TaxTMI 
TaxTMI 
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2025 (11) TMI 1282
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....(IB) No.428/KB/2023 in C.P. (IB) No.294/KB/2021 approving the Resolution Plan. In I.A. (IB) No.428/KB/2023. The Appellant in the Resolution Plan has been proposed Nil payment. Aggrieved by the said order, this Appeal has been filed. 2. Brief facts of the case necessary to be noticed for deciding the Appeal are: (i) The Appellant is a company involved in the business of manufacturing, trading and selling various kinds of agricultural equipment and crop solution products viz Tractors, Harvestor combined. SREI Equipment Finance Ltd. (CD) is a financial service provider. (ii) An Agreement dated 01.07.2016 was entered between the Appellant and the CD, whereby it was agreed to establish a cooperation, under which the CD was to provide competitive financial products to the customers of the Appellant of the sales network to finance customers' acquisition of equipment. In the Agreement, the Appellant was referred with its earlier name i.e. New Holland Flat (India) Pvt. Ltd. and SREI Equipment Finance Ltd. was referred to as Financial Institution or FI. The Company was to receive remuneration from the Financial Institution as provided in Clause-5, which was referred as '....
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....he Appellant has been admitted to the extent of Rs. 8,66,89,866/-. The said letter further called upon the Appellant to pay the balance amount of Rs. 5,63,25,395/-. The Administrator called upon the Appellant to pay the agreed amount and called the Appellant for discussion. (vii) In the CIRP of the CD, a Resolution Plan was submitted by National Asset Reconstruction Company Limited ("NARCL"), which came to be approved by the Committee of Creditors ("CoC"). (viii) After approval of the Plan, the RP filed an application for approval of the Plan before the Adjudicating Authority. Various applications were also filed before the Adjudicating Authority. The Adjudicating Authority vide the impugned order dated 11.08.2023, approved the Resolution Plan and decided various applications. (ix) The Appellant aggrieved by order has filed this Appeal. In the Appeal, the Appellant has prayed for following reliefs: "a) Set aside order dated August 11, 2023 passed by the Ld. Adjudicating Authority in I.A. No. 428/KB/2023 in CP(IB) No.294/KB/2021 to the extent it demands payment from the Appellant without set-off while reducing the claim of Appellant from the Corpo....
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....Appellant is not questioning the payouts in the Resolution Plan to the Appellant, which is Nil. It is submitted that the Appellant is not praying for setting aside the Resolution Plan and only limited prayer in the Appeal is to declare that the claim filed by the Appellant after setting off the amount payable by the Appellant to the CD, was rightly claimed by the Appellant in Form-B in the claim filed on 22.10.2021. Learned Counsel for the Appellant has placed reliance on the judgment of the Hon'ble Supreme Court in Bharti Airtel Ltd. and Anr. vs. Vijaykumar V. Iyer & Ors. in Civil Appeal Nos.3088-3089 of 2020 decided on 02.04.2024, reported in (2024) 6 SCC 418. 5. Learned Counsel for the RP refuting the submission of the Appellant submits that the impugned order dated 11.08.2023 has already been affirmed by this Tribunal by judgment dated 05.01.2024 in Company Appeal (AT) (Ins.) No.1072 of 2023 - Authum Investment and Infrastructure Ltd. vs. Rajneesh Sharma Administrator of SREI Equipment Finance Ltd. and SREI Infrastructure Finance Ltd. & Ors., which order has already been affirmed by the Hon'ble Supreme Court vide its judgment dated 07.03.2024 in Civil Appeal No.3606 of 2024 ....
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....,97,05,608/-, hence, it cannot be allowed to challenge the impugned order. It is submitted that set-off is permissible under Regulation 29 of the IBBI (Liquidation Process) Regulation, 2019, whereas no set-off is permissible under CIRP. It is submitted that judgment of the Hon'ble Supreme Court in Bharti Airtel Ltd. is not applicable as in that case, it was held that in insolvency proceedings, set-off is not permissible, which judgment in no manner supports the submission of the Appellant. 7. We have considered the submissions of the learned Counsel for the parties and have perused the record. 8. Before we proceed to consider the respective submissions of the parties, we need to notice the submission of the Appellant that the Appellant is not praying for setting aside the impugned order dated 11.08.2023 approving the Resolution Plan. The Appellant's case is that it is not aggrieved by the approval of Resolution Plan. It is submitted that the Appellant is also not aggrieved by payout in the Resolution Plan to the Appellant, which is Nil and the limited challenge by the Appellant is only to the extent that Administrator has not allowed set-off of the amount, which was payable b....
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....s of agricultural equipment's ("Equipment") namely Tractors, harvesters, combine, balers, and other farm equipment etc and their spare parts and accessories. The Operational Creditor sells the equipment to customers directly or through its appointed authorised dealers. Corporate Debtor used to finance the Equipment sold by the Operational Creditor and/or the dealers of the Operational Creditor. Operational Creditor used to raise invoices of the fees as per the terms of the Agreement on the Corporate Debtor and Corporate Debtor used to make payment to the Operational Creditor for the equipment sold to customers. Further, a Memorandum of Understanding dated January 12, 2018 was executed between the Corporate Debtor and the operational Creditor wherein subject to the corporate Debtor granting credit facilities to the customers for the sale of Equipment of the Operational Creditor, the Operational Creditor agreed to provide a fixed amount as loss sharing amount to cover the losses in case of default made by any customer in repaying the credit facility to the Corporate Debtor. For this amount, Corporate Debtor used to raise invoices on the Operational Creditor. The....
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....ol arrangement entered into vide Memorandum of Understanding dated January 12, 2018" 11. The claim was filed in Form-B under IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ('CIRP Regulations, 2016). Claim by Operational Creditors are dealt in Regulation 7. Regulation 7, sub-regulation (1) is as follows: "7. Claims by operational creditors - (1) A person claiming to be an operational creditor, other than workman or employee of the corporate debtor, shall 33 [submit claim with proof] to the interim resolution professional in person, by post or by electronic means in Form B of the 34 [Schedule-I ]: Provided that such person may submit supplementary documents or clarifications in support of the claim before the constitution of the committee." 12. Schedule-I of the CIRP Regulation prescribes Form-B, which is as follows: "(SCHEDULE-I) FORM B Proof of claim by Operational Creditor except workmen and employees (Under Regulation 7 7 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016) [Date] To The Interim Resolution Professional / Res....
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...., currently residing at [insert address], hereby declare and state as follows:- 1. [Name of corporate debtor], the corporate debtor was, at the insolvency commencement date, being the... day of..................20....., actually indebted to me in the sum of Rs. [insert amount of claim]. 2. In respect of my claim of the said sum or any part thereof, I have relied on the documents specified below: [Please list the documents relied on as evidence of claim]. 3. The said documents are true, valid and genuine to the best of my knowledge, information and belief and no material facts have been concealed therefrom. 4. In respect of the said sum or any part thereof, neither I nor any person, by my order, to my knowledge or belief, for my use, had or received any manner of satisfaction or security whatsoever, save and except the following: [Please state details of any mutual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim]. Date: Place: (Signature of the claimant) VERIFICATION I, [Name] the claimant hereinabove, do hereby verify that th....
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....RP") under the Insolvency and Bankruptcy Code, 2016 ("Code") as directed vide order dated October 8, 2021, ("Court Order") of the Hon'ble National Company Law Tribunal at Kolkata ("NCLT"), which had admitted the application filed by the Reserve Bank of India ("RBI") on October 8, 2021 under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Provider and Application to Adjudicating Authority) Rules, 2019 ("FSP Rules"). Please note that as per Rule 5(b)(i) of the FSP Rules, an interim moratorium commences upon the filing of any such application and subsequently, upon admission of such application, a moratorium commences. In this regard, I would like to reiterate and draw your attention to the provisions of Section 14 of the Code, setting out certain actions in respect of the Company which are prohibited from taking place during the CIRP period, including: (a) the institution of suits or continuation of pending suits or proceedings against the Company, including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, aliena....
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....ues payable by the Appellant to the CD, which is Rs. 5,56,59,526/-. The claim of the Appellant has also been admitted by the RP to the tune of Rs. 8,66,89,866/-. Thus, the claim admitted in the CIRP of the CD is much more than the amount due from the Appellant to the CD. Section 14 of the IBC, which provides for moratorium, prescribes following: "14. Moratorium. - (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial....
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....he concept of set-off. The Hon'ble Supreme Court has held that set-off permitted under Liquidation Regulations, 2016, cannot be applied to the CIRP. However, two exceptions were mentioned by the Hon'ble Supreme Court in the judgment i.e. (1) Parties entitle to contractual set-off; and (2) equitable set-off. The above has been laid down by the Hon'ble Supreme Court in paragraphs 30 to 33, which are as follows: "30. Given the aforesaid legal position, we do not think that the provisions of statutory set-off in terms of Order VIII Rule 6 of CPC or insolvency set-off as permitted by Regulation 29 of the Liquidation Regulations can be applied to the Corporate Insolvency Resolution Process. The aforesaid rule would be, however, subject to two exceptions or situations. The first, if at all it can be called an exception, is where a party is entitled to contractual set-off, on the date which is effective before or on the date the Corporate Insolvency Resolution Process is put into motion or commences. The reason is simple. The Corporate Insolvency Resolution Process does not preclude application of contractual set-off. During the moratorium period with initiation of the Corporate I....
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....connected, harbingering the claim and the counterclaim. It would be manifestly unjust to bifurcate the connected transactions to accept and enforce the claim of one party without adjusting the amount due to the second party. This, in our opinion, does not contradict the eclipse by way of moratorium, because the transactions are treated as singular and one. When transactions are closely connected, a claim for transactional set-off during the moratorium period on a claim by the Resolution Professional, is by way of a defence to protect the legitimate expectation and respect legal certainty." 20. The contractual set-off has been referred to as transactional set-off. While dealing with equitable set-off, it was held that equitable set-off should be genuine and clearly established on facts and in law, so as to make it in equitable and unfair that the debtor be asked to pay money, without adjustment sought that is fully justified and legal. When we come to the facts of the present case, the transactions between the parties were as per the Agreement dated 01.07.2016 and MoU dated 12.01.2018. Both the Appellant and CD were entitled to payments with respect to which, claims were made aga....
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....me liable to pay the balance amount in terms of the letters of understanding. The amounts have become payable post the commencement of the Corporate Insolvency Resolution Process. For the same reason, we will also reject the argument that by not allowing set-off, new rights are being created and, therefore, Section 14 of the IBC will not be operative and applicable. Moratorium under Section 14 is to grant protection and prevent a scramble and dissipation of the assets of the corporate debtor. The contention that the "amount" to be set-off is not part of the corporate debtor's assets in the present facts is misconceived and must be rejected." 22. Thus, in the above case, the amount became payable post the commencement of CIRP. The above was not a case of any contractual set- off or any equitable set-off. The judgment of the Hon'ble Supreme Court in Bharti Airtel Ltd., thus clearly supports the submission of the Appellant that present case is covered by exception. It is relevant to notice that law laid down by Hon'ble Supreme Court in Bharti Airtel Ltd. was not available during the CIRP and has been delivered only on 02.04.2024 during pendency of the Appeal. The law delivered by t....
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....fected its right of being served notice of the meeting of the CoC, available under Section 24(3)(c) IBC to an operational creditor with aggregate dues of not less than ten per cent of the debt and, secondly, in the proposed plan, outlay for the appellant got reduced, being a percentage of the dues payable. In our view, for the reasons above, the resolution plan stood vitiated. However, neither NCLT nor Nclat addressed itself on the aforesaid aspects which render their orders vulnerable and amenable to judicial review. 54.2. The resolution plan did not specifically place the appellant in the category of a secured creditor even though, by virtue of Section 13-A of the 1976 Act, in respect of the amount payable to it, a charge was created on the assets of the CD. As per Regulation 37 of the CIRP Regulations, 2016, a resolution plan must provide for the measures, as may be necessary, for insolvency resolution of the CD for maximisation of value of its assets, including, but not limited to, satisfaction or modification of any security interest. Further, as per Explanation 1, distribution under clause (b) of sub-section (2) of Section 30 must be fair and equitable to each class ....