||Directorate of Economic Offences VS Binay Kumar Singhania & Ors (935/2020)
- An Appeal is filed against an IO dated 19.02.2020 passed by NCLT, Kolkata Bench whereby directing the Appellant to de-attach all the properties attached vide notice dated 16.04.2018 and to restore possession thereof to the R1 (Liquidator).
- The following issues arise for consideration: –
Whether the property of CD who is not a financial establishment as defined u/s 2(e) West Bengal Protection of Interest of Depositories in Financial Establishment Act, 2013 (WBPIDFE Act) can be attached?
- In the present case, the property of the CD is attached on the allegation that CD is one of the Companies of Pincon Group Companies and the Pincon Group Companies had fraudulently accepted the deposits and all the money went to CD and the CD had purchased the attached properties with the money of the depositors. In this regard, the Appellant placed reliance on the findings of the Designated Court.
- It is clear that under the WBPIDFE Act, the property acquired either in the name of a financial establishment or in the name of any other person on behalf of such financial establishment can also be attached. In the present case, the property of the CD is attached on the allegation that CD is one of the Companies of Pincon Group Companies and the Pincon Group Companies had fraudulently accepted the deposits and all the money went to CD and the CD had purchased the attached properties with the money of the depositors. In this regard, the appellant placed reliance on the findings of the Designated Court.
- The objection raised by the R1 & R3 that the findings of the Designated Court are not binding on the CD because the CD was not a party before the Designated Court and cannot be considered as the properties of the CD attached and produced before the Court and on conclusion of the trial, such properties have been confiscated & there is nothing on record that CD had raised any objection u/s 14(3) of the WBPIDFE Act that the properties were wrongfully attached and produced before the Court.
Whether High Court of Calcutta vide Order dated 23.04.2019 directed that the assets of the CD should be kept outside the purview of sale?
- Hon’ble High Court of Calcutta vide Order dated 13.12.2018 directed the Excise Commissioner to take necessary steps for sale of the bottled liquors and to make re-allotment of the consignment of strong Spirit in tanks which were seized by the Directorate of Economic Offences from the various factories of the added Respondents, namely Pincon Spirits Ltd. and the value thereof be remitted to the one Man committee who shall keep the said sum in an interest bearing short term fixed deposit account in a nationalized bank until further Orders.
- Aforesaid Orders are passed by the High Court in the presence of Pincon Spirits Ltd. Pincon Spirit Ltd. However, they have not placed on record any objection which has been filed u/s 14(3) of WBPIDFE Act.
- In such a situation, it cannot be said that the Hon’ble High Court directed that the assets of the CD be kept outside the purview of sale.
Whether the provision of S.3 of the WBPIDFE Act is inconsistent with S.14 and 33(5) of the IBC. Therefore, S.14 as well as S.33(5) of the IBC shall prevail over S.3 of WBPIDFE Act?
- The properties of the CD were attached during 10.11.2017 to 17.11.2017 and after investigation DEO, WB filed charge sheet on 31.01.2018 u/s 406, 409, 420 and 120B of IPC and u/s 3(1)(e) of the WBPIDFE Act against 41 accused persons, including Manoranjan Roy Director of the M/s Pincon Spirits Ltd. On 16.04.2018, the registered office of M/s. Pincon Spirits Ltd. (CD) was sealed. Thereafter, on 26.04.2018 and 25.02.2019, various properties of M/s Pincon Spirits Ltd. were attached by the DEO, WB. Meanwhile, on 19.07.2018 initiated CIRP against M/s Pincon Spirits Ltd. Thus, admittedly, the properties of M/s Pincon Spirits Ltd. were seized and the registered office was sealed much prior to the initiation of CIRP. We can say that the moratorium has been declared after the properties were attached by the DEO, WB and produced before the Designated Court of Economic Offences.
- Thus, we hold that S.14 of the IBC has no overriding effect on S.3 of the WBPIDFE Act.Now, we have to consider whether S.33 (5) of the IBC prevails over S.3 of the WBPIDFE Act. S.32A declares a bar against taking any action against property of the Corporate Debtor. This bar also contemplates the connection between the offence committed by the Corporate Debtor before the commencement of the CIRP and the property of the Corporate Debtor. With the proposition laid down by the Hon’ble SC, we have examined the facts of this case. The requirement for invoking the bar against proceeding against property of the CD in relation to an offence committed before the commencement of CIRP, are as follows: – (i) there must be Resolution Plan which is approved by the Adjudicating Authority under S.31 of the IBC. No Resolution Plan was approved which resulted in the change in control of the Corporate Debtor, therefore, there is no bar to take action against the property of the Corporate Debtor in connection with the offence. In such a situation the Director of the CD and the property of the CD cannot get immunity from the prosecution. Thus, the attached property, which is confiscated by the Designated Court of Economic Offences, cannot be de- attached.
- NCLAT is of the view that the IO is not sustainable in law therefore, the Order is hereby set aside.
|IBC does not override WBPIDFE Act for the reason that there is no Resolution Plan.
||Vikek Raheja, RP (331/2021)
- On being aggrieved by the Order of the Hon’ble AA, the Appellant/ RP has preferred the present Appeal praying there to exclude the time consumed on account of time loss due to the lockdown imposed by the Government of India and State Government and time consumed due to pendency of I.A 4208 of 2020.
- CIRP of the CD had commenced from 26.02.2020 and due to lockdown i.e. from 25.03.2020 only one meeting was convened i.e. on 02.04.2020. Further, during unlock 3.0 ending 31.08.2020 the 2nd and 3rd meetings were convened on 09.06.2020 and 26.08.2020. Even after lapse of almost a year from the date of commencement of CIRP the process is at nascent stage. While so, the Appellant field an I.A 4208 of 2020 before the AA on 27.09.2020 under S.22(3)(b) of the Code and the said Application was pending for 123 days till the I.A was disposed of on 27.01.2021.
- AA vide its Order dated 17.03.2021 excluded 97 days on account of lockdown taking into consideration the period from 25.03.2020 to 30.06.2020 instead of 25.03.2020 to 31.08.2020 as prayed by the RP while calculating the total period of CIRP. However, the AA rejected the exclusion of time consumed in judicial intervention for the purpose of calculating total CIRP period.
- AA was of the view that in terms of the second proviso of S.12(3) of the IBC, CIRP shall mandatorily be completed within a period of 330 days from the CIRP date, including any extension of the period.
- AA ought to have considered the situation as exceptional circumstances for the reason of prevailing pandemic in the country and the CIRP process was still at nascent stage. It is an admitted fact that only 3 meetings have been convened from the date of commencement of CIRP till August, 2020. However, an Application is filed for replacing the RP. The said Application was pending for consideration before the AA and the same was disposed of on 27.01.2021. From the facts it is more relevant that the new RP has to commence the CIRP where it was left by his predecessor.
- Having satisfied with the grounds as made in the Appeal, Hon’ble NCLAT passed the following Order:i. A total period of 92 days is excluded whereby the time lost due to judicial intervention i.e. I.A 4208 of 2020 from the total time period of 330 days. Accordingly, NCLAT set aside paragraph 10 of the IO.ii. A total period of 160 days is excluded the time lost on account of imposition of lockdown from 25.03.2020 to 31.08.2020. Accordingly, NCLAT modify paragraph 9 of the IO.iii. Further the time spent in filing this Appeal i.e. from 12.04.2021 to 04.05.2021 is also excluded.
|Time period of 330 days for completion of CIRP can be crossed in special circumstances
||Ramasamy Palaniappan VS Radhakrishnan Dharmarajan & others (19/2021 & 20/2021)
- These 2 Appeals emanate from the common IO dated 23.12.2020 passed by NCLT, Chennai Bench whereby AA has allowed the Application filed u/s 12(2) of IBC filed by RP & R1 herein excluded the period commencing from 05.05.2020 till 31.12.2020, from the CIRP, to provide the benefit under Reg. 40 C.
- The Appellant who are the shareholders of CD has
filed this Appeal mainly on the ground that the RP has committed the categorical violation of Reg. 40C by not considering the interests of all Stakeholders of the CD and merely seeking exclusion of time period to complete the formalities in the capacity of the RP. The RP ought to have considered the entire Stakeholders’ interest and sought complete exclusion of the timeline and the activities undertaken during the excluded period to render considerable benefit to all the Stakeholders.
- The Appellant contends that the RP has acted only
to recover the bad loans and repay the creditors. The RP made no attempts to seek exclusion of the lockdown for re-issuing Form G. Whereas, on the contrary, the Resolution Applicant proceeded ahead with the entire CIRP Process in full force during the peak of the pandemic where all businesses were down to rock bottom and more so, the hospitality and the hotel industries.
- The RP did not attempt to safeguard the valuable assets of the CD and has presented the Plan of the Resolution Applicant, which takes care of just the minimum requirement as prescribed under the IBC by paying back only the financial, secured, unsecured and OC. However, the members of CoC themselves have felt that the Resolution Plan amount is far lower than the liquidation value of the CD and hence, suggested re-invitation of EOI and the re-issuance of Form G. There was no economic activity during Covid-19 pandemic.
- The RP has acted entirely against the object of the IBC, 2016, which is primarily for enhancement of entrepreneurship and maximization of the value of the CD’s assets while balancing the interests of all the Stakeholders.
- NCLAT finds that Reg. 40C could have been applied for exclusion of 179 days on account of the unprecedented situation created by the Covid-19 pandemic and some of the FC opined for fresh publication of Form G for the invitation of EOI. But the COC had unanimously decided only for seeking exclusion of 179 days, i.e. from 05.05.2020 to 31.10.2020, for completion of CIRP. But the CoC, under its commercial wisdom, did not prefer for publication of Form-G afresh to invite EOI. Therefore, such a decision of the CoC is not justiciable.
- Therefore, both the Appeals deserve to be
|Neither NCLT nor NCLAT has been endowed with the jurisdiction to reverse the commercial wisdom of CoC. Invoking Reg. 40C by IRP for extending the timeline as a matter of routine is incorrect.
||Kanwar Raj Bhagat VS Gujarat Hydrocarbons and Power SEZ Ltd & Anr (1096/2020)
- An Appeal is filed by the Ex Director of CD against an IO dated 18.11.2020 passed by NCLT, Delhi Bench admitting the Application filed by FC u/s 7 of IBC.
- Brief and relevant facts for these Appeals are that SREI Infrastructure Finance Ltd. (FC) had granted a loan of Rs. 100 Crores to Gujarat Hydrocarbons & Power SEZ Ltd. (CD) wherein Assam Company India Ltd. (ACIL) was a Corporate Guarantor (CG). ACIL is the holding Company of CD. The CD failed to repay the loan amount and interest which prompted the FC to file an Application being OA No. 477/2012 against the CD and guarantors including ACIL before DRT-1, Kolkata.
Issue 1: Whether the Application u/s 7 of IBC is barred by Limitation?
- Ex-Director of the CD argued that S.18 of the Limitation Act, 1963 is not applicable to the IBC.
- Considering the Hon’ble SC in its Judgments of B.K. Educational Services, Jignesh Shah, Babulal Vardharji the question is no longer res integra that the provisions of S.18 of the Limitation Act, 1963 are applicable to S.7 and S.9 of IBC.
- The date of default is 15.04.2012. The Debt Repayment and Settlement Agreement was entered on 24.03.2015. On failure of CD to repay, FC cancelled the said agreement on 29.05.2017. In this agreement, the CD has specifically ack. the debt. FC filed an Application u/s 7 of IBC on 10.02.2020.
- It is apparent that the Application is filed within
extended period and the Application is within Limitation, NCLAT affirm the finding of AA.
Issue 2: Whether the second Application u/s 7 of IBC is not maintainable against the CD as for the same debt and default, CIRP has already been taken place against the CG and the FC has accepted the amount in full and final settlement of all its dues?
- Ex-Director of the CD raised a plea that FC has
initiated CIRP against the CG, therefore, after two years, for the same debt and default, CIRP cannot be initiated against the CD.
- NCLAT is with the view that Application u/s 7 of IBC against CD for the same debt & default is maintainable in the light of judgement of State Bank of India v/s Athena Energy Ventures Pvt. Ltd.
- NCLAT opined that it cannot be held that the FC accepted the amount in full and final settlement of all its dues. Therefore, with a view that the Application u/s 7 of the IBC is maintainable against the CD for the same debt and default and the FC can recover the remaining dues from the CD.
|Limitation. Though CIRP has already filed against CG, it cannot be held that the FC accepted the amount in full & final settlement of all its dues & Application against CD is maintainable
||BRS Ventures Investment Ltd Vs. SREI
Infrastructure Finance Ltd & Anr. (1109/2020)
- The present Appeal is against an IO dated 11.08.2020 by the Appellant ‘BRS Ventures Investment Ltd.’, the successful Resolution Applicant in a CIRP against the Corporate Guarantor (CG), Assam Company India Ltd., (ACIL).
- The issues arising for consideration in Appeal No. are as follows:
Whether the Resolution Applicant is entitled to exercise its right over the subsidiaries company of ACIL (CG)?
No forensic audit report place on record to prove that the ACIL fraudulently made investments in its subsidiaries i.e. CD. Therefore, the assets of the subsidiaries cannot be included in the Resolution Plan in relation to ACIL submitted by Resolution Applicant (Appellant).
Whether the approved Resolution Plan has included the SEZ business of the CD?
NCLAT minutely examined the Resolution Plan it is nowhere mentioned that SEZ Business of the CD is included in the Resolution Plan. RP can only take care of the investments in the subsidiaries and not the assets of the subsidiaries.
During the CIRP of ACIL, no valuer was appointed to determine the fair value of the shares held by the CD. Therefore, the assets of the CD (Respondent) cannot be included in the Resolution Plan.
NCLAT find no merit in these Appeals, therefore, the Appeals are dismissed.
- Assets of
subsidiariescannot beincluded inResolution
Plan of CD
||Regional Provident Fund Commissioner Warangal Employees Provident Fund Organization Vs. Vandana Garg & Ors (50/2021)
- The Appeal emanates from the IO dated 20.07.2020 passed by NCLT, Chennai Bench, approving the Resolution Plan, which waves off a major portion of the Provident Fund (PF) dues owed by the CD.
- The Appellant contends that the AA has failed to consider that PF dues ought to be given priority over all other dues owed by CD in view of the express provision of S.36 of IBC and S.11 of the Employees Provident Fund and Miscellaneous Provision Act 1952 (“EPF Act”).
- In the instant case, the Appellant, despite filing a claim of Rs.1,95,01,301/- has raised a claim of Rs. 2,84,69,797/-, i.e. much higher than the amount claimed by the Appellant in its claim before the RP.
- The Appellant’s claim admitted by R1/RP had been considered while formulating the Resolution Plan of the CD. The Resolution Plan was approved by AA on 20.07.2020 as per S. 30(2) of IBC.
- The Appellant has not provided any reason or justification for raising the enhanced claim of Rs.2,84,69,797/-, which is much higher than the amount claimed.
NCLAT concludes that:
- Once a Resolution Plan is duly approved by the AA u/s 31 of IBC, the claims as provided in the Resolution Plan shall stand frozen and will be binding on the CD and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of Resolution Plan by the AA, all such claims, which are not a part of Resolution Plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the Resolution Plan.
- NCLAT believe that the Appeal sans merit and deserve to be dismissed. Hence, Appeal is dismissed.
|After approval of the Resolution Plan u/s 31, the claims as
provided in the Resolution Plan shall stand frozen and will be binding on the CD and its employees, members, creditors including the Central Government, any State
Government or any Local Authority, Guarantors and other Stakeholders.
||Laxmi Narayan Sharma Vs. Punjab National Bank & Ors. (01/2021)
- The Appeal is preferred by the Promoter/ Suspended Director of CD against an IO dated 18.01.2021 passed by NCLT, Hyderabad Bench admitting an Application submitted u/s 7 of IBC by FC assailing on the grounds of Limitation.
- Appellant contends that Application filed by the FC
is barred by Limitation, because of the fact that the Application was filed on 18.07.2019 or any date thereafter. Furthermore, it is projected that the ‘Date of Default’ for all the facilities given by the Punjab National Bank in terms of Part-IV of the Application is 30.03.2016 and that the Limitation came to an end on 29.03.2019. Moreover, the date of NPA is 30.06.2013. As such, the Application u/s 7 of IBC filed by the R1 seeking initiation of ‘CIRP’ was admitted by the AA beyond the specified Limitation period of 3 years.
- The Tribunal concludes considering the prime fact that the Guarantor(s) in respect of the Accounts of the CD (M/s. Saptarishi Hotels Private Limited) had executed the Balance and Security Confirmation Letters dated 20.02.2018 for the due amount of Rs.78,74,73,945/- [Confirmation of Correctness of Debit Balance] and keeping in mind yet another fact that a sum of Rs.15,262.75 was paid by the CD on 15.10.2018 and as on 30.06.2019 the due amount was Rs.144,02,51,063.09 comes to an irresistible, inevitable and inescapable conclusion that in respect of the loan account of the CD, there was an ‘Acknowledgement of Debt’ as per S.18 and S.19 of the Limitation Act, 1963.
- In fact, the Application filed by the R1 in July 2019 (vide intimation given by the R1’s advocate through communication dated 18.07.2019 addressed to CD) is perfectly maintainable in Law, of course, well within the period of Limitation.
- As such, the Contra Plea taken by Appellant is
legally untenable and is rejected.
- NCLAT is opined that the R1 has proved the existence of ‘Debt and Default’ (vide documents) filed along with the Application u/s 7 of IBC against the CD and that the conclusion arrived at in admitting the Application by the AA is free from legal infirmities. Therefore, Appeal is dismissed.
||Antanium Holdings PTE
Ltd VS Sujana Universal Industries Limited & Anr (07/2021)
- The Appellant/ Successful Resolution Applicant has filed the Appeal being aggrieved with the Order dated 24.12.2020 passed by the NCLT, Hyderabad Bench, had inter alia at para 22 had observed the following:
22. However, the Resolution Plan approved shall not construe any waiver to any statutory obligations/ liabilities arising out of the approved Resolution Plan and shall be dealt in accordance with the appropriate Authorities as per relevant Laws. This Adjudicating Authority is of the considered view that if any waiver is sought in the Resolution Plan, the same shall be subject to approval by the concerned Authorities. The same view has also been held by Hon’ble Principal Bench, NCLT in the case of Parveen Bansal Vs. Amit Spinning Industries Ltd. In CA No.360(PB) 2018 in CP No.(IB) 131 (PB)/2017.
- The grievance of the Appellant is that the AA had committed an error by placing an additional Para 22 of the IO, as a result thereof, the financial viability of the Plan has been seriously affected by opening of the Plan towards ‘undecided claims’. It is also represented on behalf of the Appellant that the ‘Appellant’ does not have finality towards the liabilities of the CD.
- The Appellant vehemently comes out with a plea that it is impossible for the Appellant to implement the Plan along with the additional condition mentioned in Para 22 of the IO and in any event, Para 22 of the IO seeks to bring alive claims of Statutory Authorities who did not participate in the ‘Resolution Process’ and therefore, cannot be permitted to belatedly open issues that are deemed to be settled upon approval of the ‘Resolution Plan’ by 80.64% of the voting share of the COC.
- NCLAT holds that the Resolution Plan approved shall not construe any waiver to any statutory obligations/ liabilities arising out of the approved Resolution Plan and same shall be dealt in accordance with the appropriate Authorities as per relevant Laws.
- NCLAT is of the considered view that if any waiver is sought in the Resolution Plan, the same shall be subject to approval by the concerned Authorities.
- NCLAT concludes that the said ‘Observations’ are not in the form of ‘imposition of an additional condition’ thereby opening up the Plan in regard to the ‘undecided claims’, because of the reason that the AA is within its limits to express its views/ opinion(s). The ‘Instant Appeal’ Sans merits.
|If any waiver is sought in the Resolution Plan, the same shall be subject to approval by the concerned Authorities. AA is to record analytical subjective satisfaction which is a precondition before according an Approval to the Resolution Plan
||R V Tyagarajan VS R.
Raghavendran Thiru Arooran
Sugars Ltd (59/2021)
|The Appeal is preferred by the Chairman and MD of CD being aggrieved against the Order dated 08.04.2021 passed by the NCLT, Chennai Bench whereby and where under the Liquidation of the CD was Ordered.
- The Appellant contends that RP had failed to bring on record before the AA that during the CIRP, after three rounds of invitation between December 2019 and July 2020 for EOI and submission of Resolution Plans by interested parties, only one Applicant in the final round projected a Resolution Plan with a Final Plan Value which was around 17% lower than the RP’s assessed Liquidation Value of Rs. 217 Crores. The said Plan was rejected by COC on 17.12.2020
- Further, revised ‘Compromised Settlement Offer’ (CSO) was submitted on 23.11.2020, wherein the offer to the Banks was raised from 30% to 33% of the admitted claims and the aggregate upfront payment increased to not less than 10% of the amount due to the Banks.
- Appellant urges before this Tribunal that the revised CSO of Rs. 243 Crores for all Creditors is 12% higher than the Liquidation Value of Rs. 217 Crores, and works out to 42.03% of the aggregate claims admitted by the RP.
- Appellant contends that due to the delay in receipt of investor funds, the additional upfront payment was not made and hence, the revised ‘CSO’ was not considered for approval by COC.
- The real grievance of the Appellant is that the AA had failed to consider the efforts CD at resolving the debt of the CD in the teeth of the IBC, which provides for Liquidation in the event of failure of CIRP or non-receipt of any RP within the specified period.
- NCLAT keeping in mind of a primordial fact that the decision of the COC takes a pivotal seat based on ‘Commercial Wisdom’, taking note of the fact that the COC Members with 76.02% voting share had voted against the Resolution Plan and in the teeth of ingredients of 33(2) of IBC, comes to an irresistible conclusion that the ‘IO of Liquidation’ in respect of the CD. Hence, the Appeal fails & dismissed.
|COC takes a pivotal seat based on Commercial Wisdom.
||Ronak Kundanlal Bhagat & Ors VS Parthiv Parikh RP of
Sanghvi Forging and
Engineering Ltd & Ors (364/2021)
- The Appellant is the shareholder of the CD submits that the Promoters of the CD are ready to pay the equal amount which is accepted by the Successful Resolution Applicant. Therefore, the CIRP may be stayed, till next date of hearing.
- R1 contends that Appellants being shareholders of CD have not raised any objection before the AA. Therefore, they have no locus-standy to file this Appeal.
- Further, suspended management failed to act upon the one-time settlement proposal in given time frame therefore, a new Resolution Plan was approved by COC with 100% voting share and same was approved by AA.
- NCLAT concluded with the view that the Appellants have failed to point out that there is any material irregularity in exercise of powers by the RP during the CIRP. The Promoters are failed to comply their one-time settlement.
- Hence on finding no grounds to interfere in the IO the Appeal is dismissed.
|During CIRP once the Resolution Plan is approved by A.A. the Appeal can only be filed on the grounds of material irregularity in exercise of powers by the RP.
||Executive Engineer Uttar Gujrat VIJ Company Ltd VS Devang P Samapat RP of Kanoovi Foods Pvt Ltd (371/2021) & (372/2021)
- The Appellant aggrieved by the IO passed by NCLT, Ahmedabad Bench dated 21.10.2020 whereby the AA did not find claim for recovery of electricity charges during CIRP as maintainable & Order dated 02.12.2020 whereby an Application for review its own Order was disposed off on the grounds of jurisdiction.
- The electric consumption took place for running of the office and other expenses of CD by RP & not used for manufacturing and output of the Biscuits which is the normal operation of the CD.
- Therefore, NCLAT agrees with AA that the electricity charges will be part of the CIRP Costs which can be recovered when the Resolution Plan is approved or would form part of S.53 of IBC if the Liquidation has been initiated.
- Appeal is not admitted and disposed off.
|If essential goods or services provided are not used for normal operations of CD during CIRP than the same will be part of the CIRP Costs which can be recovered when the Resolution Plan is approved or would form part of S.53 if the
Liquidation has been initiated.
||Manasi Indrajit Wadkar VS
Andhra Bank & Anr. (320/2020)
- The Appeal is filed by suspended Director of CD against an IO dated 13.01.2020 passed by NCLT, Ahmedabad Bench admitting an Application filed u/s 7 of IBC by Union Bank of India (Formerly Andhra Bank).
- CD availed Financial Assistance from various Banks and Financial Institutions since 2001 by way of Term-Loan, Cash Credit and Working Capital Demand Loan. The Working Capital Consortium came to be formed which was led by the Andhra Bank.
- CD approached CDR Cell to restructure Working Capital and Term-Loan Facilities and the restructuring package for Working Capital Limit was sanctioned on 29.12.2012. OCC Limit was restructured. Subsequently, even Supplementary Consortium Agreement and other security documents were executed.
- However, it appears that effort at restructuring did not give desired result and the NPA was declared with back date of 29.06.2012.
- Second Amendatory Agreement dated 13.03.2014. Demand Notices under SARFAESI Act were issued on 31.01.2015 & 19.06.2016.
- CD sent a response to the SARFAESI Notice on 31.01.2015. CD proposed to pay the outstanding and due balances as on date of NPA in its OTS Proposal to Andhra Bank dated 05.04.2016.
- Thus, NCLAT states that even if these two documents which have contents in the nature of ack. as covered u/s 18 of the Limitation Act the Application filed u/s 7 can be said to be within Limitation.
- NCLAT finds that the financial debt due and in default was not time barred or AA didn’t commit any error when the Application under S.7 was admitted. Appeal is dismissed.
BabulalAgarwal VS Solartex IndiaPvt Ltd & Ors(546/2020)
- The Appeal is filed by the ex-Director of CD against the IO dated 28.05.2020 passed by NCLT, Ahmedabad Bench whereby an Application u/s 9 of IBC got admitted.
- Issue arise for consideration in this Appeal are:
Whether there is any pre-existing dispute?
- CD placed an Order for coal from R1 (OC) on 27.10.2016. On supply of required quantity R1 issued invoices from 28.10.2016 to 02.11.2016 which CD failed to make payment. CD received a demand notice from OC on 08.02.2018 to which they expressed a complete denial of Operational debt vide reply dated 19.02.2018 & instead demanded an amount towards damage & loss caused to them. An Application u/s 9 filed by OC on 30.07.2018. A sister concern of the CD on 30.10.2016 has sent an e-mail to Group Concern of the OC in regard to the Purchase Order dated 11.10.2016 whereas, the present claim is in regard to the Purchase Order dated 27.10.2016. In the subsequent e-mail dated 03.11.2016, there is no reference to the earlier e-mail dated 30.10.2016. In such circumstances, we are of the view that the e- mail dated 30.10.2016 is not related to the transaction in question. Also in email dated 03.11.2016 it’s clear that CD has suffered losses as the supply was not as per specifications. The delivery of material was stopped by OC vide its reply dated 04.11.2016 on request of CD. Further, CD kept quiet for 15 months from receipt of aforementioned reply from OC & filed a civil suit only when they received a statutory notice which cannot be treated as existence of dispute. In view of NCLAT, CD has failed to prove any pre-existing dispute in regard to transaction in question.
Whether the I.O is passed in contravention of Rule 152, Rule 150 and Rule 89 of the NCLT Rules 2016?
- The AA heard the application and reserved for Orders on 20.11.2019. Thereafter, the parties have filed their written submission on 06.01.2020 and the IO was pronounced by the same Bench on 28.05.2020. Meanwhile, vide Order dated 12.05.2020 and 30.04.2020 these members have been transferred. However, due to lockdown they were unable to join their new place of posting. Since the members were physically present at Ahmedabad. Therefore, in public interest vide Order dated 21.05.2020, a special Bench was constituted to pronounce the Orders reserved by the erstwhile Bench as per S. 419 (3) of the Companies Act, 2013 for the period of 22.05.2020 to 29.05.2020. Thus, it cannot be said that the members have pronounced the IO in contravention of Rule 152 of the NCLT Rules, 2016.
- The IO was pronounced on 28.05.2020 i.e. after about five months from the conclusion of arguments which is against the Rule 150 of the NCLT Rules, 2016 as well as guidelines laid down by the Hon’ble SC in the case of Anil Rai. However, NCLAT is of the view that only this count the IO cannot be set aside which is otherwise flawless.
- The cause list for pronouncement of the IO on the same day may be an irregularity but not an illegality. As Appellant could not access the Orderwas not the case.· NCLAT held the view that Appellant failed to establish that there was a pre-existing dispute and in pronouncing the IO the AA committed any illegality. Thus, the Appeal is dismissed.
|The Civil Suit filed after receipt of statutory notice cannot be treated as existence of dispute. An Order cannot be set aside only on violation of Rule 150 of the NCLT Rules, 2016 if the Order is otherwise flawless.
||Bank of India & Ors VS Ferro Alloys Corporation Ltd Through Mr.
- The Appeal is preferred by M/s. Bank of India,
Central Bank of India, Syndicate Bank and State Bank of India, (Appellant Banks) against the IO dated 02.03.2020 passed by NCLT, Cuttack Bench whereby the AA has allowed the Application filed by the RP u/s 14 read with S.17 and S.60(5) of IBC directing all banks to reverse the due amounts appropriated by them after the CIRP Date within five weeks of receipt of this Order.Facts of the case:
- Vide Order dated 06.07.2017, Ld. AA has admitted the S.7 Application. This Order of Admission was challenged vide Company Appeal (Insolvency) No. 92 of 2017 and this Tribunal has dismissed the Appeal and concurred with the finding of the AA. Appeals challenging Admission Order were dismissed by NCLAT on 08.01.2019 and Supreme Court on 11.02.2019. Subsequently, the Resolution Plan was approved on 30.01.2020.
- The CD was granted fund based (Cash Credit Hypothecation Facility ‘CCHF’) and non-fund based facilities (Bank guarantee/LC Facility) of credit through a consortium of lenders comprising the Appellant Banks since 13.09.2011. The CD created first charge over its Fixed Assets and Current Assets.
- The Bills under Lender of Credit (LC) facility maturing during the CIRP were also honored by the erstwhile RP from the revenue generated by the CD which was making good profits and had accumulated enough cash balance. Hence, the erstwhile RP chose to reduce the utilization of the fund based facilities and had squared off the Cash Credit Facilities with all the Appellant Banks.
- Mr. Bhuvan Madan, the RP, had requested the Banks to reverse the amounts remitted by the previous IRP while discharging his duties as per the provisions of IBC.
- NCLAT is with the view that the amounts were
honored partly by margin held as FDR and partly by funds of the CD deposited in its Cash Credit Accounts. Further, merely because the CD had enough liquidity to run the Company as a going concern, the act of the Appellant Banks to adjust the credit balance in the Cash Credit Account towards the debit balance after CIRP commenced, cannot be justified.
- The IBC provides that Claims filed by the Creditors
during the CIRP shall stand crystallized and will not be settled during the CIRP in preference over other Creditors.
- NCLAT is further with the view that adjusting of the Claims by the Appellant Banks during the CIRP out of the funds of the CD results in unjust enrichment of the Banks and further, crediting amounts towards non-fund and fund based accounts during the moratorium period is against the
provisions of S. 14 of IBC.
- Hence, NCLAT finds no illegality or infirmity in
the Order of the A.A. Therefore, the Appeal is dismissed.
|Claims filed before the RP are not entitled to recover the
amounts otherwise available in the Credit Accounts or Working
Capital Accounts of the CD during the moratorium period as it is against the provisions of S.14 of IBC.