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Landmark Judgement by the Hon’ble NCLAT 1st to 15th December, 2020

Excise and Taxation Department Rewari, Haryana v. M/s Argl Ltd & Ors (DOJ 04.12.2020)

The NCLAT observed with disappointment that delay of 307 days, is sought to be condoned by the Appellant, on the ground of completion of inter departmental procedures, is absurd and the complacency on the part of those at the helm of affairs, cannot be a legal consideration warranting condonation of delay.  The Appeal was not filed within the prescribed period of 30 days or even within the extended period of 45 days.

SBI filed petition under section 7 in respect of ARGL Limited, the Corporate Debtor and the same was admitted on 16.03.2018.  The IRP made public announcement on 21.03.2018 inviting the claims. The COC  (in its meeting on 04.06.2019) approved the final Resolution Plan submitted Investment Opportunities IV Pte Ltd. (IOPL) with a voting share of 66.29%. The Adjudication Authority (NCLT, Principal Bench, New Delhi) approved the Resolution Plan, vide order dated 02.12.2019.

The NCLAT observed that the Appellant being a public functionary, was irresponsible and caused such a huge delay. The condonation of delay impermissible within the ambit of Section 61(3) of the IBC was rejected.

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Anubhav Anilkumar Agarwal v. Bank of India & Anr (DOJ 07.12.2020)

NCLAT held that power of review has not been expressly conferred on this Appellate Tribunal and the power vested in this Appellate Tribunal under Rule 11 can only be exercised for correction of a mistake.

The Appellant file the Appeal under Rule 11 of NCLAT Rules, 2016 to review the judgment dated 7th February 2020 of this Tribunal on the ground that the Appellate Tribunal had made an inadvertent error in Paragraph 14 of the judgment ignoring various documents placed on record by both the parties.  It was argued by the Appellant that the Financial Creditor (Bank of India) had filed petition u/s 7 seeking initiation of CIRP Process against RNA Corporation Ltd. who was the guarantor.  The FC has claimed the same amount pertaining to the same debt  in the CIRP of the Guarantor viz. M/s Chamber Constructions Pvt Ltd. It was submitted that the amount in question has been admitted by the Resolution Professional of Chamber Constructions in its entirety. The Appellant requested for application of ratio of this Appellate Tribunal in the judgment in case of “Dr. Vishnu Kumar Agarwal Vs Piramal Enterprises Ltd. – Company Appeal (AT) (Insolvency) No. 346 of 2018”, where it was held that once a claim is admitted for a set of claim against one Corporate Debtor in an application under Section 7, a second application by the same financial Creditor against another Corporate Debtor, be it a Guarantor or Principal Borrower, would not be maintainable.

The NCLAT opined that acceding to the prayer of Applicant would result in substituting the observations and finding recorded in para 14 of the judgment, which is beyond the ambit and scope of Rule 11 of NCLAT Rules and would amount to substituting of finding by reappraisal of evidence, a power only exercisable by a competent court while sitting in appeal. The NCLAT held that Rule 11 of NCLAT Rules, 2016 cannot be invoked in the instant case the application was dismissed.

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Apya Capital Services Pvt Ltd v. Guardian Homes Pvt Ltd (DOJ 08.12.2020)

NCLAT formed the considered opinion that the Adjudicating Authority has landed in error in holding that there was no ‘debt’ as claimed by the Appellant and there was ‘deficiency in service’ provided by the Appellant. The findings recorded by the Adjudicating Authority are grossly erroneous and same cannot be supported. Once the liability in respect of Rs. 75 lakh was admitted and the same was not discharged by the Corporate Debtor, dispute in regard to quantum of debt would be immaterial at the stage of admission of application under Section 7 unless the debt due and payable falls below the minimum threshold limit prescribed under law. The impugned order is liable to be set aside as the same is unsustainable.

The Appellant filed application before the Adjudicating Authority for triggering of Corporate Insolvency Resolution Process against ‘Guardian Homes Pvt. Ltd.’ (Corporate Debtor-CD).  The Appellant arranged for the CD, credit facilities to the extent of Rs.280 crores against payment of fee @1% amounting to Rs.2.80 crores.  The CD pleaded before the AA that there was delay in arranging the funds on the part of Appellant in respect whereof an issue was raised by the CD. The issue was amicably resolved by settling the fees at a sum of Rs.1.50 Crores out of which Rs.75 lakhs were made as part payment. The AA arrived at a conclusion that there was no debt as claimed by the Appellant besides there being deficiency in service provided by the Appellant warranting dismissal of application.

NCLAT directed the Adjudicating Authority to admit the application of Appellant under Section 7 of the ‘I&B Code’ after providing an opportunity to the Respondent- Corporate Debtor to settle the claim of Appellant, if it so chooses and pass all consequential directions as a sequel thereto.

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Muhamad Yavar Dhala v. Kavita Surana, Liquidator of Forward Shoes (India) Pvt Ltd (Corporate Debtor) (DOJ 08.12.2020)

The Appellant is the promoter of the CD under Liquidation vide Liquidation Orders passed by the Adjudicating Authority on 11.12.2018. Before the Liquidation Order was passed, it was challenged by the promoter of the CD before the Appellate Tribunal and the Appeal was rejected. During the liquidation proceedings, the promoter proposed two schemes under Section 230 of Companies Act, 2013, with the premise that he will be merely a facilitator with no control of the Corporate Debtor.

The promoters /Appellant made the E-Application on 27th December, 2019 to Ministry of MSME for getting MSME certificate, for avoiding ineligibility in relation to Sec29A of IBC. As per Section 33 (7), the promoters of the CD/Appellant had no authority to make the Application as the order for liquidation under this section shall be deemed to be a notice of discharge to the officers, employees and workmen of the corporate debtor.  The Appellant obtained an MSME Certificate, showing investment of only Rs. 2 Lakhs, while the schemes proposed that the value of assets of the CD were Rs. 67 Crores. The Adjudicating Authority was of the opinion that the said Certificate was obtained with an intention to deceive the Tribunal by projecting themselves as an MSME. This was presumed to be an abuse of the provisions of the IBC.

The NCLAT observed that the Appellant could not have been merely a facilitator and was an integral part of the Liquidation process and it was quite clear that he would remain in control. It was further observed that once the CIRP is initiated under IBC, the management is transferred to IRP/RP, and if the Liquidation Order is passed, then the powers vests with the Liquidator, and without the permission of the Liquidator, No MSME certificate could be obtained by the Appellant.  The NCLAT did not find it appropriate to reverse the process to give any further opportunities of actions under Section 230 of the Companies Act, 2013 and did not find any substance in the Appeal. Therefore, the Appeal was dismissed by the NCLAT.

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Vijayalakshmi Enterprises v. Malabar Hotels Pvt Ltd (DOJ 15.12.2020)

NCLAT held that Appellant has sought initiation of CIRP against the Corporate debtor by filing an application under section 7 of the I&B Code which cannot be held to be a legal proceeding dealing with adjudication of the disputed claims.

Resolution Plan in respect of the Corporate Debtor-‘Malabar Hotels Pvt. Ltd.’ came to be approved by the Adjudicating Authority in terms of order dated 17th September, 2018. Clause (9) of the order approves the resolution plan and suggests that outcome of adjudication of legal proceeding postulates pendency of any proceedings on the date of the approval of the Resolution Plan or even a suit or arbitration proceeding taken in respect of the claim thereafter. There is no issue in holding that initiation of CIRP would not tantamount to adjudication of the claim in regard to right to recover money which claimant in respect of a disputed claim, claims to be entitled.

The NCLAT held that in respect of a claim, Adjudication must be by a Civil Court and other adjudicatory mechanism like Arbitral Proceedings. Proceedings under IBC are only meant to resolve the insolvency issues and not to adjudge a claim. Hence, the Appellant cannot bank on this clause while filing application under section 7 of the Code. No merit was found in the application and was accordingly dismissed.

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