TaxTMI 
TaxTMI 
2019 (4) TMI 941
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....treating it as Operational Creditor. Hence, the applicant has made following prayers; a) To pass an order for quashing and setting aside the letter dated 23.08.2018 sent by the Resolution Professional for not admitting the claim of the applicant in the CIRP proceedings of the corporate debtor i.e. M/s. Alok Industries Ltd. b) To pass an order for the respondent Resolution Professional to ensure about the continuation of the executed Gas Sale Agreement dt.27.05.2013 & Gas Transmission Agreement dated 27.05.2013 under the resolution plan submitted by the resolution applicant. c) Pending the hearing and final disposal of the present Application, to pass an order for staying the proceedings, if any, initiated by the Respondent No. 1 for approval of the resolution plan by this Tribunal. d) Pending the hearing and final disposal of the present Application, to pass an order for directing the Respondent No.l to place on record the resolution plan submitted by the Resolution Applicants a long with copies of the minutes of the COC meeting and such other records as may be relevant in the adjudication of the present dispute. 2. The applicant, by this appl....
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....paid in due course of time, although the same were required to be repaid within a fortnight from the date of invoices under GSA. It is alleged that the Corporate Debtor did not make payment of such dues to the applicant for the last three years which now amount to Rs. 506.42 crores, as on the date of admission of the Company Petition [CP (IB) No.48 of 2017] and initiation of the CIRP, i.e. 18.07.2017.The applicant, in support of its claim, has annexed copies of its unpaid invoices/vouchers along with the tabular calculations to the present application as Annexure-H. 6. The applicant has further opposed the stand of the RP that he cannot consider any claim including the applicant's claim which was submitted after the expiry of CIRP period, as per the provisions of the Code, which is not correct in respect of the claim of the present applicant. Hence, such stand/contention of the RP is being challenged. 7. The applicant further contended that the CIRP period in respect of the present corporate debtor company was initially commenced from 18.07.2017 with the initial period of 180 days, which was completed on 14.01.2018. Subsequently, such period was further got extended for a....
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....ting to the corporate insolvency resolution process for Alok Industries Limited Dear Sir, This is with reference to your letters dated 24 July 2018 and 13 August 2018 ("Your Letters") relating to the purported outstanding amounts under the gas sales agreement dated 27 May 2013, executed between GAIL and Alok Industries Limited ("Company") for supply of gas. In this regard, GAIL has submitted a proof of claim under Form B dated 23rd November 2017 in terms of the Insolvency & Bankruptcy Code, 2016 ("Code") for an amount of Rs. 506.42 crores as on the insolvency commencement date of the Company ("Claim"). The statys of the Claim has been updated on the website of the Company in accordance with the provisions of the Code and the relevant regulations, under the head 'List of operational creditors: suppliers'. Accordignly, the information pertaining to the status of your Claim has been publicly available at all times. Please note that contrary to the averments made in your letter dated 13 August 2018, the resolution professional is under no obligation to separately communicate to each creditors the status of its claim as submitted to the resoltuion prof....
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....majority at its meeting held on 20th June 2018. The Application is currently pending adjudication by the Hon'ble NCLT. Trust the above clarifies the position. Yours Sincerely, Ajay Joshi Resolution Professional Alok Industries Limited IP Reg. No. IBBI/IPA-003/IP-N00019/2017-18/10166 IPA-ICAI/N/00019 11. Hence, for the above stated reasons, the applicant has prayed for quashing the above stated impugned letter with further direction to the Respondent to treat the applicant as an Operational Creditor. 12. Contrary to the above, the Respondent, i.e. RP, has vehemently opposed the above stated contention of the applicant, by filing his affidavit in reply stating the following grounds/points; a) It is denied that the present Applicant is an operational creditor of the Corporate Debtor in terms of Section 5(20) of the Code, or that the purported claim filed by the Applicant on 23rd November 2017 qualifies as an operational debt of the Corporate Debtor in terms of Section 5(21) of the Code. b) It is further submitted that the Respondent, in due discharge of his duties under the Code, rejected the pu....
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.... arise only in case the Corporate Debtor fails to consume/receive the minimum guaranteed quantity of natural gas made available by the Applicant. Therefore, the amounts allegedly payable by the Corporate Debtor to the Applicant do not on the face of it bear any direct nexus with the input and output operations of the Corporate Debtor, and accordingly do not qualify as an 'operational debt' due from the Corporate Debtor. f) It is further stated that it is evident from the Applicant's own submissions that the amount sought to be claimed in terms of Article 14 of the GAS in the nature of damages for breach of contract, as against an operational debt that has become due and payable. The Hon'ble National Company Law Tribunal (Chandigarh Bench) in the matter of Seashells Infrastructure (P.) Ltd. v. Rajpur Hydro Power (P.) Ltd. has clarified that amounts claimed in the form of damages would not qualify as an operational debt in terms of the Code. Further, in the absence of the damages amount having been quantified by a competent civil court or arbitrator, the same cannot be treated as a debt, let alone an operational debt of the Corporate Debtor. It is also undisp....
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....spondent is self-explanatory or that the same cannot be considered under law. I deny the interpretation sought to be imparted by the Applicant to the provisions of Section 5(21) of the Code and say that the same is contrary to both judicial precedents and the intention of the Legislature. It is denied that the payment to the Applicant would qualify as a debt payable to the Central Government, State Government or any local authority, on the purported basis that the Applicant is a Government of India undertaking. It is denied that the rejection of the claim by the Respondent will jeopardize the entire investment of the Applicant and submitted that the same bears no relevance to the facts of the present matter. j) It is further denied that the amounts payable toward TOP charges have been admitted by the Corporate Debtor or that the Respondent lacks the jurisdiction to decide on whether the same is an operational debt or not. It is submitted that the evaluation and subsequent admission/rejection of all claims made against the Corporate Debtor is one of the Respondent's fundamental duties under the Code. It is denied that the Respondent is under any obligation to acknowledg....
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....sions regarding proof of claim by the operational creditors has been made in Chapter III of the Regulations, 2016. Under the said Regulations, 2016 as per Regulation 7(2)(b)(i) and (ii), the existence of debt for the purpose of ascertaining the claim of the operational creditor is to be proved firstly on the basis of the contract for supply of goods and services with the Corporate Debtor and secondly invoices demanding payment of goods and services supplied to the debtor. iv) Further as per Regulation 13, the respondent Resolution Professional is required only to verify the amount of claim as claimed by the respective creditors and after verifying the claim, the Resolution Professional is required to make the list of creditors available for inspection by the persons who had submitted the proof of claim. v) Further under Regulation 14 of the said Regulations, 2016, the Resolution Professional is required to only determine the amount of claim as claimed by the debtor. Thus, as per the applicant, in the instant case, the respondent Resolution Professional is having no authority to decide the of claim of the applicant and it is incorrect to say that the respo....
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....g dues pertaining to "Take or Pay Obligation" under identical long term "Gas Sale Agreement". In the said case, the said RP has admitted the claim of GAIL as an "Operational Creditor". This clearly proves that the present respondent in present case has errored in even deciding the claim of applicant which is not settled law as contended by him. f) The applicant respectfully submits that, without prejudice to the aforesaid contention regarding jurisdiction of RP, it is the settled position of law that when any authority is proceeding/deciding against any party, then such authority is required to give a notice to such party for an opportunity of hearing and to put forward his case. Such procedure has been widely acknowledged by our Indian Judicial Jurisprudence in catena of judgments and is the basic requirement for having principle of natural justice in legal system. Thus, in the instant case when the respondent has decided to exceed his jurisdiction for adjudicating the nature of claim and further rejecting the said claim, then he was required to issue notice to applicant by giving an opportunity of hearing or a chance to satisfy respondent about the claim of GAIL. But the....
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....for reference: Quote "Thus the amount should fall within the definition of "claim" as defined under Section 3(6) of the Code; Next such a Claim should fall within the confines of the definition of a "debt" as defined in Section 3(11) meaning it should be by way of a liability or obligation due from any person; Thirdly such a "debt" should fall strictly within the scope if an "operational debt" as defined under Section 5(21) of the Code, i.e. the claim should arise in respect of...." Unquote Further the Hon'ble NCLT, New Delhi, in Para No. 11 of the above said judgment has concluded that if the claim satisfies above three conditions, then it can be categorized as an operational debt and if such claim does not fall within the above three categories, then the said claim cannot be categorized as operational debt, Thus, it is submitted that the claim of the applicant herein explicitly satisfies the definition given under the Code in Section 3(6) which says that the claim is required to be a right to payment and right to remedy for breach of contract. Thus, when the claim of the a....
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....is direct input to output of corporate debtor. Thereby, the claim of the applicant is required to be considered as an operational debt under the Code by respondent as per his own interpretation of law. (i) The applicant further submits that before executing the GSA by the Corporate Debtor, the Corporate Debtor has made a proposal vide letter dated 23.03.2010 for requirement of natural gas as a "energy" to power and steam in its Silvassa plant which is engaged in the activity of spinning, weaving, knitting Polyster Yarn, home textile and garmenting. A copy of the letter dated 22.03.2010 is annexed herewith and marked as Annexure-R1. It is submitted that the Corporate Debtor has commissioned a power generation (electricity) facility in its plant for its electricity requirement. The corporate debtor has also installed the facility for steam generation for which a natural gas is a fuel in the boilers and such steam is used for the dying purposes. Thus, the Corporate Debtor had requested for supply of natural gas on long term basis which clearly proves that the gas which was supplied by the applicant was one of the required raw material for the manufacturing process of the corp....
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....ntinued business operations of the corporate debtor. (2) For the purposes of sub¬section (If the resolution professional shall undertake the following actions, namely- (a) take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor; (b) represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings; (c) raise interim finances subject to the approval of the committee of creditors under Section 28; (d) appoint accountants, legal or other professionals in the manner as specified by Board; (e) maintain an updated list of claims; (f) convene and attend all meetings of the committee of creditors: (g) prepare the information memorandum in accordance with Section 29; (h) invite prospective resolution applicants, who fulfil such criteria as may be laid down by him with the approval of committee of creditors, having regard to the complexity and scale of operations of the business of the corporate debtor and such other condition....
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....sh Kumar Gupta [2018] 92 taxmann.com 366 (NCLT - New Delhi) has already observed that the nature of RP's duties like a deemed public servant, as being an appointee of this Code. Hence, he is legally expected to appraise of the claims duly received by him along with his comments to the CoC for its consideration, before taking a final stand on admission or otherwise of a particular class of claim. This does not seem to have been done in the present matter. The RP took an independent decision, as per prevailing practice and felt not necessary to have an interaction with the CoC for its concurrence on a debatable subject/disputed claim. Perhaps because the case laws at that point of time were not settled. 19. However, our such view appears to be fortified by the Hon'ble Supreme Court of India, in its decision in (1) Arcelormittal India (P.) Ltd. (supra) (2) Swiss Ribbons (P.) Ltd. v. Union of India & Ors., in Civil Appeal Nos. 9402-9405 of 2018 decided on October 4, 2018 (2) Swiss Ribbons Pvt. Ltd. And Anr. Vs Union of India And Ors. The Hon'ble Apex Court specifically in the matter of Arcelormittal India (P.) Ltd. (supra), has pleased to quote the conclusion given an....
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....purpose of affording the opportunity to the resolution applicants before declaring them ineligible. In our view, such procedure has not been followed hence, it vitiate the proceeding of the CoC and hence the present matter can be remanded back to the RP and CoC on this ground alone for their reconsideration." 20. In the light of the above stated preposition, it may be seen in the present matter that the RP, vide its impugned letter dated 23.08.2018, informed its decision by taking a categorical view that "Take or Pay" obligation under the GSA cannot be termed as operational debt under Section 5(21) of the Code. However, such decision is taken unilaterally and without interacting with the members of the Committee of Creditors or without having formal consultation with it, which in our humble opinion cannot be termed as reasonable approach to deal with such issue. 21. In addition to the above, during the course of hearing, Shri Sudhir Nanavati, Learned Senior Advocate for the applicant, further brought to notice of this Adjudicating Authority a peculiar fact of the case that on similar terms and conditions, the applicant's claim has already been considered and accepted by t....
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....us of operational creditor, there would be no impediment to the CIRP or on implementation of the resolution plan, as it will get amount in terms of priority given on the liquidation value of the corporate debtor company. Hence, there is need to maintain equilibrium in the present CIRP. Therefore, on this count also, the present application succeeds. 24. By considering the above stated factual position, we feel if the RP had taken appropriate decision in consultation with the members of the CoC then such disparity might have been resolved and then such occasion for two RPs coming to adopt different stand could have been avoided, because most of members, being the Bankers/Financial Creditors, are common in both CIRPs of the Corporate Debtor and fall under the jurisdiction of this Adjudicating Authority. Hence, it is pertinent to note that on very same terms and conditions, the present applicant has been treated as one of the Operational Creditors in the CIRP of M/s. Essar Steel India Limited. Hence, such disparity needs to be removed by this Adjudicating Authority by clarifying the legal position on the status of the applicant in the present matter. 25. The NCLT, Allahabad Benc....
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.... the present case are almost common except the RP. Therefore, in order to avoid multiplicity of proceedings and inconsistency of stand that may be taken by a RP in CIRP process or by this Tribunal in its formal order, the RP is advised to re-look to its decision impugned in consultation with its CoC by considering the request of Axis Bank, in the light of Section 31 read with other provision of the I & B Code, which takes care of the interest of the Guarantor as well, because if such resolution plan is approved by the Adjudicating Authority, it shall have a binding effect not only the Creditors but also to the Guarantors/Stakeholders/employees, etc. as the case may be. The RP to appraise of its conscious decision taken in consultation with CoC, to this Court. So, that it may rule on, if it is necessary." 26. Therefore, we feel appropriate to place reliance on the above stated decision of the NCLT, Allahabad Bench, for a similar direction under Section 60(5) of the Code, to be issued to the Resolution Professional to give similar treatment to the applicant as of operational creditor and treating its debts as an operational debts, so as to maintain the consistency, in the....
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....Corporate Debtor company and it is under a contractual obligation to abide the terms of the GSA and to make payment of such gas sold. 29. It is also contended that on similar footing, the RP of the another Corporate Debtor company, i.e. M/s. Essar Steel India Ltd., has already recognized the present applicant as operational creditor and its debts as operational debts under Section 5(2)(1) of the Code. 30. By considering the above stated position, we are of the view that such issue can be decided properly after knowing version/stand of the Ld. Resolution Professional of another Corporate Debtor company i.e. M/s. Essar Steel, but who is not a party to the present proceedings. 31. Although both parties have placed reliance on same decision of the Principle Bench in Pramod Yadav (supra) in support of their respective contention, yet we are of the view that this Bench is expected first to remove the inconsistency of stand being taken by the RPs in different CIRP proceedings, which falls the jurisdiction of this Adjudicating Authority, so as to ensure smooth completion of the CIRP in both CIRP. As the time is the essence of the Code and there are debatable legal grounds agitated....
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.... conform to some standard or norm which is rational and non-discriminatory. This principle was recognised and applied by a Bench of this Court presided over by Ray, C.J., in Erusian Equipment and Chemicals v. State of West Bengal (supra) where the learned Chief Justice pointed out that "the State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person The Government cannot choose to exclude persons by discrimination. The order of black-listing has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting.... A citizen has a right to claim equal treatment to enter into a contract which may be prope....