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TMI Blog2025 (3) TMI 1143X X X X Extracts X X X X X X X X Extracts X X X X ..... cheti, Mr. Ashish Parwani, Mr. Rajeev Nair, Mr. Anurag Anand, Ms. Gitika Makhija and Mr. Mukul Kulhari, Advocates for R-1. Dr. Charu Mathur, Advocate for GIDC JUDGMENT ASHOK BHUSHAN, J. These two Appeal(s) arises out of Corporate Insolvency Resolution Process ("CIRP") of the Corporate Debtor ("CD") GPT Steel Industries Limited. In Company Appeal (AT) (Ins.) No.1103 of 2024 order passed by National Company Law Tribunal, Ahmedabad, Court-2 dated 08.04.2024 in IA No.461 (AHM)/2022 has been challenged. Whereas in Company Appeal (AT) (Ins.) No.1084 of 2024 order passed by National Company Law Tribunal, Ahmedabad, Court-2 dated 08.04.2024 in IA No.159/NCLT/AHM/2020 has been challenged. 2. Brief background facts giving rise to this Appeal(s) need to be noted: (i) The CIRP against the CD commenced on an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC") by an order dated 02.05.2019. (ii) The Resolution Professional ("RP") issued publication inviting the claim from creditors. In pursuance of public announcement, claim in Form-C dated 30.07.2019 submitted by Gujarat Industrial Development Corporation ("GIDC"), Bhuj for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority also observed in the order that RP/ Financial Creditors have to pay the dues of the GIDC. (ix) Aggrieved by the aforesaid orders dated 08.04.2024, these two Appeal(s) have been filed. Company Appeal (AT) (Ins.) No.1103 of 2024 has been filed by RP, whereas Company Appeal (AT) (Ins.) No.1084 of 2024 has been filed by the Asset Reconstruction Company (India) Ltd., largest Financial Creditor having largest shareholding in the CoC of the CD. Company Appeal (AT) (Ins.) No.1103 of 2024 3. Learned Counsel for the Appellant challenging order dated 08.04.2024 passed by the Adjudicating Authority contended that Adjudicating Authority committed error in disposing of the applicating directing the RP to approach the Appellate Authority of GIDC, whereas the order dated 07.04.2022 terminating the lease granted by GIDC in favour of the CD as well as the Show Cause Notice dated 07.04.2022, were issued during moratorium, which was imposed on admission of Section 7 Application filed against the CD. The action taken by the GIDC in issuing the Show Cause Notice and order terminating the lease, is hit by Section 14 of the IBC and the Adjudicating Authority committed error in not se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the RP supported the submission of the Appellant and submits that Resolution Plan was compliant of Section 30 sub-section (2) and the lease hold rights were assets of the CD and the SRA was to get only those rights, which the CD has in the land, i.e., lease hold rights. There was no ground made out to send back the Resolution Plan to the CoC. 7. We have considered the submissions of learned Counsel for the parties and have perused the records. 8. From the facts noticed above, there is no dispute between the parties that Resolution Plan came to be approved by the CoC with requisite majority in 17th CoC Meeting held on 10.02.2020 and Letter of Intent was issued to SRA, who has also submitted Performance Bank Guarantee. An IA was filed by the RP for approval of Resolution Plan being IA No.159 of 2020 immediately after approval of the Resolution Plan, which remained pending. 9. The Resolution Plan could not be considered at an earlier point of time on account of certain litigations with respect to eligibility of SRA. The Adjudicating Authority has also extended the time for completion of CIRP. In IA No.461 of 2022 filed by the RP challenging the order dated 07.04.2022 issued by GI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition up to the date that the adjudicating authority either allows a resolution plan to come into effect or states that the corporate debtor must go into the liquidation. For this temporary period, at least, all the things referred to under Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management." 11. The Hon'ble Supreme Court allowed the Appeal and set-aside the order passed by NCLAT and directed the NCLT to dispose of the RP's application. In paragraph 29, following was directed: "29. Regard being had to the above, we allow the appeal and set aside the impugned order of Nclat. Considering that this matter has been pending for some time, we direct NCLT to dispose of the resolution professional's app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karnataka to execute supplement lease deeds in favour of the corporate debtor for the period up to 31-3-2020. 3.10. Aggrieved by the order of the NCLT, Chennai, the Government of Karnataka moved a writ petition in WP No. 5002 of 2019, before the High Court of Karnataka. When the writ petition came up for hearing, it was conceded by the resolution professional before the High Court of Karnataka that the order of the NCLT could be set aside and the matter relegated to the Tribunal, for a decision on merits, after giving an opportunity to the State to respond to the reliefs sought in the miscellaneous application. It is relevant to note here that the order of the NCLT dated 11-12-2018, was passed ex parte, on the ground that the State did not choose to appear despite service of notice. 3.11. Therefore, by an order dated 22-3-2019, the High Court of Karnataka set aside the order of the NCLT and remanded the matter back to NCLT for a fresh consideration of Miscellaneous Application No. 632 of 2018. 3.12. Thereafter, the State of Karnataka filed a statement of objections before the NCLT, primarily raising two objections, one relating to the jurisdiction of the NCLT to adjudicate u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right. 42. In fact the resolution professional in this case appears to have understood this legal position correctly, in the initial stages. This is why when the Government of Karnataka did not grant the benefit of deemed extension, even after the expiry of the lease on 25-5-2018, the resolution professional moved the High Court by way of a writ petition in WP No. 23075 of 2018. The prayer made in WP No. 23075 of 2018 was for a declaration that the mining lease should be deemed to be valid up to 31-3-2020. If NCLT was omnipotent, the resolution professional would have moved the NCLT itself for such a declaration. But he did not, as he understood the legal position correctly. 43. After the filing of the first writ petition (WP No. 23075 of 2018), the Government of Karnataka passed an order dated 26-9-2018 rejecting the claim. Therefore the resolution professional, representing the corporate debtor filed a memo before the High Court seeking withdrawal of the writ petition "with liberty to file a fresh writ petition". However th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Karnataka, to the corporate debtor, was the right to mine, excavate and recover iron ore and red oxide for a specified period of time. The deed of lease contains a schedule divided into several parts. Part I of the Schedule describes the location and area of the lease. Part II indicates the liberties and privileges of the lessee. The restrictions and conditions subject to which the grant can be enjoyed are found in Part III of the Schedule. The liberties, powers and privileges reserved to the Government, despite the grant, are indicated in Part IV. This Part IV entitles the Government to work on other minerals (other than iron ore and red oxide) on the same land, even during the subsistence of the lease. Therefore, what was granted to the corporate debtor was not an exclusive possession of the area in question, so as to enable the resolution professional to invoke Section 14(1)(d). Section 14(1)(d) may have no application to situations of this nature." 16. The Hon'ble Supreme Court in paragraph 46 recorded its conclusion that NCLT did not have jurisdiction to entertain an application against the Government of Karnataka for a direction to execute supplemental lease deeds for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) (c) of the IBC to entertain the application. We are not persuaded to accept the submission of GIDC that Adjudicating Authority had no jurisdiction to entertain the application filed by RP, since the leasehold rights of the CD were dealt in the Resolution Plan and the Application - IA No.461 of 2022 relates to insolvency process of CD, in which process GIDC has passed an order terminating the lease to take away the leasehold rights of CD out of insolvency process. 18. In result, we are of the view that application IA No.461(AHM)/2022 filed by the RP deserve to be allowed. Company Appeal (AT) (Ins.) No. 1084 of 2024 19. The order under challenge is order of the Adjudicating Authority remanding the Resolution Plan to the CoC. The entire consideration of the application is contained in paragraphs 15, 16 and 17 of the judgment of the NCLT, which are as follows: "15. It is observed that the RP has not 'amended the Information Memorandum, but rightly included the nature of the asset leased which exhibits certain risks. We are not aware of the fact that the unadmitted claim was brought to the Resolution Applicant. In view of the leased ownership, if the claim is admissible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has remitted the Resolution Plan back to the CoC for reconsideration. Learned Counsel for the Financial Creditor is correct in its submission that Adjudicating Authority has not returned any finding that Resolution Plan submitted by SRA was not in compliance of sub- section (2) of Section 30. No such shortcomings in the Resolution Plan has been pointed out, due to which the Resolution Plan suffers from any infirmity as required by Section 30, sub-section (2). The law is well settled, the Adjudicating Authority in paragraph-17 has already noticed the judgment of the Hon'ble Supreme Court K. Sashidhar vs. Indian Overseas Bank and Ors., where it was observed that Adjudicating Authority has ample power to remit the Resolution Plan for reconsideration by the CoC when there is violation of Section 30, sub-section (2) of the IBC. There can be no quarrel to the above proposition that Resolution Plan can be sent back for reconsideration of the CoC, if there is violation of Section 30, sub-section (2). Any violation of Section 30, sub-section (2) gives ample jurisdiction to NCLT to interfere with the decision of CoC approving the Resolution Plan or remit the Plan for making it compliant wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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