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Landmark Judgments by the Hon’ble NCLAT 16th to 31st August, 2021

  1. Ishita Halder v. Siba Kumar Mohapatra (DOJ: 18.08.2021)

In the present appeal, the point of issue before the Hon’ble Appellate Authority was whether the proposal made in One Time Settlement (OTS) can be considered to be acknowledgement and subsequently limitation period can be extended.

The Appellants contended that the application made under section 7 of the Insolvency and Bankruptcy Code, 2016 was time barred. On the other hand, the Respondents relied on OTS offers and letters issued in 2016, 2017 as well as in 2018.

The Hon’ble Appellate Authority in light of SC judgments- Laxmi Pat Surana vs. Union Bank of India & Anr. (2021), ARCIL vs. Bishal Jaiswal (2021) and Dena Bank vs. C. Shivakumar Reddy & Anr. (2021) held that the offer of OTS can be relied on for the purpose of considering acknowledgement under Section 18 of Limitation Act. Issue of Recovery Certificate by DRT also is relevant for the purpose of calculating limitation. It was further held that Section 23 of Indian Evidence Act will not be applied to the facts and documents in the present matter.

Accordingly, the appeal was dismissed for the lack of substance.

 

Judgment link- https://bit.ly/3kUS42L

  1. Panch Tatva Promoters Pvt. Ltd. v. GPT Steels Industries Ltd. & Ors. (DOJ: 18.08.2021)

 In the instant case, the Appellant with Respondent No.3 was a Prospective Resolution Applicant for the Corporate Debtor. The CoC in voting approved the Resolution Plan of Respondent No.3. The Appellant filed an application before the Adjudicating Authority to claim that the Respondent No. 3  has in another CIRP of a CD failed to implement the Resolution Plan and thus should be treated as ineligible; the Respondent No.3 had suppressed facts in that regard in the Resolution Plan in which fact was required to be disclosed as per Regulations 38 (1-B) of the “Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016” (CIRP Regulations).

However, the affidavit filed by the Resolution Professional revealed that ineligibility of Respondent No. 3 were considered by the CoC with regard to the ‘Allied Strips Limited’ which was pointed out and CoC still took a conscious decision to accept the Resolution Plan of Respondent No. 3.

The Hon’ble Appellate Authority pointed that Regulation 38(1-B) which is subordinate legislation will have to be read with Section 33 (3) & (4) of the Code. Admittedly, there did not exist any order under Section 33(4) holding Respondent No.3 to have contravened provisions of the Resolution Plan in any other proceedings. Additionally, it was held that delay in implementation of the Resolution Plan cannot be considered as a ground for ineligibility of the Resolution Applicant. It is a settled principle now that the Unsuccessful Resolution Applicant has no vested right or fundamental right to have its Resolution Plan approved since no adjudication has yet taken place.

The appeal was set aside stating that after the approval of the Resolution Plan by the COC, pending adjudication before the Adjudicating Authority, the COC cannot be permitted to take a U-turn from its earlier stand and reverse the decision already taken by it. Indeed, COC exercised its commercial wisdom in approval of the Resolution Plan. Once COC accepts the Resolution Plan, the Adjudicating Authority may consider if it is to be accepted or rejected. The Appellant has no right to stall the proceeding for the approval of the Resolution Plan by challenging commercial decisions of the COC.

Judgment link- https://bit.ly/2WFcZ0X

  1. The Deputy Commissioner of GST and Central Excise v. Mr. Vijaykumar V. Iyer, RP of Dishnet Wireless Limited & Anr. (DOJ: 16.08.2021)

 In the present case, the Hon’ble NCLAT reinstated what was held by the Apex Court in the recent case of Ghanshyam Mishra & Sons Pvt. Ltd. through the authorized signatory Vs. Edelweiss Asset Reconstruction Company Limited through the Directors and Ors. The Appellant submitted that he had no notice of the CIRP.  It was further contended that in spite of this when the Resolution Plan was approved no provisions were made to provide for the dues of the Appellant which were operational dues.

The Hon’ble Appellate Tribunal held that there is no reason to entertain the appeal as the fact remains the same that if a claim was never filed during CIRP, there is no question of considering such a claim in the Resolution Plan. The judgment of the Supreme Court was held to be clear and binding. For such reasons, the appeal was declined and disposed of accordingly.

Judgment link: https://bit.ly/3jt3VW7

  1. M/s Mohan Gems & Jewels Private Limited v. Vijay Verma and Anr. (DOJ: 24.08.2021)

In the instant matter, the Hon’ble NCLAT set aside an impugned order of the Adjudicating Authority in which the application for ‘sale as going concerns’ was rejected on the ground that Regulation 32A and 45(3) are inconsistent with the Insolvency and Bankruptcy Code and framed without jurisdiction by IBBI. The Liquidator contended that he is authorized to sell the Corporate Debtor or its business as a going concern pursuant to Regulations 32 (e) & (f) of the Liquidation Process Regulations and such a sale is consistent with the objective of the Code. Further, the IBBI is empowered under sec 240(1) to make regulations to carry out the provisions of the Code.

It was further observed that there are two conditions that are needed to abide by: first, the regulations have to be consistent with the provisions of the IBC and the rules framed by the Central Government; and second, the regulations must be to carry out the provisions of the IBC. Relying on a catena of landmark judgments by the Hon’ble Supreme Court [M/s Innoventive Industries (2017), Arcelor Mittal (2019) and Swiss Ribbons (2019)], it was held that IBBI is well within its delegated power to make regulations and the legality and propriety of any Regulation/Notification/Rules/Act. Keeping in view the scope and spirit of the Code, read with Section 54 of the Code, Regulation 39C of CIRP Regulations, Regulations 32(e)&(f), 32A and 45(3) of the Liquidation Process Regulations, Hon’ble NCLAT held that the sale of the ‘Corporate Debtor Company’ was carried out by the Liquidator in accordance with the Regulations. Accordingly, the appeal was allowed.

Judgment link: https://bit.ly/3kI4niq

  1. Ravi Sankar Devarakonda v. Mr. Kesava Kolar (DOJ:18.08.2021)

In the present matter, the appeal is preferred by the Resolution Professional for institution of contempt proceeding against Respondent in lieu of failure to pay the professional fees by the Corporate Debtor as ordered by the Learned Tribunal.

The Appellant preferred this appeal against impugned order of the Adjudicating Authority that disposed of the said contempt petition by making an observation that although the notices were issued to the respondent; no one appeared on his behalf.

Therefore, it is not known whether the contemnor is financially solvent or not, in order to initiate contempt proceedings. Consequently, the Tribunal is not inclined to initiate contempt proceedings and gave liberty to the Appellant/Petitioner to persuade the Contemnors to pay the outstanding amount.

Accordingly, Hon’ble NCLAT set aside the impugned order of the Adjudicating Authority and the matter is remitted back for passing necessary orders afresh (after restoring Contempt Petition) on merits.

Judgment link: https://bit.ly/3mP58ZJ

  1. Ranjeet Singh v. M/s Karan Motors Private Limited (DOJ:18.08.2021)

In the present matter, the Appellant, the employees of the Corporate Debtor have filed applications under Section 9 of the Code before the Adjudicating Authority. The applications were rejected on the ground that since the admitted principal amount has already been paid by the Corporate Debtor, there is no occurrence of default and no debt is due as the Appellant failed to provide any documents which deals with amount claimed to be in default and the date on which the default occurred, no such specific date has been mentioned by the Appellant.

While dealing with the issues at hand Hon’ble NCLAT held that the Appellants have failed to show any document to establish that the Respondent has acknowledged the dues of salary, gratuity etc. 2014 onwards. Further, considering all these facts and provisions of the law, the Tribunal opined that there is no illegality in the impugned orders. The applications under Section 9 of the Code have been rightly dismissed by observing that “if for delayed payment applicant(s) claim any interest, it well be open to them to move before a court of competent jurisdiction for recovery of interest, but initiation of Corporate Insolvency Resolution Process is not the answer.”

The Appeal was accordingly dismissed.

Judgment link: https://bit.ly/3t35GME

  1. Shapoorji Pallonji & Co. Pvt. Ltd. v. M/S. Shore Dwellings Pvt. Ltd. (DOJ: 17.08.2021)

In the instant matter, the Appellant has filed an application under Section 9 of the Code in the capacity of operational creditor for non-payment of final payment certificate (Final Bill) as part of construction contract. Appellant issued a Statutory Demand Notice under Section 8 of the Code.

The Hon’ble Adjudicating Authority held that the application is not a fit case for admission. It took note of the settlement meetings held between the Applicant and the corporate debtor and opined that the corporate debtor has made the payment of substantial part of the debt and has shown willingness to pay the remaining part and therefore, negotiations have not concluded. Further, the bench took note of the judgment of the Hon’ble Supreme Court in the case of Mobilox Innovation Private Limited Vs Kirusa Software Private Limited., and interpreted that the application was premature and is in the nature of a debt enforcement proceeding i.e. the Appellant is intending to substitute IBC to a recovery forum which is against the Code.

Hon’ble NCLAT took note of the fact that the respondent acknowledged the receipt of Demand notice sent by the Appellant and stated that they will reply in 15 days from date of issuance of the said letter. With refrence to the Mobilox case, Hon’ble NCLAT was of view that the Apex Court has laid down the law that the application has to be rejected if the Corporate Debtor establishes that there is a pre-existence of dispute prior to issuance of demand notice. However, in the present case there is no pre-existence of dispute and therefore, application under Section 9 cannot be rejected on that ground. Therefore, Hon’ble NCLAT held that the said debt and due falls under the ambit of operational debt u/s 5(21) of the Code.

Accordingly, the impugned order of the Adjudicating Authority was set aside and the present application was allowed.

 

Judgment link: https://bit.ly/3BuME5c