- Canara Bank Vs. Ms. Mamta Binani, RP of Aristo Texcon Pvt. Ltd. (DOJ: 03.01.2022)
In facts of the present case, an Appeal was filed by Canara Bank, being dissatisfied with the with order of NCLT as it failed to consider equal treatment between the Financial Creditors while distributing Funds under the Resolution Plan. The Hon’ble NCLAT observed that the Resolution Professional is an Officer of the Court and he is to exercise reasonable and responsible care for the company whose property and affairs are entrusted with him. It is the duty of the RP to scrutinize the Resolution Plan to ensure it is in accordance with Section 30 of Code and to consider the objections brought to his notice prior to the submission of the Plan to the CoC, amongst the others. Further, the Hon’ble Tribunal held that in the present case the distribution of the amount was made by the ‘Committee of Creditors’ resting on the total dues of individual Creditor and the same was neither whimsical or arbitrary in any manner. Thus, the ‘distribution of the amount’ between the Creditors provide the equal treatment to all of them, the fair value was provided to the Appellant as per decision of the CoC and the value proportionate to the dues. Further, the Hon’ble Tribunal reiterated that the commercial decision and matters pertaining to it solely comes within the ambit of the CoC who in the present case had approved the Resolution Plan with a majority of affirmative votes. Accordingly, the present Appeal was dismissed.
- Kiran Shah, RP of KSL and Industries Ltd. Vs. Enforcement Directorate, Kolkata (DOJ: 03.01.2022)
In the present case, a Provisional Attachment Order (PAO) was passed by the competent Authority under Section 5 of the Prevention of Money Laundering Act, 2002 attaching, property of the Equivalent Value of the proceeds of crime. Thereafter, a Prosecution Complaint was filed before the Adjudicating Authority, PMLA and the PAO was affirmed in respect of the property of the Corporate Debtor, which according to the Appellant was done inspite of the imposition of moratorium under the Code and the objections raised by the Erstwhile IRP. The Appellant/RP had filed an Appeal before the Appellate Tribunal, PMLA, and further filed the instant Appeal.
The Hon’ble NCLAT observed that a mere running of the eye of PMLA, patently indicates that it pertains to Proceeds of Crime and provides for the penal action. Further, Section 14 of Code deals with moratorium which is not a hindrance for the Authority and the Officers under the PMLA to deny a person of the tainted Proceeds of Crime. The Assets/Properties being the Proceeds of Crime, takes a primacy and precedence over the Insolvency and Bankruptcy Code, 2016 which promotes Resolution as its objective over Liquidation. The Hon’ble Tribunal further observed that Section 60(5) of the Code showers jurisdiction to NCLT to determine issues/ questions relating to priorities, question of Law or fact emanating out of or in relation to the Insolvency Resolution. Section 61 of the Code provides for filing of an Appeal to the NCLAT by any person aggrieved by an Order of an NCLT within 30 days. In view of same Hon’ble Tribunal held that filing of Application under Section 60(5) of the Code is not an all pervasive one, thereby conferring Jurisdiction to an NCLT to determine any question/issue of priorities, question of Law or Facts pertaining to the Corporate Debtor. Thus, in view of above it was held that NCLT is not empowered to deal with the matters falling under the purview of another authority under PMLA. Accordingly, the Appeal was dismissed.
- Ome Prakash Verma (Suspended Director of Neesa Leisure Ltd.) Vs. Amit Jain, (RP of Neesa Leisure Ltd.) (DOJ: 04.01.2022)
In the present case, the question that arose before the Hon’ble NCLAT was that when an Application under Section 7 of Code is rejected as being barred by time, whether any addition in the claim which falls into the category of time barred debt can be rejected or allowed. The Hon’ble NCLAT firstly observed the statutory scheme with respect to CIRP and noticed the duties and functions of the Resolution Professional under Section 18 of the Code. Thereafter, the Hon’ble Tribunal relying on the judgment of the Hon’ble Supreme Court in the matter of B.K. Educational Services Pvt. Ltd. vs. Parag Gupta and Associates, which dealt with the question of applicability of the Limitation Act in the Code, held that when an Application under Section 7 cannot be entertained for a debt, which is barred by time and is liable to be rejected, any addition in the claim, which may fall into the category of time barred debt, also cannot be entertained. The Hon’ble Tribunal further observed that the Appellant having objected to the addition of claim consequent, it had every right to agitate the issue and pray for adjudicatory orders from the NCLT, which he did by filing an Application. However, the NCLT by misplaced observation rejected the Application without considering the merits of the claim. Accordingly, the matter was remanded to NCLT for fresh consideration on merits.
- Whispering Tower Flat Owner Welfare Association Vs. Abhay Narayan Manudhane, RP of Corporate Debtor and Ors (DOJ: 04.01.2022)
The facts of present case the CoC in its 18th Meeting approved the Resolution, deciding to consider re-run of the CIRP and explore the possibility of ‘Project wise Resolution’ and put the same for e-voting. Pursuant to same, the RP filed an application before NCLT narrating the sequence of event, prayed for extension of CIRP period. The NCLT observed that it was because of the pressure from the Homebuyers that CoC agreed to explore the possibility of Resolution Plan of the Corporate Debtor by dividing the total assets into eight Projects and even after more than 730 days, there is no sight of completion of CIRP and the RP and CoC merely want to explore the possibility of Resolution. With these observations, the Application was rejected. The Appellants are aggrieved filed the instant Appeal.
The Hon’ble NCLAT held that the object of the Code is the resolution of the insolvency of a Corporate Debtor. Relying on the judgment of Hon’ble Supreme Court, in the matter of Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors. held that as per law, insolvency resolution process has to be completed within 330 days maximum, but in exceptional cases, the period can be extended by NCLT/NCLAT. The Hon’ble Tribunal further, observed the Hon’ble Supreme Court time and again reminded that the object of IBC is to resolve the insolvency resolution process and liquidation is to be adopted as a last resort. Thus, setting aside the order of NCLT the Hon’ble NCLAT held that NCLT ought to have given reasonable extension of period for proceeding further with Resolution Project Wise for which 25 Expression of Interests have already been received with the Resolution Professional and allowed the extension of 90 days from the date of this order during which period the Resolution Professional and the Committee of Creditors may complete the Project Wise Resolution as decided in the CoC Meeting.
- Central Board of Trustee, EPFO through The Regional P.F. Commissioner Vs. Shri Dutta India Pvt. Ltd. (DOJ: 04.01.2022)
The moot question that arose consideration before this Hon’ble Tribunal was whether the limitation for filing the Appeal u/s 61 of Code shall commence only when certified copy of the judgment (free of cost) has been provided to appellant. The Hon’ble NCLAT relying on the judgment of the Hon’ble Supreme Court in the matter of V. Nagarajan v. SKS Ispat and Power Ltd. & Ors. observed that it is not open to a person aggrieved by an order under the IBC to await the receipt of a free certified copy and prevent limitation from running, as the same will upset the timely framework of the IBC. The litigant has to file its appeal within thirty days, which can be extended up to a period of fifteen days, and no more, upon showing sufficient cause. Further the Hon’ble Tribunal relying on its earlier decision in M/s. Hasmukh N. Shah & Associates vs. M/s. Victoria Entertainment Pvt. Ltd. held that a party cannot claim limitation and file an Appeal after long expiry of limitation claiming that he was not provided free of cost copy of the judgment. The period of limitation shall not stop running merely because free of cost copy was not provided. Accordingly, the Appeal was dismissed as clearly being barred by time.
- SICOM Limited v. Mr. Sundaresh Bhat (The Liquidator of ABG Shipyard Limited) (DOJ: 06.01.2022)
In the present case the Hon’ble NCLAT observed that NCLT erroneously held that the charge being not duly registered under Section 77 sub-section (3) of the Companies Act, 2013, the Liquidator did not commit any error in not taking into consideration and classifying the Appellant as ‘unsecured creditor’. The Hon’ble Tribunal further observed that when the sale of mortgaged and hypothecated properties was directed as per judgment of the Debt Recovery Tribunal, the mortgage and hypothecation no longer remained the matter of contract, rather it was the part of the judgment of the Tribunal and the non-registration of charge as required by Section 77 of Companies Act, 2013 does not in any manner affect enforceability of the order. Thus, by virtue of judgment and order of the Debt Recovery Tribunal, the Appellants were entitled to recover their dues from the secured assets and they having relinquished the security interest according to Section 52 of the IB Code, as was requested by the Liquidator, in the liquidation proceedings, they have to be treated as ‘secured creditor. Accordingly, the Appeal was allowed.
- M/s. Ashish Ispat Pvt. Ltd. v. Primuss Pipes and Tubes Ltd. (DOJ: 07.01.2022)
In facts of the present case, an application under section 9 of the Code was admitted by the NCLT and after issuance of Form-A, the parties amicably settled the dispute and executed a Memorandum of Understanding. In light of settlement, Form-FA was received by the IRP for withdrawal of the Application in terms of Section 12A of the Code read with Regulation 30A. Accordingly, an Application for withdrawal was filed by the IRP before NCLT. During pendency of said Application, a CoC was constituted and the 1st meeting of CoC was also held. Thereafter, the NCLT observing that there being two Financial Creditors out of which one having 17% of voting shares has dissented to allow withdrawal, the Application for withdrawal cannot be considered unless the consent from CoC as required under the statute, is obtained. Hence, the Appellants and the Suspended Director of Corporate Debtor both aggrieved by the said order have filed two Appeals.
The Hon’ble NCLAT held that when the Application under Section 12A was filed for withdrawal, the CoC was not constituted and hence there was no requirement of approval of 90% of voting share of CoC. Further Regulation 30A also makes it clear that when an Application is filed prior to constitution of CoC the requirement of 90% vote of CoC is not applicable and the NCLT has to consider the Application without requiring approval by 90% vote of the CoC. Thus, the Hon’ble NCLAT relying on the judgment of the Hon’ble Supreme Court in the matter of Kamal K. Singh vs. Dinesh Gupta & Anr. and its previous judgments in the matters of Anuj Tejpal vs. Rakesh Yadav & Anr. and Sunil Tandon v Manoj Kumar Anand, IRP & Ors. held that the NCLT without considering the facts and sequence of the events had refused to entertain the Application on the ground that it is not supported by 90% vote of CoC. Thus, the present Appeals were allowed permitting withdrawal of CIRP.
- Kotak Mahindra Bank Limited v. Ravindra Loonkar (RP of ACIL Ltd.) (DOJ: 07.01.2022)
The facts of the present case is that the respondent had two fixed deposits with the appellant bank which it wanted to close and transfer the amount to TRA A/c. The bank while submitting its claim to the IRP declared that as a part of security over the corporate debtor it has a lien over the Fixed Deposits. The Hon’ble NCLAT while upholding the order of the NCLT held that once an order of Moratorium under Section 14(1)(c) is imposed, it creates a bar on the enforcement of any security interest in respect of the Corporate Debtor. No recovery action in form of lien or set-off can be exercised by banks in discharge/settlement of their pre-CIRP dues. Thus the Hon’ble NCLAT held that Fixed Deposits were not charged under Section 77 of the Companies Act, 2013 or as Additional Security hence, the appellant bank has no right over these Fixed Deposits.
- Nimitaya Infotech Private Limited v. Cox and Kings Limited (Through its RP, Mr. Aushutosh Agarwala) (DOJ: 07.01.2022)
In present case the Hon’ble NCLAT while partly allowing the appeal and modifying the order of the NCLT held that once moratorium is imposed under Section 14 of the Code any action taken by the Appellants to enforce their Security Interest over their Security Deposits or Maintenance Advance by making any deduction from the same, subsequent to initiation of CIRP, would be in violation of Section 14 of the Code.
- West Bengal Financial Corporation v. Bijoy Murmuria (DOJ: 07.01.2022)
In the present case the Hon’ble NCLAT relying on the judgment of Hon’ble Supreme Court in observed of Committee of Creditors of Essar Steel India Ltd. vs. Satish Kumar Gupta and Ors observed that the period 330 days for the resolution of the Corporate Debtor is not mandatory and stated in exceptional cases, time can be extended. The general rule being that 330 days is the outer limit within which resolution of the stressed assets of the Corporate Debtor must take place beyond which the Corporate Debtor is to be driven into liquidation. The Hon’ble Tribunal further observed in the 2nd proviso to sub-section (3) of Section 12 the word mandatorily as being manifestly arbitrary under Article 14 of Constitution of India and as being an excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19 (1)(g) of the Constitution, striking down the word “mandatorily”. Accordingly, the present Appeal was dismissed.
- Vineet Khosla v. M/S Edelweiss Asset Reconstruction Company Ltd. (DOJ: 07.01.2022)
In the instant case, the Hon’ble NCLAT while upholding the order of the NCLT held that the issue of limitation is a mixed question of law and fact. Section 238-A of Code, inserted w.e.f. 06.06.2018 provides that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or Appeals before the NCLT/ NCLAT. The Hon’ble Tribunal further analysed the issue of whether the NCLT has the jurisdiction to recall the order of initiation of CIRP and held that every court or tribunal has the power to recall any order/ decree obtained by fraud. But in the present scenario as the appellant failed to ascertain that the respondent obtained the order of initiation of CIRP through fraud/misrepresentation, NCLT has no jurisdiction to recall the order.
- Rajeev R. Jain (Suspended Director) v. AASAN Corporate Solutions Private Limited (DOJ: 12.01.2022)
The Hon’ble NCLAT in instant case, while dismissing the appeal held that principle of stare decisis is fully applicable on judgments delivered by the NCLT as well as this Appellate Tribunal. Both NCLT and NCLAT are bound by doctrine of stare decisis. To clarify what is binding as a precedent on Company Law Tribunal is the judgment of a jurisdictional Tribunal. Judgment delivered by NCLT in other jurisdictions has only persuasive value. The Hon’ble NCLAT further relying on the judgement of the Supreme Court in the matter of Collector of Central Excise, Kanpur vs. Matador Foam and Others stated that the principle behind the doctrine is that men who are governed by law should be fixed definite and known and when a law is declared by the Court of Competent Jurisdiction in absence of any palpable mistake or error, it is required to be followed. Doctrine of stare decisis is wholesome doctrine which gives certainty to law and guides the people to mould their affairs in future.