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TMI Blog2022 (6) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... s no crystallization of a debt through a decree on that date, the Code does not direct the Liquidator to wait for the same - As regards the admission of the claims, on going through the voluminous evidence including correspondences etc. produced in the course of proceedings and also the grounds on which the claims have been admitted in the cases of Respondent Nos.2 to 5 by the Liquidator with reference to. Prima facie, the Liquidator has verified the claims on the basis of Form-D submitted by the Financial Creditors along with documents, records and financial statements filed with the same. It is also noted that the Liquidator has accepted only partial amounts of the total claims made by the financial creditors and have sought legal opinion upon some of the issues before reaching a conclusion. No particular procedural mistake on the part of the Liquidator has been pointed out by the applicant during the current proceedings. It may be noted that word adjudication has been used by the Liquidator in more than one place while verifying the claim of the respondents but it seems to be a typographical or mistake through inadvertence, and the same is ignored. The allegation of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and Principal Officer (Respondent No.5) are the respondents. 2. In the present application, the applicant prays to quash the acceptance of the claim of Respondent Nos.2 to 5 by the Respondent No.1; and direct Respondent No.1 to await the final adjudication of the claims pending before the Hon'ble Debt Recovery Tribunal or the Hon'ble Punjab and Haryana High Court, or any other authority/Court/Tribunal as the case may be, before any claim for payment of financial dues on behalf of Respondent Nos.2 to 5 can be accepted and monies accordingly disbursed; direct the Respondent No.1, to effectively contest the claims made by the corporate debtor before various Courts/Tribunals, in order to discharge his legal obligations under the IB Code, 2016; pending consideration of the reliefs as aforesaid, restrain the Respondent No.1 from disbursing any funds to Respondent Nos.2 to 5; and direct the Respondent No.1, to effectively contest the claims made by the Corporate Debtor before various Hon'ble Courts/Tribunals, in order to discharge his legal obligations under the IB Code 2016. 3. The brief facts as outlined in the application are as under: 3.1 The Respondent No.1-Liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by Diary No.00019/5 dated 02.11.2020 has stated that he has collated the claims of the financial creditors based on the records. Two meetings of the Stakeholders Consultation Committee (SCC) have been held by the Respondent No.1-Liquidator on 05.02.2020 and 23.06.2020 and the Respondent No.1-Liquidator has published a sale notice on 13.07.2020 at the suggestions of the SCC inviting interested bidders to participate in the e-auction on 14.08.2020. However, Respondent No.1-Liquidator has been restrained by this Adjudicating Authority s order dated 09.09.2020 from distribution of the funds so realised among financial creditors. In its reply, Respondent No.1-Liquidator has set out a brief history of the transactions between the corporate debtor and the respondents-financial creditors. 4.1 As regard Respondent No.2-State Bank of India, the Liquidator has stated that the SBI vide sanction letter dated 01.10.2007 accepted the OTS proposal of the corporate debtor for an amount of Rs.11.46 Crores and subsequently, on 16.11.2007, an assignment agreement was executed between the State Bank of India (SBI) and Kotak Mahindra Bank Limited wherein debt of Rs.13.36 Crores (which includes 60% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 revoked the OTS and demanded repayment of the entire outstanding amount from the Corporate Debtor. It is further stated that as per the Claim Form-D submitted by IFCI to the Liquidator, total claim of IFCI is Rs.93.03 Crores as on 13.12.2019. Thus, the Liquidator has admitted the claim of IFCI to the extent of Rs.75.67 Crores as against its initial claim of Rs. 93.03 Crores. The amount admitted by the Liquidator excludes the amounts claimed by IFCI towards cost of litigation, cost of investment in equity, liquidated damages and interest on liquidated damages. 4.3 As regards Respondent No.4-Kotak Mahindra Bank Limited, Respondent No.1-Liquidator states that in 2007, one-time settlement (OTS) and restructuring was undertaken by the Corporate Debtor under which 60% of the Debt outstanding was to be paid as cash to the aforesaid banks by the Corporate Debtor. Subsequently, a revised Letter of Acceptance dated 30.09.2009 (Revised LOA') was duly executed between Kotak Bank and the Corporate Debtor and thereafter, on 10.10.2011, a Sanction Letter was issued by Kotak Bank wherein Kotak Bank sanctioned a fresh credit facility i.e. EPC (Export Packaging Credit') of Rs.2.50 Crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that proceedings before the Hon'ble High Court and DRT have no bearing on the performance of functions by Liquidator as per the provisions of IBC. It is further asserted that the Applicant has made absolutely bogus and baseless allegations against the legitimate actions of the Liquidator. 5. The Respondent No.2-State Bank of India by its reply filed by Diary No.00019/12 dated 22.02.2021 justified the claims that are lodged by it before the respondent No.1-Liquidator and also states that the proceedings before the learned DRT have no bearing on the decision of the claims by the IRP or Liquidator and the petitioner is intentionally ignoring Section 14 of the Code which operates moratorium on all the other proceedings on the commencement of CIRP. 6. On the same lines of Respondent No.4-Kotak Mahindra Bank Limited filed its reply by Diary No.00794/2 dated 09.11.2020 has justified its claim lodged with the respondent No.1-Liquidator and has asserted that it has submitted the statement of account in the pending proceedings before the learned DRT-III, Chandigarh and that the applicant is misrepresenting the facts before this Authority. It is further stated that the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has filed written submission by Diary No.00794/12 dated 18.04.2022, reiterating that instead of contesting the claims on behalf of the company, so as to maximise the value for all stakeholders, the Liquidator has decided to arbitrarily side with the banks with the result that the amounts which would otherwise become available to the remaining stakeholders would either get severely diminished or be reduced to zero. It is also stated that this Adjudicating Authority cannot, in effect, exercise the powers already bestowed on other Courts of law/Tribunals as they are already exercising jurisdiction on related issues before them. It is further stated that the scope of Section 238 of the IBC, 2016 which provides for a overriding effect of the IBC, will not be attracted in the present case as there is no conflict, and the Liquidator has to honour the decision of the various Courts of law/Tribunal as the case may be before disbursing funds from the Liquidation account, or in a situation where the funds have already been disbursed, for the Liquidator to take actions in accordance with law, and specifically, Regulation 43 of the Insolvency and Bankruptcy Board of India (Liquidation Process) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, 2016- Verification of Claims. i) Regulation 31 of IBBI (Liquidation Process) Regulations, 2016- List of Stakeholders i) Regulation 44 of the IBBI (Liquidation Process) Regulations, 2016- Completion of liquidation k) Regulation 47 of IBBI (Liquidation Process) Regulations 2016- Model Time-line for liquidation process. 11.1 It is also stated that the claims and counter claims filed before the various Courts including DRT are not crystallized as on the date of the liquidation commencement date. Therefore the liquidator has correctly verified the claims under Regulation 16(2) of the IBBI (Liquidation Process) Regulations, 2016 which states that A person shall prove its claim for debt or dues to him, including interest, if any, as on the liquidation commencement date . It is also emphasized that the liquidation process is a strictly time bound process and the liquidation is bound by the Regulation 44 and 47 of the IBBI (Liquidation Process) Regulations, 2016 which is to the following effect:- Regulation 44 Completion of liquidation :- The liquidator shall liquidate corporate debtor within a period of one year from the liquidation commencement date.. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has already filed application u/s 19(2) for the non co-cooperation of the promoter director including applicant of 368/2020 for not providing the books and documents with an ulterior motive to conceal the factual position in the accounts Application is still pending CA 143/2019. 11.3 After submitting the detailed reasons for admitting the claims with reference to documents and correspondences before him, the respondent No.1-Liquidator has also clarified that the Liquidator in no way adjudicated the claims of any stakeholder. Claims have been admitted after the verification in terms of the Section 38 and 39 of the Code, 2016 and Regulations 16, 18, 30 31 of IBBI (Liquidation Process) Regulations, 2016. The Liquidator, in accordance to the aforementioned regulations, has simply verified the claims of the stakeholders based on the information provided by the claimants along-with affidavit and as per the record available, and subsequently filed the List of Stakeholders' before this Adjudicating Authority. Hence, there is no Adjudication of Claims by the Liquidator. It is also stated that the Liquidator has only verified the claim amount that is currently on record of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spinning Weaving Mills Ltd vs. Reserve Bank of India and others'' has rejected the contention of the Applicant that mere payment of the amount due under EPC account, the Applicant account would no longer be NPA and thus liable to be classified as standard account. 13.1 Further the factum of debt due can also be corroborated from the order dated 23.04.2021 passed in CWP #18174 of 2017 Kotak Mahindra Bank Ltd. vs. The District Magistrate, Ludhiana and Another dated 23.04.2021, wherein para #15 @Pg #16 of the said order it has been recorded that the account of CD is declared as NPA, notices under Section 13(2) of the SARFAESI Act have been issued, the objections filed by the CD having been rejected - is an admitted fact. 13.2 It is submitted that the prayer that the Liquidator be directed to await the final adjudication of claims/counterclaim cannot be accepted in view of the provisions of Section 238 of l B Code, 2016, which provides that provisions of l B Code will have an overriding effect over the other laws. It is also stated that in the case of respondent out of a total claim of Rs.410.54 Crores, the Liquidator has only accepted its claim of Rs.73.05 Crores aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to the case in hand. On an appeal filed by Kotak Mahindra Bank Limited-Respondent No.4 in the present case, the Hon ble Supreme Court noticing the proceedings taken on IA No.368/2020 (present application) and IA No.555/2020 and the orders of the Hon ble NCLAT passed on 19.01.2021 and 10.08.2021, by order dated 26.11.2021 disposed of the appeal and made interalia the following observations:- 16. the submissions before us on behalf of the respondent No.1(applicant) are to the effect that there ought not to be tearing hurry in deciding those applications. Such a proposition on the part of the applicant cannot be countenanced, particularly looking to the previous orders passed in the matter, as noticed hereinabove. . 15.1 Subsequently, the Hon ble NCLAT in its order dated 04.04.2022 in Company Appeal (AT) (Insolvency) No.575 of 2021 in Kotak Mahindra Bank Limited vs. Ashok Oswal Ors. has allowed the application IA No.555/2020 by modifying the order dated 09.09.2020 and deleting the following part of the order dated 09.09.2020: In the meantime, the respondent No.1-Liquidator shall maintain status quo with regard to the distribution of funds to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to produce any other document or evidence which he thinks necessary for the purpose of verifying the whole or any part of the claim. 16. Submission of claim. (1) A person, who claims to be a stakeholder, shall submit its claim, or update its claim submitted during the corporate insolvency resolution process, including interest, if any, on or before the last date mentioned in the public announcement. (2) A person shall prove its claim for debt or dues to him, including interest, if any, as on the liquidation commencement date. 18. Claims by Financial Creditors. (1) A person claiming to be a financial creditor of the corporate debtor shall submit proof of claim to the liquidator in electronic means in Form D of Schedule II. (2) The existence of debt due to the financial creditor may be proved on the basis of- (a) the records available in an information utility, if any; or (b) other relevant documents which adequately establish the debt, including any or all of the following- (i) a financial contract supported by financial statements as evidence of the debt; (ii) a record evidencing that the amounts committed by the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference to the date of liquidation and if there is no crystallization of a debt through a decree on that date, the Code does not direct the Liquidator to wait for the same. As regards the admission of the claims, we have carefully gone through the voluminous evidence including correspondences etc. produced in the course of proceedings and also the grounds on which the claims have been admitted in the cases of Respondent Nos.2 to 5 by the Liquidator with reference to. Prima facie, the Liquidator has verified the claims on the basis of Form-D submitted by the Financial Creditors along with documents, records and financial statements filed with the same. It is also noted that the Liquidator has accepted only partial amounts of the total claims made by the financial creditors and have sought legal opinion upon some of the issues before reaching a conclusion. The issues have also been discussed in the meetings of the Stakeholders Consultation Committee (SCC). The records show that he has simply verified the claims of the stakeholders based on the information provided by the claimants along with the affidavit and by considering all the evidence before him and has filed a List of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Recovery of Debts Due to Banks Financial Institutions Act, 1993, much prior to the I B Code, 2016. In view of Section 238 of the I B Code, 2016 steps taken under the Code by the authority would have precedence over other authorities in parallel proceedings. Thus, the provisions of I B Code, 2016 should prevail in case of any conflict. Furthermore, this contention of the Applicant does not hold much water in view of the a catena of judgements of the Hon ble NCLAT in the following matter of Bimal Kumar Manubhai Savalia vs. Bank of India and Ors. Company Appeal (AT) (Insolvency) No. 1166 of 2019 wherein it has been inter-alia held as follows: (Para No. 9; page 07): We are of the view that the SARFAESI and DRT proceedings are independent and as per Section 238 of IBC, the Insolvency and Bankruptcy Code is a complete code and will have an overriding effect on other laws. Therefore, the proceedings imitated (initiated) or pending in DRT, either initiated under SARFAESI or under Debts due to the Banks and Financial Institutions cannot be taken into account for the purpose of limitation. (emphasis supplied) 19.1 The Hon'ble NCLAT in the case of Rakesh Kumar Gupta V. Mahe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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