Laxmi
Pat Surana v. Union Bank of India [Co. Appeal (AT) (Insolvency) No. 77/2020]
In
the present matter, a company (Corporate Debtor) had acted as a guarantor of a proprietorship
concern (borrower) which defaulted in its payment to the lender bank (Financial
Creditor). Pursuant to the said default, the Financial Creditor filed a Section
7 Application against the Corporate Debtor-Guarantor.
The
NCLAT observed that a ‘financial debt’ includes a debt owed to a creditor by a
‘principal’ and ‘guarantor’. An omission or failure to pay on the part of a
guarantor to pay the ‘financial creditor’ when the principal sum is
claimed/demanded will come within the scope of term ‘default’ under Section 3
(12) of the Code. The proceedings under Section 7 of the Code can be triggered
by a financial creditor in respect of a debt against a guarantor for failure to
repay the money borrowed by the principal borrower.
Reliance
was placed on K. Paramasivam v. The Karur Vysya Bank Ltd. and Ors [Co.
App. (AT) (Ins.) No. 538/2019] which provides that in case a company acts as a
guarantor to a loan facility availed by a borrower from a bank, then in such a
situation, the bank becomes a financial creditor and the said company becomes a
corporate debtor under the provisions of the Code. This position would hold
good even in case the borrower is not a company.
The
NCLAT further reiterated the following legal positions:
a) Pendency
of recovery proceedings will not prevent a financial creditor from initiating
CIRP against a corporate debtor.
b) An
Acknowledgment does not create any new right and it extends the limitation
period. When a debtor makes an acknowledgment of his liability to pay a debt,
it would mean that he was admitting a subsisting liability to pay. Reliance
placed on P. Sreedevi v. P. Appu AIR 1991 Kerala76
c) The
burden lies on the Creditor to prove that an acknowledgment was made within
time.
d) An
acknowledgment in writing must indicate a jural Relationship as that of ‘debtor’
and ‘creditor’ between the parties.
Rajesh
Kumar Agarwal v. Srivani Merchants Private Limited [Co. Appeal (AT)
(Insolvency) No. 669/2019]
The
subject matter of the present case was a flat which was in the name of the
Corporate Debtor (undergoing CIRP). The Appellant was residing in the flat and
a suit for declaration was pending in the civil court qua the flat
between the Corporate Debtor and the Appellant whereunder, the Appellant had
sought to restrain the Corporate Debtor from disturbing his alleged lawful
possession over the flat. The resolution professional/liquidator of the
Corporate Debtor sought to take control and possession of the flat. On this
aspect, the NCLAT observed that a resolution professional or liquidator is
empowered to take possession and control of the flat since it was an admitted
position that, on the date of initiation of the CIRP, the flat was in the name
of the Corporate Debtor. The civil suit would not act as an impediment to such
takeover.
Separately,
the Appellant had preferred a ‘resolution plan’ directly before the
Adjudicating Authority without first approaching the ‘resolution professional’
or the Committee of Creditors and without following the provisions under the
Code. The NCLAT while upholding the rejection of such ‘resolution plan’,
observed that such offers were untenable since the necessary procedures (for
entertaining a resolution plan) under the Code had not been complied with.
Indiana
Conveyers Private Limited v. Ducon Technologies (I) Private Limited [Co. Appeal
(AT) (Insolvency) No. 508/2019]
The
NCLAT clarified that the ‘pre-existing dispute’ sought to be raised or shown by
the Corporate Debtor in a Section 9 Application ought to be a ‘real’ dispute
and not a ‘make believe’ dispute. For such determination, the Adjudicating
Authority may examine the merits of the matter and take cognizance of any admission
of debt made by the Corporate Debtor in favour of the Operational Creditor.
Sangeeta
Goel v. Roidec India Chemicals Private Limited [Co. Appeal (AT) (Insolvency)
No. 17/2020]
In
the present matter, a Section 9 Application was dismissed by the Adjudicating
Authority for, inter alia, non-compliance (by the Operational Creditor)
of Section 9 (3) (b) of the Code. On this aspect the NCLAT observed as follows:
a) Only in a situation where the Corporate
Debtor within 10 days of the receipt of demand notice, has not sent the reply
to the Operational Creditor, then only, an affidavit to that effect can be
submitted in terms of Section 9(3)(b) of the Code. But in a case where such
notice has been sent, in reply to the demand notice by the Corporate Debtor ‘an
affidavit to that effect cannot be given’. Reliance placed on Macquarie Bank
Ltd. v. Shilpi Cable Technologies Ltd., (2018) 2 SCC 674.
b) In any event, non-fling of an affidavit
in terms of Section 9(3)(b) of the Code is a curable defect. It cannot be made
the basis for dismissing a Section 9 Application. An opportunity is required to
be given to the Operational Creditor to cure such defect. Reliance was placed
on Surendra Trading Company v. Juggilal Kamlapat, (2017) 16 SCC 143.
Edgewood
Networks Pvt. Ltd. v. Houston Technologies Private Limited [Co. Appeal (AT)
(Insolvency) No. 297/2020]
In
the present matter, the NCLAT reiterated a settled position with regard to
exclusion of time period (while computing limitation period under Section 61 of
the Code) on account of procurement of a certified copy of the Impugned Order. In
the present matter, a certified copy of the Impugned Order was picked up by the
Appellant from the registry much later from the date when it was readied by the
registry. The Appellant sought exclusion of the entire period (starting from
the date of filing for a certified copy until the date of actual receipt
thereof) for the purpose of computation of limitation under Section 61 of the
Code.
The
NCLAT held that the relevant date is when the certified copy of the order was
signed (by the registry official) and made ready for procurement; and not the
date when the Appellant actually picked up the certified copy of the order from
the registry.
Ricoh
Thermal Media Asia Pacific Private Limited v. Efficient Data Private Limited
[Co. Appeal (AT) (Insolvency) No. 1295/2019]
In
the present matter, an application of the Appellant was dismissed for
non-prosecution by the Adjudicating Authority. However, instead of preferring
an application for restoration of the said application, the Appellant preferred
an appeal before the NCLAT assailing the dismissal. The NCLAT exercising
inherent powers permitted the Appellant to move the Adjudicating Authority for
restoration of the (dismissed) application and explain as to why the same
should be restored.
George
Vinci Thomas v. Capedge Consulting Pvt. Ltd. [Co. Appeal (AT) (Insolvency) No. 1395/2019]
In
the present matter, the Corporate Debtor sought to allege existence of dispute
on the basis of a letter exchanged between the parties. However, the Adjudicating
Authority (and the NCLAT), upon perusal of the said letter, opined that it did
not indicate any ‘dispute’ but only referred to certain information which was
being sought by the Corporate Debtor from the Operation Creditor in the context
of the invoices raised. It was also observed that in a Section 9 Application, a
Corporate Debtor alleging pre-existence of dispute should be in a position to
disclose as to what the ‘dispute’ between the parties really is.
Rajive
Kaul v. Vinod Kumar
Kothari and Others [Co. Appeal (AT) (Insolvency) No. 44/2020]
In
the present matter, the following principles of law under the Code were
elaborated upon:
a) While
discussing the importance of Section 19 of the Code, the NCLAT clarified that
its coverage extends to all ‘personnel’ of the Corporate Debtor including Directors,
Managers, Key Managerial Personnel, Designated partners and Employees, if any. The
NCLAT also discussed the binding nature of the orders which are issued by the
Adjudicating Authority against the above ‘personnel’ in furtherance of an
application preferred by the resolution professional under Section 19 of the
Code.
b) While
discussing the powers of a ‘Liquidator’ appointed under Section 34 of the Code,
the NCLAT clarified that he shall have all the powers of the Board of Directors
and of the Key Managerial Personnel of the Corporate Debtor. In Section 34 of
the Code, the expression ‘vest’ is to be considered synonymous with ‘title’.
Reference was had to Daya Wanti Punj v. New Delhi Municipal Committee AIR
1982 Del 534.
c) A
company in liquidation acts through the ‘Liquidator’ and the ‘Liquidator’ steps
into the shoes in the Board of the Directors of the Company under Liquidation
for the purpose of discharging is statutory duties. In reality, the property of
the Company forming part of Liquidation still remain vested in the Company but
the control moves to the Liquidator.
d) Upon
an order of liquidation, ‘nominee directors’ of the Corporate Debtor have no
right to continue in their capacity. The Liquidator is armed with requisite
powers to remove the ‘nominee directors’
