TaxTMI 
TaxTMI 
2025 (6) TMI 460
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.... 2024 Company Appeal (AT) (Insolvency) No. 1310 of 2024 & I. A. No. 4751 - -<br>Insolvency & Bankruptcy<br>[ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Shri Sunil Fernandes, Sr. Advocate with Ms. Shankari Mishra, Advocate For Respondents : Mr. Krishnendu Dutta, Sr. Advocate with Mr. Pranaya Goyal, Ms. Rati Patni, Mr. Chiranjivi Sharma, Ms. Kathleen Lobo, Ms. Nehal Gupta, Ms. Alina Mathew, Ms. Sanchi Jain, Mr. Sagar Bansal and Mr. Dhruv Parwal, Advocates for R-1. Mr. Narender L. Jain, Advocate for new RP For the Appellant : Mr. PB Suresh, Sr. Advocate with Mr. Tushar Singh, Ms. Akshra Arshi, Mr. Pratyaksh, Advocates For the Respondents : Mr. Krishnendu Dutta, Sr. Advocate with Ms. Rati Patni, Mr. Pranaya Goyal, Mr. Chiranjivi Sharma, Ms. Kathleen Lobo, Ms. Nehal Gupta, Ms. Alina Mathew, Ms. Sanchi Jain, Mr. Sagar Bansal and Mr. Dhruv Parwal, Advocates for R-1. Ms. Shankari Mishra, Advocate for R-2. Mr. Narender L. Jain, Advocate for new RP JUDGMENT Ashok Bhushan, J. These Appeals arise out of the Corporate Insolvency Resolution Process (CIRP) of Corporate Debtor- 'M/s Golden Tobacco Limited'. Company Appeal (....
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....rofessional admitted the claim to the extent of Rs.265,97,10,569/- on 17.06.2022. Suraksha Realty Limited and Sheth Developers Limited filed their claims in Form C as Financial Creditors on 21.06.2022. Resolution Professional expressed its inability to consider the claims of Suraksha Realty Limited and Sheth Developers Limited. IA No.690 of 2022 was filed by Sheth Developers Limited and Suraksha Realty Limited seeking a direction to set aside the communication sent by the IRP and further direction to accept the claims of Applicants as Secured Financial Creditors. Central Bank of India also filed its claim as Financial Creditor on 30.09.2022. Name of Central Bank was reflected in the list of creditors as Unsecured Financial Creditors. Central Bank's claim was admitted to the extent of Rs.592.67 Crores. The application filed by Sheth Developers Limited and Suraksha Realty Limited came to be decided by order dated 16.03.2023. Adjudicating Authority held that the claim of Applicants is as a financial debt within the meaning of IBC. Adjudicating Authority directed the IRP to consider the claims of Applicants towards interest and their prayer to be treated as Secured Creditors. After ....
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.... CIRP were opened and plans were circulated to the members of the CoC. In 13th CoC meeting held on 15.03.2024, CoC rejected request for further extension of time for submission of the Resolution Plan. IA No. 357 of 2023 and IA No.358 of 2023 were heard. In IA No.614 of 2024 filed by Suraksha Realty Limited, Adjudicating Authority directed that no further meeting of the CoC be held and no decision to be taken till the orders reserved in IA No.357 of 2023 are pronounced. By order dated 13.05.2024, IA No.357 of 2023 has been partly allowed and certain directions have been issued by the Adjudicating Authority including discharge of Resolution Professional- Dr. Vichitra Narayan Pathak and appointing another Resolution Professional. Adjudicating Authority also directed for conduct of Forensic Audit. By order of the same date, IA No.358 of 2023 filed by Sheth Developers Limited has also been partly allowed. By order dated 13.05.2024, the claims of Suraksha Realty Limited and Sheth Developers Limited have been accepted insofar as claim of interest @18% is concerned, Adjudicating Authority, however, rejected the claims of Suraksha Realty Limited and Sheth Developers Limited to declare them ....
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.... Allow the instant Appeal; and/or; b) Set aside the order dated 13.05.2024 passed by the Ld. Adjudicating Authority, National Company Law Tribunal, Ahmedabad Bench, Court - II in I.A. 357(AHM) 2023 AND I.A. 358(AHM) 2023 IN CP(IB) 268 OF 2020. And/or; c) Pass ad-interim stay on the effect and operation of the orders dated 13.05.2024 passed by the Ld. Adjudicating Authority, National Company Law Tribunal, Ahmedabad Bench, Court - II in I.A. 357(AHM) 2023 and I.A. 358(AHM) 2023 in CP(IB) 268 of 2020 and/or; d) Pass any other order or direction in the facts and circumstances of the present appeal and in the interest of justice." Company Appeal (AT) (Insolvency) No.1309 of 2024 3.5. This Appeal has been filed by Suraksha Realty Ltd. challenging the order dated 13.05.2024 passed in IA No.357 of 2023. In the Appeal, following prayers have been made:- "(a) allow the present Appeal; (b) to set aside the finding in the Judgment dated 13th May 2024 that the Appellant is not granted the status of a 'secured' Financial Creditor of the Corporate Debtor and consequently to allow the claim of the Appellant as a 'secured' Financial Creditor of the....
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....nil Fernandes, Learned Senior Counsel appearing on behalf of Resolution Professional- Dr. Vichitra Narayan Pathak, Shri Krishnendu Datta, Learned Senior Counsel for Suraksha Realty Ltd., Shri Abhijeet Sinha, Learned Senior Counsel for Sheth Developers Pvt. Ltd., Shri Robin Jaisinghani, Learned Counsel for Arrow Engineering Ltd., Shri PB Suresh, Learned Senior Counsel for the Central Bank of India. We have also heard Shri Narender L. Jain, Learned Counsel appearing for new Resolution Professional. Learned Counsel for Shree Ram Vessel Scrap Pvt. Ltd. has also been heard. 6. Shri Sunil Fernandes, Learned Senior Counsel appearing for the Appellants in Company Appeal (AT) (Insolvency) Nos.1017 of 2024 & 1018 of 2024 submitted that the Resolution Professional has conducted the CIRP Process in accordance with the provisions of the IBC and CIRP Regulations. On the basis of relevant materials brought by Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd., decision was taken with regard to their claims. In pursuance of the order of the Adjudicating Authority dated 16.03.2023 accepting the claims of Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. as Financial Creditors, the claims of S....
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....o collate the claim on the basis of claims submitted and documents produced before the Resolution Professional. Resolution Professional has been meticulously following the CIRP process and in pursuance of Form G issued, several Resolution Plans have been submitted which are awaiting voting on the plan. It is submitted that even after the advisory issued by the IBBI, the CoC has passed the Resolution in 11th meeting held on 29.01.2024 reaffirming the continuance of the Appellant/Resolution Professional with 88.58% vote share. Direction of the Adjudicating Authority in the impugned order discharging the Appellant is wholly uncalled for and deserves to be set aside. Section 27 of the IBC contains detail provision for removal of Resolution Professional. No process under Section 27 of the IBC has been followed. Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. have already filed an application IA No.703 of 2023 and IA No.697 of 2023 questioning the admitted claims of some of the Financial Creditors which are pending adjudication. The observation of the Adjudicating Authority that the claims of the Central Bank of India and Arrow Engineering Ltd. have been inflated by the Resolution Pr....
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....Court in "Rachpal Mahraj vs. Bhagwandas Daruka and Others- 1950 SCC 195" as relied by Learned Counsel appearing for Arrow Engineering Ltd. is not applicable. The letter dated 16.12.2009 merely record the deposit of the title deed, hence, it did not require any registration. Definition of 'security interest' under IBC is wide enough to include any type of mortgage, charge, hypothecation etc. Adjudicating Authority held that Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. holds a negative lien on the subject land. Negative lien is also a security interest. There was no requirement of registration of charge under Section 77 of the Companies Act, 2013. It is submitted that after replacement of the Resolution Professional by the impugned order, new Resolution Professional has already taken over who has also been permitted by this Tribunal to make certain payments towards statutory payments and CIRP costs. It is submitted that grant of interest to both Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. @ of 18% is in accordance with the transaction between the parties. Clause 9.1 of the MoU stipulates refund of money along with the interest @18%. The Corporate Debtor has acknowledge....
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....filed under Section 9 of the Arbitration & Conciliation Act, 1996 by Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. which are pending in the Bombay High Court from which pleading, it is clear that the amount of Rs.132 Crores paid to the Corporate Debtor was claimed as earnest money. It is further submitted that in IA No.690 of 2022 which was filed by Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. questioning the decision of the Resolution Professional rejecting their claims, Arrow Engineering Ltd. has filed IA No.777 of 2022 seeking to be impleaded as party which was rejected by the Adjudicating Authority. It is further submitted that Arrow Engineering Ltd. was necessary party in the applications filed by Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. which has been decided by impugned order. It is submitted that Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. are not entitled for interest 18% per annum. Hon'ble Supreme Court vide its judgment dated 12.05.2016 having held the MoU being void, no claim of interest can be raised by Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. The Hon'ble Supreme Court held that "MoU loses its legal force and no right would ac....
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....is the CoC's prerogative to pass the resolution for replacement of the RP. It is submitted that IA No.849 of 2023 filed by Arrow Engineering Ltd. before the Adjudicating Authority seeking the names of Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. to be removed from the list of Financial Creditors need to be heard and decided. Counsel for Arrow Engineering Ltd. submits that the Appeal filed by Arrow Engineering Ltd. deserves to be allowed setting aside the order passed by the Adjudicating Authority. 10. Counsel appearing for the Central Bank of India challenging the impugned order submits that the Adjudicating Authority without giving an opportunity of hearing to the Central Bank of India have affected the rights of the Appellant. It is submitted that the Central Bank of India was not party in IA No.357 of 2023 and IA No.358 of 2023. It is submitted that the claim of the Central Bank of India was based on the decree of the Debt Recovery Tribunal (DRT) and the observations of the Adjudicating Authority that the Resolution Professional has admitted the inflated claim of the Central Bank of India is incorrect. It is submitted that the IA Nos. 697 of 2023 and 703 of 2023 filed ....
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....and IA No.358 of 2023 holding that Appellant Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. are entitled for 18% interest is sustainable? IV. Whether Adjudicating Authority by the impugned order could have reduced the claim of Arrow Engineering Limited to the extent of Rs.40.75 Crores without giving an opportunity to the Arrow Engineering Ltd.? V. Whether the conclusion of the Adjudicating Authority that Resolution Professional accepted inflated claim of Central Bank of India are sustainable especially when Central Bank of India was neither heard nor was made party to IA No. 357 of 2023 and IA No.358 of 2023? VI. Whether the Adjudicating Authority committed error in exercise of its jurisdiction in directing replacement of the Resolution Professional and there were sufficient material on the record to make adverse observations against the Resolution Professional? VII. Whether there was any basis for issuing direction for conducting a detailed Forensic Audit by KPMG as directed by the Adjudicating Authority in the impugned order? VIII. Whether Appellant- Shree Ram Vessel Scrap Pvt. Ltd. has made out a case for interfering with the dir....
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....s from the date of execution of these presents or within such extended time as the developers may at their discretion agree or; (b) GTL is unable to (1) pay all dues and complete all formalities under the labour agreement dated arrived between GTL and the Labour Union, or (2) make encumbrances; or (3) execute and register the irrevocable joint development agreement and irrevocable power of attorney in favour of the developers; or (4) fulfil its obligation in terms of this MoU within a period of 6 (six) months from the execution of this MoU or within such extended time as the developers may at their discretion agree; Then the developers will have no option to terminate this understanding by giving 2 (two) day notice and upon such termination, GTL shall refund all amounts paid by the developers to (or on behalf of ) GTL till such date together with interest thereon at 18% (eighteen per cent) per annum from the date of termination till the date of refund." Thus, as per the MoU, failure to execute and register the joint development agreement would have converted the advances given to interest bearing refundable advance. Though the applicants had not terminate....
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....as financial debt. The Resolution Professional vide letter dated 20.03.2023 has rejected the claim of interest of 18% as well as claims of Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. being Secured Creditors. It was challenging the order dated 20.03.2023, IA No.357 of 2023 was filed by Suraksha Realty Ltd. and IA No.358 of 2023 by Sheth Developers Pvt. Ltd. which came to be decided by the impugned order dated 13.05.2024. The submission which has been advanced by Counsel for the Appellant is that the order dated 16.03.2023 passed by the Adjudicating Authority holding Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. as Financial Creditors was never challenged and had become final, hence, it is not open for any stakeholders to question the status of Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. as Financial Creditors. Learned Counsel appearing for Arrow Engineering Ltd. submitted that Arrow Engineering has filed an IA for being impleaded in IA No.690 of 2022 filed by Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. which impleadment was refused by the Adjudicating Authority. Arrow Engineering Ltd. having not been heard and the decision dated 16.03.2023 being passed ....
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....ed 16.03.2023 declaring Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. as Financial Creditors having become final, the said question cannot be allowed to be raised in these Appeals which have been filed challenging the order dated 13.05.2024 deciding IA No.357 of 2023 and IA No.358 of 2023 filed by Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. with regard to claim of interest and claim of being Secured Creditors. 18. We do not find any substance in the objection raised by Learned Counsel for the Arrow Engineering Ltd. that Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. are not Financial Creditors. Question (II)- Whether Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. are Secured Financial Creditors of the Corporate Debtor in view of the MoU dated 26.12.2009 coupled with deposit of title with the common agent (Escrow Agent)? 19. As noted above, by the order dated 16.03.2023, Adjudicating Authority after accepting the claims of Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. as Financial Creditors directed the Resolution Professional to consider the claim of Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. qua the claim interest of 18% and further,....
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....w of the above, and in light of the settled law on the subject of equitable mortgage and memorandum, if any, accompanying the deposit of title deeds, our observations are as follows: a. Since the parties chose to reduce the terms of deposit of title deeds to writing, the implication in law (that such deposit was made with the intent to create a security) is excluded by their express bargain and the document will be the sole evidence of its terms. b. The Escrow Letter dated 26-12-2009-signed by both the creditor and the CD-contains the substantial terms of escrow arrangement agreed by and between the parties thereto qua the deposit of title deeds with the escrow agent. c. The said Escrow Letter, accompanying the deposit of title deeds with the Escrow Agent and forming integral part of the said transaction, is thus compulsorily registrable under the Registration Act, 1908 failing which it cannot be used in the evidence at all and the transaction itself cannot be proved by oral evidence either. d. Without prejudice to the aforesaid, we note that even otherwise the essentials of an 'equitable mortgage' are not satisfied in the facts of the ma....
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....visions) Act, 1985 on which Case No.17 of 1997 was registered before BIFR. On 03.04.1997, M/s. Golden Tobacco Limited, the Corporate Debtor was declared as SICK Industrial Company. State Bank of India was appointed as operating agency who submitted a Draft Rehabilitation Scheme (DRS) for revival of the M/s. Golden Tobacco Limited. The BIFR by its order dated 16.12.2002 sanctioned the scheme for rehabilitation which scheme was to operate till 31.03.2011. The scheme included the asset land of Vile Parle, Mumbai which is subject matter of issue in these Appeals. The dues of different banks and Government departments were noticed in the scheme which contained a heading 'General Terms and Conditions'. Clause 10(f) provided as follows:- "10. GENERAL TERMS AND CONDITIONS: (f) The company would not undertake any major modernization /diversification program / capital expenditure except normal capital expenditure during the period of implementation of the rehabilitation scheme without specific prior permission of the MA/BIFR." 23. The rehabilitation scheme was under implementation. The Corporate Debtor entered into MoU dated 26.12.2009 with Suraksha Realty Ltd. and Sheth....
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....tween GTL and the Labour Union; or (2) make encumbrances; or (3) execute and register the Irrevocable Joint Development Agreement and Irrevocable Power of Attorney in favour of the Developers; or (4) fulfil its obligations in terms of this MOU within a period of 6 (six) months from the execution of this MOU or within such extended time as the Developers may at their discretion agree; then the Developers will have an option to terminate this understanding by giving 2 (two) day notice and upon such termination GTL shall refund all amounts paid by the Developers to (or on behalf of) GTL till such-date together with interest thereon at 18% (eighteen per cent) per annum from the date of termination till the date of refund." 24. Clause 17 of the MoU also needs to be noticed which provides as follows:- "17. In the event, any provision of this Agreement is declared by judicial or any other competent authority, quasi-judicial or administrative, to be void, voidable, illegal or otherwise unenforceable, or indications of the same are received by either of the parties from any relevant competent authority/ies, the Parties shall construe the concerned provision of the Agree....
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....2, Hissa No. 3, Survey No. 194-A, Hissa No. 2, Survey No. 195 Hissa No. 13, 15, 16, 19 & 20, Survey No. 193 Hissa No. 14 & 16 changed to Survey No. 193 Hissa No. 18 & 2, Survey No. 195, Hissa No. 6. Survey No. 104, Hissa No. 5 & το. Survey No. της Hissa No. 18 (Part) & II, Hisse No. to, Survey No. 195 Hisse No. 4. Survey No, 195 Hissa No. 7, Sorvey No. 105 Hisss No. 8, Survey No. 195 Hises No. g. situate, lying and being at Village Vile Parle, S. V. Road, Vile Parle (West) Mumbai We have to inform you that we have entered into the attached Memorandum of Understanding dated 26th December 2009 (MOU) in relation to the aforesaid Premises in pursuance whereof Golden Tobacco Limited ("GTL") has granted development rights in relation to the said property to Sheth Developers Private Limited and Suraksha Realty Limited (collectively "the Developers). 2. We are hereby depositing the title deeds which are more particularly specified in Schedule I hereinbelow, with you to be held in escrow pending completion of the obligations of the parties specified therein. 3. We request you to handover the title deeds to the Developers once the Joint D....
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....rit Petition filed by revenue department was also dismissed. The Hon'ble Supreme Court had occasion to examine the Scheme approved under the Sick Industrial Companies (Special Provisions) Act, 1985 of the Company (Corporate Debtor). The MoU entered by Company, Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. was also noticed and considered by the Hon'ble Supreme Court in the said judgment. MoU dated 26.12.2009, entered with Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. has been noticed by the Hon'ble Supreme Court in paragraph 10 of the judgment which is as follows:- "10) Within few days of this demand, the Revenue found from the reports in print media that the company had sold its Vile Parle Property in Mumbai for a sum of Rs.591 crores. In order to verify this sale transaction, a specific survey under Section 133(A) of the Income Tax Act was conducted from which it was gathered that the Company had entered into a Memorandum of Understanding (MOU) with M/s. Sheth Developers Pvt. Ltd. and Suraksha Reality Ltd. for developing the said property. This MOU prescribed that on execution of agreement for development, the assessee Company would receive a total considerati....
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....he present case are as follows:- "58. "Mortgage", "mortgagor", "mortgagee", "mortgage-money" and "mortgage-deed" defined.-(a) A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being arc called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed. (f) Mortgage by deposit of title-deeds.-Where a person in any of the following towns, namely, the towns of Calcutta, Madras, 2[and Bombay], 3*** and in any other town which the [State Government concerned] may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds." 31. The question to be answered in the p....
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....hem in terms of the MOU". The entire transaction indicates that transaction was towards keeping the title deed with escrow agents and there was no intent to create mortgage in the assets of the Corporate Debtor. 33. It is relevant to note that the Corporate Debtor was well aware of the Rehabilitation Scheme sanctioned by BIFR. Scheme itself noted that the debts are various banks, secured creditors and government departments. Corporate Debtor has to be presumed to be well aware that the mortgage right cannot be legally or validly created in assets which are subject matter of Rehabilitation Scheme framed by BIFR, hence, the deposit of title was with limited purpose and intent which is reflected in the letter dated 26.12.2009 as extracted above. We, thus, are of the view that looking at the anvil of Section 58(f), intent on the part of the Corporate Debtor to create a mortgage by deposit of title is not reflected in the transaction. In this context, we may need to notice certain judgments relied by parties. 34. Judgment of the Hon'ble Supreme Court in "Rachpal Mahraj vs. Bhagwandas Daruka and Others- 1950 SCC 195" has been relied by Arrow Engineering Ltd. In the above case, the ....
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.... 6 of the judgment that the crucial question is did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document. It was further held that if the bargain has been reduced in writing, the document requires registration. In paragraph 6 of the judgment, following has been held:- "6. The crucial question is: did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document? If so, the document requires registration. If, on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention, and the document, being merely evidential does not require registration." 36. In the case before the Hon'ble Supreme Court, the document had only recorded transaction in which case party did not intent to reduce the bargain to writing, hence, it was held that agreement did not require registration and could have been admitted in evidence to prove the creation of cha....
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....e of title. 49. Under the English Law, whether the documents so deposited actually purport or transfer any title is immaterial for the purpose of creating an 'equitable mortgage' as long as the intention to do so is clearly discernible. The position in India however is quite different. This is because under the English Law, a mortgage created by deposit of title or documents is not construed as a legal mortgage and is only treated as an equitable mortgage. Whereas in India under the Act, 1882, more particularly under Section 58 sub-section (f) a statutory recognition has been given to the mode of creation of mortgage by deposit of title deeds. Such a mortgage by deposit of title deeds is for all purposes a 'legal mortgage' and not an equitable mort- gage................." 38. In paragraph 51, the Hon'ble Supreme Court has noticed the requisite for valid mortgage. Paragraph 51 is as follows : - "51. Deposit of title deeds is one of the many forms of mortgages whereunder there is a transfer of interest in specific immovable property for the purpose of securing payment of money advanced or to be advanced by way of loan. The three requisites for a valid mortgage ar....
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....is as to whether essential ingredients requisite as noticed above are fulfilled in the present case or not. We have already noticed that the deposit of title deeds by the debtor was not with intent to create a mortgage rights in the Corporate Debtor assets rather than the title documents were deposited with the escrow agent to keep with escrow agent till the obligation under MoU is fulfilled. The transaction when look into all attended circumstances and intent of the parties clearly indicate that there was no intent for creating mortgage. 40. Counsel for the Appellant- Suraksha Realty Limited has also relied on the judgment of this Tribunal in "Home Kraft Avenues vs. Jayesh Sanghrajka- 2025 SCC OnLine NCLAT 309" where this Tribunal while considering Section 77 of the Companies Act, 2013 held that intent of legislature was never to apply Section 77 of the Companies Act upon the Corporate Insolvency Resolution Process. In paragraphs 12 and 13, following was laid down:- "12. A bare reading of Section 77(3) of Companies Act, 2013 casts an obligation upon 'Liquidator'. However, the present case is confined to the duty and role of 'Resolution Professional' and admittedly comp....
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....e and no right would accrue to the interveners on the basis of said agreement. The Hon'ble Supreme Court had occasion to notice the arrangement of Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. with the Company i.e. Corporate Debtor dated 26.12.2009 and held that no right would accrue to these interveners (Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd.) on the basis of said agreement. When the Hon'ble Supreme Court has specifically held that no right shall accrue to the Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd on the basis of 26.12.2009, it is difficult to accept the submission of the Appellant that security interest in the assets of the Corporate Debtor i.e. Vile Parle property is created in favour of Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. and they have mortgage rights in the Corporate Debtor. We, thus, are of the clear opinion that the claim of the Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. to claim mortgage rights on the assets has to be rejected. Question No.(III)- Whether the order of the Adjudicating Authority passed in IA No. 357 of 2023 and IA No.358 of 2023 holding that Appellant Suraksha Realty Ltd. and Sheth Developers Pvt. Lt....
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.... MOU, refund of the money along with 18% interest was to made upon failure to execute the Joint Development Agreement. In the balance sheet of the Company for financial year 2011-12, 2012-13, 2013-14 the debt has been acknowledged. It is further submitted that the Corporate Debtor in its Reply filed to Section 9 application before the Bombay High Court has categorically accepted that amount is payable to Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. with interest of 18%. 46. The reply filed by the Corporate Debtor in Section 9 proceeding before the Bombay High Court is part of the record where it was pleaded by the Company that the Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. are not entitled for specific performance of MOU, however, they will be entitled to refund of the amount paid along with interest and no other reliefs can be granted. Para 4 (p) of the Reply filed before the Bombay High Court in Arbitration Petition No. 667 of 2012 is relevant, which is as follows: "(p) Without prejudice to the above and assuming without admitting that Respondent Company has committed any breach or default under the terms of the MoU, in that event also as per the terms....
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....on 9 of the Arbitration and Conciliation Act, it is indicated that the Company made submission that the amounts are to be refunded with interest. Thus, both the parties are under clear understanding that amount advanced by Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. has to be refunded with interest. In the Para 24 of the impugned order passed in IA No.357 of 2023, the Adjudicating Authority has made following observations: "24. The annual reports for the year 2011-2012, 2012-2013, 2013-2014 and the Balance Sheet of CD also demonstrates that the applicant is entitled to interest on the said amount. The CD mentioned in the balance-sheet that the company has proposed that the money received under the MoU be refunded along with interest as approved by the BIFR. It has also mentioned further that "the company has in the MDRS submitted to the OA appointed by BIFR in July 2013 sought for refunding advances and also advances of Rs. 40,75,00000/- received from strategic investor against Vile Parle property along within interest, if any, as decided by the BIFR by selling the said property". Thus, the RP overlooked admission given by the CD. Even otherwise, irrespective of Mo....
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....ing the admitted claim of Arrow Engineering is pending consideration, there was no occasion to pass any order in IA No.357 of 2023 to reduce the claim of Arrow Engineering to Rs.40.75 Crores. It is submitted that the order deserves to be set aside on the ground that order has been passed in violation of principles of natural justice. 52. In IA No.357 of 2023, the Arrow Engineering has filed IA No.1058 of 2023 praying it to be impleaded in IA No.357 of 2023, the said application was rejected by the Adjudicating Authority vide order dated 22.03.2024, which order has been brought on the record as Annexure P-14. In Para 6 of the order, the Adjudicating Authority has given reason for rejecting the application, which Para 6 is as follows: "6. Heard the applicant and the respondent and perused the documents submitted. It is pertinent to note that the applicant has also been the participant in the CoC constituted on acceptance of claims from creditors of the Corporate Debtor and contributes to 98% of the voting shares of CoC. Neither stated collusion between the Resolution Professional and present applicant have been established by any document produced by the respondent either....
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....ty-Seven Lakh Seventy Thousand Fifty-One Only) of Respondent No.3 (Central Bank of India) as a financial creditor in its entirety and accordingly direct the Respondent No. 1 to reconstitute the Committee of Creditors of the Corporate Debtor; (b) That this Hon'ble Tribunal be pleased to reject the claim of Rs.265,97,10,569/- (Rupees Two Hundred Sixty-Five Crore Ninety Seven Lakh Ten Thousand Five Hundred Sixty-Nine Only) of Respondent No.2 (Arrow Engineering Limited) and admit only a sum of Rs.40,75,00,000/- (Rupees Forty Crore Seventy-Five Lakh Only) and accordingly direct the Respondent No. 1 to reconstitute the Committee of Creditors of the Corporate Debtor with appropriate voting rights of Respondent No. 2 (Arrow Engineering Limited); (c) That this Hon'ble Tribunal be pleased to reject the claim submitted by Respondent No.5 (Aimgold Hospitality LLP) and Respondent No.4 (Punjab National Bank) on 21st March 2023 and 11th October 2011 respectively as a financial creditor and accordingly direct Respondent No. 1 to reconstitute the Committee of Creditors of the Corporate Debtor; (d) That this Hon'ble Tribunal be pleased to reconstitute the Commi....
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.... Adjudicating Authority for reducing the claim of Arrow Engineering to Rs.40.75 Crores. We, thus, are of the view that the impugned order dated 13.05.2023 in far as it direct for reducing the claim of Arrow Engineering to Rs.40.75 Crores is unsustainable. We make it clear that our decision to set aside the said direction is on the basis that said order was passed without giving opportunity of submission to the Arrow Engineering in violation of principles of natural justice. We are not expressing any opinion on the merits of the application and said issue need to be decided while deciding IA No.703 of 2023 and IA No.697 of 2023 in accordance with law. Question No.(V): Whether the conclusion of the Adjudicating Authority that Resolution Professional accepted inflated claim of Central Bank of India are sustainable especially when Central Bank of India was neither heard nor was made party to IA No. 357 of 2023 and IA No.358 of 2023? 56. The Adjudicating Authority in the impugned order has also made observation with regard to claim of Central Bank of India. Claim of Central Bank of India has been admitted by the Resolution Professional to the extent of Rs.592,67,70,051/-. The Adju....
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....? 59. The Adjudicating Authority vide impugned order has replaced the Resolution Professional - Dr. Vichitra Narayan Pathak and direction has been issued to appoint another Resolution Professional. The order of the Adjudicating Authority impugned in the appeal indicate, in so far as decision of the Resolution Professional to not accept the Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. as Secured Creditor, the Adjudicating Authority has upheld the said decision. In so far as claim of the Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. with 18% interest per annum, the said claim was allowed and it was held that the Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. are entitled for interest @18% per annum. 60. Learned counsel appearing for the Resolution Professional has contended that Resolution Professional is a 68 years old Insolvency Professional who has become Insolvency Professional on 01.10.2018. It was submitted that he was formerly Deputy General Manager in Central Bank of India. 61. The mere fact that Resolution Professional was appointed in the Central Bank of India cannot lead to inference that admission of the claim of Central Bank of India by the Res....
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....rity, who has appointed the RP cannot be said to lack jurisdiction to take a decision to replace the RP, when the facts and circumstances of a particular case warrants. In the present case, where serious allegations were made against the RP, regarding not conducting the CIRP transparently, the Adjudicating Authority did not lack jurisdiction to pass an order for replacement of the RP. The jurisdiction of Adjudicating Authority to pass an order replacing the RP has also been accepted 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 inhe....
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....rved above, the decision of the Adjudicating Authority in IA No.43 of 2021 for terminating the CIRP from Second EOI and replacement of RP can be sustained by our reasons and conclusions while deciding Company Appeal (AT) (Insolvency) No. 526 of 2022, hence, we need not delve upon various other contentions raised by respective parties regarding the collusion between SASF, RP and PLBB. 66. Insofar as Financial Creditor is concerned, the Adjudicating Authority in paragraph 22 has observed that information 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 Applicati....
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....e CIRP proceedings, on an application under Rule 11 of the NCLT Rules, 2016 has rightly invoked its inherent jurisdiction and passed the impugned order. Needless to add, this order shall not come in the way or impede any directions issued by the Hon'ble Apex Court in any connected matter and the Adjudicating Authority shall proceed in accordance with law." 64. There is no dispute to the proposition that the Adjudicating Authority has power to replace the Resolution Professional while exercising powers under Rule 11 of 2016 Rules and Section 60(5), even though there is no resolution by the CoC under Section 27 of I&B Code. We, however, in the present case, are satisfied that basis and foundation given by the Adjudicating Authority for replacement of Resolution Professional are unfounded and adverse observations and direction given by the Adjudicating Authority have not been sustained by us. 65. One of the submission which has been made by learned counsel for Suraksha Realty Ltd. and Sheth Developers Pvt. Ltd. that IBBI has initiated disciplinary proceeding against the Resolution Professional on the complaint filed by Suraksha Realty Ltd. On the said complaint advisory has alre....
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....sons to allow replacement of Resolution Professional and order passed by the Adjudicating Authority in IA No.357 of 2023 and IA No.358 of 2023 directing for replacement of Resolution Professional deserves to be set aside. 69. The Adjudicating Authority by the impugned order has directed for appointment of another Resolution Professional, one Mr. Sanjay Borad, who has continued to discharge functions of Resolution Professional during pendency of the appeal. We, thus, are of the view that order of the Adjudicating Authority directing replacement of Resolution Professional is unsustainable and deserve to be set aside, the consequence of which is that new IRP stand replaced. Question No. ( VII ) : - Whether there was any basis for issuing direction for conducting a detailed Forensic Audit by KPMG as directed by the Adjudicating Authority in the impugned order? 70. The Adjudicating Authority in the impugned order has also directed for forensic audit to be conducted through KPMG. The facts of the present case indicate that CIRP process was conducted after obtaining necessary reports from Valuers as per CIRP Regulation, 2016. Form G was published in the year 2023 under which 13.0....
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....udicating Authority in IA No.358 of 2023? 72. The case of the Appellant - Shree Ram Vessel Scrap Pvt. Ltd. is that as per Form G published, last date for submission of Resolution Plan was 02.03.2024. Appellant on 12.03.2024 sent an email to the Resolution Professional showing its inclination for submitting a Resolution Plan and further proposed a plan of approx. Rs.1400 Crores. The Resolution Professional has responded to the Appellant that CoC members in 12^th meeting held on 05.03.2024 has not granted any extension the timeline for submission of Resolution Plan. The Adjudicating Authority in the impugned order in Para 42(vi)(k) recorded following conclusion: "k) All resolution plans received as on date would be put up before newly constituted CoC after the report of KPMG is submitted to this Tribunal and approved." 73. Another direction which is sought to be impugned by the Appellant is Para 43(D), which is as follows: "(D) The CoC will not continue any process of any fresh resolution plans (other than already received) and will be reconstituted after the forensic report." 74. On its own showing, Appellant has not been able to submit the Resolution Plan....