TaxTMI 
TaxTMI 
2024 (2) TMI 261
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....uthority/NCLT, Mumbai Bench, while passing the impugned order dated 06.07.2023 in IA No.1020/2023 in CP (IB) No.1137/2017 (filed under Section 60(5) and (7) of I&B Code, 2016) had observed the following:- "Though the Ld. Counsel for the Applicant is present has not mentioned the Appearance in the Attendance Sheet. Ms Kriti Kalyani, Ld. Counsel for the Respondent is present. The present Interlocutory Application has been filed by the Applicant, Africa Power Company CC, seeking direction against the Respondent to pay the Applicant an aggregate amount of ZAR 1,17,81,893.174 (South African Rands One Crore Seventeen Lakhs Eighty One thousand Eight Hundred and Ninety Three and Seventeen Cents) or the equivalent amount in Indian National Rupees, alongwith the applicable interest therein for the dues pending from the Respondent in respect of the equivalent leased by the Applicant top the Respondent, after the admission of the Respondent in Corporate Insolvency Resolution Process (CIRP) and the equipment not returned by the Respondent to the Applicant. The Resolution Plan for the corporate Debtor was approved on 27.03.2019. Hence the present Interlocutory Applicant filed by the Applicant ....
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....earned counsel for the Appellant proceeds to point out that 'Right to reason', is an 'indispensable' part of a sound 'judicial system', 'reasons' at least are sufficient to indicate an 'application of mind', to the matter before Court and to fortify his plea, relies upon the judgement of the Hon'ble Supreme Court in the matter of UPSRTC Vs Jagdish Prasad Gupta reported in (2009)12 SCC 609(vide paragraph 8 and 9). 8. According to the Appellant, the Appellant, is not enforcing a 'Foreign Judgement' dated 06.10.2020, passed by the Hon'ble High Court of South Africa Gauteng Local Division Johannesburg, through this Tribunal. 9. Added further, it is the stand of the Appellant that the object of annexing the South Africa Hon'ble High Court Judgement was to disclose in 'Good Faith', the action taken by the 'Appellant', before approaching the 'Adjudicating Authority'/'Tribunal', Mumbai, through an 'Interlocutory Application'. 10. It is represented on behalf of the Appellant that the I&B Code, 2016 does not impose 'any bar' upon this 'Tribunal', to take cognizance of a 'Foreign Judgement'. In this connection the Learned Counsel for the Appellant, refers to the order of the 'Adjudicating ....
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.... the 1st Respondent on its letterhead, do contain the same address, as that of the rental agreement and the 'CIPC Report'. 16. The Learned Counsel for the Appellant, points out that the 2nd Respondent in paragraph 9 of the 'Affidavit' in Reply dated 23.10.2023, had mentioned that she has not authorised Mr. Sudip Sharma viz. the person who executed the 'Rental Agreement', on behalf of the 1st Respondent to enter into the 'Rental Agreement', and she has not authorised any payments to be made, to the Appellant/Petitioner and this argument raises a serious question, on the management of the internal affairs of the 1st Respondent, during the 'Corporate Insolvency Resolution Process'. 17. It is the version of the Appellant that on appointment, the management of the 1st Respondent was wholly under the aegis of the 2nd Respondent, meaning that the powers of the Board of Directors/1st Respondent were transferred to the 2nd Respondent. Also that Section 18 of the I&B Code, 2016 delineates the 2nd Respondent duties. 18. The Learned counsel for the Appellant/Petitioner adverts to Section 18 of the I&B Code, 2016, on the aspect of duty of 'Resolution Professional' and the same is as under:- ....
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....aside the 'impugned order', passed by the 'Adjudicating Authority/Tribunal', Mumbai Bench, in IA No.1020/2023 in CP (IB) 1137 of 2017, in the interest of justice. 1st Respondent's Plea. 24. According to the 1st Respondent, the Adjudicating Authority/Appellate Tribunal lacks the necessary jurisdiction to execute a 'Foreign Judgement, under the I&B Code, 2016. Also that the 'Claimed Amount', was never accounted into/or recognised as 'CIRP Cost/Costs' incurred during the period when the 1st Respondent, was managed by the 'Erstwhile Resolution Professional' coupled with the Monitoring Committee. 25. According to the 1st Respondent the 'Adjudicating Authority/Tribunal', through an order dated 04.04.2017, had directed the initiation of 'CIRP', against the 1st Respondent and Ms Vandana Garg was appointed as an 'Interim Resolution Professional', and later, confirmed as 'Resolution Professional' of the 1st Respondent. 26. It is represented on behalf of the 1st Respondent that the 'Erstwhile Resolution Professional', was Incharge of managing the affairs of the 1st Respondent, post the initiation of 'CIRP' and subsequently the 'Adjudicating Authority/Tribunal', on 27.03.2019 had 'approved....
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....ll the 'costs' incurred by the 1st Respondent, during the 'CIRP' and accounted for as 'CIRP' costs, by the 'Erstwhile Resolution Professional', as per Section 5(13) of the I&B Code, 2016, and informed to the new management of the 1st Respondent that it was paid already and further when the 'Resolution Plan', stood 'implemented' the 'claim' of the Appellant, in this Appeal, is a 'baseless' and a 'frivolous one', besides the same is not to be entertained against the new management of the 1st Respondent. 33. The Learned counsel of the 1st Respondent, points out that in regard to the 'part of the claimed amount' that was allegedly fell due, during the 'MC Period' and not recognised by the 'Erstwhile Resolution Professional', the same, cannot be saddled on the new management, especially after four years of the 'Plan approval order'. 34. The Learned counsel for the Appellant refers to Section VII(K) and (L) of the Resolution Plan which reads as under:- "K. The Company, the Proposed Investors, the Founder Promoters, existing guarantors and security providers shall not be liable to meet or discharge any claims raised by any creditors in respect of amounts which have arisen to them prio....
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....n accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to BE paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove." 36. The Learned counsel for the 1st Respondent cites the Judgement dated 13.04.2021 of the Hon'ble Supreme Court of India in the matter of Ghanashyam Mishra and sons Private Ltd Vs Edelweiss Asset Reconstruction Company Ltd, (Civil Appeal No.8129/2019) wherein at para 95 "95. (i) On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan". 37. According to the 1st Respondent, the scheme of the I&B Code, 2....
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....citly aims to promote resolution over liquidation. 2. The objective of the 'I&B Code' is Resolution. The Purpose of Resolution is for maximisation of value of assets of the 'Corporate Debtor' and thereby for all creditors. It is not maximisation of value for a 'stakeholder' or 'a set of stakeholders' such as Creditors and to promote entrepreneurship, availability of credit and balance the interests. The first order objective is "resolution". The second order objective is "maximisation of value of assets of the 'Corporate Debtor'' and the third order objective is "promoting entrepreneurship, availability of credit and balancing the interests". This order of objective is sacrosanct. In the matter of "Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Gupta and Ors.", the Hon'ble Supreme Court observed that "the 'Corporate Debtor' consists of several employees and workmen whose daily bread is dependent on the outcome of the CIRP. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible". 3. 'Financial Creditors' as members of the 'Committee of Creditors' and their Role. a....
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....akeholders, if resolution maximises the value for a or a set of stakeholder such as 'Financial Creditors'. One or a set of stakeholders cannot benefit unduly stakeholder at the cost of another. d. The 'I&B Code' prohibits any action to foreclose, recover or enforce any security interest during resolution period and thereby prevents a creditor from maximising his interests. e. It follows from the above: i. The liabilities of all creditors who are not part of 'Committee of Creditors' must also be met in the resolution. ii. The 'Financial Creditors can modify the terms of existing liabilities, while other creditors cannot take risk of postponing payment for better future prospectus. That is, 'Financial Creditors' can take haircut and can take their dues in future, while 'Operational Creditors' need to be paid immediately. iii. A creditor cannot maximise his own interests in view of moratorium.' iv. If one type of credit is given preferential treatment, the other type of credit will disappear from market. This will be against the objective of promoting availability of credit. v. The 'I&B Code' aims to balance the interests of all stakeholders and does not maximise value for....
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.... It is not recovery: Recovery is an individual effort by a creditor to recover its dues through a process that has debtor and creditor on opposite sides. When creditors recover their dues - one after another or simultaneously- from the available assets of the firm, nothing may be left in due course. Thus, while recovery bleeds the 'Corporate Debtor' to death, resolution endeavors to keep the 'Corporate Debtor' alive. In fact, the 'I&B Code' prohibits and discourages recovery in several ways. It is not liquidation: Liquidation brings the life of a corporate to an end. It destroys organisational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only if there is any surplus after satisfying the claims of a prior set of stakeholders fully. The 'I&B Code', therefore, does not allow liquidation of a 'Corporate Debtor' directly. It allows liquidation only on failure of 'Corporate Insolvency Resolution Process'. It rather facilitates and encourages resolution in several ways." 7. In view of the aforesaid decision in "Binani Industries Limited (Supra)", we hold that the Adjudicating Au....
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....ellant, that the impending documentation, for the implementation of the 'Approved Resolution Plan', had commenced and the 'take over process', was expected to be completed soon. 46. It is the version of the 2nd Respondent that the CIRP Process was started on 04.07.2017 and the 'Moratorium', imposed by the 'Adjudicating Authority/Tribunal', was in operation, on the day on which the purported contracts were said to have been executed. In reality, the 2nd Respondent, was in control of its management, pursuant to Section 23(1) of the I&B Code, 2016. Also that the 2nd Respondent, had neither executed the alleged contract nor authorised any personnel of the 1st Respondent to enter into the same. 47. According to the 2nd Respondent, the two alleged contracts dated 06.10.2017 and 01.01.2018 were concerned, they were executed allegedly on behalf of the 'Corporate Debtor by Mr. Sudeep Sharma', the Appellant had not produced any document exhibiting that Mr. Sudeep Sharma had the 'Authority', to act on behalf of the 'Corporate Debtor' and enter into legal relations on behalf of the Corporate Debtor, by executing 'Deeds' and 'Contracts'. 48. It is represented on behalf of 2nd Respondent, tha....
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....n favour of the Appellant and hold that the Adjudicating Authority has no jurisdiction to decide the question of legality and propriety of a foreign judgment and decree in an application under Section 7 or 9 or 10 of the I&B Code. The second question relating to maintainability is answered against the Appellants, they being not the 'Operational Creditors'' 54. The Learned Counsel for the 2nd Respondent, contends that the purported contract two of which are oral Contracts, cannot be relied upon, having been allegedly entered into during the 'CIRP', without the requisite 'Authorisation' of the 2nd Respondent. Section 44A of Civil Procedure Code, 1908 55. The twin requirements mentioned in Section 44A of the Civil Procedure Code are (i) the place where 'Decree' is passed must be a reciprocating territory; (ii) 'Decree' must be passed by any of the superior Courts of that reciprocating territory. 56. Under Section 44A (1) of the Civil Procedure Code, the fiction, is to treat the judgement and 'Decree' of superior Court, outside India, as equivalent to those of 'District Court', for the purpose of execution in India. Also that, the ingredients of Section 44A of the Civil Procedure C....