TaxTMI 
TaxTMI 
2024 (2) TMI 568
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....g out of Corporate Insolvency Resolution Process ("CIRP") of the Corporate Debtor - National Plywood Industries Ltd., have been heard together and are being decided by this common judgment. 2. The Company Appeal (AT) (Insolvency) No. 947 of 2021, 499 of 2022 and 526 of 2022 have been filed by Financial Creditor - Stressed Assets Stabilization Fund ("SASF"). The Company Appeal (AT) (Insolvency) No. 1001 of 2021 has been filed by Sandeep Khaitan, Resolution Professional ("RP"); The Company Appeal (AT) (Insolvency) No. 612 of 2022 has been filed by Sandeep Khaitan, erstwhile RP; and The Company Appeal (AT) (Insolvency) No. 525 of 2022 has been filed by PLBB Products Pvt. Ltd., the Resolution Applicant, who has filed the Resolution Plan in the CIRP of the Corporate Debtor. 3. The Company Appeal (AT) (Insolvency) No. 947 of 2021, filed by the Financial Creditor - SASF and Company Appeal (AT) (Insolvency) No. 1001 of 2021 filed by Sandeep Khaitan, RP challenges the order dated 07.10.2021 passed in IA No.51 of 2020 filed by RP under Section 43, 44, 45, 48, 66 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "Code"), which Application has been rejected by t....
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....f Principal Borrower were mortgaged and hypothecated to IDBI Bank under the Loan Agreement. (ii) The Principal Borrower committed default in the payment of the loan. The IDBI Bank by letter dated 09.11.2001 recalled the Loan Facility. On 03.12.2001, the IDBI invoked the corporate guarantee and raised demand of Rs.5,42,94,868/- on the Corporate Debtor. (iii) On 08.01.2002, the IDBI filed OA No.27 of 2002 before the Debts Recovery Tribunal ("DRT") Guwahati against the Principal Borrower for recovery of its dues. In OA No.27 of 2002, the Corporate Debtor was not made the party, although, the corporate guarantee was invoked on 03.12.2001. (iv) The Corporate Debtor, who was in plywood industry also suffered loss due to ban imposed by Hon'ble Supreme Court on felling of any kind of trees in the forest areas of the North- Eastern region of India. The Corporate Debtor became a sick unit and registered with BIFR under Reference Case No.259 of 2003 and IDBI was appointed as Operating Agency under the BIFR. (v) The IDBI by its Assignment Deed dated 30.09.2004, assigned the debt of NBL - Principal Borrower to the Appellant SASF. (vi) The DRT vide it....
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....On 26.08.2019, the Adjudicating Authority admitted Section 7 Application filed by SASF. Piyush Periwal, the Promoter of the Corporate Debtor filed an Appeal being Company Appeal (AT) (Insolvency) No.932 of 2019 challenging the order of admission in CIRP of the Corporate Debtor. The SASF filed a claim of Rs.16.12 Crores in CIRP under Form-C on 07.09.2019. The IRP admitted the claim of SASF. (x) An IA No.89 of 2020 was filed by Piyush Periwal, the Promoter of the Corporate Debtor, challenging the admitted claim of Rs.16.12 Crores. On 09.12.2020, the Adjudicating Authority disposed of the IA directing the RP to minutely verify the claim and reverify the claim of SASF. The RP submitted a compliance Report dated 24.12.2020 again verifying the claim as Rs.16.12 crores. (xi) This Appellate Tribunal in Company Appeal (AT) (Insolvency) No.932 of 2019 vide order dated 25.11.2019 upheld the order of admission passed by the Adjudicating Authority. Piyush Periwal filed Civil Appeal No.9142/2019 before the Hon'ble Supreme Court, challenging order of the Appellate Tribunal. On 20.01.2020, the Hon'ble Supreme Court set-aside the order of NCLAT and remanded the matter to the Appel....
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.... of 2021 as well as IA No.43 of 2021 were heard by the Adjudicating Authority and by order dated 08.04.2022 IA Nos.27 and 43 of 2021 filed by Piyush Periwal, the Promoter of the Corporate Debtor were allowed. The Adjudicating Authority by the impugned order dated 08.04.2021 removed the RP, citing the lack of transparency, conflict of interest and non-compliance of provisions of the Code. CIRP of the Corporate Debtor was directed to be terminated from the Second EOI stage and new RP was appointed. Direction was issued to start the process from stage of Invitation of EOI publishing in widely circulated newspaper of Assam, West Bengal and Tamil Nadu. Direction was also issued to RP to ensure that unit may start production within 45 days. Certain other directions were also issued to the new RP by the impugned order dated 08.04.2021. Apart from deciding IA Nos.27 and 43 of 2021, several other IAs were also disposed of by the order of the same date. We however, in the present Appeal are only concerned with the order passed by the Adjudicating Authority in IA Nos.27 and 43 of 2021 and IA No.51 of 2020. 8. As noted above against IA No.27 of 2021 Company Appeal (AT) (Insolvency) No.526 o....
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....al submitted Resolution Plan in his individual capacity and after the death of Piyush Periwal, the said Resolution Plan cannot be allowed to be prosecuted by his wife. The learned Counsel for Respondent, refuting the submissions contend that Respondent No.1 has filed various Applications as well as Resolution Plan in the CIRP of the Corporate Debtor as Promoter and Suspended Director of the Corporate Debtor. Madhulika Periwal also being Director and shareholder and Promoter of the Corporate Debtor is entitled to prosecute the Appeals. In the Application filed by Madhulika Periwal, relevant facts regarding the shareholding has been pleaded. It was pleaded that Madhulika Periwal is single largest shareholder and owns 40.43% shareholding of the Corporate Debtor. It was further pleaded that Madhulika Periwal was always the shareholder and Promoter of the Corporate Debtor, which fact is already on the record. 13. Piyush Periwal admittedly Promoter/ Director of the Corporate Debtor has filed the Resolution Plan as Promoter/ Director of the Corporate Debtor, the Corporate Debtor being MSME Company. The learned Counsel for the Applicant has relied on the Declaration at Annexure-A-D. giv....
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....." 17. The Adjudicating Authority referring to order passed in IA No.43 of 2021 has disposed of the Application by following order: "2. Heard both the sides at length. An order has been passed by this bench today in IA No. 43 of 2021 in C.P. (IB)No. 09/GB/2019. The Petitioner and the Respondent No. 1 are at the liberty to file any additional/relevant documents, if any, in support of their claim with the new RP within 10 days from the date the order is uploaded on the e-portal/website. The RP is also given 7 days' time thereafter to examine and finalise their claim in accordance with the provisions of Insolvency & Bankruptcy Code, 2016, Rules and Regulations. 3. Hence, IA No. 27 of 2021 in C.P. (IB)No. 09/GB/2019 is disposed of with the above observations." 18. We have noticed above the background facts giving rise to IA No.27 of 2021. Prior to IA No.27 of 2021, Respondent No.1 had filed another IA No.89 of 2020. We may recapitulate the sequence of events in the above reference. Section 7 Application against the Corporate Debtor filed by the Financial Creditor was admitted by order dated 26.08.2019. In pursuance of the publication issued by the IRP, the F....
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.... accordance with the Decree passed by the DRT on 03.01.2005 and the calculation of the claim is in accordance with the Decree as well as Negotiated Settlement. 21. We now proceed to note the respective submissions of learned Counsel for the parties advanced with regard to claim of Financial Creditor admitted by RP. 22. Learned Counsel for the Appellant challenging the order of Adjudicating Authority dated 08.04.2022 in IA no.27 of 2021 submits that the Adjudicating Authority committed error in issuing direction to the RP to reverify the claim of the Financial Creditor. It is submitted that Adjudicating Authority has earlier passed an order in IA No.89 of 2020 on 09.12.2020 by which the prayer of the Promoter/ Director to reject the claim of the Financial Creditor was rejected. The order passed on 09.12.2020 operated as res-judicata for any further consideration to the challenge of the admission of the claim of the Financial Creditor. It is submitted that IA No.27 of 2021 was filed with the delay and ought not to have been entertained by the Adjudicating Authority. It is submitted that the claim filed by the Financial Creditor of Rs.16.12 Crores was in accordance with the Decr....
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.... Settlement the Principal Borrower was to make payment of Rs.215.89 lakhs and convertible debentures of Rs.62 lakhs. In Negotiated Settlement, the Corporate Debtor was not the party. As per the Decree dated 03.01.2005, the Financial Creditor could have realised the amount by sale of hypothecated and mortgaged assets and the Financial Creditor proceeded to recover the amount by permitting sale of the assets of the Principal Borrower and amount of Rs.92 lakhs were paid by the Principal Borrower by sale of the assets. The Negotiated Settlement was revoked by the Financial Creditor on 24.09.2012. There is no occasion for claiming any amount from Corporate Debtor on the basis of Decree dated 03.01.2005, nor any interest liability will run against the Corporate Debtor from the date of Decree. The amount due against the Principal Borrower as per OTS was only Rs.123.65 lakhs, which remained unpaid and at best, the liability of the Corporate Debtor was to the aforesaid amount. The RP incorrectly calculated the liability of interest from the date of the Decree from 03.01.2005 against the Corporate Debtor. Whereas, after invocation of the guarantee, no steps was taken against the Corporate De....
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....215.89 lakhs was to be paid by 31.03.2008 and the Negotiated Settlement contained a Clause that on account of delay in payment, the interest of 10.25% shall be chargeable. This clearly indicated that time was not the essence of the contract. Hence, the Principal Borrower not being able to pay the entire amount within the time, the Negotiated Settlement could not have been avoided by the Financial Creditor and Financial Creditor at best was entitled to claim @ 10.25% as provided in Negotiated Settlement. The Negotiated Settlement clearly contained a waiver that interest and other liabilities, which cannot be now revived. The calculation by the RP of the claim of the Financial Creditor of interest from the date of filing of Application as per Decree dated 03.01.2005 was wholly incorrect. No interest could have been levied from the date of filing of the Application, in view of the Negotiated Settlement dated 30.04.2005. By incorrect admission of the claim of the Financial Creditor, whole CIRP is vitiated. The Financial Creditor as per the admission of its claim has been allocated initially 71.37% voting share, which was subsequently increased to 87.76%. The RP appointed by the impugne....
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....nt entered between the parties for total amount of Rs.215.89 lakhs. The Negotiated Settlement also noticed the waiver of balance principal and simple interest and further interest and liquidated damages. Appendix-I, of the Negotiated Settlement contained certain terms and conditions. It is useful to notice Clauses 1, 2, 3, and 4 of the Appendix-I, which are as follows: "1. In case NBL fails to honor its commitments in accordance with the agreed NS arrangement as per the envisaged time frame, the SASF shall have the absolute right to revoke the arrangement and reappropriate the amount received as per existing loan documents. 2. The company shall undertake to suitably increase the NS amount of SASF in case it agrees to pay higher pro rata amount to any other lender. 3. All the loan and security documents will remain in full force till such time the arrangement is satisfactorily concluded/ implemented in full on the envisaged lines. 4. In case of default on the due date as per NS, the same would attract interest at the rate of 10.25% p.a." 28. The Negotiated Settlement was revoked by the Financial Creditor on 24.09.2012. The question to be consid....
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...., in contract in which time is essential.- When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. Effect of such failure when time is not essential.- If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Effect of acceptance of performance at time other than that agreed upon.- If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-perf....
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....ank/ SASF, where the entire Negotiated Settlement was paid by the Corporate Debtor and Recovery Certificate issued in OA No.36 of 2003 was set aside by the Debts Recovery Appellate Tribunal and ultimately no due certificate was issued by the Financial Creditor on 15.07.2016, which is on the record. It is, thus, clear that even during the period when Corporate Debtor was in BIFR, Financial Creditor proceeded to recover its dues and received the entire amount as per the Negotiated Settlement and issued a No Due Certificate to the Corporate Debtor. 33. The Financial Creditor did not initiate any proceedings against the corporate guarantor for last 18 years and now after 18 years, it wants to recover the amount due to the Principal Borrower along with interest as per Decree dated 03.01.2005. The interest on the amount for last 18 years is being charged, although the Financial Creditor did not take any action against the Corporate Debtor and now seeking to recover the amount from the Corporate Debtor. It is also relevant to notice that in the proceeding before the DRT, where the DRT granted permission to sale the assets of the Principal Borrower and pay the amount, an Application was....
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.... The present is a clear case where the Financial Creditor is trying to take benefit of its own wrong, which cannot be allowed. 35. Next submission of the learned Counsel for the Appellant is that in view of the order passed in IA No.89 of 2020, IA No.27 of 2021 could not have been entertained. IA No.89 of 2020 was filed by the Promoter/ Director challenging the acceptance of claim by the RP of the Financial Creditor, which Application was disposed of by Adjudicating Authority by order dated 09.12.2020. In order dated 09.12.2020, the Adjudicating Authority has noticed the grounds taken by the Promoter/ Director on the claim of Rs.16,12,23,210/-. Paragraph 1.3 to 1.9 of the order contains the case of the Promoter/ Director, which is as follows: "1.3 It is further stated that the CD protested the said claim of Rs.16,12,23,210.00 (Rupees Sixteen Crores Twelve lacs Twenty Three thousand Two hundred Ten only) lodged by the respondent No.1 on the following grounds:- (i) That in view of the Negotiated Settlement (NS) dated 30.04.2005, the CD (Principal Borrower National Boards Ltd.) paid an amount of Rs.92.24 lacs to the respondent herein, the balance amount being Rs.1....
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.... of CHS'' Hence, from the above fact it is evident that there is no default on the part of Principal Borrower or Corporate Debtor. Further, it is surprising that on one hand the respondent has failed and neglected to take steps in accordance with the orders obtained by the respondent from the DRT and on the other side the respondent is adding up interest and projecting a large figure to prejudice the NPIL (Corporate Debtor). (ii) Another significant point in the above context is that the respondent had obtained a decree in OA No.27/2002 by the ORT on 03.01.2005. Further it is also relevant to point out that in the aforesaid OA the respondent had not arrayed the present appellant as a party. It is therefore submitted that the decree essentially operated against the principal borrower and others who were party to the OA and not against the present CD- NPIL. Additionally, the respondent and the principal borrower entered into a negotiated settlement on 30.04.2005. Even at the time of entering into the negotiated settlement, the respondent did not put the CD-NPIL on notice. It is therefore submitted that the entire process from obtaining of decree to entering ....
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....nciple of the IBC, 2016 because one of the objects of the Code of 2016 (Act 31 of 2016) is maximisation of value of assets of persons to promote entrepreneurship. 1.9 That the decree dated 05.01.205, passed by the DRT, Guwahati cannot be enforced against the CD- NPIL as because the Corporate Guarantor (NPIL) was not a party to the said proceedings." 36. The Adjudicating Authority after noticing the aforesaid facts, heard the Application and in paragraph 8 and 9, issued following directions: "8. Hence, the prayer made by the petitioner (Promoter Director) here to give direction to the RP to set aside the claim lodged by the FC, is rejected. 9. The RP is hereby directed to verify the claim amount of the FC minutely and transact the proceedings with utmost dedication strictly and in accordance with the provisions of the "Code", Rules and Regulations of IBC / IBBI." 37. From the above order, it is clear that the prayer of the Appellant - Promoter/ Director to set-aside the claim of Financial Creditor was rejected. However, RP was directed to verify the claim of Financial Creditor minutely and transact the proceedings with utmost dedication strictly and ....
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.... is inflated and incorrect and the correct claim was directed by the Adjudicating Authority to be determined by new RP by order dated 08.04.2022, the wrong admission of the claim by RP has disastrous result in the entire CIRP. We may in this context notice the judgment of this Tribunal, where this Tribunal has held that error in constitution of CoC has adverse effect on the CIRP. This Tribunal in Jayanta Banerjee vs. Shashi Agarwal and Anr. - Company Appeal (AT) (Insolvency) No.348 of 2020 in paragraph 85 and 87 has laid down following: "85. Based on the above discussion, we are the considered opinion that the Constitution of the Committee of Creditors violates the proviso to Section 21 (2) of the I & B code 2016 read with 12(3) of CIRP Regulations. Therefore, the Constitution of the creditors' committee is a nullity in the eye of law that vitiates the entire CIRP. Liquidation is like a death knell for the corporate entity/corporate person. Liquidation based on the resolution of the CoC, which consists of related party Financial Creditors having 77.20 % vote share, is a matter of grave concern. Hon'ble Supreme Court in the case of Phonix ARC (supra) has described t....
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....ucial responsibility of properly constituting the CoC and also to assign voting share to each creditor based on the financial debts owed to such creditor and without that done, there cannot be a meeting of the CoC. We cannot lose focus that the Interim Resolution Professional/ Resolution Professional is an administrator of the IBC and is expected to function under the guidance and directions of a validly constituted CoC that control the Corporate Debtor. In the present case, the IRP constituted the CoC on the basis of provisional list of claims and yet chose to exclude the Appellant/Financial creditor from the CoC on the ground that there was a need to verify the provisional claims submitted by him. This conduct is unjustified in that the exclusion of Financial Creditor from the CoC or delayed inclusion of the Financial Creditor on the CoC is prejudicial to the best interests of the Corporate Debtor. In our considered view, the undue haste shown by the IRP in certifying the constitution of the CoC; excluding a secured financial creditor therefrom on a flimsy pretext and also proceeding ahead with a meeting of an invalidly constituted CoC is not in sync with the form and spirit of t....
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....buyers should be appropriately fixed, keeping in view the order of this Tribunal in CA (AT) (Ins) 29 of 2020. (iii) The application IA No. 1898 of 2020 wherein an application for exclusion of time spent in pursuing the application before the Adjudicating Authority under sections 19(2) and 21-A of the IBC should be preferred before the Adjudicating Authority for appropriate order" 42. This Tribunal in the above cases held that improper voting share ascribed to Financial Creditor has led to the liquidation of the Corporate Debtor, which was not approved. Lastly, this Tribunal in Company Appeal (AT) (Insolvency) No.42 of 2022 - Hindalco Industries Ltd. vs. Hirakud Industrial Works Ltd. in paragraph 112 has again reiterated the same proposition, which is to the following effect: "112. Based on the above discussion, we are of the considered opinion that the Constitution of the Committee of Creditors violates the proviso to Section 21(2) of the I & B Code 2016 read with 12(3) of CIRP Regulations. Therefore, the Constitution of the creditors' committee is a nullity in the eye of law that vitiates the entire CIRP. Liquidation is like a death knell for the corporate....
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....011 from DRT. Further, the Financial Creditor did not prosecute further proceedings, even after restraining the Principal Borrower to sale its assets. Ultimately, DRT has adjourned the proceedings sine-die on 16.11.2018 as noted above. Thus, it was due to its own reasons, the Financial Creditor interdicted the proceedings of sale the immovable assets of the Principal Borrower and stopped the midway, due to which the Principal Borrower could not further sell its immovable properties further and clear the entire debt. On the other hand, the Financial Creditor filed Section 7 Application against the Corporate Debtor in 2019, abandoning the proceedings, which it was prosecuting against the Principal Borrower. It is also relevant to notice that SASF was the operating Agency in BIFR with regard to the Corporate Debtor and in the proceedings before the BIFR the debt as per guarantee was not even included in the inventory of debt. Though the Financial Creditor has initiated proceedings vide OA No.36 of 2003 regarding the Financial Facilities extended to the Corporate Debtor, which it recovered successfully and No Due Certificate was issued to the Corporate Debtor on 15.07.2016 by the Finan....
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....res availed by the Principal Borrower from IDBI in 1997." 47. The Adjudicating Authority further in paragraph 15.3 has held that due to many unwarranted decision taken in the CIRP, 48 years of running unit after surviving under BIFR, collapsed. Paragraph 15.3 of the order of the Adjudicating Authority is as follows: "15.3 As per the records available from both the sides, the R1 has not acted as per the provision of the IBC as the CoC Member having voting share of 87.76%. They have mostly concentrated on the point of Commercial Wisdom but have never restrained the R2 from taking so many unwarranted decisions which have resulted into the collapse of a 48 years MSME Running unit, after survival under BIFR, for a guarantee amount of Rs. 3.20 crores given by it in 1997 for PB." 48. The facts of the present case and sequence of events clearly indicate that Section 7 Application was nothing but proceedings to recover the dues and was not for any purpose of insolvency resolution of the Corporate Debtor. The present was a fist case where powers under Section 65 of the IBC were to be exercised and proceedings of CIRP required to be closed against the Corporate Debtor. However,....
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....ainst the Petitioner as a Corporate Guarantor, after 18 years claiming Rs. 133.34 crores against the dues from the Principal Borrower of Rs. 2.15 crores and hence the amount claimed is highly inflated for which the Application under Section 7 has been admitted. Though the Respondent No. 1 has changed the claim amount to Rs. 16.12 crores but with this claim amount, the R1 is having 87.76% voting share in CoC and gets all matters approved what it desires. i. The submission of the R1 that their officers are deputed on a temporary basis from IDBI Bank and hence, the account of the Corporate Debtor has been handled by various officers during the course of the years. Hence, the outstanding amounts in any loan account are part of the institutional records and there is no discretion on any of the officers to put an outstanding amount at their discretion. ii. ii. It is found from the records submitted by the parties that the Original Lender had disbursed only Rs. 3.08 Crores to the Principal Borrower out of the sanctioned loan amount of Rs. 3.20 Crores in 1997 The R1 has filed claim amount of Rs. 133.34 crores in the Application which is 43 times of the loan amount for a p....
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.... G inviting EOIs was published in November 2019 in widely circulated newspapers Whereas, the Form G of the second EOI was rolled out by the Respondent No.2 on 27.06.2020 only published in one local newspaper chain in Assam, The Assam Rising and its sister publication Dainandin Barta, having a reported circulation of 28,000 copies. ii. R2 submits that the reason for publication of 2nd EOI was to facilitate value optimization; availability of potential players to have more resolution applicants and there is no case of collusion. iii. As per the records made available, the second rollout of EOI was published in one local newspaper chain in Assam only when the CD is having Registered Office, Corporate Office and Units in Assam and Tamil Nadu. Accordingly, the first Form G inviting EOIs was published in November 2019 in widely circulated, newspapers in Assam, West Bengal and Tamil Nadu, including Aajkaal, Amar Assam, Financial Express and North East Times with a collective circulation of over 5,00,000 copies to attract more Resolution Plan as per the provisions of IBC. The R2 could not clarify or submit the reason for not publishing in widely circulated News papers as ....
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.... stage and replacement of the present RP with a new RP to start EOI afresh. 20.1 The success of the corporate insolvency resolution depends strictly in terms of provisions of the I&B Code and Regulations made thereunder. In this case the process is tainted from the stage of Second EOI publishing in one local newspaper chain in Assam instead of publishing in widely circulated newspapers published at the places of Registered Office, Corporate Office and major Units of the CD, allowing a Resolution Applicant to file EOI when the Entity was not in existence and modifications in the Resolution Plan after the same had been submitted before the AA for approval. The RP has not performed his duties in a fair and transparent manner as required under the CODE He himself has offered his services to the promoters of the other company of RA when the Resolution Plan of the RA is under process for approval. The RP has filed FIR/Criminal case, instead of taking up the matter before the AA under Section 74 of IBC for redressal of the issue, which had gone up to the Hon'ble Supreme Court, for one payment of Rs 32.50 lacs made by the Suspended Management to the Supplier of Raw materials to th....
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....of IBC/Regulations to push an old running 48 years old MSME Unit into the Forced Closure or Liquidation or Hostile Takeover affecting the livelihood of hundreds of employees, workers, creditors, vendors, and dependents." 54. The directions in IA No.43 of 2021 are contained in paragraph 20.4 as noticed above. The directions issued by the Adjudicating Authority in paragraph 20.4, are in to the following effect: "(i) The CIRP process from the stage of Second EoI stands terminated; and (ii) Present RP is replaced with the appointment of new RP" 55. The challenge to the aforesaid order has been raised by Financial Creditor, erstwhile RP and the PLBB/ Resolution Applicant. The learned Counsel for the Financial Creditor challenging the order contends that the finding of the Adjudicating Authority that there was collusion between Financial Creditor, RP and Respondent No.4 has not been substantiated. The learned Counsel for the Appellant submitted that the CIRP process was conducted in accordance with the prescribed procedure and regulations therein. The mentioning of claim of Rs.133.55 Crores in Section 7 Application was due to the fact that in SAFS officials of IDB....
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.... any effect on its eligibility, since it was mentioned in the Application that Respondent No.4 is in the process of incorporation. The allegation that Respondent No.2 and the CoC rollout second EOI to give backdoor entry to Respondent No.4 is wholly incorrect. The second Form-G was issued since no Resolution Plan was received in pursuance to first EOI. Even the Promoter/ Director did not file any Resolution Plan. The second Form-G was issued to fulfill the object of maximization of value of the Corporate Debtor. It is further incorrect to suggest that the RP and CoC permitted Respondent No.4 to modify the Resolution Plan from time to time. Only change made by Respondent No.4 was to increase the CIRP cost. Side-byside perusal of the Resolution Plan would show that Resolution Plan of Respondent No.4 was better than Plan of Promoter/ Director. More so, it was the commercial wisdom of CoC to approve the Resolution Plan, the Promoter Director cannot seek any direction that CoC should approve the Plan of Promoter/ Director. The approval of Resolution Plan by the CoC cannot be questioned before the Adjudicating Authority, which is a settled law. The Promoter/ Director diverted the funds o....
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.... SASF can control the entire CoC. The second EOI was rolled out by the Financial Creditor and the RP, to only benefit Respondent No.4. The fact that PLBB was not even incorporated on the date when it submitted its Resolution Plan, makes it clear that somehow RP and Financial Creditor wanted PLBB to take over the Corporate Debtor. The PLBB's Resolution Plan has not disclosed any source of fund and despite the lacking of the aforesaid eligibility requirement, the Plan was placed before the CoC. Infact, Member of Respondent No.1 himself has raised a query during the proceeding of the CoC that PLBB has not disclosed the source of fund. The Minutes of 15 CoC Meeting noticed that the representative of SASF has made an enquiry about the source of funding. The CoC Meeting, which was convened on 25.05.2021 to consider the Resolution Plan, was requested to be adjourned by several other Members of the CoC, since the said Meeting was convened in the second wave of Covid, which request was not accepted and in the Meeting held on 28.05.2021, the SASF was the sole Member of the CoC, who presented and approved the Plan. The RP has shown complete bias in favour of SASF and PLBB as he accepted the i....
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..... 526 of 2022 filed by the Financial Creditor, challenging the order of the Adjudicating Authority in IA No.27 of 2021, we have already held that admission of claim of Financial Creditor of Rs.16.12 Crores by the RP was incorrect. It has been held that RP inspite of directions of the Adjudicating Authority dated 09.12.2020 in IA No.89 of 2020, to minutely verify the claim, the RP still admitted the entire claim and stuck to its earlier decision. We have held that the claim of Rs.16.12 Crores as submitted by Financial Creditor, details of which contained in Annexure-I, Form-C submitted in 2019 was not correct. The RP has computed the interest @ 12% from 01.11.2001, the date of filing of the Application by the Financial Creditor, till the filing of Section 7 Application. Whereas, there was Negotiated Settlement dated 30.04.2005 between Financial Creditor and the Principal Borrower, under which settlement, out of Rs.215.89 lakhs, Rs.92.24 lakhs were paid by the Principal Borrower by selling his immovable land. We have already noticed that it was the Financial Creditor, who stopped the further sale of the assets by Principal Borrower, so that Principal Borrower could not make entire pa....
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....epted by this Tribunal in Company Appeal (AT) (INS.) No.1443 of 2022 - Srigopal Choudary vs. SREI Equipment Finance Ltd., wherein in paragraph 14 and 16, this Tribunal held following: "14. We are of the opinion that the Adjudicating Authority being the appointing authority of IRP/RP was well within its jurisdiction to pass an order for removal of the RP particularly in a situation where the RP had not taken any steps to convene a meeting of the CoC for the purposes of removal of RP. 16. After going through the material available on record we are satisfied that the Adjudicating Authority with an object to implement the provisions of IBC in its letter and spirit has rightly exercised its inherent jurisdiction by way of passing order of removing the appellant as RP of the CD. This fact which is reflected on record is sufficient to draw an inference that the Appellant was proceeding contrary to the statutory provisions as contained in the IBC and also delaying the smooth conclusion of CIRP. We are of the considered opinion that there is no defect in the impugned order warranting interference by this Tribunal. On the contrary the conduct of the appellant/RP which was o....
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....tion which was submitted by Financial Creditor in Section 7 Application were incorrect. However, Adjudicating Authority has taken the view that present is not a case where any proceeding under Section 75 of the Code be proceeded with. We fully concur with the view taken by the Adjudicating Authority in paragraph 22 of the impugned order, which is to the following effect: "22. The action of the FC attracts the provisions of Section 75 of IBC for incorrect information about claim amount furnished in the Application filed before this Bench. However, considering the submissions of the FC and the lack of exposure on the part of the officials of the FC in filing the Application under Section 7 of IBC, we take a lenient view and the prayer made by the Petitioner to proceed in the matter is rejected." 67. In view of our forging discussions and conclusions, we dispose of Company Appeal (AT) (Insolvency) Nos. 499 of 2022, 525 of 2022 and 612 of 2022 in following manner: (I) The order of Adjudicating Authority dated 08.04.2022 passed in IA No.43 of 2021 to the extent it terminates the CIRP from the stage of Second EOI as well as replacement of the RP is upheld. (....
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.... the Appeal. The submissions, which have been advanced in these Appeals being more or less similar, they are cumulatively referred as submissions on behalf of the Appellant. 71. The learned Counsel for the Appellant, challenging the order dated 07.10.2021 submits that the order passed by the Adjudicating Authority does not contain any reasons. The Adjudicating Authority has only recorded its conclusions, although in detailed it has noted the rival submissions raised by both the parties. It is submitted that order being passed without giving any reason, deserves to be set aside on this ground alone. It has been submitted by learned Counsel for the Appellant that Forensic Report was received on 26.08.2020, which pointed towards the preferential and undervalued transactions and the RP applied its mind to the Forensic Report as well as the materials on record and has formed the opinion that transactions undertaken by Ex-Management are preferential, undervalued and fraudulent. Hence, an Application was filed giving details of 13 such transactions, which were questioned. It is submitted that although Adjudicating Authority has noted the case of the Appellant in paragraph 4 of the orde....
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....oked on 03.12.2001. The period from 2003 to 2016, when the Corporate Debtor was in BIFR, the SASF itself had filed proceedings for recovery pertaining to financial assistance obtained from IDBI/ SASF. The entire amount due to the Financial Creditor was paid as per the Negotiated Settlement and No Due Certificate was issued by SASF on 14.07.2016, which indicates that the Corporate Debtor has discharged all its liabilities against the Financial Creditor. There was no institution or secured creditor of the Corporate Debtor, hence, there was no occasion to enter into any preferential or undervalued transaction. It is submitted that RP was biased with the Corporate Debtor and was siding with the Financial Creditor from the very beginning. Even the transaction Audit Report obtained from BDO India LLP was obtained from an entity, who has nexus with the RP. It is submitted that this Appellate Tribunal in Company Appeal (AT) (Insolvency) No.160 of 2021 - PLBB Products Pvt. Ltd. vs. Piyush Periwal, itself has noted the allegations of the Promoter/ Direct that RP has also appointed a professional Firm for forensic audit, which reflects the biasness and conflict of interest. The learned Counse....
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....parties and have perused the records. 75. The Adjudicating Authority has passed a very detailed order running into 58 pages while deciding IA No.51 of 2020. A perusal of the order indicated that in paragraph-4, the Adjudicating Authority noted the brief facts of the case as submitted by the RP. In paragraph-5 and 6, order of the Hon'ble Supreme Court and NCLAT order dated 07.09.2021 was noted. In paragraph-7, details of written submissions of RP and paragraph-8 contains submission of Respondent No.1 - Promoter/ Director. Paragraph- 9 deals with brief background of the Corporate Debtor. Paragraph-10 contains the reasons given by Respondent No.1 for non-applicability of judgment of the Hon'ble Supreme Court in Anuj Jain. Paragraph-11 is regarding details of dates on which Application was heard. Paragraph-12 contain observations of the Adjudicating Authority and paragraph-13, 14 and 15 contains the conclusion and finding of the Adjudicating Authority. 76. When we look into the entire order passed by the Adjudicating Authority, it is clear that all contention of both the parties have elaborately been noticed. As noted above, the case of the Respondent No.1 was that transactions, ....
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....section (4) of Section 43 of the Code, in two ways : (a) if the preference is given to a related party (other than an employee), the relevant time is a period of two years preceding the insolvency commencement date; and (b) if the preference is given to a person other than a related party, the relevant time is a period of one year preceding such commencement date. In other words, for a transaction to fall within the mischief sought to be remedied by Sections 43 and 44 of the Code, it ought to be a preferential one answering to the requirements of sub-section (2) of Section 43; and the preference ought to have been given at a relevant time, as specified in subsection (4) of Section 43. 21.3. However, even if a transaction of transfer otherwise answers to and comes within the scope of subsections (4) and (2) of Section 43 of the Code, it may yet remain outside the ambit of sub-section (2) because of the exclusion provided in sub-section (3) of Section 43. 21.4. Sub-section (3) of Section 43 specifically excludes some of the transfers from the ambit of sub-section (2). Such exclusion is provided to : (a) a transfer made in the ordinary course of business or financial....
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.... and submissions advanced by the Appellant have not been adverted. As noted above, only paragraphs 13 and 15 of the judgment of the Adjudicating Authority contains the conclusions or findings for deciding the Application, which are as follows: "13. Considering all the points mentioned above, We do not find any reason not to accept the submissions/ contentions of the CD, an MSME Unit, that the Suspended Management has not undertaken any transactions which can be bought under Section 43,45,49 or Section 44,48,66 of IBC and all transactions were done under regular course of business of the CD, without giving preference to any creditors falling under the same class. 15. We are of the considered view that the submission of the Suspended Management/CD, MSME Unit are acceptable and we do not have any hesitation to accept the contentions of the CD that the transactions referred to in this Application by the Petitioner have taken place in the ordinary course of business or transfer/ sales made for securing new value of the CD. " 80. When we look into the aforesaid paragraphs, it is clear that Adjudicating Authority has only recorded its conclusion, paragraphs-13 and 15 ....