9911796707
TMI Blog2021 (11) TMI 848X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate persons, firms and individuals in a time bound manner and in the interests of all stake holders. The RP is appointed to guide the process of CIRP under Section 20 of the Code and is expected to manage the operations of the corporate debtor as a going concern. As a part of such management, he is to make every endeavour to protect and preserve the value of the property of the corporate debtor - In the present case, the RP endeavours to auction the asset and secure the proceeds of such sale to the credit of the debtor and the benefit of the insolvency proceedings. In order to preserve the property either by way of auction or otherwise, the pre-condition under Section 20 is that what is stated to be preserved would be the property of the corporate debtor . This is on the one side. It is thus clear that the intention of the Code is never to address those assets over which a debtor has no title. Such assets, infact, stand specifically excluded from the liquidation process, being assets where the debtor might hold some right, but is not the owner to title of the asset. A pre-condition set out is the inclusion of the asset in question in the inventory of the debtor - The facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner's agent under the CMA, Mr.Amin (in short 'agent') is said to be supervising the safety of the asset. 5. According to both the petitioner and R5, the latter had applied for and obtained an approval under the Advance Authorisation Scheme (in short 'AA Scheme') issued by R2, i.e., Additional Director General of Foreign Trade (ADGFT) and implemented by R3 and R4, i.e., Commissioner of Customs, Tiruchirappalli/R3 Commissioner of Customs, Chennai II/R4, thus entitling the import of the sugar without the payment of customs duty. 6. The eligibility of the consignment to the AA Scheme is not the concern of this Court and the Court is only concerned with the adjudication of the plea put forth on behalf of the petitioner that, the petitioner being the owner of the asset holding full title to it, should be permitted to take custody of the asset from the bonded warehouse, where it presently lies, and re-export the same. 7. The reason for the request for re-export is that R5 is presently before the National Company Law Tribunal (NCLT) where an Insolvency Petition has been filed by the Punjab National Bank, as Financial Creditor in terms of the Insolvency and Bankruptcy Code, 2016 (in sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw my attention to contract dated 20.10.2016, wherein the first sentence states as follows: We write to confirm the terms of a contract concluded between you and Czanrnikow Group Limited on 25th October 2016 under in terms set out below. 12. Though the date of contract is 20.10.2016, the parties state in the sentence extracted aforesaid that the contract is dated 25.10.2016. This, according to him, is the first serious discrepancy. The second discrepancy pointed out is that the contract at internal page 4 is not signed by the buyer, R5. The third discrepancy pointed out is that addendum No.9 attached to the contract states that 'payment has not been made by SAS for an outstanding balance of 16847.50 MT ' whereas the petitioner, in its pleadings, at paragraph 8, page 4 of the affidavit filed in support of the Writ Petition, would state that the balance of the sugar in custody is quantified at 19537.60 MT. 13. In response, Mr.Sivanandaraj, learned counsel appearing for Mr.Adeesh Anto, learned counsel on record for the petitioner explains away the first discrepancy as a mere typographical error pointing out that there was nothing in the voluminous pleadings to establish any discr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the remittances from R5 as evidenced by bank statements supplied by R5. 18. In my view, there is no dispute on facts and the question of i) error in the contract heading, ii) inadvertent absence of the signature of R5 in the copy of the contract placed in the typed set, iii) quantification of the asset supplied and paid for being 9899 MT and the remaining being 19537.50 MT stand categorically explained. Thus, the so-called factual discrepancies will not frustrate the maintainability of this writ petition. 19. Mr.Jain then draws attention to the provisions of Section 5(20) and 5(21) of the Code defining 'operational creditor' and 'operational debt' stating that the petitioner is, at best, an operational creditor and the debt owed to it, if at all, would constitute an operational debt. The said provisions read as follows: 5. In this Part, unless the context otherwise requires,- (20) "operational creditor" means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred; (21) "operational debt" means a claim in respect of the provision of goods or services including employment or a debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Czarnikow Group Ltd. V. The Additional Director General of Foreign Trade and Ors in W.P. No.11441 of 2020 12. Leo Edibles & Fats Limited v. The Tax Recovery Officer, W.P. No.8560 of 2018, Division Bench of Hon'ble High Court of Telangana and Andhra Pradesh 13. Pr. Director General of Income Tax (Admin & TPS) Vs. Synergies DoorayAutomative Ltd. Company Appeal (AT) (Insolvency) 205 of 2017, National Company Law Appellate Tribunal Respondent No.5: 1. The State of Orissa v. Mdan Gopal Rungta (AIR 1952 SC12) 2. Mahima Savin Bansal v. savinbansal and Ors. (2015) 16 SCC 228 3. The Collector of Customs v. Madras Electric Castings P. Ltd. (1994) 1 MLJ 664 4. The Delhi Golf Club employees Union v. Union of India and Ors. WP (C) 3403/2020 (Delhi High Court) 23. In the case of Embassy Property Developments Pvt. Ltd. V. State of Karnataka and others (2019 SCC Online SC 1542) two seminal questions of importance have been identified for resolution by the Hon'ble Supreme Court as follows: i) Whether the High Court ought to interfere, under Article 226/227 of the Constitution, with an Order passed by the National Company Law Tribunal in a proceeding under the Insolvency and Bankrupt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is vested with the power of judicial review over administrative action. The NCLT, being a creature of a special statute to discharge certain specific functions, cannot be elevated to the status of a superior court having the power of judicial review over administrative action. Judicial review, as observed by this court in Sub-Committee on Judicial Accountability vs. Union of India,24 flows from the concept of a higher law, namely the Constitution. Paragraph 61 of the said decision captures this position as follows: "But where, as in this country and unlike in England, there is a written Constitution which constitutes the fundamental and in that sense a "higher law" and acts as a limitation upon the legislature and other organs of the State as grantees under the Constitution, the usual incidents of parliamentary sovereignty do not obtain and the concept is one of 'limited government'. Judicial review is, indeed, an incident of and flows from this concept of the fundamental and the higher law being the touchstone of the limits of the powers of the various organs of the State which derive power and authority under the Constitution and that the judicial wing is the interpreter of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments advanced was that an RP was duty bound under Section 20(1) to preserve the value of the property of the Corporate Debtor and that the word "property", as interpreted in Section 3(27) excluded even actionable claims and interest of every description, be it present, future, vested or contingent interest arising out of, or incidental to property and that the RP was thus entitled to move the NCLT for appropriate orders for protection of the asset. 29. This argument was rejected, the Hon'ble Bench reading the provisions of Section 20(1) in conjunction with Section 18(f)(vi) of the Code with the Explanation thereunder. The decision is at paragraphs 39 to 41, extracted below: 39. But the said argument cannot be sustained for the simple reason that the duties of a resolution professional are entirely different from the jurisdiction and powers of NCLT. In fact Section 20(1) cannot be read in isolation, but has to be read in conjunction with Section 18(f)(vi) of the IBC, 2016 together with the Explanation thereunder. Section 18 (f) (vi) reads as follows: "18. Duties of interim resolution professional. The interim resolution professional shall perform the following duties, nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution professional - (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of subsection (1), the resolution professional shall undertake the following actions: (a)…………. (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi judicial and arbitration proceedings." 41. This shows that wherever the corporate debtor has to exercise rights in judicial, quasijudicial proceedings, the resolution professional cannot shortcircuit the same and bring a claim before NCLT taking advantage of Section 60(5). 30. The aforesaid three paragraphs have been relied upon by the petitioner to bring home the fact that it is only those assets in respect of which ownership has been established to be that of the corporate debtor that could constitute the subject matter of adjudication/consideration by the RP or the NCLT and not such assets that do not vest in the corporate debtor. 31. The issue to be decided in the present m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Clauses (b) to (e) are irrelevant to the facts of this case and what might be relevant is clause (a), being raw materials. 37. The assets comprising 'sugar' would constitute raw materials in the business of R5 and as such it become relevant to determine whether the schedules to the entries in the balance sheet reveal the appropriate quantum of sugar as imported by the petitioner. For the purposes of quantification of the raw materials, one need look no further than the application filed by the RP before the NCLT in terms of Section 60(5) of the Code read with Rule 11 of the National Company Law Tribunal Rules, 2016 seeking permission to auction the asset amounting to 19537.50 MT. 38. The application is accompanied by a statement of stock-in-trade as on 31.03.2018 that reveals raw sugar of 'nil' quantity as on 31.03.2018 in the inventories of R5 at all its locations. Since the asset imported comprises raw sugar, it appears clear to me that the inventory of R5 as on 31.03.2018 does not comprise of raw sugar and the stand of R5 thus supports that of the petitioner to the effect that it does not lay claim raw sugar as being part of its inventory. 39. The balance sheets filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion' reads as follows: "5.5.5 Establishing assets in Liquidation The Committee debated what assets of the entity must be available for realisation in liquidation. Not all assets that are present within the entity, from the start of the IRP, can be considered for Liquidation. The Committee agrees that the following sets of assets must be kept out of the liquidation process: a. Assetsheldbytheentityintrust(suchasemployeepensions). b. Assets held as collateral to certain financial market institutions (such as clearing corporations or similar financial transactions to either creditors or non- creditors). In other jurisdictions, these may be referred to as "assets subject to netting and set-off in multi-lateral trading or clearing transactions". In defining these assets, the Code will take cognisance of the assets that are used as collateral to ensure counterparty guarantees in financial transactions where clear legal documentation is available as proof of transaction (Reference to IFC). These funds and assets cannot be used for recovery in Liquidation. c. Assets held as part of operational transactions where the entity has rights over the asset but is not the owner of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
