TaxTMI 
TaxTMI 
2022 (9) TMI 1161
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....nclature "Pre-Packaged Insolvency Resolution Process" (PPIRP) in short. 2. Section 54A provides as to when a corporate debtor of the above kind becomes eligible for PPIRP. Section 54B provides for duties of Resolution Professional before initiating PPIRP. Section 54C, provides the manner by which an application to initiate PPIRP is to be made. Section 54D, provides a time limit for completion of PPIRP. Section 54E deals with Moratorium and public announcement. The duties and powers of the Resolution Professional during PPIRP is provided under 54F. 3. In so far as the present case is concerned Section 54-G, H, I & J may not be that relevant. However, under Section 54K, the manner of consideration and approval of resolution plan is provided. The termination of the PPIRP, if it fails, is provided under Section 54-L. 4. The present petition C.P. No. (IBPP)-02(PB)/2022 was filed on 12.07.2022 and for the first time it was listed for hearing on 26.07.2022 and it was adjourned on more than two occasions, at request. On 03.08.2022, the following order was passed:- "IA-3591/2022 & IA-3592/2022 At request, both the applications stands adjourned to 24.08.2022. C.P. No. (IBPP)....
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....n 7 of IBC is pending before this Tribunal long before the coming into force of Pre-Packaged Ordinance dated 04.04.2021. In this regard, we are inclined to issue notice to the limited extent for examining the issue on the admissibility of the pre-packaged application in the light of Section 11A of IBC. We issue notice to the Parties in C.P. No. (IB)-1081 (PBJ/2020 and in C.P. No. (IB)-556(PB)/2022. We also allow other home buyers related to this Corporate Debtor i.e. M/s. CHD Developers Limited, who would like to present their point of view on this preliminary issue alone. The Present matter to be listed for next date of hearing on 30.08.2022, at the top of the cause-list." 6. In continuation to the earlier submissions, we heard all the parties. Before we commence to consider the issue as to whether the Pre-Packaged petition should be admitted or not in the light of Section 11A there are certain facts relevant to the present case which need to be recorded and the same reiterated below. 7. The Corporate Debtor (CD) is one CHD Developers Limited. It proposed several real estate projects both Commercial and Residential. On the basis of the real estate projects proposed by the CD....
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....incumbent Sh. R. Vardharajan, Hon'ble Actg. President and Sh. Hemant Kumar Sarangi, Hon'ble Member (Technical), hearing the matter afresh passed the detailed order in C.P. No. (IB)-1775(PB)/2018 in the case of Mr. Shailendra Kumar Agarwal v. CHD Developers Ltd. which reads as under:- "In relation to all these matters Mr. Sumant Batra, Advocate is present for the Corporate Debtor through Video Conferencing Mode. In relation to Item No. 1 being a Petition filed by the Homebuyers, the Petitioners are being represented by Mr. Gaurav Mitra, Senior Advocate. In relation to Item No. 3 which has also been filed by the Homebuyers is being represented by Mr. Piyuesh Singh, Advocate. In relation to Item Nos. 2, 4 &, 5 as filed by the Operational Creditors, the respective Operational Creditors in Item Nos. 2 and 4 are being represented by Mr. Naresh Kumar Joshi, Advocate and Mr. Sougata Ganguli, Advocate. No representation for Item No. 5. It is also brought to the notice of this Tribunal that the matter in Item No. 1 was heard in detail and order was also reserved by the erstwhile Principal Bench, however, the order was not pronounced and the matters came to be re-reserved fo....
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....notice of this Tribunal that intervening Application has been filed in these Petitions filed by the Homebuyers in IA-4716/2020 in Item No. 1 and IA-569/2020 in Item No. 3. In the circumstances, let these Applications be also posted along with the concerned main Petitions on the date of hearing. Post these matters on 16.07.2021." 11. It is to be noticed that Mr. Sumant Batra, Ld. Counsel for the CD has clearly stated that CD does not have objection if the CIRP is initiated against CD in view of debt and default, though at that moment it was partly in respect of operational creditors and the issue of home buyers was unclear on numbers. However, for reasons recorded, the Bench adjourned the matter to 16.07.2021. Thereafter, the various Benches adjourned the matter from time to time probably due to shortage of Members and shortage of time. In the mean while the IBC (Amendment) Ordinance dated 04.04.2021 came into effect bringing forth Chapter III-A and PPIRP. As noticed above, the present (IBPP)-02(PB)/2022 was filed on 12.07.2022 under Chapter IIT-A. 12. On the basis of our query raised, Mr. Sumant Batra, Ld. Counsel for the petitioner who proposed the pre-packaged application has....
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....ed on 04.04.2021. Perhaps there were some preliminary reports which guided the competent authority to issue the PPIRP Ordinance. Be that as it may, he refers to Chapter III on eligibility (para 3.2, 3.3, 3.4) which reads as under: "3.2 As discussed above, the Committee decided that the pre-pack process should, be available only to corporate debtors that are MSMEs as an alternative to the CIRP under the Code (see para 2.4.). In this regard, the Committee noted that the Code should provide that the pre-pack process is available for corporate debtors classified as 'MSMEs' as per Section 7(1) of the MSME Development Act, 2006. This reference to the definition of an MSME has been used under the Explanation to Section 240A of the Code, and the Committee discussed that jurisprudence developed on the interpretation of the reference to the definition of MSMEs as under Section 240A may be applicable to the pre-pack process as well. 3.3. Further, the Committee considered if default should be a requisite criterion for eligibility to apply to the pre-pack process. In this regard, the Sub-committee had recommended that a default by the corporate debtor should be required in the prese....
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....ority may consider such applications. It noted that ordinarily, the Adjudicating Authority would dispose of the application that has been filed first. However, since the corporate debtor will need to make preparations before being able to file an application to initiate the pre-pack process, CIRP applications may often be filed, (and remain pending) before a pre-pack application is filed. If the Adjudicating Authority then considers the CIRP application first, it would lead to very few instances of a corporate debtor being able to avail the pre-pack process. 3.15. Moreover, although the Code envisages that a CIRP application should be disposed of within 14 days of its filing, such disposal takes much longer in practice. Where a CIRP application has been filed and is pending for a long period, the corporate debtor may not have certainty on the feasibility of negotiating a base resolution plan in the absence of rules on prioritising simultaneous CIRP and prepack applications. Even if a base resolution plan has been negotiated by the corporate debtor in such a scenario, delay in disposal of CIRP application may lead to value erosion and make the negotiated plan moot. Further, differ....
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...., the Adjudicating Authority should first dispose of the application for initiating CIRP. As with (a), this approach provides an objective manner of dealing with simultaneous applications as it considers the application that has been filed first before any subsequent applications. d. In order for this mechanism outlined in paragraph b and c. to work as intended, the Committee noted that it was critical that the 14-day time- limit be strictly adhered to (see para 4.9.). The filing systems of the NCLTs will need to monitor this closely to prevent abuse of the process." 16. Annexure-II of the report is the Summary of Recommendations, at Page-216, it is recorded in the report as follows:- "iii. Overlap with CIRP A corporate debtor that is undergoing a CIRP should not be eligible to apply for a pre-pack process. Further, if applications for initiating a pre-pack process and a CIRP in respect of the same corporate debtor are simultaneously pending, they should be disposed of in the following manner (Para 3.16.):- a. Where an application for initiating a pre-pack process is filed first and subsequently a CIRP application is filed, the Adjudicating Authority should first dispose o....
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....der section 54C is pending, the Adjudicating Authority shall pass an order to admit or reject such application, before considering any application filed under section 7 or section 9 or section 10 during the pendency of such application under section 54C, in respect of the same corporate debtor. (2) Where an application under section 54C is filed within fourteen days of filing of any application under section 7 or section 9 or section 10, which is pending, in respect of the same corporate debtor, then, notwithstanding anything contained in sections 7, 9 and 10, the Adjudicating Authority shall first dispose of the application under Section 54C. (3) Where an application under section 54C is filed after fourteen days of the filing of any application under section 7 or section 9 or section 10, in respect of the same corporate debtor, the Adjudicating Authority shall first dispose of the application under section 7 or section 9 or section 10. (4) The provisions of this section shall not apply where an application under section 7 or section 9 or section 10 is filed and pending as on the date of the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021." 18....
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.... earlier in para 5, submits that the Clause (4) of Section 11A guides the Adjudicating Authority in the following manner:- In Section 11A(1), (2) & (3) reference is made to Section 54C of Chapter III-A in relation to Section 7, 9 & 10 of IBC whereas Section 11A(4) does not speak about Section 54C at all. Therefore, the same should be read to mean that any petition filed under Section 7, 9 & 10 prior to coming into force of Ordinance dated 04.04.2021 should be dealt with independently. Chapter III-A will have no bearing on the earlier Section 7 petition. If a petition filed under Section 7, 9 & 10 is already pending well before the Ordinance dated 04.04.2021, that will take precedence. It is pleaded that the Section 11A provides the manner in which the Adjudicating Authority would deal with cases of pre-Amendment Ordinance dated 04.04.2021 in Section 11A(4) and post-the Amendment Ordinance dated 04.04.2021 in Section 11A(1), (2) & (3). Post-the amendment, the guiding factor to the Adjudicating Authority is as to how Section 54C application will be dealt if Section 7, 9 or 10 of IBC petitions are filed. It would have no bearing in so far as pending cases under Section 7, 9 & 10 of ....
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.... 65. These principles are equally applicable to amendatory statutes. According to Crawford: "Amendatory statutes are subject to the general principles... relative to retroactive operation. Like original statutes, they will not be given retroactive construction, unless the language clearly makes such construction necessary. In other words, the amendment will usually take effect only from the date of its enactment and will have no application to prior transactions, in the absence of an expressed intent or an intent clearly implied to the contrary. Indeed there is a presumption that an amendment shall operate prospectively." 23. It was therefore pleaded that Chapter III-A cannot gain inroads to Section 7 of IBC petition filed and pending. It cannot erase the right already accrued. 24. Mr. Abhishek Anand, Ld. Counsel for the CHD Resortico Buyers Welfare Association has submitted that following:- (i) Pre-existing Section 7(1) IBC petition does not bar the filing of an application under Chapter III-A by a CD in terms of Section 54A read with Section 54C. He quoted the case of M/s. Surendra Trading Company v. M/s. Juggilal Kamlapat Jute Mills Company Limited And Others wherein it ....
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.... safely go back to CIRP proceedings, if the PPIRP does not work. Therefore, no prejudice will be caused to the CIRP proceedings already initiated by way of Section 7 & 9 of IBC. (iii) Since the PPIRP is based on the approval of home buyers or the real estate allottees, it is in the best interest of the real estate allottees that pre-packaged be allowed to continue as it will enure to their benefit. 26. We have considered the rival submission and the legal pleas as above. At the outset, we are very clear that this Adjudicating Authority is a creature of the statute and has to work within the framework of the IBC. As we see from the objects and reasons of the amendment to the IBC which came into effect on 04.04.2021, the Parliament in its wisdom after having enacted the IBC Code, 2016 thought it fit to have an alternative mechanism by bringing in the concept of pre-package by way of an Amendment on 04.04.2021. On a reading of the objects and reasons, one factor is clearly discernible that the Government wanted a hybrid method of Insolvency Resolution Process which includes creditors in control (Section 7, 9 or 10) as well as debtors in control (PPIRP). The Government opted for the....
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....ing prior to Amendment dated 04.04.2021 what will be the method adopted by the Adjudicating Authority, is provided under Section 11 (A) (4). Though the language of Section 11A(4) is clear and unambiguous there are two arguments on this proposition, one by Mr. Sumant Batra, Ld. Counsel and Mr. Abhishek Anand, Ld. Counsel stating that Clause (4) of Section 11A makes it clear that an application filed under Section 7, 9 or 10 has no priority from the commencement of the Amendment Ordinance dated 04.04.2021. Therefore, Section 54C Chapter III-A petition has to be dealt with without any further inquiry. On the contrary Mr. Piyush Singh, Ld. Counsel would plead that a plain reading of clause (4) of Section 11A makes it clear that the manner of disposing of an application under Chapter III-A will apply only in respect of situations as under 11A(1), (2) & (3) and it will not apply in case where Section 7, 9 or 10 application is filed and pending earlier to 04.04.2021. 33. The question is as to how Section 11A(4) should be read? Whether the plain literal meaning or the manner in which CD and some of the real estate allottees want it to be read? This has been answered by the Hon'ble Sup....
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....ly gathered from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and construed in the light of surrounding circumstances and constitutional principle and practice." iii. In Ram Rattan v. Parma Nand reported in AIR 1946 PC 51, it was held as follows: The cardinal rule of construction of statutes is to read the statutes literally, that is, by giving to the words their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning, the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation. In the present case, the literal construction leads to no apparent absurdity and therefore, there can be no compelling reason for departing from that golden rule of construction. iv. In Nasiruddin v. Sita Ram Agarwal reported in (2003) 2 SCC 577, the Supreme Court held as follows: 35. In a case where the statutory provision is plain and unambiguous, the court shall not interpret the same in a different manner, only because of harsh consequences arising therefrom.... 3....
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....t a statute is an edict of the legislature. The elementary principle of interpreting or construing a statute is to gather the mens or sententia legis of the legislature." vi. State of Andhra Pradesh v. Linde India Ltd., Case Citation: (2020) 16 Supreme Court Cases 335 : SCC Online SC 362 "It is a trite principle of interpretation that the words of a statute must be construed according to the plain, literal, and grammatical meaning of the words" 34. If the Parliament in its wisdom wanted to say that all pending Section 7, 9 or 10 petitions as on the date of commencement of Amendment dated 04.04.2021 will have no application, then they would have clearly said so. In Section 54D, it is clearly provided that PPIRP shall be completed or terminated within 120 days of commencement of pre-package insolvency. The Parliament was conscious of the fact that timeline has been granted under Chapter III-A and therefore if that does not work then CIRP can be initiated or pursued. This can only relate to situation under Section 11A(1), (2) & (3). On the contrary, in Section 11A(4) it is clearly mentioned that the provisions of Section 11A will not apply where an application under Section 7, 9 ....
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....he paragraph 3.16 (c) of Insolvency Law Committee Report which is already extracted earlier. It clarifies the object and intent behind Section 11A(4). 37. The object of Section 11A is to guide the Adjudicating Authority to deal with applications of IBC-vs. Pre pack based on relevant dates as between them (Section 11A(1) (2) & (3) and to ensure that there is no clash between the applications filed prior to the Amendment dated 04.04.2021 and application filed after coming into force of the Amendment dated 04.04.2021 Various scenarios have been identified under Section 11A and the guiding principle has been given to the Adjudicating Authority. The guiding principle enjoined in Section 11A (1), (2), (3) & (4) is binding on this Adjudicating Authority. Therefore, there cannot be any deviation, however, much the real estate allottees' plead that it will be in their best interest. 38. In the result we hold that the PPIRP i.e. (IBPP)-02(PB)/2022 cannot be entertained in view of the pending Section 7 IBC petitions C.P. No. (IB)-1081(PB)/2020 & C.P. No. (IB)-1775(PB)/2018. Since the CD has already given the consent for admission of CIRP in the earlier proceedings as recorded and that, ....