2022 (1) TMI 321 - AT - Insolvency and Bankruptcy

Adjudicating Authority lacks power to recall CIRP order; Liquidation order upheld, appeals dismissed.

MR. VINEET KHOSLA Versus M/s EDELWEISS ASSET RECONSTRUCTION COMPANY LTD., MARGRA INDUSTRIES LTD., MR. RAJENDER KUMAR GIRDHAR, MR. PARAMJEET SINGH BHATIA, ARCK RESOLUTION PROFESSIONALS LLP

The Adjudicating Authority was found not competent to recall the order initiating Corporate Insolvency Resolution Process (CIRP) as the appellant failed ... Liquidation of the Corporate Debtor - Whether the Adjudicating Authority is competent to recall the order of initiation of CIRP? - HELD THAT:- The Appellant has failed to convince that the Respondent No. 1 has committed any act of deliberate deception with the design of securing some unfair or undeserved benefit by taking undue advantage of another. The Appellant has not shown any false document which was filed in support of the Petition under Section 7 of the IBC. Thus, the Appellant has failed to make out a case that the Respondent No. 1 has obtained order dated 15.03.2019 by practicing fraud. We are unable to convince with the argument that Hon’ble Supreme Court in JIGNESH SHAH & ANOTHER VERSUS UNION OF INDIA & ANOTHER [2019 (9) TMI 1121 - SUPREME COURT] laid down that the provisions of Limitation Act would be applied to the IBC proceedings. Section 238-A of IBC inserted w.e.f. 06.06.2018 which provides that the provisions of Limitation Act shall, as far as may be, apply to the proceedings or Appeals before the Adjudicating Authority, the National Company Law Appellate Tribunal. Therefore, we find no force in the argument - Admittedly, the issue of limitation is mixed question of fact and law, therefore, we are unable to convince with the argument of Ld. Sr. Counsel that such issue can be raised at any stage even before the Higher Court. In the facts of present case the Adjudicating Authority is not competent to recall the order of initiation of CIRP. Whether the liquidation order suffers from material irregularity? - HELD THAT:- Admittedly, in this matter even after extended period beyond 180 days no resolution plan had been received. Therefore, CoC with 92.29% voting share passed the resolution for liquidation of the Corporate Debtor. Therefore, the RP filed the Application before the Adjudicating Authority for order of Liquidation - The Appellant has not filed any objection before the Adjudicating Authority in regard to the Application filed by the RP for seeking order of liquidation. The order of liquidation can be set aside only when there is any material irregularity. The Appellant has failed to point out any material irregularity - there are no ground to interfere in the order of liquidation. It is informed that in compliance of the order of liquidation the factory premises of the Corporate Debtor has already been auctioned and possession has been handed over to the auction purchaser - appeal dismissed. Issues Involved:1. Whether the Adjudicating Authority is competent to recall the order of initiation of CIRP.2. Whether the liquidation order suffers from material irregularity.Detailed Analysis:Issue 1: Whether the Adjudicating Authority is competent to recall the order of initiation of CIRP.1. Background: The Adjudicating Authority ordered the initiation of CIRP against the Corporate Debtor on 15.03.2019, which was affirmed by the Appellate Tribunal on 06.09.2019. The Suspended Director filed an application to recall this order, alleging fraud and misrepresentation regarding the date of default to bring the petition within the limitation period.2. Arguments by Appellant:- The order dated 15.03.2019 was obtained by fraud and misrepresentation, making it null and void.- Cited Supreme Court judgments (United India Insurance Co. Ltd. Vs. Rajendra Singh & Ors. and AV Papayya Sastry Vs. Government of A.P.) which state that orders obtained by fraud can be recalled by any court or tribunal.3. Arguments by Respondent:- The petition under Section 7 of IBC was filed with true facts, including acknowledgments of debt by the Corporate Debtor.- The order dated 15.03.2019 has merged with the Appellate Tribunal's order dated 06.09.2019, thus it cannot be recalled.- The Adjudicating Authority cannot exercise powers under Section 420 of the Companies Act, 2013, as the appeal has already been decided.4. Tribunal's Analysis:- Fraud is defined as an act of deliberate deception to secure an unfair benefit.- The Appellant failed to prove that the Respondent No. 1 committed any act of deliberate deception.- The Appellant did not challenge the particulars mentioned in the petition or the documents filed with it.- The Adjudicating Authority rightly held that it had no jurisdiction to recall the admission order dated 15.03.2019.5. Conclusion:- The Appellant failed to establish that the order was obtained by fraud.- The Adjudicating Authority is not competent to recall the order of initiation of CIRP.Issue 2: Whether the liquidation order suffers from material irregularity.1. Background: The CoC, with a 92.29% voting share, resolved to liquidate the Corporate Debtor after no resolution plan was received even after the extended CIRP period. Consequently, the RP filed an application for liquidation, which was allowed by the Adjudicating Authority on 15.10.2020.2. Arguments by Appellant:- The Adjudicating Authority passed the liquidation order without hearing the Appellant.- The application for recalling the admission order should have been decided first, given the substantial issue of limitation raised.3. Arguments by Respondent:- The CoC's resolution for liquidation was based on the failure to receive any resolution plan.- The RP represented the Corporate Debtor, and it was not necessary to hear the suspended directors.- The liquidation order was passed in accordance with IBC provisions.4. Tribunal's Analysis:- The Appellant did not file any objection to the liquidation application before the Adjudicating Authority.- The liquidation order can only be set aside if there is a material irregularity, which the Appellant failed to demonstrate.- The factory premises of the Corporate Debtor have already been auctioned and possession handed over to the auction purchaser.5. Conclusion:- No material irregularity was found in the liquidation order.- The Tribunal found no ground to interfere with the order of liquidation.Final Judgment:- The appeals are dismissed, with no order as to costs.- Interim orders passed by the Appellate Tribunal are vacated.