TaxTMI 
TaxTMI 
2023 (11) TMI 377
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....ned in paragraph 58 of the order. The Operational Creditor aggrieved by the order as well as the Corporate Debtor have come up in these Appeal(s), challenging the orders dated 12.07.2022. The parties hereinafter are referred as Operational Creditor and Corporate Debtor. 2. Brief facts of the case giving rise to these Appeal(s) are: (i) The Corporate Debtor approached the Operational Creditor and offered to purchase Digital Migration radio, intrinsically Safe Mission Critical Digital Radio, Tetra portable Terminal its system and application, Mobile Radio, Portable Radio Critical Surveillance & Dispatch System and wireless Video Transmission System and its Accessories. The Corporate Debtor placed purchase order on the Operational Creditor on 26.04.2012, 06.12.2012 and 30.01.2013. (ii) Pursuant to the purchase order, the Operational Creditor supplied and delivered the goods to the Corporate Debtor and issued several invoices beginning from 07.12.2012 to 24.04.2013. The Corporate Debtor failed and neglected to make the full payment towards the invoices. Certain part payments were made and after adjustment of the part payments a sum of USD 1,441,490.78 was du....
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.... Authority. The Corporate Debtor claimed to have written a letter to its Bankers (Indian Overseas Bank) for transmitting the amount. The Corporate Debtor was advised that approval of Reserve Bank of India ("RBI") is required for making the payment. The Corporate Debtor claims to have sent some application to RBI for granting approval. However, no remittance of payment had been made. (viii) In the Company Petition on 30.08.2021, the Counsel for the Corporate Debtor made a statement that Corporate Debtor is ready and willing to make payment of USD 621,348.05, which is due and payable, subject to clearance from the reserve Bank of India. The Adjudicating Authority passed an order on 30.08.2021 directing the Corporate Debtor to keep Indian rupee equivalent to this amount in fixed deposit and receipt in this regard to be handed over to the Registry of the Tribunal to establish bona fides of the Corporate Debtor. After the order dated 30.08.2021, an Application was filed by the Corporate Debtor to recall the said order, which Application was disposed of by the Adjudicating Authority on 12.07.2022, refusing to recall the said order. However, Adjudicating Authority directed the Co....
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....le High Court of Calcutta approval in making delayed foreign remittances has not been granted to the Corporate Debtor for making payment of the outstanding dues being claimed by the Operational Creditor in the present petition. 58. In the aforesaid circumstances, we have no other alternative but to hold that the Corporate Debtor has not committed any default and the failure of the Corporate Debtor in discharging the admitted outstanding debt has become a force majure in this particular case. We clearly hold that this is an admitted and acknowledged outstanding debt owed to the Operational Creditor by the Corporate Debtor which has not been paid only because of lack of the NOC/Permission to be issued by the RBI. We grant liberty to the Operational Creditor to claim the said amount which would be deposited by the CD in Indian rupees in the shape of an interest bearing deposit (FDR) within 60 days from today, and would remain lying with the Registry of this court, equivalent in US $ outstanding, as and when the permission is granted by the Reserve Bank of India. The Operational Creditor can avail any legal remedy available to the Operational Creditor anywhere and anytime but ....
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....r refuting the submissions of learned Counsel for the Appellant - Operational Creditor submits that Adjudicating Authority does not have any equity jurisdiction to direct for deposit of the amount. The Code does not provide any provision for directing the Corporate Debtor to deposit funds with the Registry. Orders passed by the Adjudicating Authority asking for deposit falls outside the scope of Adjudicating Authority. It is submitted that no default has been committed by the Corporate Debtor. The amount could not be transmitted to the Operational Creditor, since the permission of the RBI was not received. The Adjudicating Authority while acting under the Code cannot operate as a Court of Equity. Learned Counsel for the Corporate Debtor has placed reliance on judgments of the Hon'ble Supreme Court and two judgments of this Tribunal in support of his submission. It is submitted that failure in remitting the funds was not due to any default of the Corporate Debtor, hence, present was not a case of any default, so as to direct the Adjudicating Authority for admission of the CIRP. The Adjudicating Authority has rightly refused to admit Section 9 Application. It is submitted that order ....
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....e could not execute orders in time and the system became too much complicated. We lost huge money due to exchange variation and at the end of the day we reached a situation where it was Impossible for us to continue with the radio business. In the end of first quarter of 2014 for the survival of the company we took a desperate attempt for our revival by way of starting a low cost housing project. With god grace the project was successful and we got good response from the market and we could able to arrest closure of the company. With this project we could able to somehow come out partially from the bankrupt situation with few bankers. However, we still have problems in couple of accounts. With the present situation In next 6-7 months time we will have a reasonable cash flow from which we will be able to spare some money to make payment against your outstanding. With the present situation and considering the cash flow for the month of September and October, we are hopeful that we will be able to clear approximately US$ 1,60,000 by end of October'15 towards various supply of radios. During the month of November and December'15 considering the present cash f....
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....this Tribunal to establish bona fides of the Corporate Debtor. The tenure of the Fixed Deposit shall be for a period of six months in the first instance. Ld. Counsel for the Corporate Debtor seeks three weeks to make deposit. At request and considering the circumstances and also the fact that the Corporate Debtor is stated to be an MSME, three weeks' time is granted. FDRs in this regard to be submitted to the Joint Registrar of this Tribunal on or before 30.09.2021. This arrangement is acceptable to the Operational Creditor as submitted by the Ld. Counsel appearing on its behalf. List the matter on 05.10.2021." 9. The Corporate Debtor did not make the deposit as directed by the Adjudicating Authority, however, filed an Application being IA (IBC) No.1056/KB/2021 for recall of order dated 30.082.2021. The Adjudicating Authority refused to recall the order dated 30.08.2021, however, granted 60 days further time to deposit the amount. Paragraphs 22 and 23 of the said order are follows: "22. We direct the Corporate Debtor to make a deposit of the approximate conversion of USD in Indian Rupees and place the same with the Registry of this Court, within 60 days from th....
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....ng Authority to deposit the amount in Court, cannot be heard in saying that there is no default on its part, since it has not been able to transmit the amount due to want of permission from RBI. Present is a case where debt and default was fully proved and further in view of the conduct of the Corporate Debtor, in not obeying the orders of the Adjudicating Authority to deposit of the equivalent amount in Indian Rupees, default was fully established and the view of the Adjudicating Authority that no default has been committed by the Corporate Debtor is unsustainable and cannot be approved. 13. Now we come to the submissions advanced on behalf of the Corporate Debtor. It is submitted by learned Counsel for the Corporate Debtor that Adjudicating Authority does enjoy any equity jurisdiction. It is submitted that while acting under the IBC, the Adjudicating Authority cannot operate as a Court of Equity. Learned Counsel for the Corporate Debtor relied on three judgments of the Hon'ble Supreme Court namely - M/s. S.S. Engineers & Ors. vs. Hindustan Petroleum Corporation Ltd., Civil Appeal No.4583 of 2022; Innoventive Industries Limited vs. ICICI Bank and Another - (2018) 1 SCC 407; and....
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....editor. The ratio of the above judgment of Hon'ble Supreme Court as contained in paragraph 32, clearly support the submission of Operational Creditor in the present case. The sequence of events clearly proves that the Corporate Debtor has adopted a dishonest and deliberate attempt to avoid payment of operational debt. 15. The next case relied by learned Counsel for the Corporate Debtor is Innoventive Industries Limited vs. ICICI Bank and Another, where the Hon'ble Supreme Court had examined the nature of jurisdiction of the Adjudicating Authority while considering the jurisdiction in Section 7 and Section 9 Applications. In paragraph 29 of the judgment, following has been stated: "29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of ....
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.... Under Rule 4, the application is made by a financial creditor in Form 1 accompanied by documents and records required therein. Form 1 is a detailed form in 5 parts, which requires particulars of the applicant in Part I, particulars of the corporate debtor in Part II, particulars of the proposed interim resolution professional in Part III, particulars of the financial debt in Part IV and documents, records and evidence of default in Part V. Under Rule 4(3), the applicant is to dispatch a copy of the application filed with the adjudicating authority by registered post or speed post to the registered office of the corporate debtor. The speed, within which the adjudicating authority is to ascertain the existence of a default from the records of the information utility or on the basis of evidence furnished by the financial creditor, is important. This it must do within 14 days of the receipt of the application. It is at the stage of Section 7(5), where the adjudicating authority is to be satisfied that a default has occurred, that the corporate debtor is entitled to point out that a default has not occurred in the sense that the "debt", which may also include a disputed claim, is not d....
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....nce on few judgments of this Tribunal. The first judgment is (2022) SCC OnLine NCLAT 3355 - Agarwal Veneers vs. Fundtonic Services Pvt. Ltd. In the above case, this Tribunal has observed that IBC cannot be used for the purpose of debt recovery. This Tribunal in paragraph 15 to 20 laid down following: "15. It is clear from the aforenoted provisions of the Code and also the Regulations therein that unless the Operational Creditor along with its Application furnishes a copy of the invoices, the bank statements and the financial accounts, the Adjudicating Authority is empowered to reject an incomplete Application. 16. Lastly, we address to the Contention of the Ld. Counsel for the Appellant that merely because the Corporate Debtor is a going concern and an MSME, the Adjudicating Authority ought not to have rejected the Application on this ground also. 17. The Preamble of IBC is carefully worded to describe the spirit and objective of the Code to be 'Reorganisation' and 'Insolvency Resolution', specifically omitting the word 'Recovery'. The Parliament has made a conscious effort to ensure that there is a significant difference between 'Resolution' and 'Recover....
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....aph 9 has upheld the order of the Adjudicating Authority on the ground that the Appellant has initiated CIRP with fraudulently and malicious intent, which judgment has no application in the present case. 22. The next judgment relied by learned Counsel for the Corporate Debtor, of this Tribunal is Company Appeal (AT) (CH) (INS.) No.268/2023 IA No.834/2023 - Mr. Maulik Kirtibhai Shah vs. United Telecoms Ltd. The question was in the above case is as to whether on the basis of MoU dated 10.09.2005 and Settlement Agreement dated 01.11.2018, Section 9 Application could have been maintained. This Tribunal held that claim arising out of Settlement Agreement cannot be an operational debt, since IBC is not recovery mechanism. In paragraph 14, following has been held: "14. From the aforesaid it is evident that the Petition filed in respect of claims arising under the aforementioned Settlement Agreement [even if disputed herein] does not come within the definition of 'Operational Debt']. Time and again, the Hon'ble Apex Court in a catena of Judgments held that the IBC is not a 'recovery mechanism'. Even if the Settlement Agreement is taken into consideration, this 'Tribunal' is of ....
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....cal or illusory, the Adjudicating Authority has to reject the Application. This Tribunal is of the considered view that the aforenoted ratio is applicable to the facts of this case as we are satisfied that a 'dispute' truly existed for the Respondent Company to have withheld 3% of the total invoice amount. 17. Regarding whether Section 9 Application can be entertained against a Solvent Company, the scope and objective of the Code has to be kept in mind before admission of such an Application. The spirit of the Code is maximization of the assets and Resolution and not Recovery. The Hon'ble Supreme Court in the matter of 'Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of India & Anr.' (Supra) has held 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.' " 25. The above judgment also in no manner support the contentions of the Corporate Debtor in the facts of the present case. 26. ....