Steel
India v. Theme Developers Private Limited [Co. Appeal (AT) (Insolvency) No. 1014/2019]
In
the present matter, the claim of the OC towards the CD was only of interest
amount for delayed payment against goods sold and delivered. The AA rejected
the Section 9 Application of the OC on, inter alia, the ground that the
outstanding amount related to payment of interest only and hence did not
qualify to be an ‘operational debt’ in terms of the Code.
The
NCLAT upheld the decision of the AA by stating that a claim towards interest
alone cannot be termed as an operational debt. Reliance was placed by the NCLAT
on its previous decisions titled S.S. Polymers v. Kanodia Technoplast
Limited [Co. Appeal (Ins.) No. 1227/2019] and SBF Pharma v. Gujarat
Liqui Pharmacaps Limited [Co. Appeal (Ins.) No. 883/2019] wherein the above
said position was taken with a further observation and proceedings taken by a
creditor under the Code for the purpose of recovering interest amount amounts
to ‘initiation of proceedings with malicious intent’ in terms of Section 65 of
the Code.
Ansal
Properties & Infrastructure Limited v. MGF Developments Limited [Co. Appeal
(AT) (Insolvency) No. 331/2019]
In
the present case, the parties to the appeal had constituted a consortium and
had collectively made a bid for a tender relating to the Delhi Metro. The NCLAT concluded that where the parties to
the matter were joint parties to a joint venture project, then in such a case,
it could not be said that one party provided goods or services to the other and
vice versa.
Further,
the NCLAT after perusing the Memorandum executed between the parties observed
that there was nothing in the said document which substantiated the fact that
one party to the joint venture was required to carry out construction and
development related services to the other.
G
Eswara Rao v. Stressed Assets Stabilisation Fund [Co. Appeal (AT) (Insolvency)
No. 1097/2019]
The
present matter arose out of Section 7 proceedings wherein the NCLAT made the
following pertinent observations:
a) A
balance sheet/annual return of the CD cannot be treated to be an
acknowledgement under Section 18 of the Limitation Act.
b) By
filing a Section 7 Application, a decree cannot be executed. In fact, filing
such an application would attract Section 65 of the Code.
c) The
date of default (for the purpose of Section 7 of the Code) is the date when the
account of the CD is declared to be a Non Performing Asset and not the date
when a recovery certificate is issued by the Debt Recovery Tribunal in recovery
proceedings initiated pursuant to a loan default.
G.
Shivramkrishna v. Isgec Covema Limited [Co. Appeal (AT) (Insolvency) No. 1109/2019]
In
the present matter, a Section 9 Application was preferred by the OC on the
strength of an arbitral award passed by the arbitrator in favour of the OC and
against the CD. The said arbitral award had been assailed by the CD before
court (under Section 34 of the Arbitration Act) but the said challenge was
unsuccessful and the award had attained finality. The NCLAT observed that by
passing of the award the debt of the CD had been crystallised and by default in
payment of monies awarded, the debt had become due and payable. The AA had the
authority to entertain Section 9 applications under such circumstances.
The
NCLAT also observed that the limitation period (for filing of a Section 9
Application) on the basis of an arbitral award/court decree would commence from
the date on which the time period for preferring an appeal thereagainst
expires.
Separately,
the NCLAT while determining a ‘service of demand notice’ related issue,
followed its previous judgement titled Alloysmin Industries v. Raman Casting
Private Limited [Co. Appeal (Ins.) No. 684/2018] which held that a demand
notice (under Section 8 of the Code) sent to the CD at its registered office or
corporate office should be treated as valid for the purposes of the Code.
Bank
of India v. Multi Arc Coating and Straps Limited [Co. Appeal (AT) (Insolvency)
No. 891/2019]
In
the said matter, one of the questions which arose for consideration before the
NCLAT was whether a ‘one time settlement’ proposal made by the CD to the FC
bank would qualify to be an acknowledgement of debt in terms of Section 18 of
the Limitation Act. The defence set up by the CD was the said OTS proposal was
‘without prejudice’ to the rights and contentions of the CD in the ongoing
court proceedings between the parties and hence could not be termed as an
acknowledgement.
During
the course of determination of the matter, the judgement of the Supreme Court
of India titled ITC Limited v. Blue Coast Hotels Limited [CA Appeal No.
2928/2018] was relied upon which inter alia wherein ‘without prejudice’
letters were held to have legal effect and to be evidence of acknowledgement of
liability.
The
NCLAT observed that the letter in question/OTS proposal amounted to be
acknowledgment of debt for the purposes of the Limitation Act and mere usage of
the expression ‘without prejudice’ will not make any difference. Reliance was
also placed on other NCLAT judgements of Gouri Prasad Goenka v. Punjab
National Bank [Co. Appeal (Ins.) No. 28/2019] and K.R.V. Uday Charan Rao
v. Bank of India [Co. Appeal (Ins.) No. 731/2019] which observed that OTS
proposals act as acknowledgement.
Arunkant
Rai v. Allahabad Bank & Another
[Co. Appeal (AT) (Insolvency) No. 1251/2019]
In the said matter, the CD had obtained loan
from 2 (two) difference FC banks, which
had executed an inter-se consortium agreement to which the CD was not a
party. Subsequent to the account of the CD being declared a NPA, one of the FC
banks initiated Section 7 proceedings against the CD (under the Code). The
submission of the CD in this regard was that the FC bank had not complied with
the terms of the above consortium agreement while filing the Section 7
Application.
The
NCLAT placed reliance on its previous judgements in Oriental Bank of
Commerce v. Ruchi Global Limited [Co. Appeal (Ins.) No. 387/2019] and Asian
Natural Resources (India) Limited & Another v. IDBI Bank to hold that CD
who are not parties to inter-se consortium agreements (between banks) cannot
derive any advantage from them. Finally, the NCLAT concluded that there existed
no bar in law for the bank which has declared the account of the CD as NPA to
proceed under Section 7 of the Code notwithstanding any consortium agreement
executed between the lenders/banks.
Hammond
Power v. Sanjit Kumar Nayak, Resolution Professional & Others
[Co. Appeal (AT) (Insolvency) No. 606/2019]
In
the said matter, a resolution plan was assailed on the following gounds:
(a) The plan was in violation of the
provisions of the Code.
(b) The provision in the plan for paying Nil
to OC was against the Code as well as settled law on the subject.
(c) The OC deserved a similar treatment as
the FC.
(d) The COC fell in error while approving a
plan which provided payment only to itself and not to other stakeholders.
The
NCLAT during the course of adjudication relied upon the Supreme Court judgement
in Committee of Creditors of Essar Steel Limited v. Satish Kumar Gupta which
stated that courts should avoid trespassing on COC decisions and that the
judicial review in this aspect should be limited.
The
NCLAT perused the resolution plan and found that the plan did not provide
reasons to demonstrate that the interests of all stakeholders had been taken
care of. The reasons for giving Nil to OCs was also not mentioned in the plan. The
NCLAT observed that giving Nil to OCs would not amount to balancing the
interest of all stakeholders.
The
NCLAT also relied upon the Supreme Court judgement of Swiss Ribbons Private
Limited v. Union of India to hold that the decision of the COC must reflect
the fact that it has taken into account maximising the value of the assets of
the CD and the fact that it has adequately balanced the interests of
stakeholders including operational creditors.
Finally
the resolution plan was set aside by the NCLAT and sent back to the COC to
reconsider and resubmit the plan to the AA after satisfying all parameters laid
down in Essar Steel.
Ashish
Mohan Gupta v. Hind Inn and Hotels Limited
[Co. Appeal (AT) (Insolvency) No. 1282/2019]
In
a Section 9 matter, the NCLAT observed that retention money withheld by the CD
in connection with the work carried out by the OC is to be considered to be a
part of the main bill which was retained by the CD as per the terms of the Work
Order and was to be released after issuance of the completion certificate. Therefore,
retention money qualifies to be an operational debt in terms of Section 5 (21)
of the Code.
Ranjit
Kapoor v. Asset Reconstruction Company (India) Limited & Another
[Co. Appeal (AT) (Insolvency) No. 256/2019]
The
NCLAT reiterated its settled position that once an application (under Section 7
or Section 9 of the Code) is admitted by the AA, then the only option available
to the aggrieved party is to prefer an appeal under the Code.
Sagar
Sharma v. Phoenix ARC Private Limited
[Co. Appeal (AT) (Insolvency) No. 177/2019]
The
NCLAT reiterated a settled position of law that the date of coming into force
of the Code does not and cannot form a trigger point of limitation for
applications filed under the Code. Equally, Article 137 of the Limitation Act
will apply to such applications.
In
the context of limitation law and Section 18 thereof, the NCLAT relied upon the
Supreme Court judgement titled Sampuran Singh and Others v. Niranjan Kaur
(1999) 2 SCC 679 which held that for Section 18 of the Limitation Act to be
triggered, it is pertinent that the acknowledgement is prior to the expiration
of the prescribed period of filing the suit.
The
NCLAT further observed that Section 22 of the Limitation Act may be applicable
to ascertain whether a given claim is barred by limitation or not, but cannot
be made applicable for counting the period of limitation qua the
application under Section 7 of the Code.
