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2025 (8) TMI 260
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....Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Abhinav Vashisht, Sr. Advocate with Mr. Manmeet Singh, Ms. Bhavika, Deora, Ms. Saru Sharma, Advocates for Axis Bank . Ms. Payal Kabra, Mr. Pranav, Veerashwar Singh Jadaun, Advocates for Intervenor . Mr. Anand Varma & Apoorva Pandey, Advocates for IA 8388 . For the Respondents : Mr. Ritin Rai, Sr. Advocate with Mr. Aman Gandhi, Mr. Vardaan Bajaj, Mr. Ojasvi Sharma, Advocates for ZEEL, IA 8455 . Mr. Nalin Kohli, Sr. Advocate with Ms. Pooja Mahajan, Mr. Karan Vir Khosla, Mr. Anshul Malik, Ms. Nimisha Menon, Mr. Ayushman Arora, Advocates for RP . Mr. Krishnendu Dutta, Sr. Advocate with Mr. Aman Varma, Advocates for R10 . Mr. Dhruv Mehta, Sr. Advocate with Mr. Kaustubh Prakash, Ms. Hita Sharma, Ms. Tanya Singh, Mr. Rishabh Chandra, Advocates for R1 . Mr. Kunal Tandon, Sr. Advocate with Ms. Aanchal Tandon, Ms. Niti Jain, Mahima Arora, Advocates for Intervenor- Jio Star India . JUDGMENT Ashok Bhushan, J. All these Appeals have been filed against the same order dated 01.10.2024 passed by the Adjudicating Authority (National Company Law Tribunal) Mumbai Bench, Court No.III in IA No.126 o....
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....he Joint Lenders' Meeting, company presented the financial summary for the Financial Year 2023. It was stated by the Company in the Joint Lenders' Meeting that on 30.03.2023, Axis Bank has appropriated a sum of Rs.20 Crores towards its own dues which was not approved by the Company or KPMG (ASM Agent). All lenders except Axis Bank took an objection towards the same. 2.3. Again Joint Lenders' Meeting was held on 04.05.2023 in which lenders objected unilateral withdraw of amount by Axis Bank. One of the lenders also suggested to file an IA before the Adjudicating Authority or before the Appellate Tribunal for maintaining the status quo to safeguard the business of the Corporate Debtor. It was placed before the Joint Lenders' Meeting that no lender should unilaterally appropriate the funds. On 15.05.2023, Axis Bank again withdrew Rs.23 Crores. On 22.05.2023, ARCIL issued a letter to the Axis Bank to refund the appropriated amounts back to the current account of the Corporate Debtor. Axis Bank continued to withdraw the amount till 05.06.2023. Total amount withdrawn by Axis Bank was more than Rs.143 Crores during the aforesaid period. The Suspended Director- Shilpi Asthana filed an IA ....
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....of the payments withdrawn by the Axis Bank is listed before the NCLAT on 10.08.2023, hence, Appeal was not entertained and dismissed. 2.4. Company Appeal (AT) (Insolvency) No.274 of 2023 came to be heard before this Tribunal on 10.08.2023. This Tribunal heard the Company Appeal and by judgment and order dated 10.08.2023 dismissed the Appeal upholding the admission order passed by the Adjudicating Authority dated 22.02.2023. While dismissing the Appeal, all pending applications were also closed. After order dated 10.08.2023, Committee of Creditors (CoC) was constituted and first meeting was held on 01.09.2023. On 11.10.2023, IRP filed an IA No.4844 of 2023 seeking certain directions and clarifications. Challenging the order dated 10.08.2023, Shilpi Asthana, Suspended Director filed Civil Appeal No.5340 of 2023 in which an IA No.170166 of 2023 was also filed by Shilpi Asthana. An Intervention Petition No.57 of 2023 was also filed before the Adjudicating Authority by a Suspended Director Kavita Anand Kapahi. The Asset Reconstruction Company (India) Ltd. (ARCIL) filed an IA No.126 of 2024 on 16.12.2023 seeking direction against Axis Bank and other Financial Creditors to remit the amou....
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....Appellant- ARCIL. We have also heard Shri Nalin Kohli, Learned Senior Counsel with Ms. Pooja Mahajan, Learned Counsel for the Appellant in Company Appeal (AT) (Insolvency) No.1978 & 1979 of 2024. We have heard Shri Dhruv Mehta, Learned Senior Counsel appearing for Respondent- ARCIL in the Appeals, Shri Krishnendu Datta, Learned Senior Counsel for the Promoter, Shri Ritin Rai, Learned Senior Counsel for intervenor- ZEEL. Shri Kunal Tandon, Learned Senior Counsel for Intervenor- Jio Star India. Shri Anand Verma, Learned Counsel for the Intervenor in IA No.8388 of 2024. We have also heard other Learned Counsel appearing for the Intervenors. 4. Submissions which have been advanced by the Axis Bank and other lenders of the Corporate Debtor except ARCIL are common submissions challenging the order dated 01.10.2024 allowing IA No.126 of 2024 filed by ARCIL. The submissions on behalf of the lenders have been led by Counsel for the Axis Bank. Submissions of Counsel for the Axis Bank and all other lenders except ARCIL being common, we shall refer those submissions as submissions of the Appellants. Submissions on behalf of ARCIL have been advanced as Respondent in the Company Appeal of Axis ....
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....im order dated 07.03.2023, the entire admission order was stayed. It is submitted that the judgment of this Tribunal in "Ashok Kumar Tyagi v. Uco Bank & Anr.- CA(AT)(Ins) No. 1323 of 2022" relied by the Adjudicating Authority does not hold that Moratorium under Section 14 of the IBC continues to operate during the period when a CIRP admission order is stayed. Reliance on judgment of the Hon'ble Supreme Court in "Shree Chamundi Mopeds Ltd. vs. Church of South India Trust Association, CSI Cinod Secretariat, Madras [1992 3 SCC 1]" is misplaced. Relying on the judgment of the Hon'ble Supreme Court in "BPL Limited vs. R. Sudhakar [(2004) 7 SCC 2019]", it is submitted that the Hon'ble Supreme Court in the said order held that when the reference order was stayed, all consequential actions, including employee termination, were also stayed. It is submitted that after passing of the interim order dated 07.03.2023, the management of the Corporate Debtor started functioning, acting and performing all duties of management including participation in Joint Lenders' Meeting and other fora as well as notification to stock exchange. The functioning of the management after the interim order clearly i....
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....eserves to be dismissed. Adjudicating Authority has rightly rejected prayer (g) made in the application filed by ARCIL. Accounts were withdrawn from Corporate Debtor's current account where no interest accrues, therefore, there is no question of payment of any interest. 8. Shri Dhruv Mehta, Learned Senior Counsel refuting the submissions made on behalf of the Appellant- ARCIL who has been arrayed as Respondent in all the Appeals filed by lenders submitted that judgment of this Tribunal in "Ashok Kumar Tyagi" (supra) which was delivered on 21.11.2022 was the law prevailing at the relevant time which held that stay of the admission order under Section 7 cannot lead to installation of the management. Judgment of "Ashok Kumar Tyagi" (supra) was passed prior to initiation of CIRP of the Corporate Debtor, hence, all parties including Axis Bank and other lenders had the benefit of the settled legal position prior to the appropriation. It is submitted that the Adjudicating Authority has rightly relied on the judgment of the Hon'ble Supreme Court in "Shree Chamundi Mopeds Ltd." (supra) where the Hon'ble Supreme Court has laid down that the stay of an order and quashing of an order do not h....
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....wed to re-agitate the issue which was rejected both by this Tribunal as well as the Hon'ble Supreme Court. It is submitted by Shri Mehta that the res judicata applies when an issue directly and substantially in issue, is necessarily decided by a Court. The issue of appropriation was never decided by this Tribunal or the Hon'ble Supreme Court. This Tribunal only dismissed the Appeal upholding the admission order. Thus, the issue which is decided was only challenge to admission order. There is no applicability of principle of res judicata in the present case. It is submitted that the submission advanced by the Appellant on the ground of "issue estoppel" is also without any basis. No representation was made by ARCIL or any one to the lenders that they can withdraw the amount from the account of the Corporate Debtor. Principle of estoppel is applicable when on the representation one party alters its position to its detriment. In the present case, no representation was made to the Axis Bank and other lenders rather to the contrary objection was raised by ARCIL in the Joint Lenders' Meeting held on 26.04.2023 objecting withdrawal by Axis Bank from the account of the Corporate Debtor. In ....
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....up withdrawal by Axis Bank by praying that Insolvency Commencement Date be changed from 22.02.2023 to 10.08.2023 which is impermissible. 9. Counsel for the Resolution Professional submits that no application was filed either by suspended management or the ARCIL before this Tribunal seeking a direction to handover back the management of the Corporate Debtor to the IRP. Interim order dated 07.03.2023 clearly prohibited the IRP to take any steps in the CIRP which is the law laid down by this Tribunal in "Ashok Kumar Tyagi" (supra). IRP cannot be said to have failed in discharge of duties, by virtue of interim order dated 07.03.2023 he was incapable of performing any function. It is submitted that in pursuance of the order dated 22.02.2023, Resolution Professional has made publication inviting claim on 25.02.2023 and immediately after interim order dated 07.03.2023, Shilpi Asthana has informed about the interim order on 09.03.2023 by e-mail. On 10.03.2023, the management has made public disclosure informing the stock exchange that this Tribunal has granted interim order. On behalf of the management, lenders were informed that the management of the Corporate Debtor is now reinstated an....
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....IBC before the appropriate forum. We, thus, are of the views that various submissions advanced by Counsel for the Intervenors need no consideration. 12. Before proceeding further, we need to notice prayers made in IA No.126 of 2024 and IA No.4844 of 2023 and the directions issued by the Adjudicating Authority in the order dated 01.10.2024. As noted above, IA No.4844 of 2023 was filed by the IRP on 11.10.2023. In IA No.4844 of 2023, the Resolution Professional has prayed for following reliefs:- "a. Allow the present Application; b. Clarify that/ direct that the Unpaid OC Liabilities/ Unpaid Interest Claim (as defined in the Application)/ Unpaid Other Liabilities (as defined in the Application) is to considered for admission/ verification as part of the claims of the respective creditors against the Corporate Debtor (which will then be dealt with under the resolution plan or liquidation, as the case may be, in accordance with the Code); Clarify that/ direct that for the purpose of conducting various CIRP c. related activities under the Code read with the CIRP Regulations, including valuation, conducting transactional audit for avoidance transactions, preparation of Information....
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.... as well as other third party entity/entities (if any /if at all) to refund/remit back the monies to the CIRP Bank account of the Corporate Debtor to the extent in the proportion as received by each of the aforesaid Respondent; (g) Pass an order directing the Respondents No. 2 to 6 to pay interest at an appropriate rate/percentage as deemed appropriate by this Hon'ble Tribunal on the respective principal amounts withdrawn/received by them in contravention of moratorium; (h) Pass an interim order that the percent voting share qua various financial creditors shall get crystallized subject to outcome of the present Application for the purpose of distributions to be made to various Financial Creditors pursuant to resolution plan(s) submitted by Resolution Applicant(s) in the Corporate Insolvency Resolution Process of the Corporate Debtor, (i) Pass an interim order that till the disposal of this application, this Hon'ble Tribunal will not pronounce its order reserved in the I.A. No. 4844 of 2023 and /or pronounce its order reserved in the IA 4844 of 2023 only after considering the facts and circumstances of the present application; (j) Such further other appropriate ord....
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.... the present applications are not covered by the principle of Res Judicata under section 11 of CPC. Having said this, we are inclined to decide the remaining issues." 17. On the Issue No.II i.e. "On subsistence of moratorium during the Stay Period", Adjudicating Authority came to the conclusion, after referring to the judgments relied by the parties that this Appellate Tribunal while granting interim order dated 07.03.2023 did not intend to suspend Moratorium imposed under Section 14. In paragraph 77.22, following conclusion is recorded:- "77.22 Thus, based on the above discussions, we are satisfied that Hon'ble Appellate Tribunal, even in the absence of any specific directions/ observations while granting the interim stay on 07.03.2023, did not intend to suspend the moratorium imposed under section 14 or the appointment of RP but merely impelled to stay the operation of the CIRP order dated 23.02.2023. This means that the RP was only prevented from taking further steps in respect of the CIRP process of the Corporate Debtor which does not imply that the Corporate Debtor has to be handed over back to the management, and the management of the Corporate Debtor and few of its credit....
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....ect of Stay order is clearly laid down and we have no hesitation in holding all transactions undertaken during the period 07.03.2023 to 10.08.2023 were subject to the final outcome of the appeal. As the appeal stood dismissed, the moratorium stands applicable from the date of ICD i.e. 23.02.2023. 79.5 Since we had held that moratorium is applicable from 23.02.2023, all transaction during the period from 23.02.2023 to 10.08.2023 are subject to the moratorium under section 14 of IBC. The expenses incurred in the ordinary course of business to protect the Corporate Debtor and to keep it as a going concern would be safeguarded. All other transactions and appropriations would consequently be returned to the corporate debtor for the benefit of all the creditors in accordance with the provisions and intent of the IBC. 79.6 In view of our decision that moratorium is applicable from the ICD i.e. 23.02.2023, all consequential actions will follow including on withdrawal and appropriation of monies by the Respondents, and there is no need to deal with other contentions of the Respondents in this regard." 20. The Adjudicating Authority recorded its conclusion in Paragraph 83 which is to th....
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....) Whether on principle of restitution, the lenders who have withdrawn the money from the account of the Corporate Debtor during period of interim stay which came to end on 10.08.2023 when Appeal was dismissed, were obliged to reverse the amount in the account of Corporate Debtor? (VI) Whether findings and observations made by the Adjudicating Authority in paragraph 78 against the Resolution Professional deserves to be set aside? (VII) Whether order of the Adjudicating Authority dated 01.10.2024 rejecting prayer (g) in IA No.126 of 2024 filed by ARCIL deserves to be dismissed and Axis Bank and other lenders who have withdrawn the amount from the account of the Corporate Debtor were liable to refund the amount with interest? Question Nos.(I), (II) & (III) 23. The questions to be answered in the Appeals are, the effect and consequences of interim order dated 07.03.2024 passed by this Tribunal in Company Appeal (AT) (Ins.) No.274 of 2023 - Shilpi Asthana vs. Indusind Bank Ltd. & Anr. As noted above, Section 7 application was admitted by Adjudicating Authority vide order dated 22.02.2023, which application was filed by one of the Appellant - Indusind Bank Ltd. (Appellant in Compan....
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.... II of the IBC, deal with 'Corporate Insolvency Resolution Process'. Section 13 of the IBC provides that the Adjudicating Authority, after admission of the application under Section 7 or Section 9 or Section 10, shall, by an order - (a) declare a moratorium for the purposes referred to in Section 14; (b) cause a public announcement of the initiation of CIRP and call for the submission of claims under section 15; and (c) appoint an interim resolution professional in the manner as laid down in section 16. In the present case, after initiation of CIRP against the CD on 22.02.2023, the public announcement was made by the IRP on 25.02.2023. The moratorium was also declared by the same order dated 22.02.2023, prohibiting acts as contemplated in Section 14, sub-section (1) of the IBC. Section 15 of the IBC provides for public announcement of CIRP. When public announcement is made of CIRP, it is announcement to the whole world about the commencement of insolvency against the CD. 27. We need to first notice the nature of proceedings, which commences on admission of an application under Section 7. Suffice it to notice the judgment of the Hon'ble Supreme Court in Glas Trust Company LLC vs. B....
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....s a significant event that alters the nature of the proceedings, once the petition is admitted and CIRP is initiated, the proceedings become in rem. Paragraph-42 of the judgment is as follows: "42. From this scheme of Chapter II IBC, it appears that the admission of an application is a significant event that alters the nature of the proceedings, and the stakeholders involved. Initially, when the petition is filed by the financial creditor, operational creditor or corporate applicant, as the case may be, the proceedings are in personam and the only relevant stakeholders are the applicant creditor and the corporate debtor. However, once the petition is admitted and CIRP is initiated, several significant changes take place, including the transfer of the management of the affairs of the corporate debtor to the IRP, the declaration of the moratorium, and the collation of the claims against the corporate debtor. Therefore, the proceedings now change character - they become in rem and are no longer the preserve of only the applicant creditor and the corporate debtor and even creditors who were not the original applicants, become necessary stakeholders." 29. The Hon'ble Supreme Court ha....
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..... 26. ... On admission, third-party right is created in all the creditors of the corporate debtors and will have erga omnes effect. The mere filing of the petition and its pendency before admission, therefore, cannot be construed as the triggering of a proceeding in rem. Hence, the admission of the petition for consideration of the corporate insolvency resolution process is the relevant stage which would decide the status and the nature of the pendency of the proceedings and the mere filing cannot be taken as the triggering of the insolvency process." 30. The Hon'ble Supreme Court noticed two significant principles under the scheme of the IBC under Chapter II in paragraph 44, which are as follows: "44. In summary, the scheme of the IBC under Chapter II gives rise to two significant principles: 44.1. Once the petition is admitted, the proceedings are no longer the preserve of the applicant creditor and the debtor. They now become in rem and all creditors of the corporate debtor become stakeholders in the process; and 44.2. Once the petition is admitted, the management of the affairs of the corporate debtor is vested in the IRP and eventually, in the RP. Thus, the corporate ....
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.... 26.02.2023 is not withdrawn and the Axis Bank and other lenders could not have withdrawn the amount of more than Rs.143 crores from the accounts of the CD, period during which interim order was operative. 34. Learned Counsel for both the parties have relied on various judgments of the Hon'ble Supreme Court and this Tribunal, which we need to notice for answering the question. 35. The most celebrated judgment of the Hon'ble Supreme Court referred and relied by learned Counsel for the ARCIL and other parties, i.e., Shree Chamundi Mopeds Ltd. vs. Church of South India Trust Association, CSI Cinod Secretariat, Madras (1992) 3 SCC 1. In this case, the Appellant Company committed default in payment of rent of the premises belonging to the Church of South Indian Trust Association. A notice under Section 434 of the Companies Act, 1956 was issued to the Appellant and thereafter the petition was filed in the High Court of Karnataka for winding up of the Company. While the Company Petition was pending, the Appellant claiming that it has become a sick industrial company, filed a reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act 1985 ("1985 Act"). The Bo....
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.... if so, before which authority? (2) Are the proceedings instituted by a landlord for eviction of a tenant who is a sick company from the premises let out to it, required to be suspended under Section 22(1) of the Act?" 36. Section 22 under which suspension of legal proceedings was claimed has been noticed in paragraph 8 of the judgment. In paragraph 8 of the judgment, following has been observed: "8. Sub-section (1) of Section 22 which alone has relevance to these questions provides as under: "22. Suspension of legal proceedings, contracts, etc.-(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like agains....
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....fect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The same cannot be said with regard to an order staying the operation of the order of the Appellate Authority because in spite of the said order, the order of the Appellate Authority continues to exist in law and so long as it exists, it cannot be said that the appe....
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....two schemes, Appellant 1 Company was not likely to make its net worth exceed its accumulated losses, and therefore, BIFR recommended to the High Court of Bombay that the said Company be wound up. On 4-2-2002, Appellant 1's challenge to the BIFR order was dismissed by AAIFR." 39. After the aforesaid order of the BIFR and AAIFR, ICICI Bank issued a notice under Section 13(2) of the SARFAESI Act, 2002 to the Company. Writ Petition was filed challenging the order of AAIFR dated 04.02.2002 before the Delhi High Court. The Delhi High Court by its interim order on 07.01.2024, stayed both the orders, i.e. order of AAIFR dated 04.02.2002 and BIFR dated 25.07.2001. The Writ Petition filed by the Appellant was dismissed as infructuous by the Delhi High Court, against which an Appeal was filed, which came for consideration before the Hon'ble Supreme Court. The Hon'ble Supreme Court relied on the judgment of the Shree Chamundi Mopeds in paragraph-46, which is as follows : "46. Shri Sundaram is also correct when he refers to the judgment of this Court in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn. [Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn., (1992)....
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....refore, of the opinion that the passing of the interim order dated 21-2-1991 by the Delhi High Court staying the operation of the order of the appellate authority dated 7-1-1991 does not have the effect of reviving the appeal which had been dismissed by the appellate authority by its order dated 7-1-1991 and it cannot be said that after 21-2-1991, the said appeal stood revived and was pending before the appellate authority. In that view of the matter, it cannot be said that any proceedings under the Act were pending before the Board or the appellate authority on the date of the passing of the order dated 14-8-1991 by the learned Single Judge of the Karnataka High Court for winding up of the company or on 6-11-1991 when the Division Bench passed the order dismissing OSA No. 16 of 1991 filed by the appellant Company against the order of the learned Single Judge dated 14-8-1991. Section 22(1) of the Act could not, therefore, be invoked and there was no impediment in the High Court dealing with the winding up petition filed by the respondents." 40. The Hon'ble Supreme Court held that the stay order of the Delhi High Court could not have the effect of reviving the proceedings, which ha....
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....gets jurisdiction only on reference made by the Government. When the operation of the very order of reference was stayed, the question of dispute pending before the Tribunal did not arise inasmuch as the reference order itself stood suspended. So long as stay order was operating, it could not be said that the dispute was pending before the Tribunal. Admittedly, when workmen were dismissed from service stay order was operating. Learned Single Judge as well as the Division Bench of the High Court have proceeded on a wrong footing relying upon the decision of this Court in Shree Chamundi Mopeds Ltd. [(1992) 3 SCC 1 : (1992) 2 SCR 999] that the order of reference was not wiped out by virtue of staying of the operation of order of reference. It is not the question as to whether the order of reference is wiped out but the question is what is the effect of the staying of the operation of order of reference itself. Once the operation of the order of reference is stayed, there is no question of dispute pending before the Tribunal so long as the said order remains in operation because reference precedes dispute. To put it differently, dispute could come up for adjudication by the Tribunal pu....
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....ments was delivered in different contexts. The first judgment of Kihoto Hollohan [Kihoto Hollohan v. Zachillhu, 1992 Supp (2) SCC 651] was delivered in the context of landslide changes that would have taken place had a stay order not been passed in the context of the Tenth Schedule to the Constitution of India, which was enacted to remedy the evil of defection. The second judgment, namely, Ravi S. Naik [Ravi S. Naik v. Union of India, 1994 Supp (2) SCC 641] was also delivered in the same context and the third judgment was delivered in the context of Section 33(2)(b) of the Industrial Disputes Act, 1947. None of these judgments has any direct bearing on the facts before us, which can be said to be covered directly by the judgment in Shree Chamundi Mopeds Ltd." 45. We need to notice now the judgment of this Tribunal in Ashok Kumar Tyagi vs. UCO Bank & Anr. - Company Appeal (AT) (Ins.) No.1323 of 2022 and Mukesh Kumar Jain - Company Appeal (AT) (Ins.) No.930-931 of 2023, which have been referred and relied by both the parties. 46. In Ashok Kumar Tyagi, a Section 7 application filed by UCO Bank was admitted against the CD. An appeal was filed in this Tribunal, in which initially an o....
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.... an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The same cannot be said with regard to an order staying the operation of the order of the Appellate Authority because in spite of the said order, the order of the Appellate Authority continues to exist in law so long as it exists, it cannot be said that the appeal which has been disposed of by the said order has not been disposed of and is still pending....."" 47. Another judgment relied by this Tribunal in the above case was judgment of Hon'ble Supreme Court in the State of U.P. vs. Prem Chopra -(2022) SCC OnLine SC 1770. This Tribunal also considered the judgment of the Hon'ble Supreme Court in BPL Ltd vs. R. Sudhakar. This Tribunal held that difference between stay of an order and quashing of any order are well settled. It was held that in event of the stay of admission of Section 7 Application, the CD is allowed to function and position as was existi....
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....agi vs. UCO Bank and contended that in view of the said judgment, the Adjudicating Authority could not have directed the management to be reinstated. This Tribunal referring to its earlier judgment in Ashok Kumar Tyagi held that Ashok Kumar Tyagi's case did not lay down any proposition that if an order initiating CIRP has been stayed, the result would be to hand over the CD to the ex-management of the CD. In paragraphs 12 and 13 of the judgment, following were laid down: "12. The Adjudicating Authority took the view that in view of the stay of the CIRP of the Corporate Debtor by order dated 25.02.2022 passed by the Hon'ble Supreme Court, the Resolution Professional cannot continue and his all actions are without jurisdiction. Direction was issued to the Resolution Professional to handover the management of the Corporate Debtor to the CEO/Management of the Corporate Debtor, which has been impugned in the present Appeals. The judgment of this Tribunal in 'Ashok Kumar Tyagi' (supra) on which reliance has been placed by the Adjudicating Authority does not lay down any proposition that when order of initiating CIRP has been stayed, the result would be to handover the Corporate Deb....
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....fter staying of the admission order, the IRP cannot function. There cannot be any dispute to the proposition laid down by this Tribunal in Ashok Kumar Tyagi, that after stay of the admission order, IRP cannot discharge any function. Learned Counsel for the Appellant relied on order of the Hon'ble Supreme Court dated 03.09.2024 passed in Civil Appeal No.2661 of 2022 - Shobori Ganguli vs. Amit Goel & Ors. According to the Appellant in the above case, the Hon'ble Supreme Court directed that RP could not have interfered in the functioning of the Company. Civil Appeal No.2661 of 2022 was filed by Suspended Director, in which Appeal initially the Hon'ble Supreme Court had passed an order on 25.02.2022 staying the CIRP and in the said Appeal on various IAs order dated 03.09.2024 was passed by the Hon'ble Supreme Court, which order is as follows: "C.A. No.2661/2022 1. The parties agree that the matter be referred to mediation. The parties also agree on the name of Ms. Liz Mathew, learned senior counsel, as Mediator. 2. The dispute is therefore referred to mediation before Ms. Liz Mathew, learned Senior Counsel. The parties to appear before the learned Mediator on 07.09.2024, as per h....
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....the NCLAT in company Appeal (AT) (insolvency) No. 128/2021." 53. The interim order passed by the Hon'ble Supreme Court was in a particular facts and situation, where the Hon'ble Supreme Court clearly directed stay of the CIRP of the CD and has clarified the interim order dated 25.02.2022 by a subsequent order dated 03.09.2024, that RP would not interfere in the functioning of the Company and the interim order dated 25.02.2022 would mean that affairs of the Company would be run by the Suspended Director and Respondent No.3 to the Appeal. The interim order dated 25.02.2022 of the Hon'ble Supreme Court has its own directions, which were clarified on 03.09.2024. From the interim order dated 25.02.2022 and subsequent order dated 03.09.2024, no ratio can be said to be laid down, as contended by learned Counsel for the Appellant. 54. Learned Counsel for the Appellant has also relied on judgment of the Hon'ble Supreme Court in Mars Remedies Pvt. Ltd. vs. BDH Industries Ltd., decided on 02.05.2023 in Civil Appeal No.5170 of 2022. Learned Counsel for the Appellant submitted that even after the stay on the CIRP of the CD, the Hon'ble Supreme Court permitted Intervenor to pursue his Section ....
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.... granted. On account of the stay so granted, the NCLT has now passed an order dated 12.01.2023 in the intervenor's own application under Section 7 IBC. It is better to reproduced the order passed by the NCLT. It reads as follows: "Hence, we are of the considered view that the present application cannot be considered at this stage. However, the present applicant can avail the remedy of restoring the main application subject to the outcome of the appeal before Hon'ble Supreme Court in CP(IB) 804/2019." As a result of the above order, the proposed intervenor is stuck. The CIRP initiated at the behest of the respondent in the above Civil Appeal is put on hold by this Court and the CIRP initiated by the proposed intervenor is put on hold by the NCLT. Therefore the intervenor is caught in the middle and hence he seeks appropriate directions. The main contention of the corporate debtor who is the appellant in the above main appeal is that there cannot be two CIRPs simultaneously going on against the same debtor. The said contention is legally well-founded. But today, both CIRPs are on hold. This is despite the fact that the order passed in favour of the proposed intervenor in his ow....
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.... the following order: "In the meantime the impugned order(s) passed by the National Company Law Tribunal, Allahabad shall remain stayed until further orders. A copy of the special leave petition be served on the office of learned Attorney General for India. All applications for impleadment/intervention stand allowed." Mr.K.K.Venugopal, learned Attorney General for India appearing for respondent Nos.1 and 2 submitted that the order passed by this Court on 04.09.2017 needs to be vacated or modified because the consequence of the stay would be that the Management of respondent No.3 - Jaypee Infratech Ltd. would stand restored. This was not a consequence intended by this Court. It is urged by him that if the erstwhile Management of the said company continues, it will affect the rights of the creditors and the consumers as well. In the course of the hearing, we have been informed that after the order of stay was passed by this Court, the Interim Resolution Professional (IRP) has handed over records to respondent No.3 - Jaypee Infratech Ltd. ("JIL"). It is submitted by Mr.K.K.Venugopal, learned Attorney General that some time should be granted to the IRP to formulate at least a p....
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....oing restraint shall not apply to nominee Directors of lending institutions (IDBI/ICICI/SBI); e) All suits and proceeding instituted against JIL shall in terms of Section 14(1)(a) remain stayed as we have directed the IRP to remain in Management. Be it clarified that we have passed this order keeping in view the provisions of the Act and also the interest of the home buyers. I.A.stands disposed of accordingly. The matter be listed at 2.00 P.M. on 13.11.2017. The prior date given by this Court i.e. 10.10.2017 stands cancelled." 57. It is submitted that the Hon'ble Supreme Court subsequently modified the interim order and directed moratorium to come into force. Hence, it cannot be said that by an earlier order dated 04.09.2017, staying the admission order, same result would have been achieved. 58. The order of the Hon'ble Supreme Court in Chitra Sharma, does not lay down any proposition of law as contended by the Appellant. The Hon'ble Supreme Court never intended that by virtue of the stay order dated 04.09.2017, the management of the CD would stand reinstated. Considering the submissions of the parties that modification order was issued by the Hon'ble Supreme Court and ....
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....get restored. 8. We are unable to accept this submission. As has been held in Chamundi Mopeds case [Union of India v. V.P. Seth, 1994 SCC (L&S) 1052 : (1994) 27 ATC 851] the effect of stay is that the order is not operative. As the order of CAT is not operative, the order of compulsory retirement remains in force. Of course if the appeal was dismissed, the order of CAT would have got restored. But at the time prosecution was launched, it was the order of compulsory retirement which was effective. Therefore no sanction was required under Section 19 of the Prevention of Corruption Act, 1988. In any event this Court finally quashed the order of CAT. This Court held that the appellant had been compulsorily retired with effect from 10-1-1989. As the appellant had retired with effect from 10-1-1989, on the day prosecution was launched, no sanction was required." 60. The above judgment relied by learned Counsel for the Appellant is clearly distinguishable. The compulsory retirement was made on 04.01.1989 was set aside by CAT, which order was stayed by the SC. Hence, compulsory retirement remained in force. The above judgment is clearly distinguishable and was on its own facts and does ....
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....est Act, 2002. The moratorium on initiation and continuation of legal proceedings, including debt enforcement action ensures a stand-still period during which creditors cannot resort to individual enforcement action which may frustrate the object of the corporate insolvency resolution process. The prohibition on disposal of the corporate debtor's assets would ensure that the corporate debtor or its management is not able to transfer its assets, thereby stripping the corporate debtor of value during the corporate insolvency resolution process. The moratorium also extends to recovery of any property occupied by or in possession of the corporate debtor. It also prevents the termination of a contract that provides for supply of such essential goods and services as may be specified. Access to certain goods and services during the insolvency resolution process may be important for ensuring orderly completion of the proceedings. However, the costs for such goods or services will have to be paid in priority to other costs as part of a resolution plan or during distribution of assets, in case the corporate debtor goes into liquidation. Clause 14 also prescribes the period for which th....
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....under its own supervision. However, when it comes to any clash between Mhada Act and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced under Section 14 the moment a petition is admitted under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition up to the date that the adjudicating authority either allows a resolution plan to come into effect or states that the corporate debtor must go into the liquidation. For this temporary period, at least, all the things referred to under Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management." 65.....
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....emicals and Industries Ltd. and Others v. U.P. State Electricity Board and Others, has held that an order of stay which is granted during the pendency of a writ petition/suit or other proceeding comes to an end with the dismissal of the substantive proceedings and it is the duty of the court in such cases to put the parties in the same position that they would have been in but for the interim order of the court. In that case, this Court rejected the contention that when the operation of the notification itself was stayed, no surcharge could be demanded upon the amount withheld. It was held thus: "11. .... Holding otherwise would mean that even though the Electricity Board, who was the respondent in the writ petitions succeeded therein, yet deprived of the late payment surcharge which was due to it under the tariff rules/regulations. It would be a case where the Board suffers prejudice on account of the orders of the court and for no fault of its. It succeeds in the writ petition and yet loses. The consumer files the writ petition, obtains stay of operation of the notification revising the rates and fails in his attack upon the validity of the notification and yet he is relieved o....
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....such a situation, it is the duty of the Court to put the parties in the same position they would have been but for the interim order of the court, unless the order granting interim stay or final order dismissing the proceedings specifies otherwise. On the dismissal of the proceedings or vacation of the interim order, the beneficiary of the interim order shall have to pay interest on the amount withheld or not paid by virtue of the interim order." 67. Another submission which has been advanced by learned Counsel for the Appellant is that there can be no fetter in the jurisdiction of the Appellate Tribunal in granting an interim order. The Appellate Tribunal exercises the same jurisdiction, which is exercised by the Adjudicating Authority. Learned Counsel for the Appellant has relied on judgment of the Federal Court in Lachmeshwar Prasad Shukul and Ors. Vs. Keshwar Lal Chaudhuri and Ors. - (1940) SCC OnLine FC 10. In the above judgment, the Hon'ble Supreme Court had occasion to consider the power of the Appellate Court, where it was held that Appellate Court exercises same power, which is exercised by the Court of original jurisdiction. 68. There can be no two opinions to the law l....
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.... On passing of the interim order dated 07.03.2023, staying the admission order, the moratorium, which commenced on 22.02.2023, shall be kept in abeyance, but shall not be treated to be quashed, however, the nature of proceedings, i.e. proceedings in rem shall continue to be the same, even after the stay order dated 07.03.2023. Question No. (IV) 71. The submission which has been advanced by the counsel for the appellant is that the application I.A.126/2024 filed by ARCIL deserves to be dismissed since it was barred by principle of res judicata. Res judicata has been pleaded on two counts firstly in Comp. App. (AT) (Ins.) No.274/2023, the promoters have filed the I.A. praying for reversal of amount withdrawn by Axis Bank and other lenders. ARCIL had also filed a reply to the I.A. filed by the RP, in which reply ARCIL has also made prayers praying for seeking a direction for reversal of the amount withdrawn by the Axis Bank and the lenders. Issue of reversal of withdrawal of the amount was categorically raised before this Tribunal and I.A. No.2882/2023 by Shilpi Asthana the promoter in the company appeal seeking reversal of INR 143 crore appropriated by Axis Bank and to declare the ....
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....'State of Kerala & Anr,' reported in [(2000) 6 SCC 359]. 75. Learned counsel for the ARCIL have refuted the above submissions, which submissions we have already noticed in detail. Now we proceed to consider the objection raised by the appellant to the maintainability of I.A. No.126/2024 on principle of Res Judicata, Issue Estoppel and Merger as noted above. Res Judicata 76. The res judicata is pleaded by the appellant on basis of final order dated 10.08.2023 passed by this Tribunal in Comp. App. (AT) (Ins.) No.274/2023. The submission as noted above is that applications which were filed in the said company appeal by promoter as well as by the ARCIL for reversal of the amount withdrawn and appropriated by Axis Bank and other lenders stood rejected in the final order dated 10.08.2023, hence rejection of the applications, where prayer for reversal of the amount was sought shall operate as res judicata. 77. We need to first notice the judgment of this Tribunal dated 10.08.2023, where while dismissing the company appeal by judgment dated 10.08.2023, this Appellate Tribunal also closed the various applications as noted above. Copy of judgment dated 10.08.2023 is filed as Annexure - 3....
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....ation and any finding on any of the applications either filed by the promoter or by ARCIL where reversal of amount withdrawn and appropriated by Axis Bank and other lenders was prayed for. 81. The question to be answered is as to whether the closure of the above application by the judgment dated 10.08.2023 should operate res judicata for filing any application before NCLT praying for reversal of the amount withdrawn and appropriated by Axis Bank. The principles of res judicata are well settled. 82. We need to notice the judgment of the Hon'ble Supreme Court in 'Ebix Singapore Pvt. Ltd.' Vs. 'Committee of Creditors of Educomp Solutions Ltd. & Anr.' reported in [(2022) 2 SCC 401] which judgment arose out of insolvency proceedings under the IBC, where principle of res judicata was noticed and elaborated. The Hon'ble Supreme Court under heading "K.1.1 Res Judicata" has noticed and elaborated the principles of res judicata in paragraph 178 after noticing Section 11 of the Code of Civil Procedure, 1908. In paragraph 179 & 181, Hon'ble Supreme Court laid down following: "179. In Satyadhyan Ghosal v. Deorajin Debi [Satyadhyan Ghosal v. Deorajin Debi, (1960) 3 SCR 590 : AIR 1960 SC 941]....
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.... suit or the suit in which such issue is subsequently raised; and (v) The matter directly and substantially in issue in the subsequent suit must have been heard and finally decided by the court in the first suit." ( emphasis supplied ) 83. One of the ingredients which has noticed by the Hon'ble Supreme Court in above judgment is that the matter is heard and finally decided by the Court in the first suit. Hon'ble Supreme Court further noticed that matter must have been heard on merits and finally decided. Another judgment of the Hon'ble Supreme Court has been noticed where it has been laid down "to attract the doctrine of res judicata it must be conscious adjudication of an issue". In paragraphs 183, 185 & 186, following was laid down: "183. The meaning of the phrase "heard and finally decided" was considered by a judgment of a two-Judge Bench of this Court in Krishan Lal v. State of J&K [Krishan Lal v. State of J&K, (1994) 4 SCC 422 : 1994 SCC (L&S) 885], where it was held that the matter must have been heard on merits to have been "heard and finally decided". B.L. Hansaria, J. speaking for the Court, held : (SCC pp. 428-29, para 12) "12. Insofar as the second ground given ....
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....e first withdrawal application makes it clear that it had only considered only that part of Prayer (iv) which related to re-evaluation of the resolution plan, possibly because Ebix had hoped to re-evaluate the resolution plan on the basis of the information received as a consequence of Prayers (i) and (ii) and those prayers were rejected since such information was not available." 84. The principle thus firmly established is that for applying the plea of res judicata there has to be a conscious adjudication and matter directly and substantially issue is heard and finally decided. In the Comp. App. (AT) (Ins.) No.274/2023 challenge was made by the Suspended Director to the admission of Section 7 application filed by the financial creditor and as noticed above the entire judgment is devoted to consideration of grounds for challenging the order of admission of Section 7 application. No other issue was noticed, heard or decided. The applications which were filed in the appeal seeking reversal of amount withdrawn by Axis Bank and other Bank were not even considered on merit or decided and as noted above application were closed on account of dismissal of the appeal. When all applications....
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....nto which category a case falls? One test is that if the issue was "necessary" to be decided for adjudicating on the principal issue and was decided, it would have to be treated as "directly and substantially" in issue and if it is clear that the judgment was in fact based upon that decision, then it would be res judicata in a latter case (Mulla, p. 104). One has to examine the plaint, the written statement, the issues and the judgment to find out if the matter was directly and substantially in issue (Isher Singh v. Sarwan Singh [Isher Singh v. Sarwan Singh, AIR 1965 SC 948] and Syed Mohd. Salie Labbai v. Mohd. Hanifa [Syed Mohd. Salie Labbai v. Mohd. Hanifa, (1976) 4 SCC 780] ). We are of the view that the above summary in Mulla is a correct statement of the law. 19. We have here to advert to another principle of caution referred to by Mulla (p. 105): 'It is not to be assumed that matters in respect of which issues have been framed are all of them directly and substantially in issue. Nor is there any special significance to be attached to the fact that a particular issue is the first in the list of issues. Which of the matters are directly in issue and which collaterally or in....
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....ught to be raised against the ARCIL by the appellant on the ground that ARCIL having raised the issue of reversal of amount withdrawn by Axis Bank in the Comp. App. (AT) (Ins.) No. 274/2023 and which relief was not considered the said order estops the ARCIL from re-agitating the issue. 90. Learned counsel for the appellant has relied on the judgment of the Hon'ble Supreme Court in the matter of 'Hope Plantations Limited' Vs. 'Taluk Land Board, Peermade & Anr.' reported in [(1999) 5 SCC 590], where by dealing with res judicata and Issue Estoppel, Hon'ble Supreme Court laid down following in paragraph 26 : "26. ...These two aspects are "cause of action estoppel" and "issue estoppel". These two terms are of common law origin. Again, once an issue has been finally determined, parties cannot subsequently in the same suit advance arguments or adduce further evidence directed to showing that the issue was wrongly determined. Their only remedy is to approach the higher forum if available. The determination of the issue between the parties gives rise to, as noted above, an issue estoppel. It operates in any subsequent proceedings in the same suit in which the issue had been determined. I....
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....ks have pro-rata charge on the funds. ASM also confirmed that their appointment was made on behalf of all lenders by Axis Bank. Previous minutes of JLM also confirmed as such. Company stated that on one hand it is not able to make payment of statutory dues and operational creditors which are necessary for survival of the business and on the other hand one of the lender it taking preferential payment over such dues and other lenders." 93. In another JLM meeting which took place on 04.05.2023 where ARCIL has opined that lender should put an intervention application before the NCLT & NCLAT for maintaining the status quo for safe guarding business of company. It is useful to notice following discussions among lenders which is recorded in JLM meeting : "...Thereafter, KPMG and the company excused themselves and lenders had a discussion among themselves on the following issues: 1. Indus Ind informed that hearing on its CIRP application against the company has been postponed to May 12, 2023 before NCLAT. 2. Arcil once again stated that a viable solution needs to be arrived at operational creditor issue including ZEEL. It suggested that all payment except related party dues may be....
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.... Bank informed that, no further debits in the Axis Bank accounts should be allowed without concern of all the lenders. If so then the same will be at the cost of Axis Bank. 12. Axis bank stated if such was the issue then why all lenders have appropriated INR 71 crs in last 3 years including INR 6 crs by IDBI in FY 2023. 13. IDBI clarified that it has appropriated INR 6 crs in FY 2023 as it was margin money provided by borrower against BGs issued by IDBI and these funds were exclusively charged to IDBI. 14. Axis Bank to come back by May 10, 2023 and accordingly next steps to be decided thereafter." 94. The adjudicating authority in the impugned order has noted the details of the withdrawal made by the Axis Bank from the corporate debtor's account. While noticing the submission of the ARCIL, details of amount withdrawn by different lenders totalling to Rs.143.15 crore, following was noticed in paragraph 23 : " 23. It is submitted by ARCIL that there was an escrow account whereby Axis Bank (Respondent 2/R-2) was acting as Escrow Bank and certain amounts were lying in the credit of the Corporate Debtor. However, during the stay period, all the monies were illegally withdrawn a....
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....o be incorrect or any excess payment is determined to have been made due to oversight/wrong calculation etc. at any time. We also undertake to refund the amount within 10 days of receipt of the notice asking for the refund, failing which the amount erroneously paid or paid in excess shall be recovered from or adjusted against any other claim for export benefits by EEPC or by the licensing authorities of CCI & C." and it is on this score it may be noted that in the event of there being a specific undertaking to refund for any amount erroneously paid or paid in excess (emphasis supplied), question of there being any estoppel in our view would not arise. In this context correspondence exchanged between the parties are rather significant. In particular letter dated 30-11-1990 from the Assistant Development Commissioner for Iron & Steel and the reply thereto, dated 8-3-1991 which unmistakably record the factum of non-payment of JPC price." 96. The present is not a case where there was any such representation by ARCIL to the Axis Bank to withdraw the amount from the corporate debtor's account rather ARCIL has objected which is recorded in the minutes of the JLM dated 25.04.2023. 97. ....
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....2023 passed in the appeal stand merged with the final order of dismissal and the benefit taken by any of the parties has to be returned. It is submitted that Axis Bank and other lenders by taking advantage of the interim order dated 07.03.2023 withdrew the amount from the account of the corporate debtor, which interim order having ultimately come to end by dismissal of the appeal, the party has to be compensated i.e., the corporate debtor has to be refunded the amount withdrawn from its account. 103. The Doctrine of Restitution is based on the latin legal maxim "actus curiae neminem gravabit". The Hon'ble Supreme Court in 'South Eastern Coalfields Ltd.' Vs. 'State of M.P. & Ors.' reported in [(2003) 8 SCC 648] had occasion to consider the Principle of Restitution. In paragraph 26, following has been laid down : "26. In our opinion, the principle of restitution takes care of this submission. The word "restitution" in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order, what has been lost to him in execution of decree or order of the court or in direct consequence of a decree or order (see Zafar Khan v. Board of Revenue....
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....her defeat the same. Undoing the effect of an interim order by resorting to principles of restitution is an obligation of the party, who has gained by the interim order of the court, so as to wipe out the effect of the interim order passed which, in view of the reasoning adopted by the court at the stage of final decision, the court earlier would not or ought not to have passed. There is nothing wrong in an effort being made to restore the parties to the same position in which they would have been if the interim order would not have existed." 104. It shall be sufficient to notice Constitution Bench judgment of the Hon'ble Supreme Court in the matter of 'Indore Development Authority' Vs. 'Manoharlal & Ors.' reported in [(2020) 8 SCC 129]. Hon'ble Supreme Court in the above judgment had occasion to consider the principle it was held that if any interim order made is available during the pendency of the litigation, they are subject to final decision and in case the matter is dismissed as without merit, interim order automatically dissolved. In paragraphs 320 & 323, following was laid down: "320. The maxim actus curiae neminem gravabit is founded upon the principle due to court proc....
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....itution is founded on the ideal of doing complete justice at the end of litigation, and parties have to be placed in the same position but for the litigation and interim order, if any, passed in the matter. In South Eastern Coalfields Ltd. v. State of M.P. [South Eastern Coalfields Ltd. v. State of M.P., (2003) 8 SCC 648], it was held that no party could take advantage of litigation. It has to disgorge the advantage gained due to delay in case lis is lost. The interim order passed by the court merges into a final decision. The validity of an interim order, passed in favour of a party, stands reversed in the event of a final order going against the party successful at the interim stage. Section 144 of the Code of Civil Procedure is not the fountain source of restitution. It is rather a statutory recognition of the rule of justice, equity and fair play. The court has inherent jurisdiction to order restitution so as to do complete justice. This is also on the principle that a wrong order should not be perpetuated by keeping it alive and respecting it. In exercise of such power, the courts have applied the principle of restitution to myriad situations not falling within the terms of Se....
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....ibutable to the fault of either party need to be weighed. ' The principle of restitution has been statutorily recognised in Section 144 of the Code of Civil Procedure, 1908. Section 144 CPC speaks not only of a decree being varied, reversed, set aside or modified but also includes an order on a par with a decree. The scope of the provision is wide enough so as to include therein almost all the kinds of variation, reversal, setting aside or modification of a decree or order. The interim order passed by the court merges into a final decision. The validity of an interim order, passed in favour of a party, stands reversed in the event of a final decision going against the party successful at the interim stage. ... 27. ... This is also on the principle that a wrong order should not be perpetuated by keeping it alive and respecting it (A. Arunagiri Nadar v. S.P. Rathinasami [A. Arunagiri Nadar v. S.P. Rathinasami, 1970 SCC OnLine Mad 63] ). In the exercise of such inherent power, the courts have applied the principles of restitution to myriad situations not strictly falling within the terms of Section 144. 28. That no one shall suffer by an act of the court is not a rule confined t....
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....t by holding as under: "The principle of restitution has been statutorily recognized in Section 144 of the Civil Procedure Code, 1908. Section 144 CPC speaks not only of a decree being varied, reversed, set aside or modified but also includes an order on a par with a decree. The scope of the provision is wide enough so as to include therein almost all the kinds of variation, reversal, setting aside or modification of a decree or order. The interim order passed by the court merges into a final decision. The validity of an interim order, passed in favour of a party, stands reversed in the event of a final decision going against the party successful at the interim stage. Unless otherwise ordered by the court, the successful party at the end would be justified with all expediency in demanding compensation and being placed in the same situation in which it would have been if the interim order would not have been passed against it. The successful party can demand (a) the delivery of benefit earned by the opposite party under the interim order of the court, or (b) to make restitution for what it has lost; and it is the duty of the court to do so unless it feels that in the facts and on ....
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....that restitution applies any inter-parties. It is submitted that appeal was filed by the promoters, Shilpi Asthana, hence the restitution cannot be pressed against the lenders. 108. The present is not a case where it is the promoters of the corporate debtor who has withdrawn any amount from the account of the corporate debtor. It is the Axis Bank and other lenders who by taking advantage of the interim order dated 07.03.2023 proceeded to withdraw the amount from the account of the corporate debtor on the pretext that order admitting Section 7 application having been stayed by this Tribunal, there is no moratorium operating on the date after 07.03.2023 hence they were fully entitled to withdraw the amount from the account of the corporate debtor. Thus, the present is the clear case where Axis Bank and other lenders are relying the interim order 07.03.2023 for withdrawing the amount from the account of the corporate debtor. Axis Bank and respondents cannot be heard in saying that they have not taken any advantage of the interim order dated 07.03.2023 hence Doctrine of Restitution is not applicable on them. Advantage of the interim order was taken by the Axis Bank and other lenders c....
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....of admission order, IRP could not perform any function. The judgment of 'Ashok Tyagi' (Supra) on which reliance is placed by the counsel for the RP was delivered on 21.11.2022 i.e., much before commencement of the CIRP against the corporate debtor. In 'Ashok Kumar Tyagi' (Supra), this Tribunal has categorically rejected the prayer of Suspended Director to hand over the management and to permit the management to function which was functioning prior to admission order 28.10.2022. In paragraph 18 of the judgment, following was observed : " 18. The difference between stay of an Order and quashing of any Order are well settled as noticed above. In event on the stay of the admission of Section 7 Application, the Corporate Debtor is allowed to function and position as was existing prior to 28.10.2022 is restored, there shall be no difference in staying an Order and quashing of an Order. What the Appellants are asking/praying is restoration of the position as was prior to admission of Section 7 Application. We can not accept such request made by the Appellant. The Admission Order of Section 7 Application has only been stayed and not quashed thus the Corporate Debtor can not be permitted ....
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....ended by IndusInd Bank one of the lenders who initiated Section 7 proceeding, after appointment of the IRP, he has to act in the interest of the corporate debtor and in accordance with the IBC Code and the CIRP Regulations. We are of the view that adjudicating authority has rightly rejected the application I.A. filed by the RP. In paragraph 78.6, adjudicating authority has made following observations : " 78.6 Thus, in view of the same and also the clear precedence set out in Ashok Kumar Tyagi (supra) which was passed prior to the stay granted in the present matter, the RP ought not to have handed over the management and control of the Corporate Debtor back to the suspended directors without appropriate instructions/ directions from this Tribunal. " 115. We do not find any ground to interfere with the observations made by the adjudicating authority in paragraph 78. Question No. VI is answered in following manner: Finding and observation made by adjudicating authority in paragraph 78, do not deserve to be set aside. Question No. ( VII ) 116. As noted above ARCIL has also filed Comp. App. (AT) (Ins.) No. 2192/2024 challenging the order of the adjudicating authority to the limite....