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TMI Blog2022 (10) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. 2. The Corporate Debtor - Jet Airways (India) Limited has been in airline operation since 1993. Due to various reasons Jet Airways (India) Limited stopped its operation on 17.04. 2019. An Application under Section 7 was filed by State Bank of India being CP (IB) No.2205/MB/2019, which Application was admitted by NCLT, Mumbai Bench vide order dated 22.06.2019. The Adjudicating Authority appointed Mr. Ashish Chhawachharia, as an Interim Resolution Professional (IRP), who was confirmed as Resolution Professional (RP) in the First Meeting of Committee of Creditors (CoC) dated 16.07.2019. 3. Public announcement was made on 24.07.2019. The first advertisement for calling of 'Expression of Interest' from prospective Resolution Applicant was issued on 20.07.2019. Expression of Interest was issued in four rounds and last on 13.07.2020. The Resolution Plan submitted by Jalan Fritesch Consortium was approved in the 17th CoC Meeting held on 03.10.2020. 4. A Contractual Agreement between the Appellant and the Corporate Debtor was entered into under which the Appellant had agreed to sell certain assets viz. Ground Power Units and Conventional Pushback Tractor belonging to the Appellant. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA No. 2081 of 2020 in CP (IB) No.2205/MB/2019; (b) direct the Respondents to remove the Appellant's Equipment as set out in paragraph 7.8 of the present Appeal from the list of assets of the Corporate Debtor and / or the Resolution Plan; (c) retrain the Respondent No. 1 from alienating or creating any third party rights over the Appellant's Equipment as set out in paragraph 7.8 of the present Appeal in favour of Respondent No. 2 or any other person; (d) direct the Respondent No. 1 to forthwith release the Appellant's Equipment as set out in paragraph 7.8 of the present Appeal to the Appellant; (e) pass such further and other orders and directions as the nature and circumstances of the case may require as this Hon'ble Tribunal may deem fit and proper." 6. We may now notice certain details regarding Appellant and transactions/correspondences between the Appellant and the Corporate Debtor in the following paragraphs. 7. The Appellant is carrying on business of manufacturing and sale of ground support Equipment to Airlines, Airports, Cargo Airlines, Ground Handlers and Military Organization. In the month of February 2017, the 'Corporate Debtor approached the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SD 96,200/-; (b) Invoice dated CLY 10002329 dated 25 June 2018 for supply of one Ground Power Unit GPU-414E-CUP to be delivered at Chennai Airport for an amount of USD 48,100/-; (c) Invoice dated CLY10002330 dated 25 June 2018 for supply of one Ground Power Unit GPU-409E-CUP - 28 to be delivered at Bengaluru Airport for an amount of USD 48,350/-; (d) Invoice dated CLY10002331 dated 25 June 2018 for supply of one Ground Power Unit GPU-414E-CUP to be delivered at Bengaluru Airport for an amount of USD 48,350/-; and (e) Invoice dated CLY100023-45 dated 09 July 2018 for supply of one Conventional Pushback Tractor TMX- 150-12 to be delivered at New Delhi Airport for an amount of USD 92,455/-." 11. As per the terms and conditions of Invoices are specified once again as mentioned hereunder: "1. The seller expressly reserves ownership of the Equipment until full and final payment of the principal and interest; 2. The buyer shall refrain from selling the Equipment or mortgaging it to a third party until it has been fully paid for. The buyer authorizes the seller to pledge the Equipment purchased up to the amount of the sales price, the pledge lifted as soon as the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purchase Price as agreed, the Appellant addressed several emails dated 30.07.2018, 02.08.2018, 20.08.2018, 27.08.2018, 04.09.2018, 12.09.2018, 24.09.2018, 02.10.2018, 16.10.2018, 09.12.2018, 03.01.2019, 14.01.2019, 24.01.2019 and 28.01.2019 within four days and 29.01.2019 to the 'Corporate Debtor' calling upon the 'Corporate Debtor' to pay the Balance Purchase Price but the 'Corporate Debtor' failed to pay the Balance Purchase Price by email dated 29.01.2019 indicated that the Appellant is on their list of priorities and will make payment at the first opportunity. Later the Appellant addressed letters dated 16.10.2018, 09.12.2018, 13.12.2018, 20.02.2019 and 05.04.2019 to the 'Corporate Debtor' calling upon the 'Corporate Debtor' to make payment of the Balance Purchase Price if the 'Corporate Debtor' wanted to purchase the Appellant's Equipment. However, the 'Corporate Debtor' failed and neglected to make payment of the balance amount as such the Equipment with the 'Corporate Debtor' were not purchased and if ownership to those Equipment never passed to the 'Corporate Debtor' in view of the terms and conditions of Purchase Orders and Invoices. Finally, a Notice dated 01.06.2019 much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent No. 1 filed Reply dated 12.02.2020 alleging that the Appellant's Equipment form part of the fixed assets of the 'Corporate Debtor' therefore they cannot be removed from the list of fixed assets of the 'Corporate Debtor'. After approving of the Resolution Plan by the CoC an Application is filed before the Adjudicating Authority in I.A. No. 2081/2020 under Section 31 of the IBC which was allowed on contest. Without disposing MA No. 3412/2019 filed by the Appellant herein. Aggrieved by the Order, the Respondent filed this Appeal raising several contentions mainly contended that the ownership remains with the Appellant in the event of Insolvency and of the 'Corporate Debtor', the total price is not paid as agreed and that the ownership in the goods did not pass to the 'Corporate Debtor', thereby inclusion of those priorities in the list of fixed assets of the 'Corporate Debtor' is contrary to the provisions of IBC and that the Appellant is entitle to take back those Equipment strictly in terms of the Invoice but the Adjudicating Authority did not consider these facts in proper prospective committed an error in approving the Resolution Plan by Adjudicating Authority allowi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osts of risks of loss, theft, or destruction of the Equipment. The Equipment also appeared on the fixed assets register of the 'Corporate Debtor' as on March 31, 2018, 2019 and June 20, 2019. The Respondent No. 1, was in his capacity as the Resolution Professional, obligated in law to preserve the value of the Corporate Debtor's assets. He was therefore unable to return the Equipment, owing to his obligations under law. Returning the Equipment and paying rental charges for its usage would defeat an essential purpose of IBC i.e., to balance interests of all stakeholders, such that the consequences of non-payment by the 'Corporate Debtor' were equally shared by all Creditors. Jurisprudence suggested that where a 'Corporate Debtor' had paid a part of the purchase consideration due for an asset (prior to commencement of Insolvency), and the seller thereafter sought return of the assets, the Resolution Professional may not be bound to return the assets notwithstanding any terms of Agreement entered into prior to Insolvency commencement. The title to the Equipment appeared to be with the 'Corporate Debtor'. The Appellant was therefore urged to revise the proof of claim, setting out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as-in-where-iswhatever- is-left. Subsequent, to the approval of the Resolution Plan, the Applicant will decide on the manner of utilizing such Equipment (if possible) or replacing it with new Equipment to support its operation. The amounts proposed to be paid by the Resolution Applicant in terms of this Resolution Plan includes the cost of acquisition of all the assets owned by the Corporate Debtor which will be acquired by the Resolution Applicant on an "as is-where-is-whatever-is" basis and there will be no separate amounts payable by the Resolution Applicant for any of the assets owned by the Corporate Debtor, whether or not specifically included in this Resolution Plan." d. It is submitted that from a reading of the aforesaid clause, it is clear that the Resolution Plan as approved by the Hon'ble Adjudicating Authority only provides for delivery of the assets which are owned by the Corporate Debtor (as per the information provided by the RP) on an 'as is where is basis' and does not seek to appropriate any third-party assets. The Successful RA categorically denies the averments of the Appellant to the effect that the Successful RA has sought to illegally appropriate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority, seeking extension of time by another 90 days for completion of Conditions Precedent and by way of an order dated 29 September 2021, the time period for completion of Conditions Precedent was extended by another 90 days. It is humbly submitted that any interference with the Impugned Order at this critical stage will hamper the timely implementation of the Resolution Plan and jeopardise the successful resolution and revival of the Corporate Debtor." On the basis of above pleadings, the Respondent No. 2 requested to dismiss the Appeal. 24. During hearing, the Learned Counsel for the Appellant while reiterating the contentions in the Appeal draw the attention of this Tribunal to the terms and conditions of the Purchase Order and Invoice to establish that the ownership of Equipment remain with the Appellant and entitle to recover the Equipment in the event, the 'Corporate Debtor' went into Liquidation of CIRP. He further draws the attention of this Tribunal in several occasion of Sale of Goods Act, 1930, to establish the ownership remain in the goods i.e., Equipment thereby the inclusion of the Equipment in the Resolution Plan is contrary to the provisions of IBC requeste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate Debtor' be construed as transfer of title to goods? (ii) Whether the Appellant TLD MEAI FZE continued to be the owner in view of the terms and conditions of Purchase Orders and Invoices on account of alleged failure of the Respondent to pay the balance of price of Equipment? (iii) Whether the Appellant claiming to be an 'Operational Creditor' entitle to make a request to remove the Equipment from the list of fixed asset of 'Corporate Debtor' in the CIRP and claim return of those Equipment under the provisions of IBC? 28. The major contention for the Learned Counsel for the Appellant is that on account of delivery of BoL along with the goods, the property of goods i.e., Power Units and Tractors have not been transferred to the 'Corporate Debtor' and the Appellant is still an owner of those Equipment. Whereas the Counsel for the Appellant totally relying on the terms and conditions of Invoices or Purchase Orders to claim ownership of property even after delivery of the BoL along with the Equipment since the Equipment is an important Equipment. He also contended that only on payment of the balance of sale consideration for the purchase of the Equipment by the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndor under Section 45 and 51. The Hon'ble Delhi High Court based on the facts and circumstances of the case has held as follows: "Section 19 of the Sale of Goods Act, 1930 specifically provides that the property passes when it is intended to pass. Section 19(1) stipulates that where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. In this context, it would be pertinent to reiterate that clause 7 of the addendum of 24.09.1999 specifically stipulated that the title of the goods would only pass to the purchaser (respondent) once that full payment of GBP 9,00,000 under the said agreement was received by the vendor (petitioner) upon the delivery of the package FOB Mumbai for shipment to U.K. Admittedly, the petitioner has not received the agreed price of GBP 9,00,000. The intendment under the said clause is clear that unless and until the petitioner received the full price for the said goods, the property in them would not pass to the respondent and would continue to vest in the petitioner. In the light of Section 19 of the Sale of Goods Act, 1930 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of appellant-FJF that it dealt with Pawan Hans on a principal to principal basis or appointment of FJF was under the agreement by Pawan Hans. FJF had been appointed by the AES as the approved transporter. Correspondence exchanged also reveals that the liability for charges of FF or that of SWC was to be borne by AES, even if payment was contemplated to be made through Pawan Hans upon bills being presented. In the instant case, payment of sale consideration not having been made to Pawan Hans, the question of payment by Pawan Hans of the bills presented by FJF would not arise since the same was the liability of AES. We are of the view that the order passed by the learned Single Judge subserves the ends of justice and is fair and equitable. Besides the same would clearly fall within the ambit of Section 9(2)(a) and (e) of the Arbitration and Conciliation Act, 1996 as the order is in respect of goods which are the subject matter of an arbitration agreement and the order of restraint on appellants, who are not parties to the arbitration agreement is intended to preserve and protect the goods. The plea of the learned Single Judge having exceeded his jurisdiction is misconceived. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. It is suggested that as soon as the assessee company placed the goods on board the steamer named by the buyer at the Madras Port the goods became ascertained and the property in the goods passed immediately to the buyer. This argument, however, overlooks the important word "unconditionally" used in the section. The requirement of the section is not only that there shall be appropriation of the goods to the contract but that such appropriation must be made unconditionally. This Is further elaborated by Section 25 which provides that where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms the contract appropriation reserve the right or disposal of the goods until certain conditions are fulfilled. In such a case, notwithstanding the delivery of the goods to the buyer, or to a corner or other bailee for the purpose of transmission to the buye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and assay. It is submitted that being the position, the property in the goods passed and the sales were concluded outside British India, for the weighment, sampling, assay and the final fixation of the price could only take place under all these contracts outside British India. Itis not necessary for us to express any opinion on this extreme contention. Suffice it to say, for the purposes of this case, that in any event upon the terms of the contracts in question and the course of dealings between the parties the property in the goods could not have passed to the buyer earlier than the date when the bill of exchange was accepted by the buyers' Bank in London and the documents were delivered by the assessee company's agent, the Eastern Bank Ltd., London, to the buyers Bank. This admittedly, and as found by the Appellate Tribunal, always took place in London. It must, therefore, follow that at the earliest the property in the goods passed in London where the bill of lading was handed over to the buyers' Bank against the acceptance of the relative bill of exchange. In the premises, the Appellate Tribunal as well as the High Court were quite correct in holding that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present form was not competent. I would therefore dismiss this appeal." 36. Learned Counsel also relied on the Judgement of the National Company Law Tribunal, Chandigarh Bench in 'Weather Makers Pvt. Ltd.' (referred Supra) wherein in paras 9-11 it is observed as hereunder: "9. Heard the rival submission and perused the records of the case. One of the facts is not in dispute that the Applicant had supplied raw material which is in possession of the Corporate Debtor, now under insolvency, hence controlled by the appointed Ld. Resolution Professional. The Applicant has expressed an apprehension that the raw material being a chemical, is perishable in nature, hence requires to be protected before it expires or gets destroyed by any chemical reaction. 9.1 In the light of the factual matrix narrated above, a legal question has been raised that whether the raw material in possession of the Corporate Debtor, should not be allowed to be returned on commencement of "Moratorium"? On one hand the Ld. RP has taken the shelter of the provisions of section 14(1)(d) of the IBC, but on the other hand the Applicant has placed reliance on the Explanation under section 18(1)(f) of IBC. At the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing section 18(1)(f) r/w Explanation. 11. A question is to be answered that what are the areas of operation of Sec. 14 vis-a-vis Sec. 18 of IBC. A fine distinction is available between these two enactments. The area of operation of Sec. 14 is in respect of property which is occupied or in possession of the Corporate Debtor. The property as defined U/s 3(27) of the Code includes money, goods, land, actionable claims etc. If the property as defined in Sec. 3 is in possession of the Corporate Debtor, then such property cannot be recovered from the Corporate Debtor by the owner of the property on commencement of Moratorium. This is the general rule through which the Corporate Insolvency Resolution Process proceedings are being triggered on admission of an insolvency petition. Under the insolvency Code, later on an exception is provided U/s 18 (Explanation) against this general rule. However, the area of operation of Sec. 18 is distinct from Sec. 14. There is a fine distinction as appearing in Sec. 18 r/w explanation that for the purpose of this section the term "asset" shall not include an asset owned by third party in possession of Corporate Debtor, either (1) under trust, or unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s" shall not include the following, namely- (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor: and (c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator. 40. If NCLT has been conferred with jurisdiction to decide all types of claims to property. of the corporate debtor. Section 18(1)(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights. subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements. is specifically kept out of the definition of the term "assets" under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39. Based on the principle laid down in the above Judgements, it is clear that the intention of the parties to the Agreement to sell goods is the basis to determine whether the property of goods passes to the buyer or not. More particularly when the sale is under Agreement to sell as defined under Section 4 of the Sale of Goods Act, 1930. Whereas the Counsel for the Respondent would draw the attention of this Tribunal in 'J.V. Gokal & Co.' (referred Supra), the Constitutional Bench of the Supreme Court referring the Judgement of Lord Justice Bowen in 'Sanders Bros.' Vs. 'Maclean & Company'[1883] 11 QBD 327 (CA), in para 13 concluded that the seller had to meet their liability to the foreign companies with whom they opened Letters of Credit and the Government must have been anxious to get the title to the goods so that the sellers might not divert the goods towards their other commitments or to other buyers for more tempting prices. Under the contract legal safeguard for securing the goods of agreed specifications was provided for in the earlier causes and therefore there was no reason for postponing the passing of the property in the goods to the buyer till the goods were actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (P) Ltd. (referred Supra), as "... A bill of lading is a writing, signed on behalf of the owner of the ship in which goods are embarked, acknowledging the receipt of the goods, and undertaking to deliver them at the end of the voyage subject to such conditions as may be mentioned in the bill of lading'. It is well-settled in commercial world that a bill of lading represents the goods and the transfer of it operates as a transfer of the goods. The legal effect of the transfer of a bill of lading has been enunciated by Bowen, L.J., in 'Sanders Bros.' (referred Supra). The law as to the indorsement of bills of lading is as clear as in my opinion the practice of all European merchants is thoroughly understood. A cargo at sea while in the hands of the carrier is necessarily incapable of physical delivery. During this period of transit and voyage, the bill of lading by the law merchant is universally recognised as its symbol, and the indorsement and delivery of the bill of lading operates as a symbolical delivery of cargo. Property in the goods passes by such indorsement and delivery of the bill of lading, whenever it is the intention of the parties that the property should pass ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oode, Proprietary Rights and Insolvency in Sales Transactions' (2nd Edition Sweet & Maxwell 1989) 60 observed that in fact the reality is neither the document nor the document with the intention is capable to transfer ownership to its holder. BoL has no relationship with the passing of ownership or with the intention of transferer. Ownership passes by a virtue of contract of sale. Thus, there is any amount of conflict in the views expressed by the different Courts and commentaries of different authors but as per decision of the Hon'ble Supreme Court goods passes property of the goods is deemed to have been transferred on delivery of the BoL. Another view is that delivery of BoL is nothing but giving constructive possession of goods to the buyer but not passing a title to the goods however it depends upon the intention of the parties or contract if any between them to pass such title to the goods. In the instant case, there is a contract on sale conditions incorporated both in the Purchase Orders or Invoices as follows : 42. Similarly, the certain conditions were incorporated in Invoices : 43. All these conditions in the Purchase Order and Invoices would show that till payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the price while he is in possession of them; (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them; (c) a right of re-sale as limited by this Act. (2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer." 46. In the present facts, the buyer i.e., the 'Corporate Debtor', became insolvent and CIRP is initiated against him. If Sections 46 & 50 of the Sale of Goods Act, 1930, are construed strictly and the buyer i.e., the 'Corporate Debtor' became insolvent, the unpaid seller i.e., the Appellant herein is entitled to stop the Equipment in the transit in possession of the 'Corporate Debtor'. Still the unpaid seller is entitled to recover the price by filing a suit for recovery of price under Section 55 or file a suit for specific performance under Section 58 of Sale of Goods Act, 1930. 47. If the terms and conditions of the Purchase Order or Invoices as mentioned in the earlier paras ..... 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