TMI Blog2024 (11) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... has already been approved by the CoC. It is pleaded by the RP that the Applicant has not filed any claim inspite of letter written by the RP to the Applicant on 03.07.2019, asking the Appellant to file claim for any outstanding dues for period prior to CIRP. It was pleaded that Applicant cannot seek refund of any monies under an application filed before the Tribunal without following the due process prescribed under the Code. The payment towards the disincentive as imposed by the Appellant was liability of the Corporate Debtor, which remained outstanding on the date of commencement of the CIRP. Hence, the said amount has to be paid as per the Resolution Plan, in accordance with the IBC process. The prayer of the Appellant as made in IA 88 of 2020, which is levied as disincentive, dehors the IBC process, cannot be accepted. The Adjudicating Authority has rightly treated the liabilities as operational debt . The learned Counsel for the Appellant has further contended that amount of security deposit, balance of post-paid subscribers and unspent balance of prepaid subscribers of the company are held in trust by the Corporate Debtor and they are not part of the assets of the Corporate D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Company Law Tribunal, Mumbai Bench- I in I.A. No.4124 of 2019 filed by the Appellant. By the above impugned orders, passed in two IAs respectively, the Adjudicating Authority has allowed the IAs in terms of the directions given in the order. The Appellant feeling aggrieved by the orders, has come up in this Appeal. 2. Both the Appeal(s) raises common question of facts and law and have been heard together. It shall be sufficient to refer to the facts and pleadings in Company Appeal (AT) (Insolvency) No.273 of 2024 for deciding both the Appeal(s). Brief facts of the case, giving rise to the Appeal are : (i) The Appellant is a regulator constituted under Section 3 of the Telecom Regulatory Authority of India Act, 1997 (for short the 1997 Act ). The Appellant in exercise of jurisdiction under the 1997 Act has framed Regulations namely Telecommunication Consumers Education and Protection Fund Regulations, 2007. The Appellant issued the Standards of Quality of Service of Basic Telephone Service (Wireline) and Cellular Mobile Telephone Service Regulations, 2009 on 20.03.2009, prescribing quality of service parameters. The Appellant on 10.08.2009 directed all cellular mobile service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 05.12.2023, which is under challenged in the Appeal. 3. We have heard Shri Ankur Sood, learned Counsel appearing for the Appellant; Shri Krishnendu Datta, learned Senior Counsel appearing for the Respondent. 4. Learned Counsel for the Appellant submits that Adjudicating Authority committed error in treating security balance of post-paid subscribers and unspent balances of pre-paid subscribers of the company and financial disincentive levied by the Appellant as operational debt , which decision is not in accordance with law. It is submitted that security deposit balance of postpaid subscribers and unspent balances of pre-paid subscribers of the Company are held by the telecom service provider, in which the beneficial interest therein continues to vest with the subscribers till the service is actually rendered. The TRAI had issued binding directions to Respondent to refund the entire excess amounts to subscribers. The excess amounts collected by the Respondent, which belong to the subscribers, cannot be appropriated by it and treated as mere operational debts in the CIRP. The amounts are held by the Respondent only under a constructive trust or contractual arrangement . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that Act being a special law, would prevail over the provisions of IBC cannot be accepted. The Hon ble Supreme Court has already held that Section 238 of the IBC has overriding effect over any other law. Hence, IBC shall prevail over the provisions of TRAI Act. The financial disincentives are in the nature of a penalty imposed by the Appellant in terms of the Quality of Service Regulations pertaining to the pre-CIRP period. The Appellant could have only assessed the quantum of the penalty and is prohibited from enforcement of the same by virtue of Section 14 of the IBC. These monies are statutory dues/ operational debt and therefore, the Appellant ought to have filed its claim with the RP regarding the same. It is submitted that no claim was filed by the Appellant and the RP after looking into the books of accounts and financial statements has admitted the claims as operational debt . The Appellant did not file any claim, but filed an application to recover the pre-CIRP dues to circumvent the process of IBC, which is not permissible. The Resolution Plan, which is presently sub-judice before the NCLT, provides for provisions regarding payment to the operational creditors, the dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor. It appears that it having not filed a claim, a direction was sought as prayed in prayer (a) that RP should ascertain the unspent balance and security deposit payable to the subscribers and make provisions for the same in the Resolution Plan and further direction was sought to allow the payment of statutory dues amounting to Rs.85,10,000/- to the Applicant. The above were the only two prayers made in the application. The RP has filed an affidavit in reply. The RP in the reply affidavit has pleaded that Resolution Plan has already been approved by the CoC. It is pleaded by the RP that the Applicant has not filed any claim inspite of letter written by the RP to the Applicant on 03.07.2019, asking the Appellant to file claim for any outstanding dues for period prior to CIRP. It was pleaded that Applicant cannot seek refund of any monies under an application filed before the Tribunal without following the due process prescribed under the Code. Pleadings in paragraph-6 of the affidavit is as follows: 6. In response to the aforesaid relief sought, I say that this application has been filed by the Applicant to bypass the resolution process as prescribed under the Insolvency and Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se dues have been imposed as financial disincentives by the Applicants on the Corporate Debtor under Regulation 5A of the Standards of Quality of Service for Basic Telephone Service and Cellular Mobile Telephone Service (Fourth Amendment) Regulations, 2015 and Mobile number Portability Regulations, 2009 vide various show cause notices and orders. 12. I understand that the said disincentives pertain to the period prior to the insolvency commencement date. As per the provisions of the Code, all creditors of the Corporate Debtor are required to file claims for dues prior as on the insolvency commencement date. As per the provisions of the Code, any governmental and/or statutory authority is also required to file claims for any dues pending to be paid to such authority. By way of letters dated 14th May, 2019 addressed to the Applicant by the Interim Resolution Professional and letter dated 3rd July, 2019 addressed to the Applicant by me, intimated the Applicant about the ongoing moratorium and claim process. I say that the Applicant has till date not filed any such claim before me for its dues. 13. I say that, payment of any amounts to the Applicant pertaining to the period prior to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er footing than dues payable to Central or State Government. 13. The above order was passed by Adjudicating Authority referring to judgment of this Tribunal in Puneet Kaur, through her Attorney Amrit Pal Singh vs. K V Developers Pvt. Ltd. Company Appeal (AT) (Insolvency) No.390 of 2022 taking the view that security deposit balance refundable to post-paid subscribers and amount of un-spent balances in prepaid plans are the money collected in excess of the rates prescribed by the TRAI and thus, the amount, which remained unpaid as on the date of commencement of CIRP, which is also outstanding in the books of the Corporate Debtor as liability in aggregate is liable to be paid into Telecommunication Consumer Education and Protection fund in accordance with Regulation 3. 14. Now, we come to the submissions, which have been pressed by the Appellant, challenging the decision of the Adjudicating Authority. One of the submission advanced by learned Counsel for the Appellant is that TRAI Act is a special law governing all aspects of the provisions of telecommunications service in the country, whereas the IBC is a general law governing insolvency, hence the provisions of TRAI Act would prevai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant was liability of the Corporate Debtor, which remained outstanding on the date of commencement of the CIRP. Hence, the said amount has to be paid as per the Resolution Plan, in accordance with the IBC process. The prayer of the Appellant as made in IA 88 of 2020, which is levied as disincentive, dehors the IBC process, cannot be accepted. The Adjudicating Authority has rightly treated the liabilities as operational debt . The learned Counsel for the Appellant has further contended that amount of security deposit, balance of post-paid subscribers and unspent balance of prepaid subscribers of the company are held in trust by the Corporate Debtor and they are not part of the assets of the Corporate Debtor, hence the said amount are to be returned. 18. The security deposit, which was given by post-paid subscribers, which remained unpaid is an outstanding liability of the Corporate Debtor. A reply affidavit has been filed by the RP in the Appeal, where Financial Statements of 2018-19 has been brought on the record. Note 2.16 dealt with Other Current Liabilities , which are amounts due towards security deposit, advance from customers, statutory dues and book overdraft, was spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator. Palmer's Company Law, 21st edition, at page 775, has the following observation : Property which can be identified as belonging to or held by a company in trust, for other persons, may be followed and recovered from the liquidator. 26. Applying the principles to which reference has been made in this judgment, it is crystal clear that the amount, in the hands of the company, which came to it by way of deductions from the wages and salary payable to its employees, on the requisition of the society, of which the employees were the members, for satisfying the demand or debt which they owed to the society, was impressed with the character of a trust in the hands of the company, and the same can be recovered by the society from the liquidator before the liquidator proceeds to distribute the assets of the company. It must be paid over in full before any distribution of the assets of the company takes place. 21. The Gujarat High Court answered the question in the above facts that the above amount standing to the credit balance in the account of Cooperative Credit Society is trust money. The above case was on its own facts and has no application in the facts and sequence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court in (2004) 3 SCC 137 Sopan Sukhdeo Sable v. Assistant Charity Commissioner and Ors. wherein the Hon ble Supreme Court held that the pleadings of the Appellant should have been read and understood in context and not viewed in isolation. There can be no dispute to the proposition laid down by the Hon ble Supreme Court in the above case. The submission, which has been raised by the Appellant before the Adjudicating Authority in the application has also been reiterated before us, which we have considered in the above paragraph. 28. Insofar as coming to the alternative submission of the Appellant as noted above that amount towards security deposit balances of post-paid subscribers and unspent balances of prepaid subscribers by treated as CIRP cost. Section 5(13)(c), which has been referred to by the Appellant is cost, which is incurred by the RP in running the business of the CD as going concern. There is no material on record to accept the submission of the Appellant that the said amount of security deposit balances of post-paid subscribers and unspent balances of prepaid subscribers be accepted as CIRP cost. There is no foundation laid in the application, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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