AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 477
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....2.2023 passed by National Company Law Tribunal, Mumbai Bench- I in I.A. No.4124 of 2019 filed by the Appellant. By the above impugned orders, passed in two IAs respectively, the Adjudicating Authority has allowed the IAs in terms of the directions given in the order. The Appellant feeling aggrieved by the orders, has come up in this Appeal. 2. Both the Appeal(s) raises common question of facts and law and have been heard together. It shall be sufficient to refer to the facts and pleadings in Company Appeal (AT) (Insolvency) No.273 of 2024 for deciding both the Appeal(s). Brief facts of the case, giving rise to the Appeal are : (i) The Appellant is a regulator constituted under Section 3 of the Telecom Regulatory Authority of India Act, 1997 (for short the "1997 Act"). The Appellant in exercise of jurisdiction under the 1997 Act has framed Regulations namely - Telecommunication Consumers Education and Protection Fund Regulations, 2007. The Appellant issued the Standards of Quality of Service of Basic Telephone Service (Wireline) and Cellular Mobile Telephone Service Regulations, 2009 on 20.03.2009, prescribing quality of service parameters. The Appellant on 10.08.2009 di....
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.... which IA was heard by the Adjudicating Authority and allowed by order dated 05.12.2023, which is under challenged in the Appeal. 3. We have heard Shri Ankur Sood, learned Counsel appearing for the Appellant; Shri Krishnendu Datta, learned Senior Counsel appearing for the Respondent. 4. Learned Counsel for the Appellant submits that Adjudicating Authority committed error in treating security balance of post-paid subscribers and unspent balances of pre-paid subscribers of the company and financial disincentive levied by the Appellant as 'operational debt', which decision is not in accordance with law. It is submitted that security deposit balance of postpaid subscribers and unspent balances of pre-paid subscribers of the Company are held by the telecom service provider, in which the beneficial interest therein continues to vest with the subscribers till the service is actually rendered. The TRAI had issued binding directions to Respondent to refund the entire excess amounts to subscribers. The excess amounts collected by the Respondent, which belong to the subscribers, cannot be appropriated by it and treated as mere 'operational debts' in the CIRP. The amounts are held by the....
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....ional debt in terms of the provisions of the Code. The submission of the Appellant that Act being a special law, would prevail over the provisions of IBC cannot be accepted. The Hon'ble Supreme Court has already held that Section 238 of the IBC has overriding effect over any other law. Hence, IBC shall prevail over the provisions of TRAI Act. The financial disincentives are in the nature of a penalty imposed by the Appellant in terms of the Quality of Service Regulations pertaining to the pre-CIRP period. The Appellant could have only assessed the quantum of the penalty and is prohibited from enforcement of the same by virtue of Section 14 of the IBC. These monies are statutory dues/ operational debt and therefore, the Appellant ought to have filed its claim with the RP regarding the same. It is submitted that no claim was filed by the Appellant and the RP after looking into the books of accounts and financial statements has admitted the claims as 'operational debt'. The Appellant did not file any claim, but filed an application to recover the pre-CIRP dues to circumvent the process of IBC, which is not permissible. The Resolution Plan, which is presently sub-judice before the NCLT....
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....ircumstances of the case." 9. We have already noticed above that the Appellant has not filed any claim in the CIRP of the Corporate Debtor. It appears that it having not filed a claim, a direction was sought as prayed in prayer (a) that RP should ascertain the unspent balance and security deposit payable to the subscribers and make provisions for the same in the Resolution Plan and further direction was sought to allow the payment of statutory dues amounting to Rs.85,10,000/- to the Applicant. The above were the only two prayers made in the application. The RP has filed an affidavit in reply. The RP in the reply affidavit has pleaded that Resolution Plan has already been approved by the CoC. It is pleaded by the RP that the Applicant has not filed any claim inspite of letter written by the RP to the Applicant on 03.07.2019, asking the Appellant to file claim for any outstanding dues for period prior to CIRP. It was pleaded that Applicant cannot seek refund of any monies under an application filed before the Tribunal without following the due process prescribed under the Code. Pleadings in paragraph-6 of the affidavit is as follows: "6. In response to the aforesaid relie....
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....nd 13 are as follows: "11. The Applicant has sought for an amount of Rs. 85,10,000/- (Rupees eighty five lakhs ten thousand only) to be paid to the Applicant as "statutory dues". These dues have been imposed as financial disincentives by the Applicants on the Corporate Debtor under Regulation 5A of the Standards of Quality of Service for Basic Telephone Service and Cellular Mobile Telephone Service (Fourth Amendment) Regulations, 2015 and Mobile number Portability Regulations, 2009 vide various show cause notices and orders. 12. I understand that the said disincentives pertain to the period prior to the insolvency commencement date. As per the provisions of the Code, all creditors of the Corporate Debtor are required to file claims for dues prior as on the insolvency commencement date. As per the provisions of the Code, any governmental and/or statutory authority is also required to file claims for any dues pending to be paid to such authority. By way of letters dated 14th May, 2019 addressed to the Applicant by the Interim Resolution Professional and letter dated 3rd July, 2019 addressed to the Applicant by me, intimated the Applicant about the ongoing moratorium....
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....esign was either not brought to the notice of the court in Rainbow Papers (supra) or was missed altogether. In any event, the judgment has not taken note of the provisions of the IBC which treat the dues payable to secured creditors at a higher footing than dues payable to Central or State Government."" 13. The above order was passed by Adjudicating Authority referring to judgment of this Tribunal in Puneet Kaur, through her Attorney Amrit Pal Singh vs. K V Developers Pvt. Ltd. - Company Appeal (AT) (Insolvency) No.390 of 2022 taking the view that security deposit balance refundable to post-paid subscribers and amount of un-spent balances in prepaid plans are the money collected in excess of the rates prescribed by the TRAI and thus, the amount, which remained unpaid as on the date of commencement of CIRP, which is also outstanding in the books of the Corporate Debtor as liability in aggregate is liable to be paid into Telecommunication Consumer Education and Protection fund in accordance with Regulation 3. 14. Now, we come to the submissions, which have been pressed by the Appellant, challenging the decision of the Adjudicating Authority. One of the submission advanced by le....
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....RAI on the Corporate Debtor were in nature of penalty for non-compliance of Regulations 5A and 9A of Quality of Service Regulations 2009. It is also pleaded by the RP that in the books of account of the CD, outstanding dues were reflected. The payment towards the disincentive as imposed by the Appellant was liability of the Corporate Debtor, which remained outstanding on the date of commencement of the CIRP. Hence, the said amount has to be paid as per the Resolution Plan, in accordance with the IBC process. The prayer of the Appellant as made in IA 88 of 2020, which is levied as disincentive, dehors the IBC process, cannot be accepted. The Adjudicating Authority has rightly treated the liabilities as 'operational debt'. The learned Counsel for the Appellant has further contended that amount of security deposit, balance of post-paid subscribers and unspent balance of prepaid subscribers of the company are held in trust by the Corporate Debtor and they are not part of the assets of the Corporate Debtor, hence the said amount are to be returned. 18. The security deposit, which was given by post-paid subscribers, which remained unpaid is an outstanding liability of the Corporate De....
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.... is even possible. 25. If the amount in the hands of a company is impressed with trust, undoubtedly, it did not form part of the assets of the company, and the liquidator has to pay it out over any other claim before he undertakes distribution of the assets of the company. Where property in the hands of the company is impressed with a trust, it is unquestionable that it can be followed and recovered from the liquidator. Palmer's Company Law, 21st edition, at page 775, has the following observation : "Property which can be identified as belonging to or held by a company in trust, for other persons, may be followed and recovered from the liquidator." 26. Applying the principles to which reference has been made in this judgment, it is crystal clear that the amount, in the hands of the company, which came to it by way of deductions from the wages and salary payable to its employees, on the requisition of the society, of which the employees were the members, for satisfying the demand or debt which they owed to the society, was impressed with the character of a trust in the hands of the company, and the same can be recovered by the society from the liquidat....