IFCI
Limited v. ACCIL Hospitality Limited [Co. Appeal (AT) (Insolvency) No. 1422/2019]
In
the present matter the Principal Borrower of the Financial Creditor had slipped
into insolvency. During the course of the CIRP the claims of the Financial
Creditor had been admitted by the Resolution Professional. However, while the
resolution plan of the principal borrower was pending adjudication before the
AA, the Financial Creditor preferred another Section 7 Application against the
Corporate Guarantor of the Principal Borrower. The AA rejected the said second
Section 7 Application against the Corporate Debtor.
The
NCLAT observed that once the Financial Creditors claim has been collated and
admitted by the Resolution Professional in its entirety (in the CIRP of the
CD/principal borrower, then in such case, the said Financial Creditor cannot
invoke the jurisdiction of the AA for triggering CIRP against the corporate
guarantor of the CD as this would amount to duplicity of claims being pressed.
Further, the fact that the resolution plan was yet to be approved by the AA and
that the Financial Creditor may be faced with the prospect of taking a haircut
cannot be a ground to trigger a fresh/second CIRP. Reliance was placed by the
NCLAT on its earlier judgement of Dr. Vishnu Kumar Agarwal v. Piramal
Enterprises Limited [Co. App. (Ins.) No. 346/2018]
Regal
Engineers & Constructions Private Limited v. Endee Shelter Properties
Private Limited [Co. Appeal (AT) (Insolvency) No. 300/2020]
The
NCLAT reiterated that the AA or the NCLAT is not required to enter into
settling the dispute between the parties of quality of work etc. In case there
exists a pre existing dispute which cannot be said to be moonshine the
application under Section 9 of the Code is liable to be dismissed.
Meena
v. Kothari v. Maberest Hotels Private Limited [Co. Appeal (AT) (Insolvency) No.
797/2019]
In
the present case, a Financial Creditor filed a civil suit for recovery against
the Corporate Debtor which was dismissed by the civil court. The said dismissal
was assailed by the Financial Creditor by filing an appeal there against. During
the pendency of the appeal, the Financial Creditor preferred a Section 7
Application against the Corporate Debtor. The AA rejected the Section 7
Application for inter alia, the reason that the debt had not
crystallised in view of the pendency of the civil proceedings.
In
the present case, amongst other things, a question which arose was whether the
AA was right in concluding that the claim of the Financial Creditor was
contingent upon the final decision of the civil suit and unless the same was
decided the debt of the Financial Creditor could not be said to be in existence
and due. The NCLAT disagreed with the AA on this aspect.
Vishal
Doshi v. Bank of India & Another [Co. Appeal (AT) (Insolvency) No.
723/2019]
In
the present matter, a Corporate Debtor contested an admission of a Section 7
Application against it by the AA on the premise that it had a counter claim
against the Financial Creditor. Further, the Corporate Debtor also sought a
set-off of the debt against its stock which had been seized at the behest of
the Financial Creditor.
On
the issue of the counter claim and set off, the NCLAT, while relying on Swiss
Ribbons Private Limited v. Union of India [2019 (4) SCC 17] observed as
follows and upheld the view of the AA: (i) Unlike a Section 9 case, there is no
scope of raising a ‘dispute’ as far as a Section 7 case was concerned. As soon
as a ‘debt’ and a ‘default’ is proved, the AA is bound to admit the petition;
(ii) Pendency of proceedings in the DRT are no bar to a Section 7 Application
under the Code; (iii) Counter claims and set off in the context of financial
creditors are a rarity. Legitimate set offs can be considered at the stage of
the CIRP. Further, counter claims are independent rights, are not taken away by
the Code but can be preserved for the stage of admission of claims during the
resolution plan. Basis the above, the NCLAT concluded that counter claims and
set offs cannot be decided by the AA.
Punjab
National Bank v. M/s Vindhya Cereals Private Limited [Co. App. (AT) (Ins.) No. 854/2019
In
the said matter, the question which came up for consideration was ‘whether a
Financial Creditor can initiate parallel proceedings under SARFAESI Act, 2002
was well as under the Code’?
The
NCLAT, while answering in the affirmative relied upon the following:
(a) Anandram Developers Private Limited
v. National Company Law Tribunal [W.P. Nos. 29084 & 29085/2017, decided
on 17.11.2017, Madras High Court] wherein, in a similar situation, the Madras
High Court observed that the Code enables filing of a Section 7 Application,
notwithstanding the pendency of any proceedings under the SARFAESI Act, 2002.
(b) Harkirat S. Bedi v. Oriental Bank of
Commerce [2019 (108) taxmann.com 110 (NCLAT) wherein it was observed that
mere pendency of a case before the DRT for adjudication of the disputed amounts
cannot be a ground to reject a Section 7 Application under the Code, if the AA
is satisfied that there exists a ‘debt’ and a ‘default’, and the application is
complete.
(c) Neeraj Jain v. Yes Bank & Another
[Co. Appeal (AT) (Ins.) No. 323/2019] wherein the NCLAT, in the context of pending
criminal proceedings, observed that, a Section 7 Application, being a
independent proceedings, has nothing to do with the pendency of a criminal case
relating to misappropriation of funds.
(d) Karan Goel v. Pashupati Jewellers
& Others [Co. Appeal (AT) (Ins.) No. 1021/2019] wherein in the context
of civil proceedings, the NCLAT observed that, merely because a suit has been
filed by the Financial Creditor and is pending, the same cannot be a ground to
reject an application under Section 7 of the Code.
(e) The NCLAT also relied upon Section 238
of the Code to observe that this non obstante clause in the Code shall prevail
upon any other law for the time being in force.
The
NCLAT also observed that initiation of parallel proceedings (as answered above)
does not amount to a violation of Section 65 of the Code.
Neeta
Saha v. Ram Niwas Gupta [Co. Appeal (AT) (Insolvency) No. 321/2020]
In
the present matter, an ex-director of the Corporate Debtor, against whom a
Section 9 Application had been admitted, assailed such admission on the premise
that the Section 9 Application had been preferred in the same of a sole
proprietorship firm which did not qualify to be a ‘legal entity’ under the
definition of the term ‘person’ under Section 3 (23) of the Code. Reliance was
placed on RG Steels v. Berry Auto Ancillaries (P) Ltd. [IB-722/ND/2019,
NCLT New Delhi Bench III]
The
ex-director further alleged that an amendment to the cause title of the
Application was carried out by the Operational Creditor only after the matter
had been heard and reserved for orders. The AA considered this to be a
‘technical defect’ which stood cured by the Operational Creditor by filing an
amended memo of parties, prior to passing of the orders in the matter. The AA
accepted the amendment made by the Operational Creditor and proceeded
accordingly.
The
NCLAT upheld the observations of the AA in the matter. Further, the NCLAT also
accepted the findings of the AA that the Corporate Debtor had acknowledged its
liability in the matter on account of the following: (i) execution of a
settlement agreement; (ii) letter of the Corporate Debtor to the Operational
Creditor wherein it clearly expressed an intention to clear the outstanding
dues; and (iii) issuance of a cheque which was subsequently dishonoured.
S.
Shivaswamy v. Concentrix Daksh Services India Private Limited [Co. Appeal (AT)
(Insolvency) No. 800/2019]
In
the present matter, a pending refund of the Corporate Debtor (in liquidation)
from the Income Tax Department had been excluded from the ‘liquidation estate’
of the Corporate Debtor by the AA for the purpose of computing the fee of the
Liquidator (in terms of Section 34 (8) of the Code).
The
Appellant Liquidator inter alia contended that AA did not have the
authority to exclude or remove any asset of the Corporate Debtor from the
‘liquidation estate’ of the Corporate Debtor.
The
NCLAT opined that it has the discretion to decide the fee or remuneration of a
voluntary liquidator and in cases where the expenses are neither justified nor
ancillary/incidental to the winding up, the same may not be reimbursed to the
liquidator.
However,
in the facts and circumstances of the present case, the NCLAT opined that the
liquidator’s fee be computed on the basis of the Code and the Regulations,
after taking into account the refund from the Income Tax Department.
Sita
Ram v. Samir Kumar Bhattacharya & Others [Co. Appeal (AT) (Insolvency) No. 685/2019]
In
the present matter, the issue under consideration was whether the appeal was
barred by limitation, in as much as it had been preferred post the expiry of
the outer limit of 45 (forty five) days prescribed under Section 61 of the
Code. For the purpose of computing the said time limit, the Appellant claimed
knowledge about the resolution plan (sought to be assailed in the appeal) from
the date of receipt of a letter from the chairman of the monitoring committee
tasked with the supervision of the plan.
The
Respondents contested the above on the premise that the information about the
CIRP and the resolution plan had been made available in the public domain
through public notices in English and Hindi newspapers, much prior in time. The
NCLAT, while deciding in favour of the Respondents, inter alia, held
that knowledge could be attributed to the Appellant from the date of the public
notices itself, and hence the appeal was bared by limitation.
Bank
of India v. Shrenuj & Company Limited [Co. Appeal (AT) (Insolvency) No. 494/2019]
In
the present matter, while admitting a Section 7 Application, made certain
remarks about the Financial Creditor which remarks were assailed by the said
Financial Creditor before the NCLAT in an appeal. The said remarks were in the
context of alleged fraud by the Corporate Debtor and the investigations which
were pending in that regard. The limited prayer of the Financial Creditor was
expunction of the alleged disparaging remarks.
The
Financial Creditor placed reliance on the judgment of the Supreme Court in State
of Uttar Pradesh v. Mohd. Naim [AIR 1964 SC 703] which crystallised the
following considerations which ought to be taken into account by courts in the
context of making disparaging remarks against a party to the lis:
(a) Whether the party in question had the
opportunity of explaining or defending itself;
(b) Whether there is any evidence on record
bearing on that conduct justifying the remarks; and
(c) Whether the remarks were necessary for
the decision of the case, as an integral part of it.
Further
reliance was also placed on the judgement of the Supreme Court in Om Prakash
Chautala v. Kanwar Bhan & Others [Civil Appeal No. 1785/2014; Decided
on 21.01.2014] and the judgement of the Chhattisgarh High Court in Lambodar
Patel v. State of Chhattisgarh [2016 Cr LJ 2814]. Additionally, the Respondent/Corporate
Debtor in the matter also relied upon the judgement of ICICI Bank v. Shanti
Devi Sharma [2008 (7) SCC 532] to contend that the remarks pertained to
various complaints/allegations made against the Corporate Debtor which were
still pending investigation and hence could not be construed as decided facts.
The
NCLAT observed that the impugned remarks made by the AA were avoidable.
Further, it was also observed that the criminal investigation before the AA and
the insolvency proceedings were independent of each other and the AA could not
take any view on the basis of ongoing investigation by other agencies.
Parvesh
Magoo v. Ireo Grace Realtech Private
Limited [Co. Appeal (AT) (Insolvency) No. 1141/2019]
The
NCLAT relied upon its previous judgement in Navin Raheja v. Shilpi Jain
[Co. Appeal (AT) (Ins.) No. 864/2019] to state that the objective of the
legislature behind bringing about the Ordinance dated 28.12.2019 (regarding the
threshold limits for initiation of Section 7 Applications by allottees) was to
curb the filing of insolvency applications by flat allottees with a fraudulent
of malicious intent or for any purpose other than for resolution of insolvency
or liquidation. The principal test in such cases was as follows: (i) before
admitting such case, it will be desirable to find out whether the allottees
have approached the AA for refund of money or to get their
apartment/flat/premises by way of resolution; (ii) if the intention of the
allottees is only to get a refund and not possession of the flat, then this
aspect must be brought to the intention of the AA by the Corporate Debtor, in
the manner provided by the Supreme Court of India in Pioneer Urban Land and
Infrastructure Limited v. Union of India [2019 (8) SCC 416]
K.C.
Sanjeev v. Iswara Pillai Kesavan Nair [Co.
Appeal (AT) (Insolvency) No. 1427/2019]
In
the present matter, it was alleged that the IRP of the Corporate Debtor did not
deal with an application for withdrawal by the Corporate Debtor within the time
stipulated in the Code.
The
NCLAT observed that Section 12A of the Code along with Regulation 30A of the
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for
Corporate Persons) Regulations, 2016 makes it clear that the IRP is dutybound
to place an application for withdrawal within a period of 3 days from its
receipt. Reliance was also placed on the Supreme Court judgement of Swiss
Ribbons Private Limited v. Union of India [2019 SCC Online SC 73] to contend
that prior to constitution of a COC, the parties can settle and withdrawal can
be permitted, however, once the COC is constituted then in such case the
Corporate Debtor is required to settle with all the creditors.
Manesh
Agarwal v. Bank of India & Another [Co. Appeal (AT) (Insolvency) No.
494/2019]
This
case discusses in detail the essential parameters for a document to qualify to
be an acknowledgement of liability in terms of Section 18 of the Limitation
Act, 1963.
(a) A document, to qualify as an
acknowledgement of liability, must involve an admission of a jural relationship
between the parties and a conscious affirmation of an intention of continuing
such relationship in regard to an existing liability. Reference was made to the
Supreme Court judgement of J.C. Budhraja v. Chairman Orissa Mining
Corporation Limited [2008 (1) SCC (Civ) 582]
(b) Before the expiration of the period of
limitation, an acknowledgement of liability in writing renews the debt but does
not create a new right or action. Reference made to Shapoor Freedom Mazda v.
Durga Prasad Chamaria [AIR 1961 SC 1236] and J.C. Budhraja.
(c) Limitation period can be extended only
in certain select situations as envisaged under the Limitation Act, 1963 and
that existence of a suit is not necessarily one of them. Refence made to Jignesh
Shah v. Union of India [2020 (1) SCC (Civ) 48.
(d) A suit for recovery based upon a cause of
action which is within limitation cannot in any manner impact the separate and
independent remedy of a winding up proceeding.
(e) A default of debt, in a Section 7
Application, ought to be computed from the date when the account of the
Corporate Debtor was classified as NPA by the Financial Creditor bank.
Reference made to the Supreme Court judgement in Gaurav Hargobindbhai Dave
v. ARC India Limited [2019 (2) SCC 572]
