TaxTMI 
TaxTMI 
2023 (9) TMI 820
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....l, Mr. Sourabh Tandon , Advocates for R-1 (RP). Mr. Abhinav Vashisht, Sr. Advocate, Ms. Priya Seth, Mr. Siddhant Kant, Ms. Moulshree Shukla, Mr. Yugal, Advocates for CoC/R-2. Mr. Mukul Rohatgi, Sr. Advocate, Mr. Arun Kathpalia and Mr. Krishnendu Datta, Sr. Advocates with Mr. Sanjeev Sharma, Mr. Vaibhav Gaggar, Ms. Sanya Sud, Mr. Udai Khanna, Ms. Vaishali Goyal, Ms. Threcy Lawrence, Ms. Vaishnavi Bansal, Ms. Kokila Kumar, Ms. Praniti Ganjoo, Mr. Aditya Arora, Mr. Ketan Saraf , Ms. Diksha Gupta, Mr. Rajat Sinha and Mr. Ankit Vashisht, Advocates for AGI Greenpac ORDER ASHOK BHUSHAN, J. All these Appeal(s) have been filed against the same order dated 28.04.2023 passed by the National Company Law Tribunal (NCLT), Kolkata Bench, Court-I in I.A. (IB) No.1497/KB/2022 and I.A. (IB) No.628/KB/ 2023 and I.A. (IB) No.701/KB/2023 in C.P.(IB) No.369/KB/2020. All the Appeal(s) having been filed against the same order, have been heard together and are being decided by this common judgment. 2. Brief background facts giving rise to these Appeal(s) are: (i) The Corporate Insolvency Resolution Process ("CIRP") against the Corporate Debtor - Hindustan National Glass & Industries Li....
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....as placed before the Adjudicating Authority by the RP. (xi) The Adjudicating Authority vide impugned order dated 28.04.2023 rejected the IA No.1497/ 2022 filed by the Independent Sugar Corporation Ltd. Aggrieved by the order dated 28.04.2023, these Appeal(s) have been filed. Company Appeal (AT) (Insolvency) No. 735 of 2023 3. The Appellant - Independent Sugar Corporation Ltd. was the Resolution Applicant, who had submitted its Plan before the RP. The Appellant has also obtained the approval from the CCI on 30.09.2022. On 28.10.2022, the Plan submitted by the Appellant, received 88% vote share, whereas the Plan submitted by AGI Greenpac Ltd. was approved with 98% vote shares. The Independent Sugar Corporation Ltd. has filed an IA No.1497/2022 praying for setting aside the selection of the Resolution Plan submitted by AGI Greenpac Ltd. and for reconsideration of the Resolution Plan submitted by the Appellant, which Application was rejected by the impugned order. Company Appeal (AT) (Insolvency) No. 607 of 2023 4. This Appeal has been filed by the U.P. Glass Manufacturers Syndicate, who is an industry body comprising of micro, small and medium scale manufacturers ....
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....l. The Appellant claimed to have filed an Intervention Application in the interest of all the stake holders of the Corporate Debtor, including the constituent Member of the Appellant's Union. Company Appeal (AT) (Insolvency) No. 807 of 2023 7. In this Appeal, the Appellant claimed to be engaged in the business of domestic and international trading of iron ore, fines, limestone etc. The Appellant's case is that bills were approved by the Promoters of the Corporate Debtor for supply of lime stones and imported Soda Ash. The Appellant claimed to had made supply to the Corporate Debtor from the year 2019 onwards. The Appellant filed a Claim Form claiming an amount of Rs.9,66,32,805.33. The Appellant's case is that Appellant and other Operational Creditors and stakeholders were kept in the absolute dark with regard to the developments in the CoC and the Appellant has been offered only a partly sum. The Appellant aggrieved by the order dated 28.04.2023, has come up in this Appeal. 8. We have heard Shri Joy Saha, learned Senior Counsel, Shri Rajshekhar Rao, learned Senior Counsel, Shri Rana Mukherjee, learned Counsel, Shri Abhijeet Sinha, learned Counsel and Shri Abhimanyu Bhanda....
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....n reading of Section 31(4) and its proviso makes it clear that CCI approval shall be obtained prior to approval of Resolution Plan by the CoC. It is submitted Section 31(4) and its proviso should be given plain and unambiguous meaning. On application of the principle of plain interpretation, no further analysis is required. The use of word 'shall' in an ordinary sense signifies the mandatory nature of the provision. There is no basis to change the word 'shall' used in the proviso to 'may'. Taking the view of the proviso as 'directory' shall be against the plain meaning of legislative intendment. The mandatory condition can never be subject of substantial compliance. Interpreting the word 'shall' as 'may' in proviso to Section 31, sub-section (4) will make word 'shall' opios. There being no ambiguity in the statutory provision under consideration, there is no need to refer to any external aids. The judgment of this Tribunal in Arcelor Mittal India Pvt. Ltd. vs. Abjijit Guhathakurta; Makalu Trading Ltd. vs. Rajiv Chakraborty and Vishal Vijay Kalantri vs. Shailen Shah are judgments, which cannot be read to lay down any binding ratio. No reasons have been given in Arcelor Mittal case t....
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....nt of this Tribunal in Vishal Vijay Kalantri a Civil Appeal was filed in the Hon'ble Supreme Court, which too was dismissed. There being already decision of the Hon'ble Supreme Court on the judgments of this Tribunal, holding the proviso to be 'directory', there is no reason to review the settled position of law. Shri Nankani has referred to the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2018 and has relied on the 'Financial Memorandum' of the Second Amendment Bill. He has referred to Clause (d) of the Financial Memorandum under the Heading - memorandum explaining the modification contained in the Bill to replace the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018, which provides as follows: "(d) in clause 24 of the Bill, in sub-section (4) of Section 31 of the Code, a new proviso is inserted "Provided that where the resolution plan contains a provision for combination as referred to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the approval of the Competition Commission of India under that Act prior to the approval of such resolution plan by the committee of creditors" so as to clarify that the approval of the com....
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....Code shall render the whole process redundant, which cannot be said to the intention of the legislature. Hence, what is mandatory is approval and not the timeline. It is further submitted that timelines under the Code mentions 135 days for receipt of Resolution Plan and 165 days for the CoC to decide on the Plan. Proceedings before NCLT cannot be frozen till the combination approval is granted by the CCI. Hence, the proviso will nullify the entire scheme of the Code. A company cannot wait indefinitely. The learned Senior Counsel has also referred to Clause (d) of Financial Statement as referred above. It is submitted that what will be the purpose of timeline when there will be grinding halt after submission of the Plan, Resolution Applicant goes to the CCI for obtaining the approval. It is submitted that external aid is always utilized for interpreting the statute. 17. We have heard learned Counsel for the parties and perused the records. 18. While noticing the facts of the case, we have noticed that CoC has approved the Resolution Plan on 28.10.2022, whereas the CCI has granted approval to the Resolution Applicant on 15.03.2023 under approval of the combination. The Applicat....
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....rs, creditors, including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan. Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation. (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1), - (a) the moratorium order passed by the Adjudicating Authority under section 14 shall cease to have effect; and (b) the resolution professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (4) The resolution applicant shall, pursuant to the resolution p....
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....n and that the resolution applicant shall obtain the necessary approvals required within a period of one year from the date of approval of the resolution plan by the Adjudicating Authority or within such period as provided for in such law, whichever is later and where it contains a provisions for combination the approval of the Competition Commission of India shall be obtained prior to the approval of resolution plan by the committee of creditors." 22. From the above, it is clear that timeline for obtaining necessary approvals required under any law has been introduced by sub-section (4) of Section 31 by Second Amendment Act, 2018. Sub-section (4), requires that necessary approval required under any law for the time being in force, should be obtained within a period of one year from the date of approval of the Resolution Plan by the Adjudicating Authority, which provision deals with all statutory approvals. The proviso has been added as an exception to the main provision, which requires that where the Resolution Plan contains a provision for combination, as referred to in Section 5 of the Competition Act, 2002, the Resolution Applicant shall obtain the approval of the CCI under ....
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....3, wherein this Tribunal noticed the rival submission of the parties in respect of proviso to Section 31(4). In paragraph 4, 5 and 6 contentions of the parties were noticed. This Tribunal in paragraph 12, after considering the submissions laid down that purpose is complied with the approval from CCI, if obtained prior to the approval by the Adjudicating Authority. Against the judgment of this Tribunal in Makalu Trading Ltd. a Civil Appeal No.3338 of 2020 was filed, which was dismissed by the Hon'ble Supreme Court, by observing following: "1 We find no reason to interfere with the impugned order since no substantial question of law is involved in the appeal. 2 The Civil Appeal is accordingly dismissed. 3 Pending applications, if any, stand disposed of." 25. Next judgment is the judgment of this Tribunal in Vishal Vijay Kalantri vs. Shailen Shah - (2020) SCC OnLine NCLAT 1013, where again in paragraph 15 of the judgment, following has been laid down: "15. A plain reading of the provision makes it abundantly clear that the Resolution Applicant is required to obtain necessary approval required under any extant law within one year from the date of ....
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....ot mandatory. It is always open to the 'Committee of Creditors', which looks into viability, feasibility and commercial aspect of a 'Resolution Plan' to approve the 'Resolution Plan' subject to such approval by Commission, which may be obtained prior to approval of the plan by the Adjudicating Authority under Section 31 of the 'I&B Code'. In present matter already approval of the Competition Commission of India has been taken to the 'Resolution Plan'."" In the above case also, the approval of the Plan given by the CCI was prior to the approval by the Adjudicating Authority, which was held not to violate Section 31, sub-section (4). In paragraph 16 and 17, following have been held: "16. The view taken by this Appellate Tribunal in "Arcelormittal India Pvt. Ltd." (Supra) holds the field as the same has not been reversed or set aside in appeal or other proceeding. Obtaining of requisite approval under Competition Act, 2002 with regard to the provision of the Combination in the instant case is stated to be not required as the same is below threshold limit. Objection raised to buttress the argument that in absence of necessary prior statutory approval of the Committee of Cre....
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....agraph 9 has laid down: "9. The difference between a mandatory rule and a directory rule is that while the former must be strictly observed, in the case of the latter substantial compliance may be sufficient to achieve the object regarding which the rule is enacted. Certain broad propositions which can be deduced from several decisions of courts regarding the rules of construction that should be followed in determining whether a provision of law is directory or mandatory may be summarised thus: The fact that the statute uses the word "shall" while laying down a duty is not conclusive on the question whether it is a mandatory or directory provision. In order to find out the true character of the legislation, the court has to ascertain the object which the provision of law in question has to subserve and its design and the context in which it is enacted. If the object of a law is to be defeated by non-compliance with it, it has to be regarded as mandatory. But when a provision of law relates to the performance of any public duty and the invalidation of any act done in disregard of that provision causes serious prejudice to those for whose benefit it is enacted and at the sam....
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....5 of the Constitution regulating the practice and procedure to be observed in all matters coming before the High Court in exercise of its jurisdiction under Section 80-A of the Act. The words "in accordance with the rules" must therefore connote "according to the procedure prescribed by the High Court". The mode of making deposit must necessarily be an internal matter of the concerned High Court. 19. The submissions advanced by learned counsel for the appellant cannot be accepted as they proceed on the assumption that no distinction can be drawn between the requirement as to the making of a deposit in the High Court under sub-section (1) of Section 117 and the manner of making such deposit. There was considerable emphasis laid by learned counsel that sub-section (1) of Section 117 cannot be dissected into two parts, one part being treated as mandatory and the other as directory. The contention is wholly misconceived and indeed runs counter to several decisions of this Court. It is always important to bear the distinction between the mandatory and directory provisions of a statute. Sub-section (1) of Section 117 is in two parts. The first part of sub-section (1) of Section ....
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....d upon the following observations of the Privy Council in Montreal Street Railway Company v. Normandin [1917 AC 170 : 86 LJPC 113 : 116 LT 162 (PC)] : "The question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statute must be looked at. The cases on the subject will be found collected in Maxwell on Statutes, 5th Edn., p. 596 and following pages. When the provisions of a statute relate to the performance of a public duly and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience, or injustice to persons who have no control over those entrusted with the duty, and at the same time would not promote the main object of the Legislature, it has been the practice to hold such provisions to be directory only, the neglect of them, though punishable, not affecting the validity of the acts done."" 30. Another judgment, which has been cited before us is judgment of Hon'ble Supreme Court in (2005) 4 SCC 480 - Kailash vs. Nanhku and Ors., where the Hon'ble Supreme ....
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.... 266. ..." 32. To the same effect is judgment of the Hon'ble Supreme Court in AIR 1957 SC 912 - State of U.P. vs. Manbodhan Lal Srivastava, where the Hon'ble Supreme Court had occasion to consider the provision of Article 320(3)(c) of the Constitution of India. The Article 320(3(c) has been noted by the Hon'ble Supreme Court in paragraph 6, which is as follows: "6. Article 320(3)(c) is in these terms: "320. (3) The Union Public Service Commission or the State Public Service Commission, as the case may be, shall be consulted. (a)-(b) * * * (c) on all disciplinary matters affecting a person serving under the Government of India or the Government of a State in a civil capacity, including memorials or petitions relating to such matters;" The Hon'ble Supreme Court after considering the provision, held that use of word 'shall' as 'directory' and in paragraph 7, 10, 11 and 13, laid down following: "7. ....Perhaps, because of the use of the word "shall" in several parts of Article 320, the High Court was led to assume that the provisions of Article 320(3)(c) were mandatory, but in our opinion, there are several cogent reasons for holding t....
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....ether a certain provision in a statute imposing a duty on a public body or authority was mandatory or only directory, arose before their Lordships of the Judicial Committee of the Privy Council in the case of Montreal Street Railway Company v. Normandin [LR (1917) AC 170] . In that case the question mooted was whether the omission to revise the jury lists as directed by the statute, had the effect of nullifying the verdict given by a jury. Their Lordships held that the irregularities in the due revision of the jury lists, will not ipso facto avoid the verdict of a jury. The Board made the following observations in the course of their judgment: "...The question whether provisions in a statute are directory or imperative has very frequently arisen in this country, but it has been said that no general rule can be laid down, and that in every case the object of the statute must be looked at. The cases on the subject will be found collected in Maxwell on Statutes, 5th Edn., p. 596 and following pages. When the provisions of a statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious ge....
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....compliance with those provisions will not render the proceeding invalid. In that connection, the following quotation from Crawford on Statutory Construction - Article 261 at p. 516, is pertinent: "The question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed. The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other...." 13. In view of these considerations, it must be held that the provisions of Article 320(3)(c) are not mandatory and that non-compliance with those provisions, does not afford a cause of action to the respondent in a court of law. It is not for this Court further to consider what other remedy, if any, the respondent has. Appeal No. 27 is, therefore, allowed and Appeal No. 28 dismissed. In view of the fact that the appellant did not strictly comply with the terms of Article 320(3)(c) of the Constitution, we direct that each party bear its ow....