TaxTMI 
TaxTMI 
2019 (11) TMI 187
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....al ('Tribunal' for short), was transferred to the Principal Bench, New Delhi. 2. In the said petition, an application under Rule 11 of the 'National Company Law Tribunal Rules, 2016' was filed by Applicants ('Appellants' herein- 1st, 12th & 14th to 16th Respondents in the petition) with prayer to grant permission to the Appellant Company- 'M/s. Atlas Cycles (Haryana) Ltd.' to approach the consortium banks for release of title deeds in respect of non-core assets under the charge of 'Sonepat Unit' so as to proceed with its sale in accordance with the resolutions passed by the Board. 3. Before the Tribunal, the petitioners ('1st & 2nd Respondents' herein) brought attention that the resolution passed by the Board of Directors on 14th December, 2017 is under challenge in C.A. No. 179(PB)/ 2018. The said application was disposed of on 2nd August, 2018 and the Respondents ('Appellants' herein) were restrained from giving effect to the resolutions dated 14th December, 2017 and 24th February, 2018 in the light of the previous orders dated 24th August, 2015 and 7th September, 2015. 4. The Appellants ('Respondents' before the Tribunal) also filed C.A. No. 511(PB)/2018 and C.A. No. 61....
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....v. 'M/s. Atlas (Cycles) Haryana Ltd.' being C.P.(I.B.)No.175/Chd/Hry/2018: Vide order dated 26.09.2018 the Tribunal granted Atlas five weeks time to file a reply and the matter is fixed for arguments on 15.11.2018. ii. M/s. Mahajan Tyre Company v. M/s. Atlas (Cycles) Haryana Ltd. being C.P.(I.B.)No.240/Chd/Hry/2018 : Vide order dated 05.10.2018 the Tribunal granted Atlas five six weeks time to file a reply and the matter is fixed for arguments on 13.12.2018. iii. M/s. Surindera Cycles v. M/s. At las (Cycles) Haryana Ltd. being C.P.(I.B.)No.261/Chd/Hry/2018 : Vide order dated 10.09.2018 the Tribunal issued notice on the application filed by the Operational Creditor and is fixed for appearance on behalf of Atlas on 14.12.2018. iv. Avon Ispat - S. 8 IBC notice received v. Berger Paints - S. 8 IBC notice received i. Over a period of time, 'Sahibabad' and 'Sonepat Unit' have contributed a sum of Rs. 45.51 crores and Rs. 26.68 crores respectively towards meeting outstanding liabilities of 'Malanpur Unit', pursuant to its closure under directions of the Board. A communication dated 04.03.2018 was sent to the Board by the CFO of the compan....
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....itted under the signatures of Sb. I.D. Chugh, Whole Time Director." 8. The Applicants ('Appellants' herein) plea before the Tribunal was that the petitioners- non applicants ('Respondents' herein) could not operationalize the 'Sonepat Unit' and production from the 'Sonepat Unit' continues to be zero. It was further alleged that the petitioners (1st & 2nd Respondents herein) have failed to furnish the requisite information sought by the Board of Directors and no information has been furnished regarding the outstanding liabilities to its suppliers. The information is necessary to prepare the defence in theproceedings initiated by 'Operational Creditors' under the 'Insolvency and Bankruptcy Code, 2016' in NCLT, Chandigarh. The 'Sonepat Unit' has not been able to clear its statutory liabilities later on liquidating the outstanding liabilities of suppliers. The Board of Directors has strongly felt that the only possible solution for the Respondent No. 1 company is to liquidate the non-core assets of the company so that additional funds could be generated and be utilized to stabilize the financial position which otherwise is getting adversely impacted. 9. Non-applicants/Petitioners....
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....o. 1, 12, 14 to 16 have joined hands to defeat the direct ions of the Ho n 'ble Appel late Tribunal . By not infusing funds the appl icants are pushing the Sonepat Uni t to penury and create a si tuat ion to f i le an appl icat ion for issuance of direct ion. I t is whol ly unfair.Therefore, we are not inclined to grant any interim relief at this stage particularly when nothing has been placed on record to show that the applicant-respondent No. 1 company as such is unable to meet the liability of the Operational Creditors who have filed petitions under the Insolvency and Bankruptcy Code, 2016. 21. Mr. R.S Sun, learned senior counsel appearing for TDI Infratech Limited has submitted that one property at item No. 11 of the table may not be included as a part of the prayer made in this application as TDI Infratech Limited has acquired some interest in it. As we are dismissing the application the request made by Mr. Suri would not survive. We order accordingly." 11. With the aforesaid observations, the application was dismissed which is under challenge in this appeal. 12. For deciding the issue, it is desirable to notice the relevant background of the case as narrated by....
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...., vide resolution dated 5th October, 2014, the Board of Directors resolved to close the unit and suspended all manufacturing activity in the unit. The Board also directed that the territories of 'Malanpur Unit' shall be divided equally and serviced by the other two units i.e. 'Sonepat' and 'Sahibabad Unit'. It also resolved that all the liabilities of 'Malanpur Unit' shall be met out of sale of assets of 'Malanpur Unit'/ 'ASTI'/ 'Atlas Auto' and the deficit if any shall be borne equally by 'Sonepat' and 'Sahibabad Unit'. It also resolved that pending sale/ liquidation of assets of 'Malanpur Unit', both 'Sonepat' and 'Sahibabad Unit' shall contribute a sum of Rs. 10 crores each to tide over the immediate liabilities which include statutory dues and bank liabilities to prevent any situation of the bank account of the company turning 'NPA'. 16. The arbitration proceedings between the Kapur family members culminated into an award dated 1st November, 2014 passed by the Hon'ble Sole Arbitrator. It is pertinent to mention that the Learned Arbitrator, in contradiction to his previous orders, directed division of the management, control and ownership of Appellant no. 1 Company. 17. Af....
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....ate Tribunal being Company Appeal (AT) Nos. 260-262 of 2018. The said appeals were disposed of vide order dated 28th August, 2018 with part modification of the order dated 2nd August, 2018 passed by Tribunal, Principal Bench. The said order was corrected vide order dated 17th September, 2018. Relevant portion of which reads as follows: "14. By the impugned order, the Tribunal has kept certain resolution in abeyance and directed to continue with the operation of the two orders dated 24th August, 2015 and 7th September, 2015. Two of the resolutions of the Board of Directors dated 14^th December, 2017 and 24th February, 2018 have been kept in abeyance and the Board of Directors has been directed to facilitate the 'Sonepat Unit' in production to achieve the optimum level. The Applicant/Petitioner No.1 (Respondent herein) has also been directed to furnish all details sought by the Board of Directors of the Company relating to fund flow from the Government order and utilization thereof. 15. Learned Senior Cousnel appearing on behalf of the Appellants submits that if the Respondents are allowed to sign the cheques, many of the cheques will be bounced, as already bounced ....
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....f such signature, the Company may either authorise any of its representative already posted in the 'Sonepat Unit' or may post any of its representative to ensure joint signatures on the cheque for payment in favour of workmen, employees, suppliers or raw materials, other creditors, electricity charges, water charges, tax etc. iii. Till 'Sonepat Unit' achieve optimum level of production, it will be open to the Board of Directors of the Company to make available the products, such as cycles and other parts to 'Sonepat Unit' from other units for meeting the demand and supply in the market which is under the control of 'Sonepat Unit'. 'Sonepat Unit', in its turn, will keep an account of the products, such as cycles and other parts received from other units and after sale of such products will report the same to the Company as also the unit(s) from which the products such as cycles and its parts are supplied. The 'Sonepat Unit' will not sell any product such as cycles and its parts supplied by other units on credit. The 'Sonepat Unit' will transfer the amount generated from sale of product of other units to the unit concerned within 30 days of sale failing which, in default the....
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....e of the order dated 28^th August, 2018. The Board passed a resolution dated 29th August, 2018 directing the other unit to supply to 'Sonepat Unit'. However, the 1^st Respondent asked the bicycles to be supplied at Marginal Cost vide communication dated 11th September, 2018 contrary to the terms of the order. An appropriate reply dated 12th September, 2018 was sent by the Board of Directors and another communication dated 18th September, 2018 was sent by 'Sahibabad Unit' forwarding price lists, etc. 26. Therefore, according to the Appellant, the Tribunal erroneously observed that no material has been placed on record to establish that the Company has no funds. It is submitted that the Tribunal failed to take note of the following facts: a. Bank position as on 31st March, 2019. i. Sanctioned limit - Rs. 19 crores ii. Drawing power- Rs. 18.54 crores iii. Availed limits - Rs. 18.14 crores b. All mutual funds exhausted except for a small art fund of Rs. 50 lakhs which is sub judice. c. Payments to suppliers overdue, more than 60 days - Rs. 57 crores. d. Position of funds as on 31st December, 2018 can be seen from the Let....
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....ged by Management Committee of 'Malanpur Unit'. The permission for sale of the said asset was granted by the Tribunal vide order dated 12th August, 2018 in C.A. No. 842 (PB)/ 2018. Proposed utilization of the sale proceeds The amount likely to be realized through the sale of the said asset 35 crores Amount proposed to be paid to the consortium bankers as a condition for release of the title deeds of the said property as the same are held by the banks as collateral security for the financial assistance extended to the company 20 crores Amount liable to be paid back to M/s. AGR Steel Strips P. Ltd., towards refund of advance received by Atlas against proposed sale of the said asset to M/s. AGR Steel Strips P. Ltd., in 2012. AGR has a lien on the said property till the amount of advance along with interest is not refunded to AGR. 13 crores Brokerage 0.82 crores TDS 0.35 crores Dues of HSIIDC, part refund to AGR Steel Strips and repayment of fixed deposits, etc. 2 crores The amount of Rs. 2 crores that was received as advance has already been utilized for payment of dues of HSIIDC, part refund to AGR Steel Strips and repayment....
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....plea taken by 1st & 2nd Respondents ('Petitioners' before the Tribunal) also cannot be accepted as they had not filed any reply affidavit nor taken any plea that there are three separate subsidiary Companies as discussed above. If there are three different Companies, then Insolvency Proceeding will be initiated against one of them such as 'Atlas Cycles (Sonepat) Limited'. However, for non-payment of dues in absence of separate Companies, the Insolvency Proceeding will be initiated against Appellant No.1 Company- 'Atlas Cycle (Haryana) Limited'. 32. The other plea taken by 1st & 2nd Respondents is that the Appellants created obstacles and, therefore, the application was filed by 'Sonepat Unit' against the Board Resolutions but from the record, we find that the application under Sections 241-242 of the Companies Act, 2013 was filed with prayer for demerger by 1st & 2nd Respondents in their individual capacity (as petitioners) and not by so called 'Atlas Cycles (Sonepat) Limited' or 'Sonepat Unit'. 33. The 1st & 2nd Respondents ('Petitioners' before the Tribunal) have alleged obstacles created by Board of Directors, as detailed below: (i) 'Malanpur Unit' of the Company ....
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....ng for a demerger of the Unit as per the 'Memorandum of Understanding' and 'Board Resolutions'. Non- Core Assets of the 'Sonepat Unit' are the only assets of the Unit. The Board of Directors was permitted to sell only the 'Bawal Unit' and the sale proceeds were to be infused in the 'Sonepat Unit' so that the Unit starts manufacturing again and further to repay the 'Operational Creditors'. The Board of Directors instead of infusing the said funds in the 'Sonepat Unit' and or repaying Rs. 11 Crores to the 'Operational Creditors' have changed their stand before this Appellate Tribunal. 36. It is accepted that 'AGR Steel Strips Pvt Ltd.' had only advanced Rs. 6.37 crores to the Company in 2012. Since it is outstanding since the year 2012 and there is no urgency to pay the same and the Board of Directors should prioritise in repaying the funds due under IBC. 37. It is stated that Non- Core Assets of the 'Sonepat Unit' includes properties which have already been sold to the Trusts of the 'Sonepat Unit', and the payments have been received by the Board of Directors and the matter is currently pending before the Hon'ble Delhi High Court. It is informed that the Board of Directors hav....
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.... Board of Directors to decide whether sale of non-core assets ought to be made or not. It was the duty of the Tribunal to notice that impending threat of an 'I&B Code' petition being admitted against the Company cannot be undermined. It is not in dispute that there are more than ten 'I&B Code' petitions in which the company has received notice and all petitions (except one) pertain to the liabilities of 'Sonepat Unit' qua vendors. Interest of more than 12,000 shareholders is at stake and a perfectly solvent company having the distinction of a market leader may be pushed to insolvency due to a baseless dispute created by one promoter group. 44. If the Board of Directors on perusal of the record finds that there is no money payable or receivable to pay to the 'Operational Creditors'/ 'Financial Creditors' to save it from initiation of the 'Corporate Insolvency Resolution Process', the Tribunal or this Appellate Tribunal cannot go into commercial wisdom and financial matrix of the Company to decide whether a particular asset or one or other asset is required to be sold to satisfy the liabili ties of the company ('Atlas Cycle (Haryana) Limited') including the liabilities of 'Sonepat....