Dismissal of Suit: Plaintiff not Financial Creditor, Excluded from Creditors' Committee

The present suit was dismissed due to the Supreme Court's findings that the plaintiff was not a financial creditor of the defendant No. 1 under the Insolvency and Bankruptcy Code. The plaintiff and another party were excluded from the Committee of Creditors, and the moratorium under the IBC prevented the suit's continuation. The court affirmed the decisions of the lower courts and dismissed the suit, allowing the plaintiff to pursue other legal remedies if necessary.

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Issues Involved:

1. Withdrawal of vakalatnama by defendant No. 2's counsel.
2. Appointment of Resolution Professional (RP) for defendant No. 1 and the moratorium.
3. Maintainability of the present suit in light of the Supreme Court's judgment.
4. Exclusion of the plaintiff from the Committee of Creditors (CoC) by NCLT and NCLAT.
5. Supreme Court's findings on the plaintiff's status as a financial creditor and related party.
6. Bar to continuation of the present suit under the Insolvency and Bankruptcy Code (IBC).

Issue-wise Detailed Analysis:

1. Withdrawal of vakalatnama by defendant No. 2's counsel:

Mr. Akhilesh Wahal, Advocate, submitted that he has instructions to withdraw their vakalatnama. At request, Mr. Arjun Syal and Mr. Akhilesh Wahal, Advocates, are discharged from appearance on behalf of defendant No. 2.

2. Appointment of Resolution Professional (RP) for defendant No. 1 and the moratorium:

Mr. Mohit Uppal, Advocate, appears for the Resolution Professional and submits that Mr. Jailesh Kumar Grover has been appointed as the RP of defendant No. 1 (Akme Projects Limited). He submits that the moratorium qua the defendant No. 1 company is still in operation. The plaintiff has already submitted its claims before the RP.

3. Maintainability of the present suit in light of the Supreme Court's judgment:

Learned counsel appearing for the RP handed over a copy of the judgment passed by the Hon'ble Supreme Court dated 01.02.2021 in Civil Appeal No. 2842/2020 and Civil Appeal No. 3063/2020 to contend that the present suit is not maintainable in view of the aforesaid judgment.

4. Exclusion of the plaintiff from the Committee of Creditors (CoC) by NCLT and NCLAT:

NCLT held that the plaintiff (Spade Financial Services Limited) along with AAA Landmark Private Limited (AAA) has to be excluded from the CoC formed in relation to the Corporate Insolvency Resolution Process (CIRP) initiated against Akme Projects Ltd. (defendant No. 1). This was upon applications filed by Phoenix Arc Private Limited (Phoenix) and YES Bank under Section 60(5)(C) of the Insolvency and Bankruptcy Code, 2016 (IBC). The NCLT's order dated 19.07.2019 was affirmed by NCLAT on 27.01.2020.

5. Supreme Court's findings on the plaintiff's status as a financial creditor and related party:

The Supreme Court, in its judgment dated 01.02.2021, gave a categorical finding that Spade (the plaintiff) cannot be labeled as a financial creditor of the Corporate Debtor (defendant No. 1) under Section 5(7) of IBC. The Supreme Court also held that Spade and AAA were related parties of the Corporate Debtor under Section 5(24) of IBC. Thus, the decision of NCLAT excluding Spade and AAA from the CoC was affirmed. The Supreme Court set aside the decision of the NCLAT that referred to Spade and AAA as financial creditors.

6. Bar to continuation of the present suit under the Insolvency and Bankruptcy Code (IBC):

The moratorium under Section 14 of the IBC continues to operate against defendant No. 1 company, creating a clear bar to the continuation of the present suit. The Supreme Court's findings and the provisions of IBC indicate that the present suit cannot proceed. The suit is dismissed accordingly.

Conclusion:

In view of the categorical findings by the Hon'ble Supreme Court and the provisions of IBC, the present suit is dismissed. If any cause of action still survives in favor of the plaintiff, the plaintiff would be at liberty to pursue its legal remedies available.

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