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TMI Blog2024 (7) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... reditor has filed this Appeal. 2. Brief facts of the case necessary to be noticed for deciding this appeal are:- 2.1. Federal Bank had advanced various loans to Howrah Mills Company Limited (Corporate Debtor) in the year 2013 amounting to Rs.40.38 Crores. Federal Bank declared the loan accounts of the Corporate Debtor as Non- Performing Asset (NPA) on 30.12.2015. Federal Bank assigned the loans given to the Corporate Debtor with all right, title and security interest in favour of the Appellant vide a Registered Assignment Agreement dated 30.03.2016. Due to continued defaults by the Corporate Debtor, Appellant preferred a Company Petition bearing C.P.(IB) No. 4/KB/2019 to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor. During pendency of Section 7 application, the Appellant entered into an Agreement to Assign dated 15.01.2020 with Respondent No.2- 'Abhinandan Holdings Pvt. Ltd.' (hereinafter referred to as 'Intending Assignee') under which agreement, Appellant agreed to assign the loan along with security interests upon receipt of total consideration of Rs.26.01 Crores. After Agreement to Assign, Appellant filed an application to withdraw Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant filed a rejoinder to the reply filed by the Respondent No.2. Adjudicating Authority after hearing the parties by impugned order has rejected Section 7 application filed by the Appellant. Adjudicating Authority held that the Appellant cannot proceed against 'Howrah Mills Company Ltd.'. However, it can proceed against the Respondent No.2 for any default committed by the Respondent No.2 in terms of the Agreement but not against Howrah Mills, its financial assets being already purchased by Respondent No.2. Adjudicating Authority held that in view of the interim injunction dated 29.09.2021, the assignment agreement is still enforced and the Appellant has been restrained by Civil Court of Competent jurisdiction from giving effect to the notice dated 02.03.2020. It was further held that the default against 3rd and 4th tranche falls within 10A and application under Section 7 against the corporate debtor is not maintainable. Aggrieved by the impugned order, this appeal has been filed. 2.2. An IA No.3031 of 2024 has been filed by Respondent No.1- Corporate Debtor praying for deletion of Respondent No.1 from the memo of parties of the appeal. 3. We have heard Shri Abhijit Sinha, Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement dated 15.01.2020. Since Respondent No.2 failed to honour its commitment which agreement was revoked and cancelled and the application for restoration was filed on 31.07.2020 much before passing of the order of interim injunction. The order of interim injunction in no manner affect the debt and default which is committed by the corporate debtor and the said order cannot be relied for rejection of Section 7 application filed by the appellant. Debt and default having been committed by the corporate debtor which debt and default is still continuing since amount payable by the corporate debtor has not been paid Appellant was fully entitled to pursue Section 7 application and the Adjudicating Authority committed error in rejecting Section 7 application. The order passed by the Adjudicating Authority deserves to be set aside and Section 7 application filed by the appellant be admitted. 5. Shri Sunil Fernandes, Learned Senior Counsel appearing for the Respondent No.2 supported the impugned order of the Adjudicating Authority and submits that in view of the Agreement to Assign dated 15.01.2020, it is the Respondent No.2 who has come into picture as assignee of the debt of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 1(d) defines 'purchase consideration', which is as follows:- "1. Definitions xxx xxx xxx d. Purchase Consideration means an amount agreed amongst the Parties which shall be the aggregate purchase consideration for the Agreement to Assign the Financial Assets OR means an amount of Rs. 26,01,00,000/-, (Rupees Twenty Six Crores and One Lakh Only) being the aggregate purchase consideration for the Loans. The Purchase Consideration shall be paid as per the schedule mentioned below, subject to cure period as stipulated under clause 7.4.2 of this agreement. Sr. No. Particulars Instalment% Instalment 1. Since Paid 25.00% 6.50 2. On or before January 31, 2020 17.30% 4.50 3. On or before February 29, 2020 26.91% 7.00 4. On or before March 25, 2020 30.79% 8.01 Total 100% 26.01 WHEREAS: (A) The Intending Assignor has expressed its desire to assign to Intending Assignee, the Financial Assets (as hereinafter defined) of the Borrower more particularly described in Schedule I and the Intending Assignee is agreeable to acquire the said Financial Assets. (B) The Parties are desirous of setting forth the terms and conditions, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be withdrawn. Clauses 7.4.1, 7.4.2, 7.4.4 and 7.4.5 are as follows : - "7.4 Performance 7.4.1. If by the terms of this Agreement, any act would be required to be performed on or within a period ending on a day, which is not a business day, then it shall be performed, on or by the immediately succeeding business day. Time is of the essence of the contract. 7.4.2 Any delay in making payment of any single instalments of the Consideration under Sr. No. 2, 3, and 4 of the table under clause 1.d above beyond a cure period of 30 days from the respective due dates of payments shall be considered as Event of Default (hereinafter referred to as "Event of Default"). However, JMFARC shall permit delay up to 30 days from the respective due dates for the payments by Intending Assignee subject to Intending Assignee paying simple interest computed @ 12% p.a. for the period of delay, on the delayed amount of instalment. In case of Event of Default, JMFARC shall have the right to forfeit the amounts received till the Date of Default and also to cancel this arrangement. Any such amount received shall be adjusted against the outstanding dues owed by the Borrower to JMFARC. 7.4.3 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Sr. No. 2, 3 and 4 of the table under clause 1.d above beyond a cure period of 30 days from the respective due dates of payments shall be considered as event of default". Under clause 1(d) table no.2 before 31.01.2020 amount of Rs.4.5 Crores was to be paid giving benefit of cure period of 30 days. 30 days period came to an end on 01.03.2020. Thereafter the financial creditor has rightly issued a letter dated 02.03.2020 revoking and cancelling the agreement to assign, event of default having happened. 13. In any view of the matter, the debt of financial creditor has not been assigned to Respondent No.2 till date. The Appellant continue to be creditor and the Respondent No.1- Corporate Debtor as a debtor. Further, it is relevant to notice that the order of the Adjudicating Authority dated 23.01.2020 itself contemplated that the financial creditor will be entitled to revive the company petition if assignment fails. Assignment having been failed, financial creditor filed an application for revival on 31.07.2020 which was also allowed by the Adjudicating Authority on 02.02.2021 which order was also not interfered by this Tribunal vide order dated 11.01.2023 in Company Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which agreement has been breached and as per liberty granted by the Adjudicating Authority, the company petition was revived which order was also affirmed by this Tribunal. Thus, there is no impediment in proceeding under Section 7 application. As observed above, agreement dated 15.01.2020 was only agreement to assign and was not assignment agreement. Purchase consideration has not been paid. No document of assignment has yet been executed by the appellant in favour of Respondent No.2. Thus, the debt on the part of the corporate debtor still continues and having not assigned to Respondent No.2, the corporate debtor continues as debtor and cannot be absolved from its liabilities to pay its debt. 16. Learned Counsel for the Respondent has placed much reliance on Clause 7.4.5 of the Agreement to Assign. The contention has been advanced that in view of Clause 7.4.5, upon receipt of initial 25% of the consideration, JMFARC shall keep in abeyance all legal actions and legal proceedings initiated by JMFARC against Howrah Mills and its guarantors. We have already extracted the relevant clauses of Agreement to Assign dated 15.01.2020 in paragraphs 8 to 11 of this judgment. Purchase conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the [Adjudicating Authority or the Board] is empowered by, or under, this Code to pass any order and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any order passed by such [Adjudicating Authority or the Board] under this Code." 19. In the present case, Section 7 application is within the jurisdiction of the Adjudicating Authority which application although initially was withdrawn but having been restored by subsequent order of the Adjudicating Authority has to be continued and interim injunction order dated 29.09.2021 issued by the Commercial Court can have no effect on continuance of proceeding under Section 7. We may also refer to Section 238 which gives Code an overriding effect. Section 238 is as follows:- "238. Provisions of this Code to override other laws. - The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." 20. The Adjudicating Authority in the impugned order after noticing the injunction order dated 29.09.2021 came to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e litigant would be entitled to canvass that in his wisdom the judicial order detrimental to his interests was void, voidable, or patently erroneous. And based on such plea, to avoid or disregard or even disobey the same. This course can never be permitted. 55. To be fair to the learned counsel for the appellants, it needs to be noticed that reliance was also placed on behalf of the appellants on Kiran Singh, Sadashiv Prasad Singh, and Jagmittar Sain Bhagat cases to contend that a decree passed by a court without jurisdiction was a nullity and that its invalidity could not be corrected even by the consent of the parties concerned. We are of the considered view that the proposition debated and concluded in the judgments relied upon by the learned counsel for the appellants (referred to above) is of no relevance to the conclusions drawn in the foregoing paragraph. In our determination hereinabove, we have not held that a void order can be legitimised. What we have concluded in the foregoing paragraph is that while an order passed by a court subsists, the same is liable to be complied with, till it is set aside." 23. There is no dispute to the proposition laid down by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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