TaxTMI 
TaxTMI 
TaxTMI 
2023 (7) TMI 309
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....Debtor-Jaiswal Neco Industries Limited, Respondent (hereinafter referred to as "JNIL") praying for dismissal of Section 7 Application of Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "The Code") filed by the Appellant. 2. The Adjudicating Authority heard the parties on I.A. No. 2973 of 2022 and by Impugned Order allowed the Application dismissing Section 7 Application of the Code as not maintainable. 3. Background facts and sequence of events necessary to be noted for deciding this Appeal are:- a. An Indenture of Family Settlement (hereinafter referred to as "IFS") was executed between Basant Lal Shaw (BLS) and his sons. Under the IFS, Jayaswal Family was divided into two Groups; one Group consisted BLS and two sons along with their family members known as "BLS Group"and other group consisted of one son of BLS namely Manoj Kumar Jayaswal and his sons knows as "MKJ Group". b. Under the IFS, BLS Group was allotted "Jayaswal Neco Industries Limited" (JNIL in short) and MKJ Group was allotted "Corporate Ispat Alloys Limited" (CIAL in short). c. The IFS further provided that JNIL would be entitled to the Strip Mill Division of CIAL for the purpose CIAL was to ....
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.... the scheme of merger, the Strip Mill Division was eventually demerged and absorbed by GNIL. GNIL thereafter serviced the Bank Loans of Strip Mill Division from April, 2013. The sole arbitrator dismissed the Application filed by MKJ Group under Section 31(6) vide Judgment dated 26.11.2014. h. CIAL issued winding up notice to JNIL with respect to debt of Rs. 104,43,67,347.94/- . On 06th April, 2015, Company Petition No. 11/2015 was filed by CIAL under Section 439 of the Companies Act, 1956 before the Hon'ble Bombay High Court. Hon'ble Bombay High Court passed an order on 15.10.2015 observing that it would be prudent to await the outcome of the arbitration proceeding pending before the Sole Arbitrator. The Order of Hon'ble Bombay High Court was challenged by CIAL. Division Bench vide order dated 29.01.2016 allowed the Appeal filed by CIAL and quashed the Order dated 15.10.2015. The JNIL filed an Appeal before Hon'ble Supreme Court against the Division Bench Judgment of the High Court. Hon'ble Supreme Court on 29.03.2016 disposed of the Appeal directing the Learned Single Judge of the Bombay High Court to consider the objection of JNIL at the preliminary stage. On 24th March, 2017, ....
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....nt and Mr. Ramji Srinivasan, Learned Sr. Counsel for the Respondent. 5. Mr. Krishnendu Datta, Learned Sr. Counsel appearing for the Appellant submits that impugned order is a non-speaking order which does not deal with contentions raised by the Appellant. It is submitted that financial debt and default was fully established. It is submitted that closure of the arbitration proceedings which have been relied by Ld. Adjudicating Authority has no bearing on the claim of the Appellant since neither the Appellant nor its assignor and nor Corporate Debtor were parties to the arbitration proceedings. It is submitted that liability of the corporate debtor to make payment qua the Strip Mill Division was clearly set out in the scheme of arrangement between CIAL and JNIL. It is submitted that debt in question was assigned to the Appellant in the year 2017 by which time Arbitration Proceeding has not even come to an end. It is submitted that Company Petition filed by the CIAL was withdrawn without any information or knowledge of the Appellant which shall have no bearing on the rights of the Appellant. It is submitted that inter se claim between CIAL and JNIL were not subject matter of the arbi....
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....ce sheet has to be read with the notes on to account hence the case of the Appellant that there is acknowledgement of debt is wholly incorrect. The claim of the Appellant was hopelessly barred by time. Assignment deed was executed on 24th March, 2017 where Section 7 Application has been filed in the year 2022 after more than five years. 7. We have considered the submissions of Learned Counsel for the parties and have perused the record. 8. IFS was entered into between Members of Jayaswal Family. The assets and properties including CIAL and JNIL were distributed among the two groups i.e. BLS Group and MKJ Group. CIAL was allocated to MKJ Group whereas JNIL was given to BLS Group. Strip Mill Division of CIAL was to be demerged from CIAL and was to be merged with JNIL. IFS provided for payment of lease rental by JNIL and payment towards loan and interest was from out of lease rental. IFS further clearly contemplated that after units are merged with JNIL, the liability for payment of the balance loans and interest shall be on JNIL. Clause 7(l) contains following stipulation: "...........All these units referred above are being run by Jayaswal Neco Industries Limited under lease on ....
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.... was paid by CIAL till March, 2021. Suit was ultimately dismissed on account of arbitration clause i.e. Clause 27 in the IFS. Arbitration Proceedings were initiated by the BLS Group where counter claim was also filed by MKJ Group. One of the claims, claim "c" by the MKJ Group was "a claim towards non-payment of installments in the matter of Strip Mill Division of Corporate Ispat Alloys Limited (CIAL) in terms of Clause 7 (l)". 10. While noticing the facts, we have noted that in the arbitration proceedings MKJ Group filed an Application under Section 31(6) of the Arbitration and Conciliation Act claiming for an Interim Award for an amount of Rs. 102,26,78,728/- which amount according to the MKJ Group was admitted in the balance sheet of Corporate Debtor JNIL. The Application praying for Interim Award for aforesaid amount by MKJ Group was dismissed by Sole Arbitrator on 26th November, 2014 which order was not challenged. It is clear that in the arbitration proceedings which was between two groups i.e. BLS and MKJ Groups. MKJ Group claimed the amount paid by CIAL towards installments to the lenders and claim of Rs. 102,26,78,728/- was made which claim was repelled in the arbitration ....
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....n basis of which an Application under Section 7 to be filed either by CIAL or its assignee. From the sequence of events as noted above it is clear that assignor had assigned its debt of Rs. 104 Crores to the Appellant on 24th March, 2017 when it failed to obtain an Interim Award from the sole arbitrator by filing an application under Section 31(6) of the Arbitration and Conciliation Act which was rejected on 23rd September, 2016. CIAL failed to obtain any order in its favour although it raised its claim for the said amount as noted above a suit was filed by MKJ Group No. 584 of 2011 with regard to installments paid by CIAL from August, 2010 which suit was ultimately dismissed by Hon'ble Bombay High Court and all claims and counter claims were taken before the Sole Arbitrator including claim of Rs. 102,26,78,728/- raised by CIAL in an Application for interim award. The assignment in favour of Appellant made on 24th March, 2017 was thereafter and sequence and events makes it clear that assignment was nothing but transfer of litigation in favour of the Appellant. 12. Now we come to the submissions which have been pressed by the Learned Sr. Counsel for the Appellant regarding entries ....
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....28/-. It is useful to extract the entire Letter dated 20th September, 2014: "To Millind Bodhankar Abhijit Group Behind Mount Carmel School, Prashant Nagar, Near Food Corporation Office, Ajanl, Nagpur Reference:- Your Letter dated 15.09.2014. Dear Mr. Bodhankar We are in the receipt of your letter dated 15/09/2014 wherein you have raised a claim of Rs. 102,26,78,728 (Rs. One Hundred and Two Crores Twenty Six Lakh Seventy Eight Thousand Seven Hundred and Twenty Eight) being so called admitted liability of Jayaswal Neco Industries Ltd. At the outset the contents of the letter dated 15.09.2014 are denied in toto. It is pertinent to mention here that the instant subject matter is subjudice before the Hon'ble Arbitrator Justice (Ret) V.C. Daga arising out of the Arbitration Proceedings between Arvind Kumar Jayaswal and Others Vs. Manoj Kumar Jayaswal and Others for adjudicating the dispute arising of the Indenture Family Settlement dated 31.07.2008. That MKJ Group (the Respondent in Arbitration Proceedings) is actively participating in the Arbitration Proceedings and is well aware about the same. Without prejudice to the above we reserve our right to re....
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....has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgement of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act." 16. We however cannot be oblivious to the fact that ledger account of CIAL Strip Mill Division which was demerged in JNIL by virtue of order dated 13.02.2013 reflected the position of ledger as it was existed and maintained by CIAL prior to merger. Reflection of the entry annual statement of 2013-14 as incorporated in the Annual Financial Statement of GNIL was reflection of the ledger account. Subsequent financial statement beginning from 2015-16 contained a caveat disputing the claim of Rs. 104 and odd Crores. We have noticed above that CIAL had filed a Company Petition before the High Court claiming non-payment of debt of Rs. 104,43,67,347.94/- by the JNIL in which company petition the claim was disputed and ultimately company petition stood withdrawn. We thus are not persuaded to accept the submission of Appellant that there is acknowledgement of debt by Corporate Debtor towards CIAL i.e. assignor of Appellant. The claim of amount of Rs. 104,4....