TaxTMI 
TaxTMI 
2020 (3) TMI 32
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....Debtor. It is not in dispute that on 01-08-2016 i.e. almost one year prior to filing of application under section 7 of I&B Code by the financial creditor, the corporate debtor executed lease deed in favour of one M/s. Daakh Jute LLP and handed over the jute mill for running. It is also not in dispute that lease agreement in between the Corporate debtor and Daakh Jute LLP is still subsisting. It is submitted by the Ld. Counsel for the RP that lease deed is void as it was executed by the corporate debtor after the receipt of notice under section 13(2) of SARFAESI At. He pointed out that Resolution Professional has filed application under section 45 of the I&B Code bearing No. CA (IB) No. 36/KB/2019 for cancellation of that lease deed. I fail to understand how that application is maintainable which is filed beyond CIRP period of 270 days and more particularly when lease agreement was executed one year prior to the date of commencement of admission of the application of the finance creditor against the corporate debtor. In my considered opinion such application may not be maintainable under section 46 of I&B Code. Apart from that, real question is having published the notice calling fo....
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.... to so many conditions and the conditions which cannot be complied within reasonable period of time, ought not to have approved by the CoC. 26. This takes me to consider one more crucial aspect due to which I feel that the resolution plan submitted for my approval, cannot be approved. Section 30(2)(e) of I&B Code states that the resolution plan should not contravene any provisions of law by the time being in force. Successful Resolution Applicant, M/s. K.L.Jute clearly stated in their plan that this authority while approving their plan has to pass the order cancelling the lease deed dated 01-08-2016 executed in between the Corporate Debtor and Daaksh Jute LLP. To my mind, this condition in the plan is contrary to the established procedure of law. Hon'ble NCLAT in case of Raj Builders vs. Raj oil Mills ltd. (Company Appeal No. 304 of 2018) clearly stated the position of law in this aspect. It was appeal against the order of NCLT, Mumbai bench, in that case, the Corporate Debtor was tenant holding over in the premises which was to go in possession of Successful Resolution Applicant. NCLT, Mumbai bench noted this fact while approving the plan but did not pass order of eviction o....
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....f section 29A are not applicable to the corporate debtor, in view of section 240A of I&B Code. Such questions are irrelevant. CoC has approved the only one plan i.e. M/s.K.L.Jute Private Limited. However, in my considered opinion that plan does not comply all provisions stated in section 30(2) of I&B Code. I have to reject that plan. Now alternative left for me to pass the order of liquidation of the Corporate Debtor. Lr. Sr. counsel while arguing for the workmen submitted that if such occasion arises, the corporate debtor may be liquidated as a going concern. I accept the request. It is seen from the record that RP did not give correct advise when he submitted K.L.Jute's Plan for approval of CoC. In my considered opinion, in such a situation it would not be proper to appoint the present RP as the Liquidator. Hence, I replace the liquidator, in view of provision of Section 33(6) of I&B Code." and finally passed an order of liquidating the 1st Respondent/Corporate Debtor- Tirupati Jute Industries Limited as a going concern under Regulation 32(c) of the IBBI(Liquidation Process), Regulation 2016. Further, the Adjudicating Authority appointed Mr. Chhedi Rajbhar as a Liquidator et....
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....nt of the 'Corporate Insolvency Resolution Process' to which numerous creditors (Financial Creditors, Operational Creditors and Workmen & Employees) filed their claims. Further, the 'Interim Resolution Professional' formed the 'Committee of Creditors' which comprise of the following (along with voting share): i. Federal Bank/5th Respondent - 74.8% (recorded in the impugned order as 75.18%) ii. SIDBI/1st Respondent -22.4% (recorded in the impugned order as 22.51%) iii. Abinandan Holding Pvt. Ltd/6th Respondent - 2.30% (recorded in the impugned order as 2.31%) iv. Everbright Vinimay Pvt. Ltd/7th Respondent - 0.50% 7. That apart, it is stand of the Appellant that the 1st meeting of 'Committee of Creditor' on 02-03-2018 confirmed the 'Interim Resolution Professional' Mr. Pinaki Sircar as 'Resolution Professional' (3rd Respondent) and that the said 'Resolution Professional' filed an application u/S 45 and 46 of the 'Insolvency and Bankruptcy Code, 2016' for cancellation of the 'Lease Agreement dated 01-08-2016 (after the expiry of the 270 days period), which was dismissed by the 'Adjudicating....
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....red Lease Agreement dated 01-08-2016 as part of its plan) with 97.20% vote share and in January, 2019 an Application C.A No. 36/KB/2019 filed by the 'Resolution Professional' before the 'Adjudicating Authority' seeking cancellation of unregistered Lease Agreement dated 01-08-2016, executed between the 1st Respondent/Corporate Debtor and the 2nd Respondent. 11. The Learned counsel for the Appellant contends that the Lease Agreement dated 01-08-2016 executed by the 1st Respondent/Corporate Debtor after the issuance of notice under section 13(2) of the 'SARFAESI Act' against the 1st Respondent/Corporate Debtor is not void ab initio. Further, the 'Adjudicating Authority' had failed to consider the relevant period for a preferential transaction as 'one year' as opposed to 'two years' prescribed under section 46 of the I&B Code. 12. The Learned counsel for the Appellant submits that an 'Adjudicating Authority' cannot reconsider the decision of the CoC in its commercial wisdom as per decision K.Sasidharan v. Indian overseas Bank & ors., C.A No. 10673/18 and Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta & or....
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.... the contention of the Appellant that the 2nd Respondent was incorporated with five partners (three of which were sons of shareholders of the 1st Respondent/Corporate Debtor and two were related to the Directors of the 1st Respondent/Corporate Debtor. 16. The Learned counsel for the Appellant takes a plea that the 'Resolution Plan' of the Appellant had made provisions of payments under the Resolution Plan to all shareholders as per the Information Memorandum provided by the 'Resolution Professional' and in reality, the Appellant had made provisions by the Resolution Plan in respect of the following: i. 100% dues of Workmen & Employees of the Corporate Debtor -amount to Rs. 76, 39, 184/- (rupees Seventy-Six Lac Thirty-nine Thousand One Hundred Eighty-Four Only). ii. 100% Statutory dues of provident Fund to the Workmen & Employees of the Corporate Debtor - amounting to Rs. 1, 34, 84,014/- (Rupees One Crore Thirty-Four lac Eighty Four thousand Fourteen Only). iii. 100% Statutory dues of provident Fund to the Workmen & Employees of the Corporate Debtor up till 31-07-2016 - amounting to Rs. 7,65,30,745/- (Rupees Seven Crore Sixty Five lac thirty Thousand Seven Hun....
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....erty" together with the word "value". Section 18 and 25 do not use the expression "property". Another important aspect is that under section 25(2) (b) of IBC, 2016, the Resolution professional is obliged to represent and act on behalf of the Corporate Debtor with third parties and exercise rights for the benefit of the corporate Debtor in judicial, quasi-judicial and arbitration proceedings. Section 25(1) and 25(2) (b) reads as follows: "25. Duties of Resolution professional- (1) It shall be the duty of the resolution professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purpose of sub-section (1), the resolution professional shall undertake the following actions:- (a) &nbs....
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....isen, in view of the stand taken by the Government of Karnataka before the High Court that they chose to challenge the order of the NCLT before the High Court, instead of before NCLAT, due to the fraudulent and collusive manner in which the CIRP was initiated by one of the related parties of the Corporate Debtor themselves. In the writ petition filed by the Government of Karnataka before the High Court, it was specifically pleaded (i) that the Managing Director of the Corporate Debtor entered into an agreement on 06-02-2011 with one M/s.D.P.Exports, for carrying out mining operations on behalf of the Corporate Debtor and also for managing its affairs and selling 100% of the extracted iron ore; (ii) that the said M/s. D.P. Exports was a partnership firm of which one Mr.M.Poobalan and his wife were partners; (iii) that another agreement dated 11-12-2012 was entered into between the Corporate Debtor and a proprietary concern by name M/s. P. & D. Enterprises, of which the very same person namely, Mr. M.Poobalan was the sole proprietor; (iv) that the said agreement was for hiring of machinery and equipment; (v) that a finance agreement was also entered into on 12-12-2012 between the Cor....
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....r was closed from 2015 and to restart the closed jute mill of 1st Respondent/Corporate Debtor, steps were taken to incorporate the 2nd Respondent at least two months prior to the execution of the formal operating lease agreement dated 01-08-2016 and that the necessary application was filed before the 'Registrar of Companies', Kolkata much before the Lease Agreement was entered into between the parties. 22. In this connection, it is pointed out on the side of the 2nd Respondent that since the 'Registrar of Companies' had not formally issued a 'certificate of incorporation', the Lease Agreement was not to be executed. Furthermore, the need for entering into a 'Lease Agreement' was to commence the closed unit and to provide an employment and wages to one thousand two hundred workers who were jobless for nearly two years. 23. The Learned counsel for the 2nd Respondent takes a stand that the 'Lease Agreement' in question does not visualise any 'sale', transfer or encumbrance over the 'Fixed Asset', land and properties of the 1st Respondent/Corporate Debtor. At this stage, the Learned counsel for the 2nd Respondent brings to the n....
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....-2019. In this connection, the Learned counsel for the 2nd Respondent contends that prior to the passing of liquidation order as on 13-02-2019, the 'Adjudicating Authority' came to a conclusion that such an application by the 'Resolution Professional' Under Section 46 of the Code was not maintainable on numerous grounds (including the ground that during the period of CIRP, the 'Resolution Professional' and the 'Committee of Creditors') had remained silent and had not taken steps to challenge the validity of the 'Lease Agreement'. 29. The Learned counsel for the 2nd Respondent points out that the 'Federal Bank' during the entire 'Corporate Insolvency Resolution Process' accepted the rent from the 2nd Respondent in a continuously fashion and the said Bank had waived its right, if any, after issuance of Section 13(2) notice under the SARFAESI Act, 2002 to the Corporate Debtor on 01-04-2016. 30. The Learned counsel for the 2nd Respondent submits that the ownership of the Jute Mill is not vested with the 2nd Respondent and in fact the 'Federal Bank' was informed of the execution of the 'Lease Agreement' by the 1st....
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....the Lease Agreement dated 01-08-2016 and the 'Resolution Professional' and the Committee of creditors had not found the issue of 2nd Respondent purported to be a 'related party' to the 1st Respondent and as such the Appellant has no 'Locus standi' to raise this issue, during oral hearing, and after the 'Resolution Plan' was voted and placed for 'Approval'. 35. The Learned Counsel for the 2nd Respondent contends that the 2nd Respondent filed a Civil Suit in T.S. No. 467 of 2019 before the 3rd Civil Judge (Junior Division) at Howrah, wherein the Respondent Nos. 4, 5, 10 and 11 are party defendants. The 'Status Quo order' in respect of nature, character and possession of the suit property was passed on 18-04-2019 by directing the defendants, including 'Federal Bank' and SIDBI (4th Respondent) and the Interim order was lastly extended till 17-01-2020. 36. The plea taken on behalf of the 3rd Respondent in the present case, the 'Lease' created in favour of the 2nd Respondent is void ab initio and, therefore, the eviction of 2nd Respondent does not make a Resolution plan conditionally or in violation of any law for the time....
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....e 'Lease Deed' and hence the 8th Respondent was advised to submit an 'Addendum' to the 'Resolution Plan' dated 15-09-2018. 41. The 3rd Respondent communicated that 'EOI' was issued on 'as is whereas and as is what is basis' and only those plans which would be submitted as per invitation would be considered, which was prior notice to the 8th Respondent in the meeting of 'CoC' that took place on 27-09-2018. Hence, the 'Addendum' of the Resolution Plan dated 15-09-2018 was submitted by the 8th Respondent before the 3rd Respondent/RP in a 'sealed envelope' under a covering letter dated 30-09-2018, which was duly received. 42. The Learned Counsel for the 8th Respondent points out that the 'Addendum' to the Plan of the 8th Respondent dated 15-09-2018 was submitted in a sealed cover 01-10-2018 before the 'Resolution Professional'/3rd Respondent and the same was subject to the directives given by the Resolution Professional/3rd Respondent that the 'Successful Resolution Applicant' would deal with the 'Operational Lease' between the Corporate Debtor and the 2nd Respondent separately after being....
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....39;Adjudicating Authority' in highlighting the irregularities and illegalities noticed during the 'Corporate Insolvency Resolution Process' which was conducted at the instructions of the major stake holders in the CoC viz; 3rd Respondent and 4th Respondent and sought declaration that the 'Resolution Plan' submitted by the Appellant is an illegal and void one. 49. The Learned Counsel for the 8th Respondents contends that the Adjudicating Authority had rightly rejected the 'Resolution plan' of the Appellant, since the same is in 'breach of Law' and further that the I&B Code has no provision for eviction of a 'Lessee' or Tenant. 50. The Learned Counsel for the 8th Respondent submits that the Resolution Plan of the Appellant could not have been approved by placing reliance on the ingredient of Regulation 39(3) of the 'Corporate Persons Regulations' and further that Regulation 39(3) has no application in respect of any Resolution Process commenced before 03-07-2018. In the instant case the Resolution process commenced on 12-01-2018. 51. The Learned Counsel for the Respondents No. 10th & 11th submits that the 'Resolution Plan'....
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....tors on being placed before an 'Adjudicating Authority' the said Authority is to apply its mind before giving a green signal or even rejecting the same. 56. Insofar as the 'Preferential transactions' and 'relevant time' that as per Section 43 of the Code, it is to be pointed out that this provision can be pressed into service by a 'Resolution Professional' or a Liquidator before an 'Adjudicating Authority' under section 44 of the Code and that the said Authority is to pass an appropriate order, as he deems fit and proper. The aim of Section 43 of the Code is to protect the 'body of interest' over whom an undue preference was given in favour of other 'creditors' and 'transactions' can be called as a preferential ones entered into by a Corporate Debtor, wherein a Corporate Debtor gave undue preference at a relevant time to any person. The 'transfer of property' or any interest of property ought to be of a 'Corporate Debtor' and such transfer was made with a view to give 'undue preference' to the 'Transferee'. In a case of 'Fraudulent Preference' the dominant motive of a 'Debto....
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....ar that the 'NCLT' or 'NCLAT' have sole jurisdiction to determine all issues pertaining to the I&B C. Also, Section 64(2) Code speaks 'no order' injunction can be granted by any Court, Tribunal or Authorities in respect of any action taken or to be pursuant to the power of confer of NCLT as well as NCLAT under this Code. An injunction to stay the proceedings before the 'National Company Law Tribunal' cannot be issued by a 'Civil Court' as per decision Jotun India Pvt. Ltd v. PSL Limited [2018] Company cases OL page 224 and confirmed in the decision reported in 2018 95 Taxmann.com 311. 60. If an Adjudicating Authority is dissatisfied with a 'Resolution Professional', he may appoint another 'Resolution Professional' as a 'Liquidator'. Needless, to make an emphasis that it is the duty of Corporate Debtor to cooperate with a Liquidator. Section 35 of the Code, confers powers and duties of a Liquidator to ensure an orderly completion of the 'Liquidation Proceedings'. Even an Adjudicating Authority may assign certain duties, to be discharged by him. Undoubtedly a 'Liquidator' is to act under the supervision ....
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....the Resolution Plan subject to the same being in conformity with the ingredient of Section 30(2) of the Code. A Resolution Professional can submit his ex facie opinion to the 'Committee of Creditors' that the law was or was not violated. It is true that the Section 30(2)(e) of the Code does not authorise the Resolution Professional to determine whether the Resolution Plan does or does not violate the relevant provisions of Law. 64. In reality, ascribing conditions in the 'Resolution Plan' by the Appellant/Resolution Applicant is an unacceptable one, in the considered opinion of this Tribunal. Therefore, the Adjudicating Authority in the impugned order came to the right conclusion that the plan of the Resolution Applicant/Appellant was in negation of Law. 65. Insofar as, the eviction of 2nd Respondent is concerned, the Adjudicating Authority is not empowered to pass an order of eviction and it is for an 'Aggrieved party' to move the appropriate forum for redressal of its grievances in accordance with Law. In short, the Committee of Creditors had approved the Resolution Plan in utter disregard regard to the ingredient of Section 30(2)(e) of the I&B Code and ....
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....ed or 'preferential transactions' subject to the supervisory jurisdiction of an Adjudicating Authority and these issues also answered As regards the ingredients of Section 240A of the Code it is to be pointed out that a Financial Creditor or an Operational Creditor of MSME may take it to Insolvency Proceedings before an 'Adjudicating Authority'. But the fact of the matter is that the MSME may not be pushed into liquidation thereby affecting the employees and workers of MSME and therefore, Section 240A (2) of the Code specifies that the Central Government may, in public interest by notification direct that any of the provisions of the IBC shall not apply to Micro, Small and Medium Enterprises or apply to them with such modifications as may be mentioned. The learned Adjudicating Authority in the impugned order had not entered into the aspect of whether 8th and 9th Respondent are related to 1st Respondent/corporate Debtor or otherwise or whether the ingredient of section 29A of the Code applies or not because of the fact the said authority thought it fit that these aspects are irrelevant and while rejecting the plan ordered the liquidation of the 1st Respondent. The Ad....