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2021 (12) TMI 742 - AT - Insolvency and BankruptcySeeking initiation of Contempt proceedings against the Members of Committee of Creditor (CoC) and Resolution Professional (RP) - wilful and deliberate disobedience of the order - invocation of inherent powers under Rule 11 of NCLAT Rules, 2016 - HELD THAT - As per Regulation 31 Insolvency Resolution Process costs under Section 5(13) (e) mean defined in clause (a) to (e). for the present case, Regulation 31 (b) is relevant which provides that amounts due to a person whose rightsare prejudicially affected on account of the moratorium imposed under Section 14(1) (d). Due to moratorium period the lessor could not recover the possession of the property from the Corporate Debtor. Thus, the right of lessor to recover rent are affected on account of moratorium. Therefore, the lessor is entitled to recover the rent and which shall include in CIRP costs - there are no substance in the argument that the rent cannot be included in the CIRP costs. Whether the Respondents have wilfully disobeyed the order passed by this Appellate Tribunal on 31.01.2019? - HELD THAT - In the present case, the CIRP commenced on 25.07.2019 when the Application under Section 9 was admitted and moratorium under Section 13(1) has declared. Subsequently, the RP has filed the Application for liquidation. The Ld. Adjudicating Authority vide order dated 14.06.2019 allowed the Application and liquidation of the Corporate Debtor was initiated and the assets of the Corporate Debtor were put for liquidation. Thus, as per the order dated 31.01.2019 the CoC is required to pay rent since 01.12.2018 till 13.06.2019 i.e. just before initiation of liquidation of the Corporate Debtor - It is true that the Adjudicating Authority vide order dated 14.06.2019 allowed the Application of RP and passed an order of liquidation of Corporate Debtor as no resolution plan has been received and 270 days are over. The Liquidation order is passed on 14.06.2019 this fact is again reiterated by the Adjudicating Authority in its order dated 11.06.2021. As per the Applicant the current rate of two warehouses is ₹ 35,73,270/- including GST. As per the order of this Appellate Tribunal the Applicant is entitled rent 01.12.2018 up to moratorium period i.e. 13.06.2019 just before initiation of liquidation. It comes to ₹ 2,29,88,037 for 6 months 13 days. The Applicant has already received the amount of ₹ 3,02,11,464/- as shown in the Affidavit of the Respondent No. 2. Thus, the Applicant has already received the rent as per the order of this Appellate Tribunal. The moratorium is ceased on 13.06.2019 and the Respondents have paid the rent as per the order of this Appellate Tribunal till order of moratorium - the Contempt Application is disposed of.
Issues Involved:
1. Initiation of Contempt Proceedings 2. Payment of Rent During CIRP 3. Definition of Moratorium Period 4. Inclusion of Rent in CIRP Costs 5. Jurisdiction and Application of Rule 11 of NCLAT Rules, 2016 Issue-wise Detailed Analysis: 1. Initiation of Contempt Proceedings: The Applicant sought initiation of contempt proceedings against the Committee of Creditors (CoC) and the Resolution Professional (RP) for willful and deliberate disobedience of the order dated 31.01.2019, which directed the CoC to pay the rent for the leased premises from 01.12.2018 onwards. Despite these directions, as of the application date, a significant portion of the rent remained unpaid, compelling the Applicant to file for contempt. 2. Payment of Rent During CIRP: The Corporate Insolvency Resolution Process (CIRP) was initiated on 25.07.2018 against the Corporate Debtor. The Adjudicating Authority directed the CoC to pay the rent from 01.12.2018 onwards. The CoC's appeal against this order was dismissed by the Appellate Tribunal on 31.01.2019, which upheld the payment directive. The Applicant argued that the Respondents continued to utilize the leased premises without paying the rent, leading to significant financial distress for the Applicant. 3. Definition of Moratorium Period: The core dispute revolved around the definition of the moratorium period. The Applicant argued that the moratorium continued until the completion of liquidation, while the Respondents contended that it ended with the liquidation order on 14.06.2019. The Tribunal clarified that the moratorium ceased upon the initiation of liquidation, as per Section 14(4) of the Insolvency and Bankruptcy Code (IBC). 4. Inclusion of Rent in CIRP Costs: The Tribunal examined whether rent could be included in CIRP costs. It referred to Section 5(13) of the IBC and Regulation 31 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, which include amounts due to a person whose rights are prejudicially affected by the moratorium. The Tribunal concluded that the lessor's right to recover rent was affected by the moratorium, thus qualifying it as CIRP costs. 5. Jurisdiction and Application of Rule 11 of NCLAT Rules, 2016: The Respondents raised a preliminary objection regarding the jurisdiction, arguing that the application should have been filed under Section 425 of the Companies Act, 2013, rather than Rule 11 of NCLAT Rules, 2016. The Tribunal dismissed this objection, stating that the mere mention of a wrong provision does not affect the merits of the case. Conclusion: The Tribunal found that the CoC had paid the rent for the period from 01.12.2018 to 13.06.2019, amounting to ?3,02,11,464/-. The Applicant had received the rent as per the Tribunal's order. Therefore, no case was made out to punish the Respondents for contempt. The contempt application was disposed of without any order as to costs.
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