TaxTMI 
TaxTMI 
2022 (2) TMI 675
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....146 of 2020 being aggrieved against the impugned order dated 4th December, 2019 (delivered on 17th December, 2019) in MA/1189/2019 in Company Petition No. IBA/434/2010 (filed by the Applicant/Resolution Professional) passed by the 'Adjudicating Authority' (National Company Law Tribunal, Division Bench, Chennai). 2. The 'Adjudicating Authority' (National Company Law Tribunal, Division Bench, Chennai) while passing the 'impugned order' dated 04.12.2019 (delivered on 17.12.2019) in MA/1189/2019 in Company Petition No. IBA/434/2010 (filed by the Applicant/Resolution Professional under Section 33 & 60(5) of the I & B Code, 2016 read with Regulation 33(2) of IBBI (Liquidation Process Regulations, 2016) at paragraphs 8 to 17 had observed the following:- "8. At this juncture, it is pertinent on the part of us to mention that since the Suspended Directors and their counsel have kept on saying that money would come from various sources so as to avoid sending this company to liquidation, we have also believed that this payment would avert sending this company into liquidation in that belief waited again and again hoping that this money, which the Suspended Directors promised to br....
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.....07.2019, upon which the Financial Creditor (M/s Muthoot Fincorp Ltd) shall exit from the Committee of Creditors. The suspended director has further stated that the aforesaid sum will be paid by raising funds through DCB Bank and/or Phoenix ARC and/or Kotak Mahindra Bank and/or Financial Institutions and friends and relatives with an undertaking that upon failure to pay the aforesaid amount within sixty days i.e. with effect from 23.07.2019, the Financial Creditor (M/s Muthoot Fincorp Ltd) may proceed in accordance with the procedure under Insolvency and Bankruptcy Code, 2016 (IBC). The suspended director has also mentioned that the undertaking has been given to Muthoot Fincorp Ltd (Financial Creditor) without prejudice to the rights and contentions of the suspended director. Looking at the affidavit filed by the suspended director, we hereby hold that he shall procced as stated in the affidavit but until such time, the management of the company will run as contemplated under IBC by making it clear that the affidavit will be considered without prejudice to the rights and contentions of the suspended director as well as M/s Muthoot Fincorp Ltd. List this a....
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....sed by the 'Adjudicating Authority' is bad in law and is in complete negation to the Letter and Spirit of the provisions of the I & B Code, 2016. 4. The Learned Counsel for the Appellant contends that the 'Adjudicating Authority' had failed to appreciate that the 'Corporate Applicant' should have remained as a 'Going Concern' under the I & B Code with a view to arrive at a suitable Resolution Plan. 5. According to the Learned Counsel for the Appellant, the 'Adjudicating Authority' had not taken into account of the prime fact that without the 'Corporate Applicant' being a 'Going Concern' the pending debts would not possibly be repaid by it which would finally affect the interest of all stake holders. 6. The Learned Counsel for the Appellant takes a plea that the 'Adjudicating Authority' had committed an error in not appreciating the fact that the 'Suspended Directors' were not in possession of the Hospital Premises under the Equipment and Machinery present therein had provided all the information that were available with them. 7. The Learned Counsel for the Appellant proceeds to point out that the physical possession of the Hospital(asset of the 'Corporate Applicant') wa....
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....Tribunal' that the 'Loan Agreement', relied upon by the 1st Respondent was drafted and prepared by the 1st Respondent unilaterally as against the records of the 'Corporate Debtor'. Moreover, the 'Memorandum of Deposit of Title Deed' was prepared by the 1st Respondent and presented before the 'Office of the Sub-Registrar' where the Director of 'Corporate Applicant' had executed the said document and that 1st Respondent had conveyed that only on execution of 'Deposit of Title Deeds', the balance amount of Rs. 7 Crores would be released to the 'Corporate Applicant'. 14. The Learned Counsel for the Appellant submits that the 1st Respondent had only released a sum of Rs. 3 Crores, as against Rs. 7 Crores and the balance of Rs. 4 Crores was not released by the 1st Respondent till date. 15. The Learned Counsel for the Appellant, pertaining to the issue of 'Application' under Section 87 of the Companies Act, 2013 made by the 1st Respondent and the resultant order dated 10.01.2018 passed by the 'Regional Director' points out that the 'Corporate Debtor' was filing the statutory compliance before the 'Registrar of Companies' and the 'Ministry of Corporate Affairs', maintaining the recor....
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....re, it cannot be said that just because the 'Settlement Deed' was executed, the property is vested with the Appellant. 19. The Learned Counsel for the Appellant contends that the 'Deed of Solemn Undertaking' was executed by the Appellant, to keep the record straight and to recognize that the Schedule Property stands vested with 'Corporate Applicant' by means of incorporation and to undertake that the Appellant will not treat the property as his personal property. 20. The Learned Counsel for the Appellant submits that on 13.01.2020, the 1st Respondent had issued a notice under Section 13(4) of the SARFAESI Act 2002 read with Rules 8(6) of the Security Interest (Enforcement) Rules, 2002 of the 'Corporate Applicant' and its 'Suspended Director' providing one last and final opportunity to them, to discharge their liability within a period of 30 days, post which the 'Assets of the 'Corporate Applicant' presently under the physical possession of the 1st Respondent shall be exposed for Sale through e-auction. In fact, the action of the 1st Respondent is in contradiction to Section 52 of the Code and that the Appellant apprehends that the 1st Respondent might illegally and against th....
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....Bank and Rs. 1.7 Crores machineries was owned by the 'Corporate Applicant' and the possession of the Hospitals was illegally retained by the 1st Respondent. 26. The Learned Counsel for the Appellant contends that the 'Adjudicating Authority' had failed to appreciate that the delay in settlement was on account of the 1st Respondent and after the filing of MA No. 1189/2019 by the Resolution Professional praying to liquidate the 'Corporte Applicant' on 22.10.2019, the Promotors on 06.11.2019 had filed the Memo before the 'Adjudicating Authority' mentioning that leading Financial Institutions are in constant touch to settle the outstanding dues and whole deal would be struck in the next 15 days and that the outstanding dues of the 1st Respondent will be settled by them and sought to exclude the 26 days from the CIRP period. However, the 'Adjudicating Authority' without considering these prays, had passed the 'Liquidation' order. 27. The Learned Counsel for the Appellant projects an argument that only 180 days plus 30 days extension was granted to the 'Corporate Applicant' but the Code as it stood had provided for the time period of 180 days and extension upto 90 days namely viz.,....
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....orporate Applicant' and (3) 'Charged Documents' filed with the Registrar of Companies. 32. The Learned Counsel for the Appellant contends that the explanation of the 'Statutory Auditor' categorically stated that the 'Ownership of the Property' vests with the 'Corporate Applicant'. 33. The Learned Counsel for the Appellant submits that the 'Resolution Professional' Sripriya Kumar was replaced in the first meeting of the CoC dated 03.07.2019 (the 1st Respondent/Majority Member of CoC had voted in the first meeting of the CoC to replace the 'Resolution Profession' Sripriaya Kumar with that of Deepa V Ramani) and that the replaced Resolution Professional Ms Deepa V Ramani had not pressed for the adjudication of MA 363/2019, but moved an 'Application' to Liquidate the 'Corporate Applicant' at the instant of 1st Respondent/Financial Institution. Apart from that, the Resolution Professional/Liquidator was reluctant to take possession on numerous occasions. 34. The Learned Counsel for the Appellant comes out with a stand that the 'Resolution Professional' had time and again failed to take possession of the Assets of the 'Corporate Debtor' as per Section 25(2)9a) of the Code which ....
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....d also filed IA 699/IB/2020 along with an 'Application' for urgent hearing before the 'Adjudicating Authority' at Chennai with misleading information seeking to direct the 4th Respondent to hand over the physical possess to it, against the order dated 24.01.2020 passed by this 'Tribunal' in Company Appeal (AT)(Ins) 146/2020. 39. The Learned Counsel for the Appellant adverts to the fact that IA 699/IBA/2020 filed by the (1st Respondent/Financial Corporation) was allowed by the 'Adjudicating Authority in disregard to the 'Principles of Natural Justice' and contrary to the pleadings and documents available on record, without hearing the impleadment Application IA 933/IB/2020 filed by the Appellant and also without considering the corrected pending MA No. 363/2019. As such, a request is made on behalf of the Appellant for passing of an order against the 1st Respondent/Financial Corporation under Section 65 of the I&B Code for taking steps against the Order dated 24.01.2010 passed by this 'Tribunal'. 40. The Learned Counsel for the Appellant makes a fervent plea before this 'Tribunal' to consider IA 2936/2020 (Filed by the Appellant/Applicant) in permitting the Appellant to comple....
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....and development of the Indian economy. What is interesting to note is that the Preamble does not, in any manner, refer to liquidation, which is only availed of as a last resort if there is either no resolution plan or the resolution plans submitted are not up to the mark. Even in liquidation, the liquidator can sell the business of the corporate debtor as a going concern. (See ArcelorMIttal (Arcelor Mittal (India)(P)Ltd V Satish Kumar Gupta, (2019) 2 SCC 1] at para 83, fn 3). 28. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters/those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corpora....
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....ven without such consent of the Central Government, the insolvency proceedings under Section 7 or Section 9 of the IBC initiated by the operational creditor shall be maintainable." (ii). The Learned Counsel for the Appellant cites the judgement of the Hon'ble Supreme Court in K. Shasidhar Vs Indian Overseas Bank and Ors (vide Civil Appeal No. 10673 of 2018) dated 05.02.2019 wherein at paragraph 61 and 62 it is observed as under:- 61. Assuming that this provision was applicable to the cases on hand, non-recording of reasons for approving or rejecting the resolution plan by the concerned financial creditor during the voting in the meeting of CoC, would not render the final collective decision of CoC nullity per se. Concededly, if the objection to the resolution plan is on account of infraction of ground(s) specified in Sections 30(2) and 61(3), that must be specifically and expressly raised at the relevant time. For, the approval of the resolution plan by the CoC can be challenged on those grounds. However, if the opposition to the proposed resolution plan is purely a commercial or business decision, the same, being non-justiciable, is not open to challenge before the Adj....
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....ce served upon them before proceeding to take measures under sub-section (4) of Section 13. Such reasons, overruling the objections of the borrower, must also be communicated to the borrower by the secured creditor. It will only be in fulfillment of a requirement of reasonableness and fairness in the dealings of institutional financing which is so important from the point of view of the economy of the country and would serve the purpose in the growth of a healthy economy. It would certainly provide guidance to the secured debtors in general in conducting the affairs in a manner that they may not be found defaulting and being made liable for the unsavoury steps contained under sub-section (4) of Section 13. At the same time, more importantly we must make it clear unequivocally that communication of the reasons not accepting the objections taken by the secured borrower may not be taken to give an occasion to resort to such proceedings which are not permissible under the provisions of the Act. But communication of reasons not to accept the objections of the borrower, would certainly be for the purpose of his knowledge which would be a step forward towards his right to know as to why h....
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....of monies due and outstanding." (iv) The Learned Counsel for the Appellant refers to the Judgement of the Hon'ble Supreme Court of India in Swiss Ribbons Pvt Ltd and others V. Union of India and others 2019 4 SCC 17 wherein at paragraph 27 it is observed as under: "27. According to us, it is clear that most financial creditors, particularly banks and financial institutions, are secured creditors whereas most operational creditors are unsecured, payments for goods and services as well as payments to workers not being secured by mortgaged documents and the like. The distinction between secured and unsecured creditors is a distinction which has obtained since the earliest of the Companies Acts both in the United Kingdom and in this country. Apart from the above, the nature of loan agreements with financial creditors is different from contracts with operational creditors for supplying goods and services. Financial creditors generally lend finance on a term loan or for working capital that enables the corporate debtor to either set up and/or operate its business. On the other hand, contracts with operational creditors are relatable to supply of goods and services in the oper....
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.... 15. 'SARFAESI Act, 2002' being an existing law, Section 238 of the 'I&B Code' will prevail over any of the provisions of the 'SARFAESI Act, 2002' if it is inconsistent with any of the provisions of the 'I&B Code'. 16. In the aforesaid background, we hold that Section 18 of the 'I&B Code' will prevail over Section 13(4) of the 'SARFAESI Act, 2002' and the 'Dena Bank' cannot retain the possession of the property in question of which the 'Corporate Debtor' is the owner". (vi) The Learned Counsel for the Appellant cites the judgement of this Tribunal in M/s Unigreen Global Pvt Ltd V. Punjab National Bank (vide Comp App (AT)(Ins) No.81/2017 wherein at paragraph 26 it is observed as under:- "26. Any proceeding under Section 13(4) of the SARFAESI Act, 2002 or suit under Section 19 of the DRT Act, 1993 pending before Debt Recovery Tribunal or appeal pending before Debt Recovery Appellate Tribunal cannot proceed in view of the order of moratorium as may be passed." (vii) The Learned Counsel for the Appellant adverts to the order of the 'Adjudicating Authority' dated 12.12.2019 (NCLT Mumbai Bench in MA No.130/2019 CP/IB/3863/MB/2018) in Goa Auto Accessories V....
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....ed umbrella. The scheme of the Code is to make an attempt in divesting the erstwhile management of the Corporate Applicant of its power and vesting it in a professional agency to continue the business of the Corporate Body as a going concern until the resolution plan in drawn up in a time bound period of 270 days is an exhaustive Code by itself. 23.Section 60(5) and (b)(c) of the Code empowers NCLT to entertain the dispute raised in the suit, section 63 of the Code further bars the jurisdiction of the Civil Court in matters pertaining to the NCLAT, section 231 of the Code also bar the jurisdiction of the civil court from granting any injunction in respect of any action taken or in pursuance of any order passed by the Adjudicating Authority under this Code. This code is a self-contained legislation conferring the supervisory powers on the NCLT over CIRP process right from the stage of application being made for initiation of the CIRP process to the completion of the CIRP/Liquidation as the case may be. Upon conjoint reading of section 60(5), Section 63, Section 231 and section 238, the jurisdiction of Civil Court is excluded related to the matters related to I&B Co....
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....ainst the action taken by the 1st Respondent for the enforcement of its charge qua the property at No. 1, 7th Avenue, Besant Nagar, Chennai- 90 (the subject property) under Section 13(4) of the SARFAESI Act, 2002, which was affirmed through the Order of Possession dated 12.07.2018 passed by the Chief Metropolitan Magistrate. 46. The Learned Counsel for the 1st Respondent refers to the Order of the Hon'ble High Court, dated 20.02.2019 wherein at paragraphs 11 & 12 it is observed as under: "11. From the above reply it is also clear that the petitioner has not disputed the claim made by the 1st Respondent. In fact they specifically admitted the claim and only sought three months' time to settle the outstanding. But in spite of seeking for three months' time to settle the outstanding as early as 03.10.2007, it is pertinent to note that even till date, the petitioner has not settle the loan account with the 1st Respondent...." "12. It is also pertinent to note that even before this Court, when the matter came up on 11.10.2018, undertaking was made by the petitioner that the entire due payable to the respondent would be paid within a period of 45 days. To that effect....
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.... Counsel for the 1st Respondent places reliance on the ingredients of Section 33(2) of the I & B Code which enjoins the 'Adjudicating Authority' who shall pass an order of liquidation of the 'Corporate Debtor' in the event of a prescribed majority vote of the Member of 'Committee of Creditors' to that effect. 50. The Learned Counsel for the 1st Respondent contends that the impugned order passed by the 'Adjudicating Authority' was pursuant to the 'Resolution' dated 18.10.2019, passed by the properly constituted 'Committee of Creditors' by a majority of 73.44% and even the 'remainder' of the 'Committee of Creditors' had just abstained from voting, but had not voted against the said 'Resolution' and in this regard, the pertinent portion of the said 'Resolution' of the 'Committee of Creditors' qua Liquidation of the 'Corporate Debtor' is mentioned as under: "Resolved that pursuant to the provisions of Section 33 of the Insolvency and Bankruptcy Code, 2016 of the Committee of Creditors be and is hereby given for submitting an application to the Honourable National Company Law Tribunal, Chennai Bench for Liquidation of M/s Santhosh Hospitals Private Limited, in the event of n....
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....n'. INELIGIBILITY UNDER SECTION 29A OF THE CODE 55. The Learned Counsel for the 1st Respondent contends that the 'Appellant' and other 'Suspended Directors of the Corporate Directors' are not eligible to participate in the Resolution of the Corporate Debtor by virtue of Section 29A of the I&B Code which prohibits 'related parties' from submitting a 'Resolution Plan' and also from participating in the 'Liquidation Process of a 'Corporate Debtor' in respect of whom a 'Liquidation Order' was passed by the 'Adjudicating Authority'. AVAILING OF LOAN 56. The Learned Counsel for the 1st Respondent submits that the 3rd Respondent availed the loan from the 1st Respondent to a sum of Rs. 42,00,00,000/- as per sanction letter dated 14.07.2016 and later executed a loan agreement dated 06.08.2016 indicating clearly that the 'Appellant' stood as 'Guarantors' and furnished security, in the nature of the subject property. Furthermore, the subject property was mortgaged by the Appellant, being the owner of the same, through a 'Memorandum of Deposit of Title Deeds' dated 17.08.2016, registered in the 'Office of the Sub-Registrar' (vide Document No.8571 of 2016). 57. The Learned Counse....
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.... and subsequently filed an affidavit dated 13.12.2018 before the Chief Metropolitan Magistrate among other things mentioning that no hospital services were being rendered and further that there were no patients in the Hospital. 61. The Learned Counsel for the 1st Respondent refers to the affidavit filed by the Corporate Debtor in WP No.24867 of 2018 before the Hon'ble High Court of Madras wherein the 'Corporate Debtor' had admitted that the subject property is owned by the Appellant and not the Corporate Debtor and the relevant portion is as follows: "..4. I state that the land of commercial Plot No.1, 7th Avenue, Besant Nagar, Chennai - 600090, comprised in Survey No.154 Part, Thiruvanmiyur Village, Mylapore-Triplicane Taluk, measuring about 7 Grounds and 963 Sq. Fee was originally owned by Dr. P.M. Narguman (wife of Dr. P. Mahalingam) and thereafter by renowned cardiologist Dr. P Mahalingam (the Petitioiner's Founder and Chairman).." "...6. I state that the loan Agreement executed----Subsequent to completion of the necessary formalities, legal requirements and in pursuance of the Loan Agreement, a Memorandum of Deposit of Title Deeds in respect of the premise....
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....r Section 36(4) in respect of 'Assets' that, despite being evidenced on the Balance Sheet of the 'Corporate Debtor', are owned by a third party and is in possession of the 'Corporate Debtor'. Hence, it is the stand of the 1st Respondent, that the 'subject property' never ought to have been subject to 'insolvency proceedings' qua the 'Corporate Debtor' and also sought to be excluded from the ambit of the instant 'Liquidation Proceedings'. 67. The Learned Counsel for the 1st Respondent submits that the Appellant furnished an 'undertaking' through an 'Affidavit' dated 26.07.2019 in and by which he undertook to pay a sum of Rs. 57,50,00,000/- to the 1st Respondent in satisfaction of the debt owed by the 3rd Respondent, within 60 days. 1ST RESPONDENT'S CITATIONS: 68.(a) The Learned Counsel for the 1st Respondent adverts to the Judgement of this 'Tribunal' dated 31.07.2019 in 'Kautilya Industries Pvt. Ltd. v. Parasrampuriya Synthetic Ltd. [Comp. Appeal (AT)(INS) No. 282 of 2019] wherein at paragraph 6 to 11 it is observed as under: "6. On 3rd January, 2019, the Hon'ble High Court of Judicature for Rajasthan, Bench at Jaipur, taking into consideration the fact that the '....
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....dent refers to the Judgment of this 'Tribunal' dated 24.07.2018 in 'Chandra Kalian Prakash v. Rajeev Mannadiar & Ors.' [vide Comp. App. (AT)(INS) 149 of 2018] wherein it is observed as under: "The grievance of the appellant is that 180 days was to be completed by 21st January, 2018 but much prior to the same, without taking further course of calling for 'Resolution Plan', the matter was hurriedly closed by the 'Committee of Creditors' in its meeting held on 3rd October, 2017 decided to proceed with the liquidation. From the record we find that there was no 'resolution applicant' who came forward to file a 'Resolution Plan'. The 'Committee of Creditors' in its meeting held on 31st August, 2017 asked the 'Resolution Professional' to come forward with concrete proposal for revival of the company as otherwise they will have to consider the question of liquidating the company. Thereafter in absence of 'resolution plan', the 'Committee of Creditors' decided to go ahead with the liquidation of the company. Learned counsel appearing on behalf of the promoter submits that the appellant could have submitted a 'Resolution Plan' but in view of Section 29A, as the appellant is....
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....2) of the Insolvency and Bankruptcy Code, 2016 read together with explanation inserted by Act 26 of 2019 enforced w.e.f. 16th August, 2019, the COC is empowered to take a decision in regard to liquidation of the Corporate Debtor even after an application has been filed by the Resolution Professional placing the Resolution Plan approved by the COC before the Adjudicating Authority for approval. Of course, the withdrawal of the Resolution Plan can be done before its approval by the Adjudicating Authority. This implies that even after approval of the Resolution Plan by the COC and laying it before the Adjudicating Authority, the COC can change its mind and pass a Resolution liquidating the Corporate Debtor subject to only exception that such course cannot be adopted after its confirmation i.e. after approval of the Resolution Plan by the Adjudicating Authority. We find no merit in this appeal. The same is dismissed." and the same was upheld by the Hon'ble Supreme Court in Civil Appeal No.5640 of 2021. (e). The Learned Counsel for the 1st Respondent places reliance on the decision of the Hon'ble Supreme Court in 'K Shashidhar v. Indian Overseas Bank' [(2019) 12 SCC 150 a....
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....tcy process When a firm (referred to as the corporate debtor in the draft law) defaults, the question arises about what is to be done. Many possibilities can be envisioned. One possibility is to take the firm into liquidation. Another possibility is to negotiate a debt restructuring, where the creditors accept a reduction of debt on an NPV basis, and hope that the negotiated value exceeds the liquidation value. Another possibility is to sell the firm as a going concern and use the proceeds to pay creditors. Many hybrid structures of these broad categories can be envisioned. The Committee believes that there is only one correct forum for evaluating such possibilities, and making a decision: a creditors committee, where all financial creditors have votes in proportion to the magnitude of debt that they hold. In the past, laws in India have brought arms of the Government (legislature, executive or judiciary) into this question. This has been strictly avoided by the Committee. The appropriate disposition of a defaulting firm is a business decision, and only the creditors should make it." (emphasis supplied) (f). The Learned Counsel for 1st Respondent refers to the decision ....
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....lities of the corporate debtor; equally, however, there are proposals which envision the creation of charge or securities in respect of MCGM's properties. Nevertheless, the authorities under the Code could not have precluded the control that MCGM undoubtedly has, under law, to deal with its properties and the land in question which undeniably are public properties. The resolution plan therefore, would be a serious impediment to MCGM's independent plans to ensure that public health amenities are developed in the manner it chooses, and for which fresh approval under the MMC Act may be forthcoming for a separate scheme formulated by that corporation (MCGM)." and points out that in the instant case, ownership of the 'subject property' should be governed by the proper and legitimate 'Title Documents' and not in terms of the Balance Sheet entries in the 'Corporate Debtor's Financial Statements'. THE REGISTRATION ACT, 1908 69. The Learned Counsel for the 1st Respondent refers to Section 51 of the Registration Act, 1908 and submits that documents concerning immovable property are required to be maintained only in Book I which relates to 'Register of Non-Testamentary Document relat....
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....sence of a deed of conveyance (duly stamped and registered as required by law), no right, title or interest in an immoveable property can be transferred. 12. Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) would fall short of the requirements of sections 54 and 55 of TP Act and will not confer any title nor transfer any interest in an immovable property (except to the limited right granted under section 53A of TP Act). According to TP Act, an agreement of sale, whether with possession or without possession, is not a conveyance. Section 54 of TP Act enacts that sale of immoveable property can be made only by a registered instrument and an agreement of sale does not create any interest or charge on its subject matter. ASPECT OF DEED OF SOLEMN UNDERTAKING 71. The Learned Counsel for the 1st Respondent comes out with a plea that the 'Deed of Solemn Undertaking' vest/convey the property in favour of the 'Corporate Debtor' in the year 1988, prior to the 'Asset' coming into ownership of Dr.PM Nargunam, as per Sale Deed dated 30.01.1989 and prior to the gift thereof to the Appellant (28.09.2002) and this is contrary to the....
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....Mr. Kapur, learned counsel appearing for the respondent/Bank, the said issue is squarely covered by the judgment of the Supreme Court in State Bank of India (supra). Paras 20 and 25 of the said decision that answer the issue raised by Mr. Sethi, Senior Advocate against him, read as under:- "20. Section 14 refers to four matters that may be prohibited once the moratorium comes into effect. In each of the matters referred to, be it institution or continuation of proceedings, the transferring, encumbering or alienating of assets, action to recover security interest, or recovery of property by an owner which is in possession of the corporate debtor, what is conspicuous by its absence is any mention of the personal guarantor. Indeed, the corporate debtor and the corporate debtor alone is referred to in the said section. A plain reading of the said section, therefore, leads to the conclusion that the moratorium referred to in Section 14 can have no manner of application to personal guarantors of a corporate debtor. XXX XXX XXX 25. Section 31 of the Act was also strongly relied upon by the respondents. This section only states that once a resolution plan, as app....
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....ntemplate withdrawal of an application under Section 7 once it is admitted under Section 7(5). The terminal points are, firstly, the approval of a Resolution Plan and secondly, the initiation of liquidation proceeding on a Resolution Plan not being approved. When a financial creditor applies under Section 7 of the Code of 2016 it is exercising a statutory right. The exercise of such statutory right does not depend upon the contractual obligations of the parties bound by the respective contracts between the creditor, principal debtor and the surety. Such contracts cannot be said to have rescinded, novated, frustrated, modified, altered or affected in any manner, on an application under Section 7 of the Code of 2016 being filed. After its admission under Section 7(5) of the Code of 2016, when an order under Section 14 is passed, then also only the statutory right of a financial institution to proceed under the SARFAESI Act, 2002 remains suspended for a limited period. The existing contracts between the surety, principal debtor and the creditor remains unaffected. 37. Section 14 of the Code of 2016 does not apply to a personal guarantor. The Code of 2016 does not allow person....
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....etion of 180 days. 3.In view of the aforesaid stand taken by the respondent and not denied by the appellant and in absence of any 'resolution plan', no other option left but to dismiss the appeal. 4.The appeal is accordingly dismissed. No cost." 77. The Learned Counsel for the 1st Respondent cites the judgement of this Tribunal in Amit Basia & Anr Vs Anant Overseas Ltd and Anr reported in 2018 SCC OnLine NCLAT 592 wherein at paragraph 4 and 5 it is observed as under:- 4. Similar issue fell for consideration before this Appellate Tribunal in 'Quantum Limited (Corporate Debtor)' vs 'Indus Finance Corporation Limited in CA(AT) (Insolvency) No. 35 of 2018 wherein the Appellate Tribunal by order dated 20th February, 2018 taking into consideration the relevant provisions of 'I&B Code' observed as follows: 4. From sub-section (2) of Section 12, it is clear that resolution professional can file an application to the Adjudicating Authority for extension of the period of the corporate insolvency resolution process, only if instructed to do so by a resolution passed at a meeting of the committee of creditors by a vote of 75% of the voting shares. The pro....
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....AT 635 wherein at paragraph 3 to 5 it is observed as under:- "3. In the present case, the Adjudicating Authority has not hold that the subject matter of the case do not justify to extend the period. It has not been rejected on the ground that the committee of creditors or resolution professional has not justified their performance during the 180 days. In such circumstances, the Adjudicating Authority was required to extend the period of Resolution process to enable the Committee of Creditor to find out whether a suitable resolution plan is to be approved or not instead of passing order for liquidation, which is the last recourse to be taken on failure of resolution process. 4.For the reasons aforesaid, we set aside the impugned order dated 9th January, 2018 and extend the period of resolution process for another 90 days to be counted from today. The period between 181st day and passing of this order shall not be counted for any purpose and is to be excluded for all purpose. Now the Resolution Professional, Committee of Creditors and the Adjudicating Authority will proceed in accordance with law. 5.The appeal is allowed with the aforesaid observations. No ....
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....earned Counsel for the 3rd Respondent brings it to the notice of this Tribunal that because of the completion of the CIRP extended period, on 19.10.2019, the CoC on 18.10.2019 had passed a resolution to prefer an appropriate application, in terms of Section 33 of the Code and that MA 1189/2019 in IBA/434/2019 was filed by the Resolution Professional, before the 'Adjudicating Authority' on 23.10.2019, upon the expiry of the CIRP period, as per the Scheme of the Code, requiring the Resolution Professional to file an application, in the event of No Resolution Plan being approved during the CIRP period and in terms of the Resolution dated 18.10.2019 passed by the Committee of Creditors. APPRAISAL 84. At the outset, this 'Tribunal' points out that before the 'Adjudicating Authority', the Applicant/Resolution Professional in MA 1189/2019 in IBA/434/2019 (filed under Section 33 of the I&B Code, 2016 r/w Regulation 33(2) of the Insolvency and Bankruptcy Board of India (Liquidation Process), Regulations, 2016 and Section 60(5) of the Code) had prayed for passing of an appropriate order to liquidate Corporate Debtor as per Chapter III of the I&B Code and Regulations framed thereunder e....
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.... The amount payable to I-Net Solutions Rs. 13,64,941 The amount payable to Chennai Healthcare Engineers Rs. 29,09,135 Total Rs. 39,52,24,076 91. The 'Adjudicating Authority' after taking into account of the fact that the Corporate Applicant had defaulted in repaying the debt payable to the 1st Respondent/Muthoot Fincorp Ltd and others ultimately came to the conclusion that the CP IBA/434/2019 was a fit case for admission under Section 10 of the Code and appointed Mrs Sripriya Kumar as 'Interim Resolution Professional' by admitting the Company Petition on 04.04.2019 (but delivered on 08.04.2019). 92. The Interim Resolution Profession/Applicant filed MA 363/2019 in CP No.IBA/434/2019 (under Section 14 r/w 18 and Section 60(5) of the Code) seeking permission from the 'Adjudicating Authority' to permit the Applicant/Resolution Professional to take possession, control and custody of the land and building of Hospital at Besant Nagar, Chennai, (described in Schedule to the application) and with relevant aid and assistance as may be necessary to take possession of such land and building and to stay all further proceedings in respect of Sale Notice dated 11.04.2019. ....
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....m and under the said property, at one point of time was leased out to the 'Corporate Debtor/Santhosh Hospital Pvt Ltd' and the said 'Lease' itself was cancelled by mutual consent on 24.09.2013. Therefore, it is the plea of the 1st Respondent that the 'Corporate Debtor/Santhosh Hospital Pvt Ltd' cannot make a claim against the property, under the lawful possession of the 1st Respondent, taken with due procedure of law and sustained by the Hon'ble High Court of Madras and the Debt Recovery Tribunal, Chennai. Further, the 'Corporate Debtor', who has no right over such properties can exhibit the same, as 'Asset' in its 'Annual Balance Sheet' and other 'Statutory Returns' and Filings, from September, 2013. 98. According to the 1st Respondent 'Moratorium' under Section 14 of the Code is inapplicable to the property of the Guarantor/Surety and that the property being reflected in the 'Balance Sheet' will not confer any 'Title or Ownership' in law. That apart, it is the duty of the 'Interim Resolution Professional' to submit a valid evidence of 'Title' to the land, claimed to be in the ownership of 'Corporate Debtor' (including for the plot of land valued at Rs. 1.37 crores in the 'Bala....
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....002, the Appellant's wife had executed a registered 'Settlement Deed' on the file of Joint Sub-Registrar I, South Chennai (vide Document No.4613 of 2002) to and in favour of her husband, the Appellant (Dr. P. Mahalingam) in respect of the piece and parcel of the land bearing No.1, 7th Avenue, Besant Nagar, Chennai 600090 in S.No.154 Part of Thiruvanmiyur Village, formerly Saidapet Taluk, at present Mylapore Triplicane Taluk with an extent of 7 Grounds 0963 Sq Ft within the stated boundaries in the Schedule. 103. A mere perusal of the contents of the 'Settlement Deed' dated 28.09.2002 indicates clearly that the 'Settlor' (The Appellant's wife Mrs. P.M. Nargunam) had executed the said 'Deed' in respect of the subject property, out of her own love and affection, towards the 'Settlee' (the Appellant - Dr. P. Mahalingam) by conveying, transferring and assigning the same absolutely etc. RECTIFICATION DEED 104. It comes to be known that the Tamil Nadu Housing Board through its Manager, Marketing and Service, Besant Nagar Division, Chennai 20 had executed a registered 'Rectification Deed' to and in favour of the Appellant in correcting the Schedule of the property in accordance wi....
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....hat Section 51(1) to 51(3) of the Registration Act, 1908 under the caption 'Register-books to be kept in the several Offices' (Part XI of the Duties and Powers of the Registering Officers (A) as to the register-books and indexes) envisages the following: "(1) The following books shall be kept in the several offices hereinafter named, namely:- A- In all the registration Offices- Book 1, "Register of non-testamentary documents relating to immovable property"; Book 2, "Record of reasons for refusal to register"; Book 3, "Register of wills and authorities to adopt"; and Book 4, "Miscellaneous Register"; B- In the offices of Registrars- Book 5, "Register of deposits of wills", (2) In Book 1 shall be entered or filed all documents or memoranda registered under Sections 17, 18 and 89 which relate to immovable property, and are not wills. (3) In Book 4 shall be entered all documents registered under clause (d) and (f) of section 18 which do not relate to immovable property." 109. The ingredients of Section 17 of the Registration Act, 1908 enjoins "Documents of which registration is compulsory" ....
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.... in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds'. 112. In the instant case, the 'Memorandum of Title Deed' was executed before the Office of Sub Registrar by the 'Director of the Corporate Applicant' on 17.08.2016 and according to the Appellant, even after the execution of 'Deposit of Title Deeds', the 1st Respondent had released a sum of Rs. 3 crores only and the balance 4 crores was not released by the 1st Respondent till date. In fact, the loan of the Indian Overseas Bank, availed by the Santosh Hospitals Pvt. Ltd. was taken over by the 1st Respondent. 113. An intention to create an 'Equitable Mortgage' may be inferred from a delivery of the document to be held, or a direction to hold them, until the settlement of an account or the execution of a mortgage or for the purpose of preparing a legal mortgage, for an existing debt (vide Fisher and Lightwood's Law of Mortgage 7th Edn P. 19) 114. The intent to create an '....
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.... of Undertaking' dated 05.11.2002 is not a legally valid document of transfer/conveyance, in the manner known to law. 120. Apart from the above, the 'Financial Statements' of the 'Corporate Debtor/Santhosh Hospitals Pvt. Ltd.' had recorded the 'subject property' as an asset of the 'Corporate Debtor/Santosh Hospitals Pvt Ltd.' from the year 2002 and not from the year of incorporation during the year 1988, which is certainly, not a favourable circumstance to and in favour of the 'Appellant'. 121. It is to be remembered that in law, the ownership of an immovable property is regulated and governed by a valid 'Title Deed' and in fact, as regards the plea taken on behalf of the 'Appellant' that Section 238 of the I & B Code, 2016 overrides the SARFAESI ACT, 2002 is not acceded by this 'Tribunal' because of the reason that the' Mode of Transfer' of an 'immovable property' is to be effected by way of legitimate instruments, recognised by law. 122. In law, by virtue of the 'Settlement Deed' the title to the property vests with the 'Settlee' on execution of the 'Settlement Deed'. In the instant case, the 'Settlement Deed' dated 28.09.2002 executed by the Appellant's wife in fa....
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....litan Magistrate had opined that the petitioner was entitled to take possession of the Schedule mentioned assets and ultimately allowed the application by means of order dated 12.07.2018. 127. Moreover, the 'Corporate Debtor/M/s Santhosh Hospitals Pvt Ltd' filed WP No.24867 of 2018 before the Hon'ble High Court of Madras against the 1st Respondent/M/s Muthoot Fincorp Ltd and two others, seeking to restore the 3rd Respondent/Corporate Debtor/Petitioner's possession to the subject property etc. and on 20.02.2019 at paragraph 12 and 13 it is observed as under:-- "12.It is also pertinent to note that even before this Court when the matter came up on 11.10.2018, an undertaking was made by the petitioner that the entire dues payable to the respondent would be paid within a period of 45 days. To that effect, the petitioner has also field an affidavit of undertaking dated 17.10.2018. Therefore, without honouring the undertaking given before this Court, the petitioner filed an application seeking for extension of time and this Court also showed indulgence to the petitioner by order dated 05.12.2018 extending the time for compliance till 10.01.2019. Even then, without complying w....
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....ng Authority, on receipt of application from the Resolution Professional under Section 12(2) of the Code. Section 12(3) of the Code says that the CIRP shall mandatorily be completed within a period of 330 days from the Insolvency commencement date, including any extension of the period of CIRP granted under this Section and the time taken in legal proceedings in relation to such Resolution process of the Corporate Debtor. AIM OF RESOLUTION 131. The first purpose under the Code is one of 'Resolution'. The other aim is 'maximisation of value of assets of the 'Corporate Debtor' and the next objective is 'promoting entrepreneurship, availability of credit and balancing interest'. INTERIM RESOLUTION PROFESSIONAL'S DUTIES 132. As per Section 18(1) of the I&B Code specifies that the Interim Resolution Professional is to collect all information pertaining to the financial position of the 'Corporate Debtor' and to constitute a 'Committee of Creditors' at the earliest point of time. As per Section 18(b) the Interim Resolution Professional shall perform the duty of receiving and collating all the claims submitted by the creditors to him. He is to take control over and monitoring t....
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....ONAL'S DUTIES 136. Section 25 of the Code spells out the duty of Resolution Professional to preserve and protect the assets of the 'Corporate Debtor' and specifies the duties/functions he is to perform the same. A 'Resolution Professional' is entitled to raise interim finance (whether secured or unsecured) with the prior approval of the Committee of Creditors. LIQUIDATION 137. If no 'Resolution Plan' is approved by the Committee of Creditors, an Adjudicating Authority is left with no option but to pass an order of 'liquidation' of the company, where the time prescribed under Section 12 had expired, the Adjudicating Authority can pass an order of liquidation against the 'Corporate Debtor' regardless of whether the 'Management of the Corporate Debtor' or the 'Resolution Applicant', as the case may be, had an adequate opportunity to come up with the suitable plan. LIQUIDATION PROCESS 138. The 'Liquidation Process' will be triggered as per Section 33 of the Code, if (a) either no Resolution Plan is filed within the time prescribed under Section 12 of the Code or a Resolution Plan was rejected by the Adjudicating Authority; (b) where the Resolution Professional, before af....
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.... on 14.12.2021), the Hon'ble Supreme Court at para 29 has observed as under:- "29 The IBC is a complete code in itself. The Adjudicating Authority and the Appellate Authority are creatures of the statute. Their jurisdiction is statutorily conferred. The statute which confers jurisdiction also structures, channelises and circumscribes the ambit of such jurisdiction. Thus, while the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity." 143. As far as the present case is concerned, the CIRP period of 180 days came to an end on 4.10.2019. Despite the 'Affidavit of Undertaking' furnished by the 'Appellant' to pay Rs. 57.50 Crores to the 1st Respondent/M/s Muthoot Fincorp Ltd, the 'Appellant' had not raised the amount and to pay the same to the 1st Respondent. In short, there was no iota of any indication from the side of the 'Appellant' to raise funds for making payment. In fact, no Resolution of the Corporate Insolvency Process is allowed except as per Section 12-A of the I & B Code. 144. To settle the 'Corporate Debtor'/Company's Debts adequate opportunities were provided by the 'Adjudicating Authority' ....
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....osh Hospitals Pvt Ltd) has filed the instant Comp App (At)(Ins) No.1121/2020 being dissatisfied with the order dated 17.12.2020 in IA/699/IB/2020 in IBA/434/2019 (filed by the 1st Respondent/M/s Muthoot Fincorp Ltd under Section 60(5) of the Code). 149. The 'Adjudicating Authority' while passing the impugned order on 17.12.2020 in IA/699/IB/2020 in IBA/434/2019 (filed by the 1st Respondent/Applicant had inter alia observed the following:- "The question as to the ownership of the said property is yet to be adjudicated. The property appears to be in possession of the Appliant prior to the order dated 12.04.2020. The question as to whether the property is the asset of the Corporate Debtor is not yet decided. Connected MA/363/2019 is pending on the file of this Adjudicating Authority. In view of the same, this Adjudicating Authority directs the 1st Respondent (Greater Chennai Corporation) to hand over the keys of the Hospital premises at No.1, 7th Avenue, Besant Nagar, Chennai 600090 to the Applicant herein (Muthoot Fincorp Ltd). The Applicant herein shall hold the possession of the property till the adjudication of MA/363/2019." and allowed the application. ....