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TMI Blog2022 (9) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... ringing this Ordinance. How the hybrid method should work? - HELD THAT:- While bringing the amendment into force the Parliament in its wisdom perceived a situation where the Adjudicating Authority will be faced with the dilemma as to how the matter should be resolved if there are applications are filed or pending under IBC Chapter IIIA as the case may be. It is a situation of FC in control versus the CD in control - In order to ensure that the Adjudicating Authority does not face a logjam and to resolve the overlap, Section 11A was brought into force laying down the parameters as to how the Adjudicating Authority will deal with the cases of this nature. The pre-package application under Chapter III-A which has been filed on 12.07.2022, cannot take precedence over the Section 7 of IBC application which was filed on 21.10.2020, and remained pending though heard and reserved and re-heard on a number of occasions. The Section 7 IBC application filed and pending in the case will have to be given precedence over the pre-package application - Merely because there was a delay in the admission of CIRP proceedings in the Section 7 IBC application, this Tribunal finds no justificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anand, Karan Kohli and Sahil Bhatia, Advs. ORDER R. Sudhakar, J. (President) 1. C.P. No. (IBPP)-02(PB)/2022 is a petition filed under Section 54C of IBC (Pre-Packaged). Pursuant to IBC (Amendment) Ordinance dated 04.04.2021, a new procedure for resolving cases of Micro, Small and Medium Enterprises (MSME) under IBC has been introduced by way of Chapter III-A. It goes by the nomenclature Pre-Packaged Insolvency Resolution Process (PPIRP) in short. 2. Section 54A provides as to when a corporate debtor of the above kind becomes eligible for PPIRP. Section 54B provides for duties of Resolution Professional before initiating PPIRP. Section 54C, provides the manner by which an application to initiate PPIRP is to be made. Section 54D, provides a time limit for completion of PPIRP. Section 54E deals with Moratorium and public announcement. The duties and powers of the Resolution Professional during PPIRP is provided under 54F. 3. In so far as the present case is concerned Section 54-G, H, I J may not be that relevant. However, under Section 54K, the manner of consideration and approval of resolution plan is provided. The termination of the PPIRP, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he IBC should be considered by this Adjudicating Authority, we have heard Ld. Counsel Mr. Sumant Batra, at length on various dates. He has submitted certain reports, documents etc., supporting his arguments. We have also heard Mr. Piyush Singh, Ld. Counsel for the petitioner in (IB)-1081(PB)/2020. The preliminary issue that arises for consideration is whether a pre-packaged application can be entertained, when a petition under Section 7 of IBC is pending before this Tribunal long before the coming into force of Pre-Packaged Ordinance dated 04.04.2021. In this regard, we are inclined to issue notice to the limited extent for examining the issue on the admissibility of the pre-packaged application in the light of Section 11A of IBC. We issue notice to the Parties in C.P. No. (IB)-1081 (PBJ/2020 and in C.P. No. (IB)-556(PB)/2022. We also allow other home buyers related to this Corporate Debtor i.e. M/s. CHD Developers Limited, who would like to present their point of view on this preliminary issue alone. The Present matter to be listed for next date of hearing on 30.08.2022, at the top of the cause-list. 6. In continuation to the earlier submissions, we heard all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2020 w.e.f. 28.12.2019. After the amendment, it is stated that other real estate allottees joined hands with him so as to comply with the threshold limit as required by the Amendment, subject to verification of various orders on admission of additional real estate allottees. 10. Sh. B.S.V. Prakash Kumar, Actg. President on the eve of completing his tenure, by order dated 31.05.2021 re-opened the case for hearing on 07.06.2021. On 07.06.2021, the new incumbent Sh. R. Vardharajan, Hon'ble Actg. President and Sh. Hemant Kumar Sarangi, Hon'ble Member (Technical), hearing the matter afresh passed the detailed order in C.P. No. (IB)-1775(PB)/2018 in the case of Mr. Shailendra Kumar Agarwal v. CHD Developers Ltd. which reads as under:- In relation to all these matters Mr. Sumant Batra, Advocate is present for the Corporate Debtor through Video Conferencing Mode. In relation to Item No. 1 being a Petition filed by the Homebuyers, the Petitioners are being represented by Mr. Gaurav Mitra, Senior Advocate. In relation to Item No. 3 which has also been filed by the Homebuyers is being represented by Mr. Piyuesh Singh, Advocate. In relation to Item Nos. 2, 4 , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection in CIRP being initiated against the Corporate Debtor. Since all the Petitions namely Item Nos. 1 to 5 are in respect of initiation of CIRP, in view of the statement made by the Ld. Advocate for the Corporate Debtor, we direct the Corporate Debtor to file a suitable Board Resolution to this effect as well as an Affidavit supporting the same before this Tribunal on or before the next date of hearing. In relation to Item Nos. 1 and 3, Mr. Sandeep Buharia, Advocate brings to the notice of this Tribunal that intervening Application has been filed in these Petitions filed by the Homebuyers in IA-4716/2020 in Item No. 1 and IA-569/2020 in Item No. 3. In the circumstances, let these Applications be also posted along with the concerned main Petitions on the date of hearing. Post these matters on 16.07.2021. 11. It is to be noticed that Mr. Sumant Batra, Ld. Counsel for the CD has clearly stated that CD does not have objection if the CIRP is initiated against CD in view of debt and default, though at that moment it was partly in respect of operational creditors and the issue of home buyers was unclear on numbers. However, for reasons recorded, the Bench adjourned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of their businesses and which preserves jobs; AND WHEREAS in order to achieve these objectives, it is considered expedient to introduce a pre-packaged insolvency resolution process for corporate persons classified as micro, small and medium enterprises; 13. Mr. Sumant Batra, Ld. Counsel has relied on the Report of the Insolvency Law Committee on PPIRP of July, 2021. It is little surprising to note that the report of the Insolvency Law Committee (ILC) on PPIRP is dated July, 2021 whereas Ordinance was already issued on 04.04.2021. Perhaps there were some preliminary reports which guided the competent authority to issue the PPIRP Ordinance. Be that as it may, he refers to Chapter III on eligibility (para 3.2, 3.3, 3.4) which reads as under: 3.2 As discussed above, the Committee decided that the pre-pack process should, be available only to corporate debtors that are MSMEs as an alternative to the CIRP under the Code (see para 2.4.). In this regard, the Committee noted that the Code should provide that the pre-pack process is available for corporate debtors classified as 'MSMEs' as per Section 7(1) of the MSME Development Act, 2006. This reference to the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that the pre-pack process is an alternative to the CIRP, and therefore, the corporate debtor may choose to go for either process at a given point of time. Thus, the Committee agreed that the Code should provide that a corporate debtor in respect of whom a CIRP has been admitted, would not be eligible to apply for the pre-pack process. 3.14. Further, there may be scenarios where an application for CIRP and pre-pack are pending together. The Committee deliberated on whether the Code should lay down the order in which the Adjudicating Authority may consider such applications. It noted that ordinarily, the Adjudicating Authority would dispose of the application that has been filed first. However, since the corporate debtor will need to make preparations before being able to file an application to initiate the pre-pack process, CIRP applications may often be filed, (and remain pending) before a pre-pack application is filed. If the Adjudicating Authority then considers the CIRP application first, it would lead to very few instances of a corporate debtor being able to avail the pre-pack process. 3.15. Moreover, although the Code envisages that a CIRP application should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packs limited, hindering quicker and cost-effective resolution of the stress faced by MSME corporate debtors. Therefore, the Committee thought that it would be suitable to allow corporate debtors a small window, after the filing of a CIRP application, to file a pre-pack application that would be considered first. In practice, this will only help debtors that are at an advanced stage of preparation for filing the pre-pack application. c. Where an application for initiating CIRP is filed and subsequently a pre-pack application is filed after 14 days of former, the Adjudicating Authority should first dispose of the application for initiating CIRP. As with (a), this approach provides an objective manner of dealing with simultaneous applications as it considers the application that has been filed first before any subsequent applications. d. In order for this mechanism outlined in paragraph b and c. to work as intended, the Committee noted that it was critical that the 14-day time- limit be strictly adhered to (see para 4.9.). The filing systems of the NCLTs will need to monitor this closely to prevent abuse of the process. 16. Annexure-II of the report is the Summary of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation admit the application if it is complete or reject the application if it is incomplete. In the proviso to Section 54C(4) it is laid down that the Adjudicating Authority shall before rejecting an application, give notice to the applicant to rectify the defect in the application within seven days from the receipt of such notice from the Adjudicating Authority. Section 54C(5) indicates the date of commencement of the PPIRP. In the light of the above provisions another section becomes relevant in the present case, namely Section 11A and it reads as follows:- 11A. (1) Where an application filed under section 54C is pending, the Adjudicating Authority shall pass an order to admit or reject such application, before considering any application filed under section 7 or section 9 or section 10 during the pendency of such application under section 54C, in respect of the same corporate debtor. (2) Where an application under section 54C is filed within fourteen days of filing of any application under section 7 or section 9 or section 10, which is pending, in respect of the same corporate debtor, then, notwithstanding anything contained in sections 7, 9 and 10, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitions of different kinds of CIRP PPIRP. That pending applications refer to Section 11A(1), (2) (3) should be dealt with only on those terms and any application which do not form part of Section 11A(1), (2) (3) and which are pending as on the date of commencement of the Amendment dated 04.04.2021 has no relevance in relation to PPIRP application and dealt with as priority. 21. On the contrary, Mr. Piyush Singh, Ld. Counsel for the petitioner who has filed one Section 7 petition on 21.10.2020 long before the 04.04.2021 Ordinance and which is pending consideration on the various dates of hearing, which we have already recorded earlier in para 5, submits that the Clause (4) of Section 11A guides the Adjudicating Authority in the following manner:- In Section 11A(1), (2) (3) reference is made to Section 54C of Chapter III-A in relation to Section 7, 9 10 of IBC whereas Section 11A(4) does not speak about Section 54C at all. Therefore, the same should be read to mean that any petition filed under Section 7, 9 10 prior to coming into force of Ordinance dated 04.04.2021 should be dealt with independently. Chapter III-A will have no bearing on the earlier Section 7 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed, nor open to attack under powers of avoidance is subsequently conferred. They are also not rendered valid by subsequent relaxations of the law, whether relating to form or to substance. Similarly, provisions in which a contrary intention does not appear neither impose new liabilities in respect of events taking place before their commencement, nor relieve persons from liabilities then existing, and the view that existing obligations were not intended to be affected has been taken in varying degrees even of provisions expressly prohibiting proceedings. (See Halsbury's Laws of England, 4th Edn., Vol. 44, paras 921, 922, 925 and 926.) 65. These principles are equally applicable to amendatory statutes. According to Crawford: Amendatory statutes are subject to the general principles... relative to retroactive operation. Like original statutes, they will not be given retroactive construction, unless the language clearly makes such construction necessary. In other words, the amendment will usually take effect only from the date of its enactment and will have no application to prior transactions, in the absence of an expressed intent or an intent clearly implied to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of suo moto order passed by Hon'ble Supreme Court, if excluded, then prepackage application will fall short by period of one month only from the date of Ordinance dated 04.04.2021 and he pleaded that Section 238A be invoked to his benefit. 25. Mr. Gaurav Mitra, Ld. Counsel for one of the Home Buyers who first initiated the proceedings against CHD Developers Ltd. ((IB)-1775(PB)/2018) submitted that:- (i) The special provision of Chapter III-A will override the general provision of Section 7 of IBC because it is in keeping with the ultimate purpose of rehabilitation of the company. (ii) In view of the timeline of 120 days provided in the PPIRP, one can safely go back to CIRP proceedings, if the PPIRP does not work. Therefore, no prejudice will be caused to the CIRP proceedings already initiated by way of Section 7 9 of IBC. (iii) Since the PPIRP is based on the approval of home buyers or the real estate allottees, it is in the best interest of the real estate allottees that pre-packaged be allowed to continue as it will enure to their benefit. 26. We have considered the rival submission and the legal pleas as above. At the outset, we are very clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nario is Section 11A(3) If 54C application of PPIRP is filed 14 days after application under Section 7, 9 or 10 of IBC is filed against the same CD, the Adjudicating Authority has been mandated to dispose off the application under Section 7, 9 or 10 of IBC at the first instance, making it clear that Section 7, 9 or 10 will take precedence over Section 54C. 32. A combined reading of Section 11A(1), (2) (3) makes it clear that this time line for taking up petitions as mentioned therein comes into effect only from 04.04.2021 (i.e.) the date of Ordinance. It is because Section 54C can be filed only on after 04.04.2021. Now, in a given case if an application under Section 7 IBC is pending prior to Amendment dated 04.04.2021 what will be the method adopted by the Adjudicating Authority, is provided under Section 11 (A) (4). Though the language of Section 11A(4) is clear and unambiguous there are two arguments on this proposition, one by Mr. Sumant Batra, Ld. Counsel and Mr. Abhishek Anand, Ld. Counsel stating that Clause (4) of Section 11A makes it clear that an application filed under Section 7, 9 or 10 has no priority from the commencement of the Amendment Ordinance dated 04.04. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always presume that the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect. A construction which attributes redundancy to the legislature will not be accepted except for compelling reasons such as obvious drafting errors. 15. It is well settled that literal interpretation should be given to a statute if the same does not lead to an absurdity ii. In Nairin v. University of St. Andrews reported in 1909 AC 147, the Apex Court held that, Unless there is any ambiguity it would not be open to the Court to depart from the normal rule of construction which is that the intention of the Legislature should be primarily gathered from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and construed in the light of surrounding circumstances and constitutional principle and practice. iii. In Ram Rattan v. Parma Nand reported in AIR 1946 PC 51, it was held as follows: The cardinal rule of construction of statutes is to read the statutes literally, that is, by giving to the words their ordinary, natural and grammatical meaning. If, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature. Where the language is plain and admits of but one meaning, the task of interpretation can hardly be said to arise. The decision in a case calls for a full and fair application of particular statutory language to particular facts as found. It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the Legislature intended something which it omitted to express. A construction which would leave without effect any part of the language of a statute will normally be rejected. v. In State of Jharkhand v. Govind Singh reported in (2005) 10 SCC 437, the Supreme Court held that, 12. It is said that a statute is an edict of the legislature. The elementary principle of interpreting or construing a statute is to gather the mens or sententia legis of the legislature. vi. State of Andhra Pradesh v. Linde India Ltd., Case Citation: (2020) 16 Supreme Court Cases 335 : SCC Online SC 362 It is a trite principle of interpretation that the words of a statute must be construed according to the plain, literal, and grammatical meaning of the words 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to Ordinance dated 04.04.2021 will have precedence over Section 54C petition. We also notice that the CD through his counsel has earlier recorded that he has no objection for initiation of CIRP proceedings and it is recorded in order dated 07.06.2021 and has already been recorded in para 10 above. For various reasons the Section 7 IBC application could not be admitted and there appears to be no fault on the part of the applicant in the Section 7 IBC application. Merely because there was a delay in the admission of CIRP proceedings in the Section 7 IBC application, this Tribunal finds no justification to allow the pre-package to take precedence. We are bound by the mandate of Section 11A(4). Further our view is fortified by reading the paragraph 3.16 (c) of Insolvency Law Committee Report which is already extracted earlier. It clarifies the object and intent behind Section 11A(4). 37. The object of Section 11A is to guide the Adjudicating Authority to deal with applications of IBC-vs. Pre pack based on relevant dates as between them (Section 11A(1) (2) (3) and to ensure that there is no clash between the applications filed prior to the Amendment dated 04.04.2021 and appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation 6(1) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. 42. As a consequence of the application being admitted in terms of Section 7 of IBC, 2016 moratorium as envisaged under the provisions of Section 14(1) of IBC shall follow in relation to the Respondent as per sub clauses (a) to (d) of section 14(1) of the IBC. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the IBC shall come in force. 43. We direct the Petitioners to deposit a sum of Rs. 2,00,000/- (Rupees Two Lakhs Only) with the Interim Resolution Professional Mr. Rajesh Kumar Parakh, to meet out the expenses to perform the functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016. The needful shall be done within three days from the date of receipt of this order by the Petitioner. The amount however, will be subject to adjustment by the Committee of Creditors as accounted for by Interim Resolution Professional and shall be paid back to the Petitioner. 44. The registry is directed to communicate a copy of the Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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