Landmark Judgments by the Hon’ble NCLAT from 1st to 15th October, 2022.
Mrs. Renuka Devi Rangaswamy Vs. M/s Regen Powertech Private limited and Ors.(NCLAT – Chennai) [D.O.J. – 10.10.2022]
In the instant case the Appellant is aggrieved by the Order passed by the AA – Chennai-II, vide the impugned Order the AA held that the Appellant had failed to prove any dishonest intent of the Respondent to defraud the Creditors, the AA further held that the transfer of assets within the group companies per se would not constitute “Fraudulent Trading” as stipulated under section 66(1) of the Code, 2016. Challenging the impugned Order the Appellant also stated that the AA had failed to take into consideration the Documents, Audited Financial Statements, Fixed Assets of the Corporate Debtor, Bank Statement of the Corporate Debtor;
The issue that arose before the NCLAT was whether the transfer of assets within the group of companies would constitute a fraudulent trading as per Section 66 of the Code, 2016
The Hon’ble NCLAT held that it must be borne in mind that whenever a Fraud on a Corporate Debtor is committed, in the course of carrying business, it does not necessarily mean that the business is being carried on with an intent to defraud the Creditors. Further a High-Level Proof, is very much required in regard to a Fraudulent Intent. That further the NCLAT held that it is the duty of the Appellant to satisfy the NCLAT that an individual is carrying business with Corporate Debtor with an dishonest intent. The NCLAT going through the impugned order passed by AA dated 01.07.2022 came to a Conclusion that the Transfer of Assets among the Group Companies ex-facie is not a Fraudulent Trading, as per Section 66 (1) of the Code, 2016. Moreover, because of the fact that all Transactions between the Companies as well as the Asset details were maintained in a Transparent Manner.
National Agriculture Cooperative Marketing Federation Limited (NAFED) Vs. Synergy Petro Products Private Limited (NCLAT – New Delhi) [ D.O.J. – 11.10.2022]
That in the present case the Appellant is aggrieved by the Order dated 31.05.2021 passed by the AA – Principal Bench New Delhi, whereby the Appellant filed an application under Section 7 of the Code for initiating CIRP of the Corporate Debtor/Respondent herein on the ground that Corporate Debtor defaulted in repaying the Arbitral Award (which arose from a dispute of Leave and Licence Agreement between the parties) and due license fee. The AA dismissed the Section 7 Application on the ground that the transaction between the parties does not come under the purview of Financial Debt and the Appellant qualifies to be an Operational Creditor not a Financial Creditor.
The Hon’ble NCLAT held that Leave and License Agreement was the core base transaction between the parties on the basis of which Arbitration Award was passed. This Leave and License Agreement does not qualify to be Lease/Financial Lease/capital Lease in view of the terms and restrictions of the Leave and License Agreement. Further the Hon’ble NCLAT relying upon “Sushil Ansal Vs. Ashok Tripathi and Ors.”, Company Appeal (AT) (Ins) No. 452 of 2020 in which it was held that Decree Holder, though included in the definition of ‘Creditor’, does not fall within the definition of ‘Financial Creditor’ and cannot seek initiation of CIRP as ‘Financial Creditor’ dismissed the appeal and upheld the Order passed by the AA.
Sreedhar Tripathy Vs. Gujarat State Financial Corporation and Ors. (NCLAT – New Delhi) [D.O.J. – 12.10.2022]
The Appellant in the present case was aggrieved by the order of Liquidation passed by the AA. The fact in issue was whether the Order of liquidation in the present case where the CoC since the initiation of CIRP were reluctant to continue with the CIRP process was valid. It was argued by the Appellant that the CoC after being constituted, it deliberately failed to hand over the assets due to which the RP could not draw Information Memorandum and issue EOI. The record of the Minutes of CoC meetings showed that the CoC was of the opinion that since there was no possibility of Corporate Debtor being a going concern in near future therefore, in such circumstances, continuation of CIRP would only involve more expenses and cost without any corresponding advantage. Accordingly, it was resolved that the RP was to file an application seeking an order of liquidation of the Corporate Debtor as per the relevant provisions of the Code, 2016
Held: It is pertinent to note that while dealing with the issue, NCLAT declined to hold that the decision of CoC was arbitrary. The CoC is empowered to take decision under the statutory scheme and where in the present case the decision of the CoC for liquidation has been approved by the AA, NCLAT further held that there was no ground to interfere at the instance of the Appellant. Having said that, the NCLAT also held that it cannot be said that whenever decision is taken for liquidation the same is not open to judicial review by the AA and NCLAT. Thus, keeping the ambit of review of decision of CoC open to review. Appeal is accordingly dismissed
RMY Industries LLP Vs. Apple Industries Pvt. Ltd. Through its Official Liquidator (NCLAT – Delhi) [D.O.J. – 12.10.2022]
The Appellant in the present case is the Successful Auction Purchaser in the liquidation proceeding where assets were sold as going concern on ‘as is where is’ basis. The question of law in the present matter was pertaining to the power of liquidator to grant relief or concessions pertaining to past dues or allow extinguishment of past remaining outstanding liabilities.
The Appellant in the present case relied on the case of Company Appeal (AT) (Ins.) No. 650 of 2020, M/s Shiv Shakti Inter Globe Exports Pvt. Ltd. vs. M/s KTC Foods Private Limited. The Hon’ble Tribunal while granting the liberty to Appellant to file fresh Application held that the Adjudicating Authority is empowered to consider any application filed by the Liquidator or Successful Auction Purchaser, which may arise with regard to terms and conditions of auction sale or sale as going concern as per the Liquidation Regulation.