidator in relation to compromise or arrangement under Section 230 of the Companies Act, if any, shall not form part of liquidation cost. The said provision when read with Regulation 2B, clearly makes it clear that cost incurred with regard to compromise or arrangement has to be borne by the Corporate Debtor or Scheme Proponent. However, the said provision does not indicate that the Liquidator is not entitled to claim his fee during the period compromise or arrangement is under consideration. Since the Liquidator is entitled for his fee as per the provision of Section 34, subsections (8) and (9) and Regulation 4, it cannot be said that Liquidator is left high and dry with regard to his fee during the period compromise or arrangement is under consideration. However, whether Liquidator is entitled to fee beyond the period of 90 days for completion of compromise or arrangement is a different question, which need no answer in the present Appeal.
The Adjudicating Authority committed no error in directing the Liquidator to refund fee, which was wrongly realized from the Respondent. The Appellant himself has brought on record various emails and reminders sent by the Liquidator to Respondent where Liquidator has asked Respondent No.1 to make various payments and the payments were made.
The Liquidator was not entitled to claim any liquidation fee from Respondent for the period during which compromise and arrangement scheme was under consideration. As noted above in paragraph 14 of the reply, the Liquidator has claimed a fee of Rs.23,01,000/-, which is clearly unsustainable. Liquidator in paragraph 14 has given the details of all expenses and fee payable totaling to Rs.24,12,172. At the highest, the Liquidator was entitled to expenses. Thus, even if we allow all expenses claimed in paragraph 14 of the reply of the Liquidator, he was not entitled to a fee of Rs.23,01,000/- and after deducting the amount of Rs.23,01,000/- in total amount, the Liquidator at best is entitled for amount of Rs.1,11,172/- towards all expenses claimed by the Liquidator.
The Adjudicating Authority has rightly directed the Liquidator to refund of the amount. As observed above, the Liquidator at best is entitled to expenses as claimed by him in the liquidation process and if the amount of all expenses claimed by the Liquidator are deducted, still the Liquidator is liable to refund the amount of Rs.22,77,108/-, as per his own calculation - the direction to refund the amount of Rs.23,88,280/- be modified for refund of the amount of Rs.22,77,108/-.
From the facts which have been noticed and the manner in which the Liquidator has conducted the liquidation process, raises question on understanding of the liquidation process, liquidation regulations and the manner in which the Liquidator has demanded liquidation fee from the Scheme Proponent - appeal dismissed.
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2023 (12) TMI 443
Exclusion of the time spent by the Appellant in the earlier litigation - invocation of Section 14 of IBC Act - HELD THAT:- Section 14(1) of the Act deals with the suit, Section 14(2) deals with the application and Section 14(3) is in respect of filing a fresh suit instituted upon permission granted by the Court. In Section 14(1)&(2) the terms which are to be noticed and highlighted are ‘prosecuting with due diligence’ and ‘prosecuting in good faith’.
It has also been held that due diligence and caution are essential prerequisites for attracting Section 14 but due diligence cannot be measured by any absolute standards rather it is measured with prudence or activity expected from and ordinarily exercised by a reasonable and prudent person under the particular circumstances and in respect of good faith it has been observed that nothing shall be deemed to be done in good faith which is not done with due care and attention. It is further held that Section 14 will not help a party who is guilty of negligence, lapse or inaction.
It cannot be said that the order passed by the Adjudicating Authority was without jurisdiction. The Adjudicating Authority had the jurisdiction to pass the order on an application filed under Section 60(5) of the Code.
In the present case, the Applicant/Respondent invoked not only Regulation 31A(6) of the Regulations but also Section 60(5) of the Code - The Tribunal has recorded the reasons while disposing of the application which cannot be said to be an order having been passed without jurisdiction and the contention of the Appellant in this regard is totally incorrect. The order of the Adjudicating Authority may be, in the opinion of the Appellant, illegal but for that matter the Appellant has to prefer an appeal and not the writ petition and then a special leave petition before the Hon’ble Supreme Court even against the order of the Hon’ble High court by which the Appellant was relegated to avail his remedy of appeal and also granted stay till the appeal is filed. If this procedure is allowed to be followed then there would be no end to the filing of the writ petitions against the order of the Adjudicating Authority of the NCLT before the Hon’ble High Courts and thereafter the orders of the Hon’ble High Courts would be challenged before the Hon’ble Supreme Court.
There are no merit in the submission of the Appellant for excluding the period under Section 14 of the Act and since the appeal has been filed after the period of 53 days from the date of passing of the impugned order - appeal dismissed.
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2023 (12) TMI 317
Maintainability of application - initiation of CIRP - default committed prior to Section 10A period and continues in the Section 10 A period - Failure to pay the interest on the unsecured loan which period was prior to the Section 10A period and the default had continued thereafter in the Section 10A period.
The principal finding of the impugned order is that the Section 7 application was not maintainable by holding the date of default to be February 2021 which was during the prohibited period under Section 10A of the IBC.
HELD THAT:- A plain reading of Section 10A signifies that no application/ proceedings under Sections 7, 9 and 10 can be initiated for any default in payment which is committed during Section 10A period. The object and purpose of Section 10A has been explained in the ordinance by which Section 10A was brought into operation. What is essentially barred is initiation of CIRP proceedings when the Corporate Debtor commits any default during the Section 10A period. However, if the default is committed prior to the Section 10A period and continues in the Section 10A period, this statutory provision does not put any bar on the initiation of CIRP proceedings - the aim and objective of Section 10A was to protect a Corporate Debtor from the filing of any insolvency application against it for any default committed during the period when Covid-19 pandemic was prevailing. It was never intended to cover any default which occurred before Section 10A period and continuing thereafter.
The present is a case where prima facie the default has been committed by the Corporate Debtor since 2018 which is prior to commencement of Section 10A period. Hence, this is a case where the default was undisputedly committed before the bar of Section 10A came into play. There being categorical default by the Respondent prior to Section 10A period, the Corporate Debtor was clearly not entitled to claim the benefit of Section 10A period. Since the liability to pay interest arose prior to Section 10A period since the default was committed prior to Section 10A period, we are of the considered opinion that the view taken by the Adjudicating Authority that the Section 7 application being premised on a letter calling for loan repayment which was dated 01.02.2021 and this date falling during the prohibited period under Section 10A renders the petition non-maintainable is misconceived and untenable in the eyes of law.
There are no hesitation in holding that the finding returned by the Adjudicating Authority that the Section 7 application was not maintainable as the alleged default occurred during the section 10A period is not tenable.
The impugned order is, therefore, set aside - appeal allowed.
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2023 (12) TMI 316
Maintainability of Section 9 application in respect of extinguished claims - Seeking initiation of Corporate Insolvency Resolution Process against Corporate Debtor - extinguishment of right of the Operational Creditor in respect of their claims - resolution plan of the Corporate Debtor already been approved - the claims of the Operational Creditor is being part of the resolution plan or not - HELD THAT:- Having come to the finding that the Appellant had not filed their claims before the Resolution Professional before approval of the resolution plan by the Adjudicating Authority and that there is no unambiguous proof that the claim of the Appellant was reflected in the records of the Corporate Debtor we now make a foray into the question whether the claims which did not constitute part of the resolution plan stood extinguished and, if so, whether the Appellant can file a Section 9 application at this stage in respect of such extinguished claims.
It is undisputed that the Corporate Debtor had started its operations with a clean slate after settlement of dues with the creditors in terms of the orders of the Adjudicating Authority dated 17.10.2017. It is also a well settled legal precept that a resolution applicant cannot be expected to make a provision in relation to any creditor who has failed to make a claim within the stipulated time-line. It logically follows therefore that there is no legitimate scope in the IBC framework for agitating or initiating any proceeding in respect of a claim which was not part of the resolution plan or was not preferred at the relevant time - in the present case, when CIRP has been terminated way back in 2017 and the Corporate Debtor is already in saddle after following the due process, allowing a Section 9 application to proceed on the basis of an extinguished claim which had not been preferred before the Resolution Professional within the stipulated time cannot be countenanced. The Operational Creditor has endeavoured to indirectly assail the approval of a resolution plan after more than 5 years by initiating a separate Section 9 proceeding which is legally not tenable.
Thus, no error has been committed by the Adjudicating Authority in rejecting the Section 9 application - appeal dismissed.
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2023 (12) TMI 315
Condonation of delay in filing the Appeal - ground taken in the Delay Condonation Application is that order passed by the Adjudicating Authority was uploaded on the NCLT, E-Portal only on 10th September, 2023 hence the period from 30th August, 2023 to 10th September, 2023 shall be excluded for the purpose of limitation.
HELD THAT:- The only explanation given by the Appellant in this Application that limitation will commence from the date when the order was uploaded does not commend in view of the settled law - Appellant’s submission that he was only informed about the operative portion of the Order shall not stop the commencement of the limitation period.
The Appeal has been admittedly filed on 19.10.2023 i.e. beyond the period of 45 days. The jurisdiction to condone the delay is limited to only 15 days. The Appeal having been filed beyond 15 days after expiry of the limitation, the delay cannot be condoned and Delay Condonation Application is dismissed.
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