TaxTMI 
TaxTMI 
2021 (11) TMI 848
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....er of Credit for payment and supply, insofar as the sugar was to be released in instalments. 2. As and when payments were effected by R5, lease deeds were executed between R5 and the petitioner's agent in India to protect the custody of the sugar and to ensure that title of the petitioner to the asset stood secured till such time the entirety of the sugar was released to R5 upon receipt of payment. 3. Sale consideration has been paid by R5 in respect of 9899 MT of sugar and this quantity has been released. The balance is yet to be sold as and when the consideration is received from R5. According to the petitioner, it continues to hold title to the balance of the sugar, i.e., approximately 19,537.60 MT, valued at USD 9 million (approx.) or Rs. 67.5 crores (in short 'asset'). 4. The sugar has been imported in anticipation of the sale to R5 and upon import, sugar has been retained in a bonded warehouse in the customs frontier and according to the petitioner, has not entered into the territory of India. The bonded warehouse is under lock and key, both at the instance of R5 as well as the petitioner, the latter having placed its lock above the lock placed by the petitioner. The....
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.... 10. Mr.Ajay K.Jain, learned counsel appearing for Mr.Raghav Rajeev Menon, learned counsel for the Resolution Professional appointed in the CIRP of R5 raises a preliminary and serious objection to the maintainability of this Writ Petition as according to him, the petitioner should have approached the NCLT for redressal in terms of the Code. The Resolution Professional has filed an application seeking the leave of the NCLT to auction the asset, that had been resisted by the petitioner herein who contended that the NCLT has no jurisdiction to adjudicate upon the fate of the asset. The present Writ Petition has been filed by the petitioner as a counter-blast to the aforesaid application of R5, though seeking an independent relief. During the pendency of this Writ Petition, the application filed by the Resolution Professional has come to be closed by the NCLT. 11. The first argument advanced is that there are serious differences in the facts as projected by the petitioners and R5, and these questions of fact are not liable to be addressed, adjudicated upon or resolved under Article 226 of the Constitution of India. According to R5, there are discrepancies in the language of the co....
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....ignature of R5 is indeed blank. However, nowhere is the transaction in itself disputed and in fact, R5 has admittedly effected payments for some portion of the sugar imported under the Customs Concessional Duty Rules. 16. It is also not the case of R5 that there is another contract that governs the transaction as between the parties. The defence of R5 also refers to, and is based upon the very same contract and in my view, R5 cannot be permitted to blow hot and cold in this regard. 17. The bank statements circulated by R5 upon the direction of the Court also make it clear that the remittances effected and what has been paid there for, would be in respect of 9899 MT only. The schedule of payments as per the pleadings filed by the petitioner is as under: Payments: Value Date Type SAS $ 300,000,00 12/01/2017 Prepayment SAS $ 19,357.60 30/01/2017 Cash SAS $ 480,642.40 30/01/2017 Prepayment SAS $ 100,000.00 02/02/2017 Cash SAS $ 200,000.00 11/05/2017 Cash SAS $ 100,000.00 31/05/2017 Cash SAS $ 750,000.00 30/06/2017 Cash SAS $ 2,850,000.00 18/07/2017 Cash SAS $ 1,570,000.0....
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.... effect by virtue of any such law. 22. He refers to the provisions of Sections 18 and 20 of the Code that vest power in the Resolution Professional to manage the business of the corporate debtor as a going concern and for this power, permit him to carry out various functions including the safeguarding of the assets of the corporate debtor as recorded in its balance sheets. 23. The following cases have been cited at the Bar: Petitioner : 1. Embassy Property Developers Pvt. Ltd. V. State of Karnataka and others: (2019 SCC Online SC 1542) 2.Smt. Gunwant Kaur &Ors. V. State of Karnataka and Others (2019 SCC Online SC 1542) 3. Century Spining and Manufacturing Company Ltd. &Anr V. The Ulhasangar Municipal Council &Anr. (1970 (1) SCC 582) 4. K.I.Shephard& Others V. Union of India &Ors. (1987 (4) SCC 431) 5. ABL International Ltd &Anr v. Export Credit Guarantee Corporation of India Limited &Ors. ((2004) 3 SCC 553 6. V.C.Banaras Hindu University &Ors v. Shrikant ((2006) 11 SCC 42) 7. PopatraoVyankatrao Patil v. State of Maharashtra &Ors (2020 SCC Online SC 291) 8. Canon India Pvt Ltd. Vs. Commissioner of Custo....
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....s a single Unified Umbrella Code, covering the entire gamut of the law relating to insolvency resolution of corporate persons and others in a time bound manner. The code provides a three-tier mechanism namely (i) the NCLT, which is the Adjudicating Authority (ii) the NCLAT which is the appellate authority and (iii) this court as the final authority, for dealing with all issues that may arise in relation to the re-organisation and insolvency resolution of corporate persons. In so far as insolvency resolution of corporate debtors and personal 3 AIR 2017 SC 4084 guarantors are concerned, any order passed by the NCLT is appealable to NCLAT under Section 61 of the IBC, 2016 and the orders of the NCLAT are amenable to the appellate jurisdiction of this court under Section 62. It is in this context that the action of the State of Karnataka in bypassing the remedy of appeal to NCLAT and the act of the High Court in entertaining the writ petition against the order of the NCLT are being questioned.. 25. The jurisdiction and powers of the High Court under Article 226 were then delved into and after noticing the ratio of several cases, they state at paragraph 28 as follows: 28. The....
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....he High Courts have been vested with powers under Article 226/227 wide enough to correct errors of jurisdiction. The NCLT being a creature of Statute does not have the jurisdiction to entertain an application against the Government of Karnataka seeking a direction to execute deeds for extension of mining lease and in so entertaining such application, had exercised a jurisdiction not vested in it. Such a jurisdictional error or in other words, exercise of jurisdiction that it did not possess, is a fundamental flaw and this can be corrected by judicial review, the Hon'ble Bench held. 27. Yet another question raised related to whether the NCLT was competent to enter into allegations of fraud, especially in the matter of initiation of CIRP. The Bench held that both the NCLT and National Company Law Appellate Tribunal (NCLAT) would hold such jurisdiction, but neither forum would have the jurisdiction to adjudicate upon disputes arising under other enactments, in that case, the Mines and Minerals (Development Regulation) Act, 1957 and the Rules issued thereunder. If the NCLT and NCLAT did venture into such alien territories, it would constitute a jurisdictional error that could be cor....
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....sidiary of the corporate debtor; and (c) such other assets as may be notified by the Central Government in consultation with any financial sector regulator." 40. If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term "assets" under the Explanation to Section 18. This assumes significance in view of the language used in Sections 18 and 25 in contrast to the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word "assets", while Section 20(1) uses the word "property" together with the word "value". Sections 18 and 25 do not use th....
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....e corporate debtor'. 33. In the present case, the RP endeavours to auction the asset and secure the proceeds of such sale to the credit of the debtor and the benefit of the insolvency proceedings. In order to preserve the property either by way of auction or otherwise, the pre-condition under Section 20 is that what is stated to be preserved would be the 'property of the corporate debtor'. This is on the one side. 34. The duties of the interim resolution professional under Section 18 have been enumerated under clauses (a) to (g) and clause (f) provides that the RP is empowered 'to take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor or with information utility or the depository of securities or any other registry that records the ownership of assets'. 35. Since the question of title/ownership of the goods rests upon a determination as to whether the said goods/asset are recorded in the balance sheet of the corporate debtor, the RP was directed to produce the relevant balance sheets and has so produced the balance sheets accompanied by the schedules for the relevant period, being ....
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....pre-existing lock on the from doors of the afore-mentioned warehouses which were placed by a third party. The Applicant took necessary steps to place his lock over and above the pre-existing lock without tampering or breaking the erstwhile lock place by the third party. . . . . 8. It is submitted that as per the records available with the Applicant that, the total amount of sugar stocked in the warehouses at Pennadum and Kottur amounts to 19537.50 metric tonnes, as per details made available to the Applicant, however the same is subject to verification after actual weighment. 41. The submissions at paragraph 8 are material, since R5 confirms the position that the amount of sugar stocked in the warehouses at Pennadam and Kottur are quantified at 19537.50 MT which corresponds to the quantification of the asset filed by the petitioner in its affidavit filed in support of the Writ Petition. Thus the quantification of the asset is not in dispute. 42. The contents of paragraph 5 of the application extracted above also confirm the statement of the petitioner that the asset is presently under lock and key, both at the instance of R5 and the petitioner. Though R5 ref....
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....eld in trust. An example are funds and securities held for employees pensions programs. (b) Assets that are held as security by financial market institutions that are laid out in the Indian Financial Code. These include collateral posted to the clearing corporation. (c) Assets held as part of operational transactions which have been provided to the entity with reservation of title. These include goods in inventory where the title of the goods belongs to a trade creditor or a wholesale distributor. All such assets cannot be used by the liquidator to realise recoveries for creditors. 3. Access to security in contracts that were entered into prior to the IRP and Liquidation will not be changed as a consequence of Liquidation. 44. It is thus clear that the intention of the Code is never to address those assets over which a debtor has no title. Such assets, infact, stand specifically excluded from the liquidation process, being assets where the debtor might hold some right, but is not the owner to title of the asset. A pre-condition set out is the inclusion of the asset in question in the inventory of the debtor. 45. The case law relied upon by ....