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Landmark Judgments by the Hon’ble NCLAT 1st July to 15th July, 2022

  1. The Regional Provident Fund Commissioner Vs. Mr. Arunava Sikdar RP M/s. The National Sewing Thread Company Ltd. (DOJ 01.07.2022)

In the instant case, the Appellant preferred an Appeal before the Hon’ble NCLAT after a delay of 65 days as against the permissible limit for filing an appeal of 45 days. The Appellant accordingly prayed for condonation of 20 days in filing the appeal, stating it had no communication of order and was also not a party to the IBA/IA proceedings. The Hon’ble NCLAT dismissed the Appeal inter-aila holding that Condonation of delay is not a matter of right or routine. There is no difference between a ‘Good Cause’  and ‘Sufficient Cause’ in Law. The discretion of the ‘Tribunal’ or ‘Court of Law’ to condone the delay in a given case is to be exercised by a ‘Tribunal’ and ‘Court of Law’ based on ‘sound exercise of prudent discretion’ and by application of ‘Judicial Mind’.

Link: https://efiling.nclat.gov.in/nclat/order_view.php?

  1. Avantha Holdings Ltd. Vs. Mr. Abhilash Lal, RP for Jhabua Power Ltd. (DOJ 04.07.2022)

In facts of present case, the Hon’ble NCLT initiated CIRP of the Corporate Debtor on 27.03.2019, and on 30.12.2019 NTPC submitted its Resolution Plan. Pertinently, Canara Bank had classified the Joint Ventures of NTPC as a Non-Performing Asset (NPA) on 21.05.2018, effective from 01.04.2009. The Appellant, being Promoter of the CD sought disqualification of NTPC under Section 29A(c) of Code. The question that arose consideration before the Hon’ble NCLAT was whether the date on which NPA classification is declared is relevant or the date ‘with effect from’ such classification is made to be effective is relevant for the purpose of 29A(c)?

The Hon’ble NCLAT observed that the statutory provision under Section 29A(c) of the Code has given a grace period of one year and in case even after the expiry of grace period, the RA is unable to pay its dues and NPA continues, then the RA becomes ineligible. The Hon’ble NCLAT held that the date of NPA classification ought to be taken as 21.05.2018 and in case backdate is taken into consideration, the very purpose of statutory prescription under Section 29A(c) would be defeated by the Financial Institutions by declaring NPA on particular date and making it effective from back date, so that no RA can take the benefit of statutory provision provided under Section 29A(c). In present case, since one year had not elapsed from the date of NPA classification to the CIRP commencement date, the RA is eligible.

Link: https://efiling.nclat.gov.in/nclat/order_view.php?

  1. Sanjeev Mahajan Vs. India Bank (Erstwhile Allahabad Bank) & Anr. (DOJ 04.07.2022)

In present case, a compromise proposal was accepted for Rs.260 Crores against the Nimitaya Group consisting of Corporate Debtor and three other entities. An amount of Rs. 154 Crores was paid by 31.03.2019 and of due Rs.102 Crores remained to be paid hence, earlier compromise failed. Subsequently, to filing a Section 7 Application, Bank invited a bid for sale of NPAs of the Corporate Debtor to Asset Reconstruction Companies (ARC’s)/ Non-Banking Financial Companies (NBFC’s)/ Financial Institution (FI’s) for an amount of Rs.81 Crores. However, when the same amount of Rs. 81 Crores with the same conditions of repayment was being offered by the Appellant, the same has been rejected by the Bank. Being aggrieved, the present Appeal was filed.

The Hon’ble NCLAT relying on the judgment of Hon’ble Supreme Court in the matter of ES Krishnamurthy & Ors. vs. M/s. Bharath Hi Tech Builders Pvt. Ltd. observed that the primary object of IBC is to revive the Corporate Debtor and to ensure that it starts running and the settlements have to be encouraged because the ultimate purpose of the IBC is to facilitate the continuance and rehabilitation of a Corporate Debtor. Again, relying on the judgment of Hon’ble Supreme Court in matter of Bijnor Urban Cooperative Bank Limited, Bijnor and Ors. vs. Meenal Agarwal and Ors., held that the law has been clearly laid down that although settlement has to be encouraged in the IBC but no direction can be issued to the Financial Creditor to positively grant the benefit of OTS to a borrower. The debt and default having been found by the Adjudicating Authority by admitting Application which debt and default having not been questioned, there is no error in the order of the NCLT admitting Section 7 Application. In the facts and sequence of the events the Hon’ble NCLAT held that one more opportunity be given to the Appellant to submit an Application under Section 12A to the IRP/ RP for being placed before the CoC.

Link: https://efiling.nclat.gov.in/nclat/order_view.php?

  1. Jaipur Trade Expocentre Pvt. Ltd. Vs. M/s Metro Jet Airways Training Pvt. Ltd. (DOJ 05.07.2022)

In present case the Hon’ble 5 Judge Bench of NCLAT was faced with question as to whether the claim of the Licensor for payment of License Fee for use and occupation of immovable premises for commercial purpose is a claim of Operational Debt under Section 5 (21) of the Code.

The Hon’ble NCLAT while refereeing to Section 5(21) of the Code, observed that neither the term ‘operational’ nor the term ‘services’ has been defined under the Code. When an expression is not defined under the statute, the Court has to take its meaning in accordance with the well-established rules of statutory interpretation. In instant case, the claim of licensor is a claim as per the definition under Section 3 (6) and the liability of the claim is a debt as per the definition of debt under section 3 (11) of Code. While referreing t

The Hon’ble NCLAT referred to its earlier judgment of Mr. M. Ravindranath Reddy Vs. Mr. G. Kishan & Ors. and observed that the judgment in the said case does not lay down the correct law as the Tribunal relied on Section 14(2) of the Code for interpretation of the term Service which is a very restricted meaning of the term service and that Section 5 (21) of the Code has a much wider meaning. Further, the Hon’ble NCLAT referring the judgment of Promila Taneja Vs. Surendri Design Pvt. Ltd., observed that Section 3(37) of the Code held that reliance on the definition of the term Service in Consumer Protection Act, 2019 and Central Goods and Services Tax Act, 2017 are not relevant. However, in the instant case where Agreement itself contemplates payment of GST for the services under the Agreement, on which GST is payable, the definition of ‘service’ under Central Goods and Services Tax Act, 2017 cannot be said to be irrelevant. More so, even if an expression is not defined in the statute, the meaning of expression in general parlance has to be considered for finding out the meaning and purpose of expression. Hence, the Hon’ble NCLAT held that both in Mr. M. Ravindranath Reddy and Promila Taneja this Tribunal did not dwell upon the correct meaning of expression ‘service’ used in Section 5(21) of the Code held that the claim of Licensor for payment of license fee for use of Demised Premises for business purposes is an Operational Debt within the meaning of Section 5(21) of the Code.

Link: https://efiling.nclat.gov.in/nclat/order_view.php?

  1. Tejas Khandhar Vs. Bank of Baroda (DOJ 12.07.2022)

In the instant case, the suspended director of Corporate Debtor preferred an appeal contending the Ld. NCLT incorrectly admitted Section 7 Application, as the same was barred by Limitation, on ground that date of default is 22.09.2013 whereas Application was filed in 11.07.2019. The Hon’ble NCLAT relying on the judgment of Hon’ble Supreme Court in the matter of Dena Bank (now Bank of Baroda) Vs. C. Shivkumar Reddy and Anr. observed that the offer of OTS of a live claim, made within the period of limitation should be construed as an acknowledgement to attract Section 18 of the Limitation Act. Hence, an Application under Section 7 of the Code would not be barred by limitation, on the ground that it had been filed beyond a period of 3 years from the date of declaration of the loan account of the Corporate Debtor as NPA, if there were an acknowledgement of the debt by the Corporate Debtor before expiry of the period of limitation of 3 years, in which case the period of limitation would get extended by a further period of 3 years. Accordingly, in present case, default occurred in year 2013, the OTS proposal was made on 2016 and revised in 2018 falls within the definition of the ambit of ‘acknowledgement of debt’ as envisaged under Section 18 of the Limitation Act, 1963.

Link: https://efiling.nclat.gov.in/nclat/order_view.php?

  1. Krishan Kumar Basia Vs. State Bank of India. (DOJ 14.07.2022)

The issue that arose consideration before the Hon’ble NCLAT was whether the date of filing of the application or the date of registration of the case, is to be registered to initiate the Interim Moratorium. In facts of case, the State Bank of India filed an Application under Section 95(1) of Code on 01.01.2021 before the Ld. NCLT and the same was registered on 18.12.2022. The Appellant, being the Personal Guarantor of Corporate Debtor also filed an Application under Section 94 of Code on 25.10.2021, which got numbered on 22.12.2021. Evidently, application under Section 95 by State Bank of India was filed earlier in point of time, but the application filed by Personal Guarantor got registered earlier in point of time. The Hon’ble NCLAT relying on the judgment of Hon’ble Supreme Court in the matter of Vidyawati Gupta and Ors. vs. Bhakti Hari Nayak and Ors. observed that even if there is any defect in the Application, which is subsequently cured, the date of presentation of the Application shall remain the same and shall not be dependent on the date when defects are cured. Accordingly, the filing of Application under Section 95 by the State Bank of India is on a date when Application was filed and allotted number electronically and the submission of the Appellant that date of filing of the Application shall be the date when Application is numbered is incorrect.

Link:https://efiling.nclat.gov.in/nclat/order_view.php?

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