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Insolvency and Bankruptcy - Case Laws
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2024 (5) TMI 871 - SC ORDER
CIRP - parties have compromised and settled the matter in terms of the Deed of Settlement - HELD THAT:- The Corporate Insolvency Resolution Process against respondent no. 2 – M/s. Anjani Realtors Pvt. Ltd. will be treated as closed.
The appeal is disposed of.
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2024 (5) TMI 852 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Dismissal of application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 - CIRP - no relationship of financial creditor and the corporate debtor - no transaction in the nature of financial debt between the parties - no privity of contract between the parties - HELD THAT:- It is not in dispute that the Appellants had advanced the loan to PHPL and not to Respondent. There is no privity of contract between the parties. PHPL failed to return the money taken as loan from the Appellants - It was provided in clause 35 of the sale deed that the vendee shall pay to the confirming party and it is mentioned in so many words in the sale deed that the money has already been paid by the vendee to the confirming party but the allegation of the Appellants is that the said money has not been paid to them by the vendor.
In such circumstances, it is not a case which would fall within the provisions of the Code to trigger CIRP, invoking Section 7 of the Code and therefore, the Tribunal has rightly dismissed the application, however, liberty has been granted to the Appellants to pursue his other remedy for the purpose of recovery. It would also be not out of place to mention that the regime of the Code is not for recovery but for the resolution of debt by maximisation of the asset and to bring the CD on its own feet. Therefore, not only Respondent was dragged in the litigation at the instance of the Appellants before the Tribunal but also in this appeal in which no case is made out at all.
The present appeal is hereby dismissed.
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2024 (5) TMI 808 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Violation of principles of natural justice - non-speaking order - impugned order has not dealt with the various prayers made by the Appellant in the application and has confined its order with the claim which has been admitted by the RP - HELD THAT:- This matter requires a relook by the Adjudicating Authority for the purpose of recording a finding on each prayers sought in the application after taking into consideration the pleadings as well as the evidence brought on record. As according to us, the impugned order is totally nonspeaking.
Application is hereby restored and the matter is remanded back to the Adjudicating Authority to decide the application again by recording reasons while dealing with the prayers made in the application - appeal allowed by way of remand.
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2024 (5) TMI 789 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Scope of CIRP costs - Allowability of the claims during the CIRP to be treated as CIRP costs - waterfall mechanism - contract was completed during the CIRP period - cost attributable to the Respondent can be considered as CIRP cost or not - whether the costs incurred for the work done during the CIRP by Respondent No 1/subcontractor, can be considered as CIRP Cost or not by the Liquidator? - HELD THAT:- From the extracts of the minutes of the CoC, it is clear that a conscious decision was taken that payments to vendors engaged in specific projects would be sourced from the cash flow generated by those projects' customers. The Darlipali Plant of the Corporate Debtor ceased operations during the CIRP Period. Consequently, the activities undertaken by Respondent No. 1, acting as a subcontractor, did not contribute to the Corporate Debtor's viability as a "going concern." This pivotal factor led Respondent No. 2, in its capacity as the Resolution Professional, to exclude the costs incurred by Respondent No. 1 from the ambit of CIRP Costs.
It is agreed that mere fact that the dues have arisen during the CIRP period would not be determinative of it to be classified as CIRP cost. Interpreting Section 5(13)(c) of the Code in this manner would render the words “in running the business of the corporate debtor as a going concern” otiose. Further, it is clear from Regulation 31 and the guidance provided by IBBI vide the above-mentioned circular that unless the CoC has approved the dues and they directly relate to the CIRP, the dues cannot be classified as CIRP cost. And the CoC decided to exclude the cost incurred from the terminated projects, which is not maintaining the Corporate Debtor as “a going concern”.
In conclusion, the following criteria determine whether a cost incurred by the Resolution Professional during CIRP qualifies as CIRP cost: (a) maintaining the Corporate Debtor as a going concern, (b) payment to suppliers of essential goods and services, and (c) direct relation to CIRP with approval from the Committee of Creditors (CoC). Applying these criteria to this case, the claim fails to meet the definition of CIRP cost.
This has also been held so in various decisions of this Tribunal also. In Bharat Hotels Ltd. v Tapan Chakraborty [2022 (9) TMI 224 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] it was held that These issued may be decided in the meeting of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision. It shall be always open for the appellant to raise issue regarding the cost in the meeting of the Committee of Creditors. With reference to the grievance of the Appellant with regard to obtaining valuation report, it is always open to the Appellant to request the Liquidator to obtain a valuation report, if not already obtained.
The Respondent's claim should be classified as non-CIRP cost, falling under Section 53 of the Code for distribution during liquidation - The Respondent's claim doesn't meet the CIRP cost definition. It lacks CoC approval, doesn't support the "going concern" objective, and is subject to unrealized payments from NTPC. The AA's decision contradicts CoC's authority, previous rulings, and commercial realities and is therefore set aside. Accordingly, the Respondent's claim should not be treated as CIRP cost.
Appeal allowed.
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2024 (5) TMI 784 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , CHENNAI BENCH
Initiation of CIRP - maintainability of application filed under Section 7 of IBC - application beyond the period of limitation - HELD THAT:- Three home buyers initiated the legal proceedings under the Code by filing the application under Section 7 which was admitted on 20.08.2019. Since, the CIRP was initiated against the Company as a whole (Corporate Debtor), therefore, the homebuyers of Dreamz Sneh Project also filed their claims to the IRP which were admitted. However, by a subsequent order dated 04.09.2020, the CIRP initiated was ordered to be confined to only one project, namely, Dreamz Sumadhur Porject. As a result thereof, a separate cause of action arose to the Appellant for the purpose of redressal of their grievance with the passing of the order dated 04.09.2020 and therefore, they filed the application under Section 7 on 19.08.2021 within a period of three years from the date of cause of action 04.09.2020 had arisen.
The arguments raised by the Appellant is that the limitation can be extended only under Section 18 and 19 of the limitation Act, cannot be accepted because of the decision of the Hon’ble Supreme Court in the case of Dena Bank [2021 (8) TMI 315 - SUPREME COURT]. It has been held that the limitation can be counted from the date of the judgment or decree.
There are no error in the impugned order in so far as the issue of limitation has been decided which has only been challenged in this appeal, therefore, the present appeal is found devoid of merit and the same is hereby dismissed.
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2024 (5) TMI 728 - PATNA HIGH COURT
CIRP - waterfall mechanism - extinguishment of demand for reason of the State Tax Authorities not moving the National Company Law Tribunal (NCLT) for inclusion of their demand in the resolution plan, as a debt payable by the Company-a Corporate Debtor under the IBC - HELD THAT:- The petitioner was incorporated as a Special Purpose Vehicle to carry out the work of upgradation of Hazipur-Muzaffarpur section of the existing NH-77 within the State of Bihar on Build Operate and Transfer (BOT) (annuity-basis) under the National Highway Development Project Phase-III. The agreement executed by the petitioner with the NHAI is produced as Annnexure-P/1 dated 24.02.2010. It was by Annexure-P2 dated 03.01.2020 that the NCLT, New Delhi, admitted the petitioner into the CIRP in terms of the IBC - Annexure-P/2 is dated 03.01.2020 and till the approval of the resolution plan on 10.05.2022 there was a moratorium under Section 14 of the IBC. It has to be noticed that this does not preclude the State Tax Authorities from proceeding with the assessment, which can be proceeded with, but no recovery can be effected.
The State or the Central Government or any local authority definitely is reserved with the right to approach the Resolution Professional with their claims which the Resolution Professional is obliged to include in the resolution plan. There is also an appeal provided from the order of the NCLT to the National Company Law Appellate Tribunal which can be availed by any creditor whose claims have not been included by the resolution professional.
In the present case there is no challenge against the resolution plan as approved by the COC followed up with the approval of the adjudicating authority; the NCLT. The State does not have a case that they have approached the R.P. within the period provided and before the resolution plan was approved by the COC and then by the NCLT. There is no recovery initiated or assessment order passed before the resolution plan is approved - The order of the NCLT was approved finding that, even the dues to the Central or the State Government payable into the respective consolidated funds stand on a different footing; covered only under Section 53(1)(e) of the IBC, in a liquidation proceeding. The debts owed to secured creditors who have relinquished their security interest have a better claim under Section 53(1)(b); at par and along with the dues of the workmen for the just prior 24 months period; both of which have pre-eminence from that of a secured creditor who does not give up the security interest. Even the financial debts owed to unsecured creditors by virtue of Section 53(1)(d) of the IBC has a better claim than the dues to the Central Government and the State Government falling under Clause-(e) of Section 53(1) of the IBC.
Both the writ petitions are allowed restraining the State from proceeding for recovery under the impugned assessment orders.
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2024 (5) TMI 727 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Imitation of CIRP - Admissibility of Intervention Petition - Homebuyers - Appellant claiming that they are holding 102 units in Festival City Project and they sought intervention in the Company Petition. - NCLT admitted the Section 7 application which was affirmed by the Supreme Court - HELD THAT:- The Company Petition which has been filed in the year 2024 by Respondent No.6- M/s. Mist Direct Sales Pvt. Ltd., Counsel for the Respondent No.2 has produced the order dated 05.04.2024 of the Adjudicating Authority where petitioners have been asked to clarify various aspects. The petition under Section 230 for scheme by the corporate debtor is independent proceeding but filing of the said petition cannot be a ground to not permit the proceeding under Section 7 which are being halted and obstructed by one or other attempts by corporate debtor and other applicants as noted above. It is further noticed that the case of the corporate debtor as noticed from the record, it is clear that the RERA registration of the project has already cancelled and there is a dispute of title as claimed by the corporate debtor regarding the land.
There are no substance in the submission of the counsel appearing for Respondent No.6 to accepts the submission that Section 7 application be further not proceeded with till application under Section 230 of the Companies Act filed by Respondent No.6 be finalised.
Section 7 application has to be proceeded and decided in accordance with law and in the facts of the present case, Adjudicating Authority did not commit any error in rejecting the Intervention Petition - there are no error in the impugned order. The appeal is dismissed.
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2024 (5) TMI 726 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Rejection of section 9 application - Initiation of CIRP - prior dispute in relation to existence of debt or not - whether there was a pre-existing dispute between the two parties with regard to the operational debt? - HELD THAT:- In the present case, from material on record, it is clear that the demand notice was issued by the Operational Creditor on 12.07.2022 and no notice of dispute was raised by the Corporate Debtor. The argument of the Corporate Debtor is not persuasive that the notice was not effectively served upon him for reasons spelt out by the Adjudicating Authority in para 5.3.1 of the impugned order - The statutory scheme of IBC in such circumstances pretty much entitled the Operational Creditor to file an application under Section 9 and this is exactly the course of action followed by the Operational Creditor and we therefore find nothing wrong in this course of action. It is only at this stage when the Operational Creditor moved an application before the Adjudicating Authority under Section 9 that the Corporate Debtor has endeavoured to protect its interests and raised the issue of pre-existing disputes.
In the present case, it is contended by the Corporate Debtor that there is no valid and legal claim to receive payment. The issue of proforma invoice in place of debit note has been voiced by the Corporate Debtor as tantamount to breach of contractual obligations and therefore held by the Adjudicating Authority to be yet another ground of dispute.
Where operational creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which however is not so borne out by the facts of the present case. That pre-existing dispute was very much there is amply supported by material on the record. Such contractual disputes require further investigation and cannot be considered by the Adjudicating Authority in the exercise of their summary jurisdiction. And for such disputed amounts, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. Keeping in view that the present facts of the case indicates that the operational debt is disputed, the Adjudicating Authority has therefore correctly rejected the Section 9 application.
The Adjudicating Authority did not commit any error in rejecting the Section 9 application filed by the Appellant. There is no merit in the Appeal. Appeal is dismissed.
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2024 (5) TMI 679 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Seeking directions to the Resolution professional to conduct Transaction Audit of the books of the Corporate Debtor appointing Mr Amit Khandelwal as an independent auditor - constitutionality of re-constitution of COC by RP without conducting the transaction audit - legality of approval of resolution plan by the illegally constituted COC - HELD THAT:- The impugned order being only interlocutory order and subsequently another order has been passed on 11.03.2024 all issues pertaining to the application are open and to be considered and decided by the Adjudicating Authority after hearing both the parties.
Since the Adjudicating Authority in subsequent order makes it clear that the application may be decided afresh after hearing both the parties and considering the Reply, there are no reason to keep the appeal pending.
Appeal disposed off.
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2024 (5) TMI 678 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Initiation of CIRP - application barred by Section 10A of IBC - date of alleged default is mentioned as 08.08.2018 from which date three years’ period came to end on 08.08.2021 and thereafter petition was not filed within the time - HELD THAT:- The present is a case where admittedly default was committed by the Corporate Debtor much prior to 10A period i.e. 08.08.2018 as was claimed by the State Bank of India in its application. When default was committed by the Corporate Debtor prior to 10A period, it is not open for the Appellant to claim that application deserve to be rejected on the ground of Section 10A.
There are two reasons for not accepting the submissions of the Appellant that the application under Section 7 was bared by Section 10A. Firstly, the default was committed by the Corporate Debtor prior to 10A period w.e.f. 08.08.2018, which was date of default mentioned in Section 7 application. When Section 7 application mentions date of default which default was committed prior to 10A period, application under Section 7 cannot be held to be barred by Section 10A. Further, although OTS was communicated by the Bank by letter dated 05.09.2020 but the OTS itself contemplates that parties shall jointly file an application before the DRT where original application filed by the Bank was pending and obtain the Consent Decree - The undertaking admittedly was issued on 11.05.2021. When the Joint Application was filed subsequent to 10A period and Consent Decree was obtained only on 26.04.2022, the submission of the Appellant that application under Section 7 was barred by 10A cannot be accepted.
It is relevant to notice that the date of default was mentioned as 08.8.2018 and OTS proposals were given by the Corporate Debtor on 11.03.2020 and 05.05.2020. The application under Section 7 was filed by the Bank on 13.03.2023 i.e. well within three years from submission of OTS proposal. OTS proposal submitted by the Corporate Debtor was clearly acknowledgement of debt and the benefit of Section 18 of the Limitation Act shall be available to the Financial Creditor. Further, admittedly Consent Decree was passed by Debts Recovery Tribunal on 26.04.2022 and from the date of decree of the DRT, there shall be further period of three years for filing application.
There are no grounds have been made out in this appeal to interfere with the impugned order admitting Section 7 application. There is no merit in the Appeal - Appeal is dismissed.
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2024 (5) TMI 677 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , NEW DELHI
Entitlement to file an appeal as an Independent Director in the Corporate Debtor - aggrieved person regarding acceptance of claim of the financial creditor or the quantum of financial credit admitted or not - HELD THAT:- It is apparent that the OTS of 2008 was revoked and that the claim made by Respondent No. 2 was filed ignoring the said revoked OTS. The appellant’s submission that the OTS was not revoked is not borne out from the documents.. The admission of claim of Respondent No. 2 is in accordance with the application and order of admission under Section 7 of IBC, 2016, the correspondence between the financial creditor and corporate debtor and other records of the Corporate Debtor. The claim, as well as constitution of CoC with voting share as per claim, was in the knowledge of appellant from the very beginning. There are no fault in the RP’s admission of claim of Respondent No. 2.
There are no merit in this Appeal. The Appeal is accordingly dismissed.
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2024 (5) TMI 676 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Admission of Section 95 application filed by the Financial Creditor - Personal Guarantor of the Corporate Debtor - date of default - time limitation - Insolvency petition which has been filed by the Financial Creditor has been signed by Resolution Professional who was not the authorized officer of Respondent No.1 - Personal Guarantee dated 25.07.2012 executed by the Appellant in favour of Dena Bank is an unstamped document.
Time limitation - Submission of the Appellant is that the Deed of Guarantee dated 25.07.2012 was invoked by Recall Notice dated 04.03.2016, hence, three years’ period of limitation ended on 04.03.2019 and application filed by the Financial Creditor on 10.08.2021 was barred by time - HELD THAT:- On looking into the Declaration cum Undertaking, which was issued by the Appellant, it is clear that said declaration contained the acknowledgement of debt of the company towards the Financial Creditor. The acknowledgment of debt in writing is sufficient to extend the period of limitation as per Section 18 of the Limitation Act. Thus, the said Declaration cum Undertaking will extend further period of three years from date of undertaking and the application under Section 95 which was filed on 10.08.2021 cannot be said to be barred by time.
The Hon’ble Supreme Court by Suo Motu Writ Petition (Civil) No. 03 of 2020 [2021 (3) TMI 497 - SC ORDER] has excluded the period from 15.03.2020 to 28.02.2022 and in the present case the application was filed on 10.08.2021 i.e. during the aforesaid period. The three years’ period from date of Declaration cum Undertaking came to an end on 28.01.2021 i.e. within the period which as excluded by the Hon’ble Supreme Court - thus, the application cannot be said to be barred by time.
Insolvency petition which has been filed by the Financial Creditor has been signed by Resolution Professional who was not the authorized officer of Respondent No.1 - HELD THAT:- Section 95(1) permits a creditor to file an application through a Resolution Professional for initiating the insolvency resolution process. Thus, the submission of application by the Financial Creditor through Resolution Professional is clearly permitted by Section 95(1) - there are no defect in the application which warrants dismissal of application on this ground. No defect was pointed out by the Adjudicating Authority to the Financial Creditor, which fact is undisputed.
Personal Guarantee dated 25.07.2012 executed by the Appellant in favour of Dena Bank is an unstamped document - HELD THAT:- The Application under Section 7 was filed by the Financial Creditor against the Corporate Debtor with regard to same loan facility, which was admitted by the Adjudicating Authority vide its order dated 19.02.2020. Thus, when Financial Creditor’s status was accepted in Section 7 proceeding and the application under Section 7 was admitted against the Corporate Debtor, the status of Financial Creditor as Assignee of the Bank cannot be questioned by the Appellant in this proceeding. We do not find any substance in the submission of the Appellant.
There are no error in the order passed by the Adjudicating Authority admitting Section 95 application. There is no merit in the appeal - appeal dismissed.
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2024 (5) TMI 628 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Violation of Principle of Natural Justice - denial of opportunity of hearing - grounds which were taken by the Adjudicating Authority were neither pleaded by the application filed by the Torrent Power Limited and Vantage Point Asset Management Pte. Ltd. nor they were addressed at the time of hearing of the application as pleaded by the RP and CoC - correctness of approved Resolution Plan - HELD THAT:- There are substance in the submission of the Counsel for the Appellant that process adopted by the Adjudicating Authority in proceeding to allow application has violated the Principles of Natural Justice. No notice was issued in the application, no reply was called on the applications and while allowing the said application the entire plan which was approved has been remitted for reconsideration - the impugned order deserves to be set aside on the ground of violation of Principles of Natural Justice.
The Hon’ble Supreme Court further in Ramkrishna Forgings Limited vs. Ravindra Loonkar, Resolution Profession of ACIL Limited & Anr., [2023 (11) TMI 910 - SUPREME COURT] again reiterated that Adjudicating Authority has jurisdiction only under Section 31(2) of the Code, which gives power not to approve the Plan, only when the Resolution Plan does not meet the requirements of the Code.
The observation that in absence of any discrimination or perverse decision, it is not open to the Adjudicating Authority or this Appellate Tribunal to modify the Plan was in reference of the claim of Operational Creditor, which was under consideration in the said Appeal. The expression discrimination has to be understood in the context of the Operational Creditor, who as per the provisions of Section 30, sub-section (2) is entitled to an amount. In event the amount offered to the Operational Creditor is not in accordance with Section 30, sub-section (2), there may be a ground for interference.
The concept of discrimination of payment to various creditors have been further explained and elaborated in by the Hon’ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA & OTHERS [2019 (11) TMI 731 - SUPREME COURT], where it has been held that there can be different payment to various classes of creditors. Another expression used in paragraph-6 by this Tribunal is perversity.
In the facts of the present case, there can be no allegation against the Appellant about the concealment of any fact from the Adjudicating Authority. The Appellant was only a Resolution Applicant, who has submitted a Resolution Plan, which after evaluation was placed before the CoC by the RP.
The CoC being led by two leading Banks, i.e., Bank of Baroda and State Bank of India, having vote share of 92.77% and 7.23% respectively was well aware of the financial intricacies and there has to be intrinsic assumption that the Financial Creditors were well aware of all financials of each Resolution Plan.
The findings of the Adjudicating Authority regarding incomplete financial data has been challenged in the Appeals both by Sarda as well as RP and CoC - the impugned order passed by Adjudicating Authority dated 06.10.2023 deserves to be set aside, on the violation of principles of natural justice, consequent to which order, the matter needs to go back to the Adjudicating Authority for fresh consideration.
Appeal disposed off.
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2024 (5) TMI 627 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Initiation of CIRP - NCLAT admitted the application u/s 7 - existence of debt and default - date of default was 14.02.2020, when the account was declared NPA - application barred by Section 10A of IBC or not - HELD THAT:- The Application under Section 7 clearly mentions that date of default was 14.02.2020, when the account was declared NPA. The Financial Creditor was fully entitled to file Section 7 Application, treating the date of default as 14.02.2020 - It is further relevant to notice that date of NPA mentioned was not for the first time mentioned in Section 7 Application. The Financial Creditor has initiated proceedings under the SARFAESI Act against the Corporate Debtor before the Debts Recovery Tribunal, referring to Notice under Section 13, sub-section (2) of SARFAESI Act and the date of NPA was mentioned as 14.02.2020. The sheet-anchor submission of learned Counsel for the Appellant is on renewal letter dated 26.07.2019 issued by the Syndicate Bank (now Canara Bank).
Renewal of sanction for one year is the renewal of working capital limit, as noted in the letter. Renewal of working capital limit is not relatable to the default committed by the Corporate Debtor in fulfilling the obligations under the Sanctioned Facilities. When on 14.02.2020, accounts of the Corporate Debtor were declared as NPA, it clearly means that default was committed by the Corporate Debtor in carrying out his financial obligations. Renewal of sanction has nothing to do with the date of default committed by the Corporate Debtor in fulfilling its financial obligations. Thus, the very basis of the submission of learned Counsel for the Appellant that since renewal of working capital limit was renewed for one year upto 25.07.2020, hence, the date of default is 25.07.2020, has no basis and is to be rejected.
The application under Section 7 filed by Canara Bank was not barred by Section 10A as contended by the Appellant. The Adjudicating Authority having found the debt and default, has rightly proceeded to admit Section 7 Application. In paragraph 16 of the order, the Adjudicating Authority has noted all relevant factors to be considered in Section 7 Application and has proceeded to answer the said issues in favour of the Financial Creditor.
The are no error in the impugned order passed by the Adjudicating Authority admitting Section 7 Application. There is no merit in the Appeal - appeal dismissed.
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2024 (5) TMI 626 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Rejection of prayer of Operational Creditor to initiate the CIRP against the Corporate Debtor/ Respondent - Respondent did not respond to the demand notice under Section 8 of the IBC - Operational Creditors or not - breach of terms and conditions of the contract leading to pre-existing dispute.
Whether the appellant is an Operational Creditor as per IBC? - HELD THAT:- In the present case, the appellant had placed an advance with the respondent for supply of goods, it does not matter who is the supplier or the receiver of goods and services as laid down in the M/s Consolidated Construction Consortium Ltd. [2022 (2) TMI 254 - SUPREME COURT] - The present case is squarely covered by the said judgment, as there is a clear nexus between payment made and supply of goods and services. Accordingly, the appellant is to be treated as Operational Creditor in the instant case.
Whether there has been a breach of terms and conditions of the contract leading to pre-existing dispute? - HELD THAT:- It is clear from all the documents on record that the delivery was to be made Ex-plant Rajkot and not at Hong Kong as submitted by the appellant before the Adjudicating Authority. The appellant had tried to mislead both the forums regarding the same - All the events reflect clearly that there was a pre-existing contractual dispute between both the parties, which the appellant is trying to settle through IBC mechanism.
In this regard reliance placed on Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. [2017 (9) TMI 1270 - SUPREME COURT], where the Hon’ble Supreme Court explained the process for an operational creditor initiating CIRP in respect of a corporate debtor. The Court held 'Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute [Section 8(2)(a)]. What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be.'
In the instant case, there was a pre-existing dispute between the parties regarding contractual conditions relating to place of delivery and obligation of parties for transport of goods and therefore the application for CIRP against Corporate Debtor cannot be allowed. The matter has been correctly decided by the Adjudicating Authority in this regard.
Appeal dismissed.
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2024 (5) TMI 625 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
Initiation of CIRP - Rejection of Section 9 application - cyber fraud committed against the Respondent - pre-existing disputes or not - HELD THAT:- Since the fraud was perpetrated by unknown third parties, dragging the Operational Creditor into the dispute was a simple and deliberate ploy on the part of the Corporate Debtor to evade payment of liabilities. The pre-existing dispute was a fictional dispute and more of an after-thought. Moreover, it has been contended that even after having become a victim of cyber fraud, the fact that the Respondent had willing paid further sums of money to the Appellant in their Nordea Bank account shows that there was no dispute between the two parties with respect to the operational debt being due and payable.
When the Respondent in their police complaint had expressly admitted that the fraud was committed by an unknown third party and not by the Appellant and did not make the Appellant an accused party in their police complaint, the cyber fraud and the related police complaint cannot constitute evidence of a pre-existing dispute inter se between the Operational Creditor and Corporate Debtor - Since the matter is already under police investigations and there is no finality in the matter, attributing any culpability on the employees of the Operational Creditor based on surmise and conjecture of the Corporate Debtor would be pre-mature and highly presumptuous given the summary jurisdiction of the Adjudicating Authority and this Appellate Tribunal. It is not required to examine the above contention of the Respondent that the perpetrators of the cyber fraud were assisted by employees of the Operational Creditor.
There is force in the contention of the Appellant that since the Corporate Debtor and the Operational Creditor were in a long-standing business relationship, had the Corporate Debtor shown professional diligence and due rigour, they would have been able to easily detect the suspicious emails and averted the ensuing cyber fraud. This clearly shows the negligence and carelessness on the part of the Respondent which led to the cyber fraud - the Adjudicating Authority wrongly dismissed the Section 9 application, in complete disregard of evidence on record, by treating the cyber-fraud as a preexisting dispute between the parties while being singularly oblivious of the role of unknown third-party perpetrators which cast serious doubts on the plausibility of dispute inter se between the Appellant and the Respondent.
The very fact that much after the issue of the Demand Notice, an amount of Euro 49,664/- has been claimed to have been paid by the Corporate Debtor to the Appellant as stated in their Reply Affidavit as placed at pages 26-27 shows that they have acknowledged that outstanding operational debt qua the Appellant was payable by them. Furthermore, we find that in the said Reply affidavit of the Respondent, the Respondent has accepted and admitted that it owed the Appellant a sum of Euro 62,222/-. This acknowledgement in itself is sufficient to satisfy existence of undisputed operational debt exceeding the threshold level of Rs.1 lakh.
The Adjudicating Authority has erroneously rejected the application under Section 9 of IBC - To meet the ends of justice, the Corporate Debtor is given the liberty to release payment of outstanding operational debt as per terms mutually agreed between the two parties - the payment shall be released by the Corporate Debtor by way of Demand Draft in favour of the Operational Creditor within 30 days from the date of uploading of this order failing which the Corporate Debtor would come under the rigours of CIRP on the expiry of said 30 days period.
Appeal alowed.
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2024 (5) TMI 570 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Admission of Section 7 Application - default committed by Corporate Debtor in paying the amount due and payable - Non-performing assets - existence of debt and default or not - liability not denied - HELD THAT:- There is no dispute to the outstanding amount due on the Corporate Debtor. Sequence of events clearly indicate that at no stage Corporate Debtor has denied its liability. In reply to the notice under Section 13, sub-section (2) of the SARFAESI Act, the Appellant cited reasons for not making the payment, but liability to make payment was not denied. The Adjudicating Authority by the impugned order has found that Financial Creditor has been able to establish the factum of existence of financial debt and its default. The finding recorded by the Adjudicating Authority that there is a financial debt, which is in default, does not warrant any interference by this Tribunal in the present Appeal. Debt and default having been proved, the Adjudicating Authority has rightly admitted Section 7 Application filed by the Financial Creditor.
Thus, no grounds have been made out to interfere with the impugned order in the present Appeal. There is no merit in the Appeal. The Appeal is dismissed.
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2024 (5) TMI 526 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Admissibility of section 9 application - initiation of CIRP - operational debt claimed by RCL was due and payable or not - if any default thereto was committed by the Respondent No.1/BJCL - As claimed debt were paid before the admission of CIRP application - Respondent claimed the dues of GST are still pending - HELD THAT:- In the case of Section 9 application, it is necessary for the Operational Creditor to indicate the particulars of the crystallised debt qua the Corporate Debtor. From the given particulars in the Section 8 demand notice, it is clear that the total amount of operational debt claimed by RCL is Rs.1,96,96,325/- of which the principal amount for non-supply of cement clinker against advance was Rs.1,83,81,894/-. In addition, interest was claimed at the rate of 18% per annum from 11.04.2022 for 145 days amounting Rs.13,14,431/- only. In the Section 9 application, in Part IV also, the total amount of debt has been similarly shown as Rs.1,96,96,325/- only and interest has been calculated with effect from 11.04.2020 to 02.09.2022. It is therefore an undisputed fact that the crystallised amount of operational debt is Rs 1.96 cr only including interest and we do not find any other sum included in Form 3 or Form 5 submitted by the RCL. It is an undisputed fact that RCL had never sought any GST amount in the Section 8 demand notice or Section 9 application or at any time when the matter was pending adjudication before the Adjudicating Authority.
The scheme of the IBC is to ensure that when a default takes place, in the sense that the debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt, once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. On looking into the facts of the present case, there are no hesitation to opine that BGCL had already made payment of the entire operational debt as claimed by RCL in Section 8 Demand Notice and debt as reflected in Form 5 of Section 9 application.
In the factual matrix of the case at hand, when the dues in terms of Form 3 and Form 5 have been cleared by BJCL, endeavours on the part of RCL to seek initiation of CIRP by raising claims which do not find place in Form 3 and Form 5 filed by them, clearly manifests the intention of the RCL to invoke the provision of IBC to enforce recovery of debts against the Corporate Debtor. Allowing such claims which never formed part of the claim of operational debt before the Adjudicating Authority to be considered at the appeal stage is not tenable. This cannot be commended as it militates against the spirit and essence of IBC.
The Impugned Order of the Adjudicating Authority is set aside - Appeal allowed.
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2024 (5) TMI 470 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB
Claim of appellant rejected on the ground that Resolution Plan has been approved by the CoC - right to claim consideration of claim again in third round - NOIDA’s status and claims - HELD THAT:- In view of the pendency of the Applications of the Appellant(s) before the Adjudicating Authority, which are yet to be adjudicated, it is not found necessary at this stage to enter into submission or express any opinion on merits. The approval of Resolution Plan by the CoC on 03.03.2020 being no more in operation and the SRA has to resubmit the Resolution Plan, as per direction of the Adjudicating Authority dated 05.03.2024 and has to include the claim of NOIDA as Secured Creditor with respect to other Applications, which are pending consideration, it is appropriate that resubmission of the Plan by SRA should await the disposal of those Applications. Applications, including Applications for acceptance of the claim, which although are belated claims, it is for the Adjudicating Authority to consider the Applications and take a decision as to whether the said claims have to be included or not.
The learned Counsel for the Appellant has also referred and relied on the judgment of this Tribunal in PUNEET KAUR VERSUS KV DEVELOPERS PRIVATE LIMITED, MR. PANKAJ NARANG, COMMITTEE OF CREDITORS, CONSORTIUM OF SUMIT KUMAR KHANNA AND M/S. BRIJ KISHORE TRADING PVT. LTD. [2022 (6) TMI 108 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI], where this Tribunal held that even if the homebuyers has not filed the claim within the time, the RP is under obligation to include the claims, which are reflected in the records of the Corporate Debtor.
The applications by different Applicants including these two Appellant(s) being pending consideration, at this stage, it is not necessary for this Tribunal to express any opinion on the merits of the Applications, which are pending adjudication before the Adjudicating Authority. As observed, resubmission of the Resolution Plan by the SRA has to await the decision of all other Applications, which was deferred by the Adjudicating Authority for consideration on 30.04.2024, as per order dated 05.03.2024 itself. There is no doubt that claim of the NOIDA has to be considered as per the direction dated 05.03.2024 as Secured Creditor, but since other Applications are still pending, the ends of justice will be served in disposing of these Appeal.
The order passed by Adjudicating Authority is not being interfered with - Adjudicating Authority may consider and dispose of the Applications as noted in the order dated 05.03.2024, which were deferred for consideration on 30.04.2024 at an early date - petition disposed off.
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2024 (5) TMI 469 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI
CIRP - Admissibility of Section 95 Applications against Personal Guarantors - discharge the liabilities of Personal Guarantors on approval of Resolution Plan - submission of the Appellant that since the entire debt has been assigned to SPV, personal guarantees against the Appellant could not have been invoked, has been considered and rejected by the Adjudicating Authority by the impugned order - time limitation - HELD THAT:- The judgment of the Hon’ble Supreme Court in LALIT KUMAR JAIN VERSUS UNION OF INDIA AND ORS. [2021 (5) TMI 743 - SUPREME COURT] has categorically laid down that approval of Resolution Plan does not ipso facto discharge the liabilities of Personal Guarantors.
The judgment of this Tribunal in UV Asset Reconstruction Company Limited vs. Electrosteel Castings Limited [2024 (3) TMI 804 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] is considered where one of the questions arose as to whether by approval of Resolution Plan, entire debt of the Corporate Debtor stood extinguished and as a result there will be no default. It was held by this Tribunal that even after approval of Resolution Plan, recourse against third party can be resorted to and the approval of Resolution Plan, does not extinguish the right of Financial Creditor to proceed against third party.
The Adjudicating Authority by the impugned order has admitted Section 95 Applications, upholding the initiation of proceeding under Section 95 by the SBI. The Adjudicating Authority has rightly returned a finding that the Resolution Plan of Corporate Debtor was approved and the entire debt of the Corporate Debtor has been taken over by the Successful Resolution Applicant, but the guarantee given by the Promoters has not been assigned to SRA. The Adjudicating Authority also held that Application was filed within limitation. The date of default mentioned in the Application was 23.01.2019 and the petition under Section 95 was filed on 22.05.2021.
There are no error in the order of the Adjudicating Authority, admitting Section 95 Applications by the impugned order. There is no merit in any of the submissions of the learned Counsel for the Appellant(s) - appeal dismissed.
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