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TMI Blog2024 (5) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 95 indicate that the Rules are not being complied with in a timely manner - The Section 94 Applications were declined to be registered after being pending on e-filing number for a period of 339 days. The Section 95 Applications was declined to be registered after being pending on e-filing number for a period of 181 days. This indicates that the interim moratorium in these mentioned matters itself was lasting for the said period of time. Considering that interim moratorium commences on e-filing of the applications, i.e., uploading of the document prior to any scrutiny, there is a possibility that parties who have had their applications declined due to failure to comply with the notices and timelines issued by Respondent No. 2, proceed to e-file their applications again. In such cases, the aggrieved persons have a remedy under Rule 63 of the NCLT Rules to prefer an appeal within the period stipulated. Any application which had earlier been dismissed and is refiled without resorting to the due process under law, ought not to be considered valid and shall not be considered as filed for the purposes of Section 96 of the IBC. The same shall be ignored and no cognizance shall be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts. The details of the same are mentioned below: Account of Jayesh R Shah and Nilesh R Shah a. Mr. Jayesh R Shah ( Mr. J Shah ), Mr. Nilesh R Shah ( Mr. N Shah ), along with Mr. Vatsal Jayesh Shah, Mr. Zenil Jayesh Shah, Mrs. Neeta N Shah, Mrs. Paru J Shah and Rasiklal Sankalchand Jewellers Pvt. Ltd. approached the Petitioner for grant of loan facilities as co-borrowers. The Petitioner sanctioned and granted a home loan being Baroda Home Loan of INR 7,18,00,000/- (Rupees Seven Crore and Eighteen Lacs) on 3rd January 2019. As security for the Home Loan, the property being Flat No. 502, 5th Floor, I wing, Kukreja Palace, Ghatkopar, Taluka Kurla, Mumbai ( Mortgaged Property ) was mortgaged with the Petitioner. b. The Petitioner, vide subsequent sanction, granted further facilities being top up loan of INR 2,11,00,000/- (Rupees Two Crores Eleven Lacs) and Personal Suvidha Loan of INR 22,00,000/- (Rupees Twenty-Two Lacs). c. The total loan facilities granted by the Petitioner was INR 9,51,00,000/- (Rupees Nine Crores Fifty One Lacs). d. Due to the defaults committed by the borrowers, the loan account of the Borrowers was classified as NPA on 30th November 2019 by the Petitioner. e. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts pertaining to another account of Mr. S.B Shah where a Section 95 Application was filed and the interim moratorium has been running for a period of 64 days from the date of e-filing and the objections in the same were not complied with by the applicants therein till the date of filing of the present Petition. m. The Petitioner submitted that the above-mentioned issue is not limited to these three accounts but is being faced by several financial institutions/secured creditors and enforcement measures are being stalled by borrowers and guarantors misusing the provisions of Section 94 and Section 95. According to the Petitioner the provisions of Section 94 95 of the IBC are a tool in the hands of unscrupulous borrowers/mortgagors, who file applications under Section 94 and/or 95 of the IBC, and thereafter not remove the office objections and enjoy the interim moratorium. 4. In light of the aforementioned facts, the Petitioner has submitted that: a. Several of the applications including the Section 94 and Section 95 Applications mentioned hereinabove are on filing number and no effort has been made by the defaulters to register and number the applications or have the same listed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indefinite interim moratorium to the defaulters and defeat the rights of the financial institutions/secured creditors. 5. Notice was issued to Respondent No. 1 and Respondent No. 2. Directions were issued for filing of a reply to bring on record the statistics pertaining to the number of applications filed, details of timelines for which such applications have been pending and Respondent No. 2 s compliance with the timelines under Rule 28 of NCLT Rules. Respondent No. 2 has filed its reply and addressed the issues including shortage of staff. Respondent No. 2 has also stated that Rule 28 is being complied with, however, due to the volume of matters being filed, timely compliance of the same has not been possible. 6. Before proceeding further, we would like to state the relevant provisions: 7. The relevant provisions of the IBC are reproduced herein below: Section 94: Application by debtor to initiate insolvency resolution process. (1) A debtor who commits a default may apply, either personally or through a resolution professional, to the Adjudicating Authority for initiating the insolvency resolution process, by submitting an application. (2) Where the debtor is a partner of a firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the debtor. (6) The application referred to in sub-section (1) shall be in such form and manner and accompanied by such fee as may be prescribed. (7) The details and documents required to be submitted under sub-section (4) shall be such as may be specified. 96. Interim Moratorium (1) When an application is filed under Section 94 or Section 95 (a) an interim moratorium shall commence on the date of the application in relation to all debts and shall cease to have effect on the date of admission of such application; and (b) during the interim-moratorium period (i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and (ii) the creditors of the debtor shall not initiate any legal action of proceedings in respect of any debt. 8. It is also pertinent to reproduce Rule 28 of the NCLT Rules. The National Company Law Tribunal Rules, 2016 provide for rules and procedure for institution of proceedings, petition, appeals etc. Rule 28 provides for endorsement and scrutiny of petitions or appeals or documents. The relevant Rule is reproduced hereinbelow 28. Endorsement and scrutiny of petition or appeal or document.- (1) The person in charge of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given below: a. Notice issued under Rule 28 (2) dated 4th December 2023 notifying a list of matters where the defects were to be removed within 7 days failing which suitable orders would be passed in accordance with Rule 28 (3). This notice was pertaining to matters pending between January 2023 and July 2023. b. Notice issued under Rule 28 (3) dated 8th January 2024 stating that matters where objections are not removed till 15th January 2024 will be dealt with in accordance with Rule 28 (3) and Rule 28 (4). c. Notice issued under Rule 28 (4) dated 20th February 2024 declining to register the matters where parties failed to comply according to the notices dated 4th December 2023 and 8th January 2024. Vide this notice, the matters pending between January 2023 and July 2023 were dealt with. In this list, there were 57 applications pending under Section 95 of IBC and 12 applications pending under Section 94 of IBC. d. Notice issued under Rule 28 (2) dated 28th February 2024 notifying a list of matters where the defects were to be removed within 7 days failing which suitable orders would be passed in accordance with Rule 28 (3). This notice was pertaining to matters pending between Jul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 will issue a notice under Rule 28 (3) and Rule 28 (4) stating that matters where compliance is not carried out will be proceeded to be dealt with in accordance with Rule 28 (4). The timeframe given for compliance in this notice will be 30 days from the date of notice. On the expiry of such period of 30 days, Respondent No. 2 shall within a period of 7 days issue a notice under Rule 28 (4) declining to register the matters where compliance has not been carried out. Within the said period of 7 days the online status must be immediately updated to dismissed as declined to register . d. Where the Applicant purported to comply with the objections notified and refiles the application, Respondent No. 2 shall scrutinize the said purported compliance within a period of 7 days from such re-filing of the application. It is made clear that the if the applicant has not complied, then Respondent No. 2 shall within a period of 7 days issue a notice under Rule 28 (4) declining to register the application. 14. The abovementioned timelines and procedure are being laid down after hearing the Respondents at great length. These timelines shall be adhered to. 15. In addition to the above, considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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