TaxTMI 
TaxTMI 
2021 (7) TMI 663
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....for R-1. Mr. Keyur J. Shah and Ms. Noopur K Dalal, for IRP (R-2). Proposed Intervenors: Mr. Pankaj Jain, for I.A. 941 of 2021. Ameya Ranade, for I.A. 956 of 2021. Mr. Mohit Chaudhary and Ms. Garima Sharma, for I.A. 957 of 2021. Mr. Ramchandra Madan and Mr. Rahul Gupta, for I.A. 1082, 1083, 1084, 1085 & 1086 of 2021. Mr. Krishnendu Datta, Sr. Advocate alongwith Mr. Samer Parekh, Mr. Sumit Goel, Ms. Sonal Gupta and Ms. Malvika Bhenot, for I.A. 1094 of 2021. Mr. Salvador Santosh Rebello, for I.A. 1116 of 2021. Mr. Debesh Panda, for Diary No. 27487 & 27488. Ms. Mithali Gupta, Mr. Raghav Sharma, Ms. Anukriti Dua, Mr. Mukesh Suhkhija, Mr. P.S. Ghai, Mr. Paras Mithal and Mr. Carlos De Sousa. JUDGEMENT [Per; Shreesha Merla, Member (T)] 1. The Appellant erstwhile Director of 'OYO Hotels and Homes Private Limited' (the 'Corporate Debtor') has preferred the instant Appeal against the Order of Admission of Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (in short, the 'Code') filed by Mr. Rakesh Yadav/the 'Operational Creditor'. The Order of Admission passed on 30.03.2021 by the Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench) and the conseque....
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.... MTH are two separate and distinct legal entities. The dues under the present MSA if payable to the 'Operational Creditor' can only be claimed against MTH and not against R-2 and therefore the Learned Adjudicating Authority ought not to have admitted the Petition under Section 9 ignoring the factum that the Application was filed against incorrect legal entity and also the existence of 'Pre-Existing Dispute'. 2. This Tribunal on 08.04.2021 based on the submission of the Learned Counsel that the 'Operational Creditor' has wrongly proceeded against the 'Corporate Debtor' instead of the sister concern and that the sister concern has already paid all the amounts claimed by the 'Operational Creditor' and that the Committee of Creditors has not yet been constituted, issued notice and suspended the Constitution of the Committee of Creditors. The Counsel for the Appellant further submitted that all efforts would be made to settle with the 'Operational Creditor' under Section 12-A of the Code. 3. Subsequently, the Appellant filed IA No. 815 of 2021 under Rule 11 read with Rule 31 of the National Company Law Appellate Tribunal Rules, 2016 (NCLAT Rules) seeking a direction to set aside the....
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....td. 6. The Intervention Application IA 957 of 2021 is preferred by M/s. Regalia Retreat on the following grounds:- The Applicant is a partnership concern carrying on the business of Hotels, Restaurants, Guest Houses in 2006 in the name and style of Hotel Regalia Retreat. While so, the agents of an entity named M/s. Oravel Stays Pvt. Ltd., merged into the Corporate Debtor Company with effect from 01.11.2019, approached the Applicant with a proposal to run Hotel Regalia Retreat under the label of 'OYO Homes'. The Applicant entered into a contract with the 'Corporate Debtor' on 15.02.2018, as per the terms of which, the 'Corporate Debtor' agreed to provide assured benchmark revenue of Rs.12,00,000/- per month and charge a fee of 2.5% and commission of 12.5% on the total revenue generated in a month. The parties entered into a new contract dated 11.12.2018 whereby, the assured benchmark revenue was reduced to Rs.10,00,000/- per month, but 'Corporate Debtor' failed to honor its part of obligation since 11.12.2018 despite modifying the terms of the contract with respect to minimum guarantee. As on 01.04.2021, the 'Corporate Debtor' owes an amount of Rs. 50,04,391/- to the Appli....
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.... IA No. 941 of 2021 seeking intervention on the ground that the Applicant has rendered Lease Rent Services of Sher Singh Palace to the 'Corporate Debtor' and entered into a Lease Agreement on 05.09.2019; that despite service of Demand Notice dated 01.01.2021, the 'Corporate Debtor' failed to pay the debt amount of Rs. 1,53,85,851/- and hence pursuant to the paper publication dated 03.04.2021, a claim was preferred before the IRP. Submissions on behalf of the Learned Counsel appearing for the Applicant in IA No. 941 of 2021: The Learned Counsel submitted that the Applicant does not have locus standi to file the withdrawal Application and placed reliance on the ratio of 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra) to buttress his argument that CIRP are Proceedings in Rem and hence withdrawal Application under Rule 11 cannot be entertained. 9. M/s. Lovely Hotels Pvt. Ltd. preferred IA No. 1084 of 2021, seeking to intervene in the present Proceedings on the ground that the Applicant entered into a Lease and License Agreement (LLA) dated 11.07.2017, with the 'Corporate Debtor' who undertook to run the Hotel as part of OYO Platform and generate revenue therefrom and undertook to pay a....
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....Association of India preferred IA No. 1094/2021 seeking intervention, on behalf of its hotelier Members: Learned Senior Counsel for the Applicants in IA No. 1094 of 2021, vehemently opposed this withdrawal Application as not maintainable on the following grounds:- Despite the insertion of Section 12-A of the Code, there was no provision which dealt with the situation where withdrawal, Application was sought for 'after Admission but before Constitution of CoC'. Such a situation was dealt with by the Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra). Subsequent to the above Judgment, Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 was substituted with effect from 25.07.2019, which provides for Application for withdrawal of Proceedings under Section 9 after its Admission but before the Constitution of the CoC provided i. has to be filed before the NCLT; ii. by the Applicant to the IRP; iii. in Form FA accompanied with Bank guarantee; After Regulation 30-A was substituted on 25.07.2019, an Application for withdrawal, cannot be filed before NCLAT by invoking inherent power....
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.... 6,50,00,000 4. M/s. PB Ventures LLP, Mumbai Marketing and Operational Consulting Agreement 14,58,87,870 5. M/s. SAAG VENTURES, Bangalore Marketing and Operational Consulting Agreement 48,62,081 6. M/s. ARMA HOSPITALITY, Mumbai Management and Service Agreement 4,87,24,193 7. M/s. AIRPORT RESIDENCY, Bangalore Marketing and Operational Consulting Agreement 25,60,195 8. M/s. Samaroh Hospitality, LLP, Indore Marketing and Operational Consulting Agreement 41,08,997 9. M/s. OCEANS 7 Hotels and Resorts, Goa Management and Service Agreement 3,23,51,780 10. M/s. Aildasani Hotels & Resorts, Indore Marketing and Operational Consulting Agreement 27,37,708 11. Max Heights Infrastructure Ltd., New Delhi Lease Agreement 74,41,533 TOTAL CLAIM AMOUNT Rs. 35,00,50,450 It is stated that the Applicants and the 'Corporate Debtor' entered into Lease Agreements and MSAs wherein the 'Corporate Debtor' interalia agreed to use and run the properties on various terms and conditions on payment of rental and license fee, but has defaulted to the tune of Rs. 35,00,50,450/- for which various notices were sent, but there w....
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....ide Dairy India Pvt. Ltd.' (Supra) has laid down that once an Application is admitted cannot be withdrawn since, other Creditors are entitled to raise their claims. Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra) has observed that the Proceedings before the Adjudicating Authority is a collective Proceeding and that a party can approach NCLT directly for exercise of inherent powers under Rule 11 of NCLT Rules, 2016. NCLAT cannot permit withdrawal of an admitted Insolvency Application. The Application must necessarily be filed through IRP only before the NCLT. Allowing the IA and vacating the stay on the Constitution of Committee of Creditors would prejudice their rights. In support of his contention, the Learned Counsel placed reliance on the following Judgements:- Sr. No. Case Name i. ' Jai Kishan Gupta' (Supra). ii. 'Samarth Lifters Pvt. Ltd.' Vs. 'DBM Geotechnics and Constructions Pvt. Ltd' CP(IB) 1798 of 2018. iii. 'Abhishek Singh' Vs. 'Huhtamaki PPL Ltd.' Company Appeal (AT) (Insolvency) No. 235 of 2021. iv. 'Hadi Mohd. Taher Badri' Vs. 'Neeraj Gupta' Company Appeal (AT) (Insolvency) No. 107 of 2019. v. 'Javitri Estates Pvt. Ltd....
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.... On 30.10.2020, the sole Arbitrator recorded the consent of the Applicant and the 'Corporate Debtor' to continue operating under revenue sharing model till February, 2021. On 12.04.2021, in light of the public announcement made on 03.03.2021, this 'Operational Creditor' preferred their claim before the IRP to the tune of Rs. 5,74,09,620/-. Submissions of Learned Counsel appearing on behalf of the proposed Intervenor/Applicant in IA No. 1083 of 2021: It is submitted that a withdrawal of CIRP Process can be carried out any stage but only before the NCLT and after submission of claims of all the Creditors. Section 12-A read with Regulation 30-A is a complete Code governing settlement and the Appellant herein is trying to bypass the provisions of the Code. 17. Diary No. 27487 is preferred by the proposed Intervenor Applicant/ Dost Hospitality Services Pvt. Ltd.; a sister concern of Karmyogi Properties Pvt. Ltd. (Diary No. 27488) both seeking similar directions on the following grounds:- It is the case of the Proposed Intervenor Applicants that only a direction to conduct a forensic Audit would bring to light the fraud being committed by the 'Corporate Debtor' with respect t....
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....iling the present Application on behalf of its Members, the details of which has not been given; that the Application is devoid of material and has been filed on behalf of unknown number of Members with unknown amount of claims and no details of Members who are yet to prove their case and hence the Intervention Application is devoid of merit and ought to be dismissed at the threshold. 21. He further contended that the proposed Intervention Applications are contrary to the settled principles of law laid down in 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra); that the proposed Intervenors are not allowed to contest the merit of the Appeal or contest the settlement of the subject dispute as Proceedings under the Code are not debt recovery Proceedings; that the proposed Intervenors can come into existence only on the confirmation of CoC under the Code and have no locus standi to object a settlement between the 'Operational Creditor' and a third party; that Section 14 of the Code bars the filing of any Application against the 'Corporate Debtor' under Sections 7 and 9 during the moratorium period and that the proposed Intervenors have not placed any documents on record to substantiate any '....
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....d having regard to the settlement arrived at between the Appellant and the 'Operational Creditor'/Respondent herein, prior to the Constitution of CoC. Assessment: 24. For better understanding of the case, paras 79 to 82 of 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra) are being reproduced as hereunder:- 'Section 12-A is not violative of Article 14 79. Section 12-A was inserted by the Insolvency and Bankruptcy (Second Amendment) Act, 2018 with retrospective effect from 6-6-2018. It reads as follows: "12-A. Withdrawal of application admitted under Sections 7, 9 or 10 - The adjudicating authority may allow the withdrawal of application admitted under Section 7 or Section 9 or Section 10, on an application made by the applicant with the approval of ninety per cent voting share of the Committee of Creditors, in such manner as may be specified." 80. The ILC Report of March 2018, which led to the insertion of Section 12-A, stated as follows: "29.1. Under Rule 8 of the CIRP Rules, NCLT may permit withdrawal of the application on a request by the applicant before its admission. However, there is no provision in the Code or the CIRP Rules in relation to permissibility of withdr....
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.... had been admitted by NCLT or NCLAT. 81. Regulation 30-A of the CIRP Regulations states as under: "30-A. Withdrawal of application.- (1) An application for withdrawal under Section 12-A shall be submitted to the interim resolution professional or the resolution professional, as the case may be, in Form FA of the Schedule before issue of invitation for expression of interest under Regulation 36-A. (2) The application in sub-regulation (1) shall be accompanied by a bank guarantee towards estimated cost incurred for purposes of clauses (c) and (d) of Regulation n31 till the date of application. (3) The committee shall consider the application made under sub-regulation (1) within seven days of its Constitution or seven days of receipt of the application, whichever is later. (4) Where the application is approved by the committee with ninety per cent voting share, the resolution professional shall submit the application under sub-regulation (1) to the adjudicating authority on behalf of the applicant, within three days of such approval. (5) The adjudicating authority may, by order, approve the application submitted under subregulation (4). This Court, by its order da....
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....nd thereafter NCLAT can always set aside such decision under Section 60 of the Code. For all these reasons, we are of the view that Section 12-A also passes Constitutional muster.' (Emphasis Supplied) 25. The Learned Counsels for the Intervention Applicants strenuously contended that as per para 82 of the aforenoted Judgement, a party seeking withdrawal should necessarily approach NCLT directly, which Tribunal may, in exercise of its inherent power under Rule 11 allow or disallow an Application for withdrawal or settlement and therefore this Tribunal cannot entertain such Applications of Withdrawal. 26. At this juncture, it is material to study the observations made by the Hon'ble Apex Court in 'Committee of Creditors of Essar Steel India Limited' Vs. 'Satish Kumar Gupta & Ors.' reported in (2020) 8 SCC 531 in para 82 wherein the Hon'ble Apex Court has referred to the Judgement of the Federal Court in 'Lachmeshwar Prasad Shukul' Vs. 'Keshwar Lal Chaudhuri' AIR 1941 FC 5 and in 'Shiv Shakti Coop. Housing Society Nagpur' Vs. 'Swaraj Developers and Ors.' MANU/SC/0335/2003 (2003)6SCC 659 and noted that 'an Appeal is essentially a continuation of the original Proceeding. This bein....
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....iss Ribbons Pvt. Ltd. & Anr', and in exercise our inherent powers under Rule 11 of the NCLAT Rules, 2016, allow the prayer made by Mr. Dharmender Sharma for withdrawal of the application in view of the settlement already reached. We accordingly set aside the impugned order dated 10th January, 2019 and dismiss the C.P. (IB) No. 158/Chd/Hry/2018 as withdrawn'. 29. In the aforenoted Judgement though eight Financial Creditors wanted to intervene opposing the settlement and have contended that they have already submitted their claims before the Resolution Professional, this Tribunal, taking into consideration that the parties have settled the matter prior to the Constitution of Committee of Creditors did not entertain the Intervention Applications and has allowed the Application of Withdrawal in exercise of inherent power under Rule 11 of the NCLAT Rules, 2016 and closed the Proceedings. 30. This Tribunal in 'Avishek Roy' Vs. 'Diamond Steel Enterprise and Ors.' in Company Appeal (AT) (Insolvency) No. 794 of 2018 dated 12.03.2019 placed reliance on the principle laid down by the Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra) and has set aside the Admission Order u....
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....led claim with the IRP. We are disposing the present Appeal on the basis of the compromise referred. It will be open to the Financial Creditor Prema Gupta to initiate proceedings of her own. 6. In view of the settlement reached before formation of CoC between the parties, in exercise of powers conferred under Rule-11 of NCLAT Rules, 2016, we set aside the Impugned Order dated 04.1.2020 whereby 'Corporate Insolvency Resolution Process' was initiated against Krishna Estate Developers Private Limited (Corporate Debtor) and the Application under Section 9 IBC filed by M/s Dinesh Sanitary Store stands disposed of as withdrawn.' (Emphasis Supplied) 34. This Tribunal has consistently exercised powers conferred under Rule 11 on a case-to-case basis in view of the settlement reached prior to formation of CoC. Subsequent to the Amendment i.e. 25.07.2019 this Tribunal had the occasion of exercising Rule 11 in the following matters:- 'Janak Dhawan' Vs. 'Famous Innovations Digital Creative Pvt. Ltd. & Ors.' in Company Appeal (AT) (Insolvency) in 769 of 2019 dated 20.12.2019. 'Gouri Prasad Goenka' Vs. 'Surender Kumar Agarwal & Anr.' in Company Appeal (AT) (Insolvency) No. 105 ....
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....e Regulations dated 25.07.2019. The Counsel for the Intervenor Applicants have also relied on the Judgement of this Tribunal in 'Mr. K.C. Sanjeev' Vs. 'Mr. Easwara Pillai Kesavan Nair & Ors.' in Company Appeal (AT) (Insolvency) No. 1427 of 2019 dated 28.02.2020, which is also not applicable to the facts of this case for the fundamental reason that CoC was already constituted and Section 12-A comes into play. 36. Applicability of Regulation 30-A(1)(a) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Process) Regulation, 2016 to the facts of this case:- 37. We note that in exercise of the Appellate jurisdiction, we are bound to consider any change in law affecting the question involved in the Appeal and which was effected subsequent to the decision of 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra). For better understanding of the case, Section 12-A is reproduced as hereunder:- '1[12-A. Withdrawal of Application admitted under section 7, 9 or 10. - The Adjudicating Authority may allow the withdrawal or application admitted under section 7 or section 9 or section 10, on an application made by the applicant with the approval of ninety p....
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....licant shall deposit an amount, towards the actual expenses incurred for the purposes referred to in clause (a) or clause (b) of sub-regulation (2) till the date of approval by the Adjudicating Authority, as determined by the interim resolution professional or resolution professional, as the case may be, within three days of such approval, in the bank account of the corporate debtor, failing which the bank guarantee received under sub-regulation (2) shall be invoked, without prejudice to any other action permissible against the applicant under the Code." (Emphasis Supplied) 39. Form FA dated 25.07.2019 reads thus:- FORM FA APPLICATION FOR WITHDRAWAL OF CORPORATE INSOLVENCY RESOLUTION PROCESS [Under Regulation 30A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016] [Date] To The Adjudicating Authority [Through the Interim Resolution Professional/Resolution Professional] [name of corporate debtor] Subject: Withdrawal of Application admitted for corporate insolvency resolution process of [name of corporate debtor] I, [Name of applicant], had filed an application bearing [particulars of ....
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....of justice or to prevent abuse of the process of the Appellate Tribunal.' The Hon'ble Apex Court in 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra) has clearly discussed the stage and has observed that 'we make it clear that at any stage where the Committee of Creditors is not yet constituted, a party can approach NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule 11 of NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the parties concerned and considering all relevant factors on the facts of each case'. It is a well settled proposition of law that substantive law takes precedence over a Regulation and Section 12-A clearly refers to withdrawal of an Application under Section 7, 9 or 10 after the Constitution of the Committee of Creditors, seeking approval of 90% of the voting share of the CoC. Keeping in view the ratio of the Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra) and the aforenoted reason, we hold that in the facts and circumstances of the attendant case before us, we do not find force in the contention of the proposed Intervenor Applicants that the Applicati....
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....onal Creditors evidences that all amounts due and payable by the Corporate Debtor to the Operational Creditor, who filed the Section 9 Application, have been paid in full and final satisfaction, to the parties concerned in that Application, together with the IRP Costs. Keeping in view the ongoing discussions, the aforenoted Judgements, the ratio of 'Swiss Ribbons Pvt. Ltd. and Ors.' (Supra), the facts of the attendant case, we allow the Application of Withdrawal in exercise of inherent powers under Rule 11. We note that Regulation 30-A(1)(a) is not applicable to the present Application. The Intervenor Applications filed during the pendency of the Appeal, prior to the Constitution of CoC, are disallowed. 47. For all the aforenoted reasons, the Proposed Intervention Application Nos. 941, 956, 957, 1082, 1083, 1084, 1085, 1086, 1094, 1116 of 2021 and Diary Nos. 27487 & 27488 are dismissed. IA 815 of 2021 is allowed, consequently Company Appeal (AT) (Insolvency) 298 of 2021 is allowed and we set aside the Impugned Order dated 30.03.2021. In effect, Order(s) passed by Ld. Adjudicating Authority appointing 'Interim Resolution Professional', declaring moratorium, freezing of account and ....