TaxTMI 
TaxTMI 
2021 (2) TMI 306
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....625/KB/2019 and 615/KB/2019 in Company Petition (IB) No.176/KB/2018, whereby the Adjudicating Authority has summarily disposed of the Applications filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (in short 'I&B Code') by issuing a common one-line order "Liquidator to consider its claim as per Rules". Being aggrieved by the said Order, the Appellants have filed the two separate Appeals mentioned above. Their original status in the company petition represents the Parties in this Appeal for the sake of convenience. 2. These brief facts of the case are as follows: The Appellant in CA (AT) (Ins.) No. 191 of 2020 Million Link (China) Investment Limited filed an Application seeking directions against the Liquidator/Corporate Debtor to refund an amount of Rs. 2,40,35,301/- immediately- (Rupees Two Crores Forty Lacs Thirty-Five Thousand Three Hundred and One Only) paid as advance by the Appellant for purchase of Ferro Silicon Manganese from Corporate Debtor during CIRP period as the Corporate Debtor failed to supply the said goods on account of a breakdown in its manufacturing abilities or in the alternative to treat the said refund/claim of the Appellant ....
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....k insisted on keeping the business relations intact and purchasing the goods manufactured by the corporate debtors manufacturing plant. Corporate debtor further represented that its business is being run as a going concern and as such there are effective attempts and steps being made to revive the business and as such corporate debtor will be able to undertake and complete all the business transactions that it agrees to undertake with million Link within the timeline agreed. v) Based on the aforesaid representations and considering the fact that the corporate debtor might benefit from the business so received, million Link agreed to purchase the remaining quantity of 900 MT of Ferro Silicon Manganese from Corporate Debtor and therefore vide addendum dated 11th September 2018 to Purchase Contract No. MLC20180824 dated 24th August 2018, Corporate Debtor was substituted as the seller in place of Youthstar Vanijya (P) Ltd for sale of balance quantity of 900 MT out of the total quantity of 1000 MT at the same price. Therefore, the addendum's effect is that the Youthstar Vanijya (P) would sell a quantity of hundred metric ton and the Corporate Debtor would sell a quantity of....
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....lf against the mandate of the said Circular. After that, the Appellant filed the aforesaid Application in CA (IB) No.625/KB/2019 seeking direction against the Liquidator to refund the advance payments made for the purchase of goods by Appellant during CIRP or in the alternative to classify and admit the claims submitted by Appellants as Corporate Insolvency Resolution Process Cost (in short CIRP cost). But the Liquidator refuses to treat the aforesaid claim as CIRP cost and clarify its position to treat the same as a pre-CIRP claim for disbursement. 6. In Company Appeal (AT) (Ins.) No. 190 of 2020 has been filed by Tuf Metallurgical Private Limited against the Liquidator of the Corporate Debtor on being aggrieved by the interim order passed by the Adjudicating Authority/National Company Law Tribunal, Kolkata passed in CA (IB) No.615/KB/2019 in Company Petition No.176/KB/2018 under Section 60(5) of the Code. 7. Brief facts of this Company Application is that the Appellant filed an Application before the Liquidator of the Corporate Debtor for issuing a direction to refund an amount of Rs. 4,50,54,512/- (Rupees Four Crore Fifty Lacs Fifty Four Thousand Five Hundred Twelve Only) ....
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....prejudice to the Appellant, who has paid advance amount to purchase goods from Corporate Debtor undergoing CIRP in good faith. 9. The Liquidator/Respondent No.2 has filed its Reply, wherein it is stated that the Adjudicating Authority has directed him to consider the claim of the Appellant as per rules. Under the Impugned Order Appellants lodged its claim afresh on 03rd January 2020. The claim was under consideration of Respondent No.2, and it was taking some time since several factual clarification was required. Still, the Appellant has filed the present Appeal before this Appellate Tribunal. 10. The Liquidator contends that the respondent No.3 has handed over a list of unpaid CIRP cost and expenses to the respondent No.2 at the end of CIRP period and the list does not feature the name of Appellants herein. It is bound by the list provided by the RP. He cannot declare any claim as CIRP cost when he was not involved in the said transaction. 11. Liquidator further states that if an advance has been paid by the purchaser, under no circumstances does the same fall under any of the clauses of Section 5(13) of the Code. It is contended that the alleged advance cannot be treated....
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....ards "Payment for Goods" against Proforma Invoice IMFA/PI/18- 19/006. After adjusting the bill of the goods supplied, balance advance amount USD 333834 remains with the corporate debtor, which is claimed as CIRP cost. 17. The proforma invoice depicts that it was generated for the supply of 900 MT of Ferro Silicon Manganese @ 1040 USD per MT, valued USD 9,36,000/-. It is also stated in the proforma invoice that advance payment is released along with the purchase order and balance amount payable at the time, the loaded container is released from the plant. Appellant has also annexed the copy of commercial invoice dated 15th October 2018 which is relating to the supply of 162 MT of Industrial Raw Materials for Steel Rolling Mills, i.e. Ferro Silicon Manganese @ 1040 MT amounting to the US $168480. Therefore, it is apparent that after deduction of the value of goods supplied by the Corporate Debtor amounting to USD 338834.13, from the advance amount paid for goods left with the Corporate Debtor was USD 3,33,834 which is being claimed as CIRP cost by the Appellant. 18. Appellant has further annexed the copy of Form 'G' filed under Regulation 20 of the Insolvency & Bankrupt....
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.... of Section 20(2)(b) of the Code, in as much as in terms of the provision thereof only the IRP / RP can enter into a contract on behalf of the corporate debtor, who can amend and modify the contracts or transactions which were entered into before the commencement of CIRP, as the Management of the operations of the corporate debtor remains with The Resolution Professional and power of the Board of directors is suspended. Thus the contract is void ab initio and that being so the Appellant's claim cannot be considered a CIRP cost incurred during the CIRP. The Appellant cannot claim ignorance of the fact that Corporate Debtor is under CIRP as the advance payment was made by the Appellant on 28th September 2018, well after 6 months of the insolvency commencement date, i.e. 09th March 2018. 23. The learned Liquidator further states that advance paid by a purchaser does not fall under any of the clauses of Section 5(13) of the Code for the following reasons; a. The same is not interim finance since there is no COC ratification to that effect, and further, the Appellant has not made out a case that it is interim finance. b. The same cannot be construed as the Resol....
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....assets of the corporate debtor, including the continued business operations of the corporate debtor. (2) For the purposes of sub-section (1), 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; 2[(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....
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....te debtor for a debit transaction from any such accounts in excess of the amount as may be decided by the committee of creditors in their meeting; (f) undertake any related party transaction; (g) amend any constitutional documents of the corporate debtor; (h) delegate its authority to any other person; (i) dispose of or permit the disposal of shares of any shareholder of the corporate debtor or their nominees to third parties; (j) make any change in the Management of the corporate debtor or its subsidiary; (k) transfer rights or financial debts or operational debts under material contracts otherwise than in the ordinary course of business; (l) make changes in the appointment or terms of contract of such personnel as specified by the committee of creditors; or (m) make changes in the appointment or terms of contract of statutory auditors or internal auditors of the corporate debtor. (2) The resolution professional shall convene a meeting of the committee of creditors and seek the vote of the creditors prior to taking any of the actions under sub-section (1). (3) No action under sub-sec....
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....ttee. 32. Essential supplies.-The essential goods and services referred to in Section 14(2) shall mean- (1) electricity; (2) water; (3) telecommunication services; and (4) information technology services, to the extent these are not a direct input to the output produced or supplied by the corporate debtor. Illustration.-Water supplied to a corporate debtor will be essential supplies for drinking and sanitation purposes, and not for generation of hydro-electricity. 33. Costs of the interim resolution professional.-(1) The applicant shall fix the expenses to be incurred on or by the interim resolution professional. (2) The Adjudicating Authority shall fix expenses where the applicant has not fixed expenses under sub-regulation (1). (3) The applicant shall bear the expenses which shall be reimbursed by the committee to the extent it ratifies. (4) The amount of expenses ratified by the committee shall be treated as insolvency resolution process costs. 45[Explanation.-For the purposes of this regulation, "expenses" include the fee to be paid to the interim resolution professional, fee to b....
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....sion regarding Insolvency Resolution Process costs. Regulation 31 provides that 'amount due to suppliers of essential goods and services under Regulation 32' shall be treated as Insolvency Resolution Process costs. 28. In the instant case, it is noticed that the Corporate Debtor raised proforma invoice during CIRP for the supply of 900 metric tons of Ferro Silicon Manganese at the rate of US$ 1040 per metric ton. But it supplied only 162 metric tons of Ferro Silicon Manganese. It is also on record that the Corporate Debtor received an advance of US$ 507,314 for the supply of industrial raw material Ferro Silicon Manganese. It is also undisputed that the goods worth Rs.1 US$ 168,480 could be supplied and US$ 338,834 remained left as advanced money with the Corporate Debtor. During Corporate Insolvency Resolution Process the Corporate Debtor was under Management and control of the Resolution Professional. 29. The Liquidator's learned counsel contends that if an advance has been paid by the purchaser, under no circumstances does the same fall under the ambit of Section 5(13) of the Code. Firstly, because there is no CoC ratification to that effect and further, the Appellant ....
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....ed; (e) supporting records of fee and other expenses incurred are maintained at least for 3 years from the completion of the CIRP; (f) approval of the committee of creditors for the fee or other the expense is obtained wherever approval is required; (g) all CIRP related fee and other expenses are paid through banking channel." 33. Based on the above Circular, it is clear that the Committee of Creditors' approval is required for the fee and other expenses incurred by the Resolution Professional, only where approval is required. The Insolvency and Bankruptcy Code provides the places where prior approval is required explicitly with the vote's necessary percentage. Thus, it cannot be said that any action of the Resolution Professional can only be validated if it has the Committee of Creditors' approval. 34. Regarding the argument advanced by the Liquidator about IBBI Circular dated 12th June 2018, it is pertinent to mention that the Circular provides that Insolvency Professional is to ensure that fee and other expenses incurred by him are directly related to and are reasonable and necessary for the CIRP. It is further provided that wherever ....
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....or rejection of the claim to the Creditor and the Corporate Debtor within seven days of admission or rejection of the claim. Section 42 of the Code provides that a creditor may file an Appeal before the Adjudicating Authority against the Liquidator's decision to accept or reject the claim, within 14 days from receipt of such decision. The Liquidator cannot simply sit on the claim without deciding the same one way or the other. 41. In case of 2019 SCC OnLine NCLAT 785 M V Projects V Divya Jyoti Sponges Iron Pvt Ltd this Tribunal has held that: "25. In view of the aforesaid provision, if the Appellant has supplied the goods during the period of the 'Corporate Insolvency Resolution Process' to keep the Company as a going concern, it was the duty of the 'Resolution Professional' to include such cost towards 'Resolution Process Cost' for payment in favour of Appellant for non-inclusion of the same, it can be held that the 'Resolution Plan' in question is in violation of Section 30(2)(a) of the 'I&B Code'." 42. In case of 2019 SCC OnLine NCLAT 146 MSTC Limited V Adhunik Metaliks Ltd this Tribunal has held: "17. The Appel....
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....g to the 'Resolution Professional' a sum of Rs. 165.09 Crores as on the 'Insolvency Commencement Date' less an amount of Rs. 18.5 Crores was disbursed to 'MSTC Limited', after which their pending claim stood at Rs. 146.59 Crores. In order to ensure continued supply of goods (raw materials) through 'MSTC Limited' an advance amount of Rs. 56.72 Crores out of the admitted claim of Rs. 146.59 Crores was made. Thereafter, amount as due was Rs. 108.36 Crores. 22. It was further submitted that 'MSTC Limited' is demanding to treat their outstanding claims of Rs. 108.36 Crores which relates to supply made prior to the 'Insolvency Commencement Date'. It was submitted that the aforesaid amount of Rs. 108.36 Crores cannot be treated as 'Resolution Process Cost'. 23. According to Appellant - 'MSTC Limited', whatever payment made by the 'Resolution Professional' has been appropriated towards the old dues. According to learned counsel, such appropriation can be made even during the moratorium period. 24. Having heard learned counsel, we find that the Adjudicating Authority rightly held that Section ....
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....h a process of managing the business operations of the Corporate Debtor, if advance payments for supply of goods is received, it cannot be treated as raising an interim finance. It is an advance for payment of goods which the Corporate Debtor as a going concern may be manufacturing. The goods are either to be supplied, or the amount should be returned. If the goods are not supplied, the purchaser cannot be made to run for his money. If this approach as in the present matter is not changed, it will become difficult to keep the Corporate Debtors as a going concern. Such amount received as an advance payment for the supply of goods during the CIRP would have to be treated as CIRP costs. A perusal of the record of Company Appeal (AT) (Ins.) No. 191 of 2020 shows purchase contract dated 24th August 2018 (Page 64) executed between the Appellant and Youth Star Vanijya Pvt. Ltd. which has an addendum (Page 67) dated 21st September 2018. The addendum may be reproduced: This date of 21st September 2018 is subsequent to the date of admission of the Application under Section 7 of IBC on 09th March 2018. Then, there is a document relating to the supply of a part of the goods to the extent of....
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....f Section 40 of I&B Code within 30 days from the date of this Judgment. If the claims are rejected, the Liquidator will communicate the reason to the Appellants and not act on the rejections for 14 days in terms of Section 42 of I&B Code, to enable Appellants to move before the Adjudicating Authority. We make it clear that if the IRP/RP fails to file response and submit all the necessary information before the Liquidator within 15 days as directed above, the Liquidator will file report before the Adjudicating Authority and refer the matter to IBBI for taking suitable steps/actions in the matter. Registry to send the copy of this Judgment to the parties immediately. With the above observations, both the Appeals stand disposed. ============= Document 1 SKP Impex Metal & Ferro Alloys Ltd. 077101WB1991PLC051901 Ref. No. 1MFA/PL/ 18-19/006 68 28 PROFORMA INVOICE MILLION LINK (CHINA) INVESTMENT LTD. ROOM 3508,35/F., BANK OF AMERICA TOWER, 12 HARCOURT ROAD, HONGKONG Date: 24.09.2018 FERRO SILICO MANGANESE QUANTITY RATE(USD) VALUE(USD) Min 65% Min, Si: 16% Mia. 2% Max, P: 0.25% Max, 900 MT 1040.00/MT 036000.00 S:0.03% M....
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.... IBBI/IP/013/2018 dated 12.06.2018) To, The Liquidator SAMIR KUMAR BHATTACHARYA (Reg. No: IBBI/IPA-002/IP-N00273/2017-2018/10831) Address as set out in Public Announcement: LSI Resolution (P) Ltd Sagar Trade Cube, 5th Floor 104, S.P. Mukherjee Road Kolkata-700026 Regd. Email: [email protected] Email for Communication: liquidator [email protected] From, MILLION LINK (CHINA) INVESTMENT LIMITED Address: Room No. 350E, 35/F Bank of America Tower 12, Harcourt Road, Hong Kong Email [email protected] & vaibhav [email protected] 14th March 2019 SUBJECT: SUBMISSION OF PROOF OF CLAIM IN RESPECT OF THE LIQUIDATION OF IMPEX METAL & FERRO ALLOYS LIMITED UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016. Sir, shejan Million Link (China) Investment Limited ('Million Link') hereby submits this proof of claim in respect of the liquidation in the case of Impex Metal & Ferro Alloys Limited IMFAL). The details for the same are set out below: 1. NAME OF OTHER STAKEHOLDER PARTICULARS (if an incorporated body provide identification number and proof of incorporation. If partnership or ind....
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....ion Link USD $1040/MT raising demand of advance payment of USD $507314.13 4. True Copy of SWIFT transaction details evidencing advance payment of USD $ 507,314.13/- by Million Link to IMFAL against Proforma Invoice dated 24.09.2018 5. True Copy of documents evidencing 1 shipping of 100MT of Ferto Silicon Manganese by Youthstar Vanijva (P) Lrd to Million Link 6. True Copy of documents evidencing shipping of 162MT of Ferro Silicon Manganese by IMFAL to Million Link A. Million Link had placed an order to purchase 1000MT of Ferro Silicon Manganese from Youthstar Vanijya Private Limited (based in Kolkata) at the rate of USD $ 1040/MT vide Purchase Contract Purchase Contract MLC20180824 dated 24.08.2018. No. B. Million Link on 17.09.2018 vide Bank of China (Hong Kong) Limited's Reference No. 12180917CBS18046 paid an advance amount of USD $ 104,000/ for 100MT to Youthstar Vanijya Private Limited against the aforesaid Purchase Contract dated 24.08.2018. C. That vide Addendum No. dated 11.09.2018 to Purchase Contract No. MLC20180824 dated 24.08.2018, IMFAL. agreed to be substituted as the s....