TaxTMI 
TaxTMI 
2025 (11) TMI 1558
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.... The present appeal filed under Section 61 of Insolvency and Bankruptcy Code 2016 ('IBC' in short) by the Appellant arises out of two sperate orders dated 22.03.2024 (hereinafter referred to as 'Impugned Orders') passed by the Adjudicating Authority (National Company Law Tribunal, Kolkata, Bench- II) in I.A. No. 15/KB/2024 in T.A. No.8/KB/2022 and I.A. No.2/KB/2024 in TP No. 4/KB/2022. By the impugned orders, the Adjudicating Authority has dismissed I.A. No.15 of 2024 upholding the rejection of claims of the Appellant filed with the Resolution Professional and approved I.A. No.2 of 2024 approving the resolution plan of the Corporate Debtor. Aggrieved by the impugned orders, the present appeal has been preferred by the Appellant. 2. Outlining the factual matrix of the matter, the salient events are as under: • The genesis of the present proceedings arises out of the winding up orders issued by the Hon'ble Calcutta High Court on 04.06.1990 in respect of Rishra Steel Ltd. • A Single Judge Bench of the Calcutta High Court on 02.05.1997 approved a scheme of revival of Rishra Steel by inducting Sylvan Commercial Pvt. Ltd. ('Sylvan' in short) as a promoter. ....
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....Debtor by the Adjudicating Authority on 18.07.2022 with the last date of claims filing being 01.08.2022. The CoC approved the plan of Successful Resolution Applicant ('SRA' in short) on 15.05.2023 following which the RP filed I.A. No. 85 of 2023 before the Adjudicating Authority for approval of the plan. The plan was remitted back to the CoC by the Adjudicating Authority for certain procedural compliances with regard to participation of suspended management in terms of Section 24 of IBC. • IA No.145/KB/2023 was filed by Sylvan in the meantime before the Adjudicating Authority to adjudicate on their claims in terms of the order of the Hon'ble Supreme Court of 06.08.2021. On 05.10.2023, the Adjudicating Authority while disposing of IA No.145/KB/2023 directed Sylvan to submit its claims before the RP irrespective of claims filed by Sylvan before the OL during the earlier winding-up process by distinguishing it from current insolvency proceedings. • The Appellant filed their claim of Rs. 245 cr. before the RP on 04.11.2023 to which the RP informed the Appellant on 08.11.2023 that the claim was not submitted in the prescribed format. • The Appellan....
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.... certified these expenses and accepted the expenses claimed by the Appellant amounting Rs. 2.15 cr. While admitting that the Division Bench of Calcutta High Court had set aside the Single Bench Order on 03.10.1997, it was asserted that the Division Bench had taken notice that the Appellant had made considerable investments. Directions had been issued thereafter by the Calcutta High Court on 17.08.2006 allowing Sylvan to lodge their claims with the OL which was affirmed by the Hon'ble Apex Court on 26.11.2019. However, as the OL admitted their claim only partially, this was challenged by them before the Hon'ble Apex Court which transferred the matter to NCLT, Kolkata for adjudication on 06.08.2021 while also directing that the OL's report and objections thereto of the Appellant be also considered. 4. Elaborating further it was stated that in pursuance of the orders of the Hon'ble Supreme Court, the Adjudicating Authority had entrusted the RP to collate the claims of the Appellant. The Appellant had submitted their claim of Rs. 245 Cr. in the prescribed format before the RP on 09.11.2023 along with supporting documents. It was further asserted that though the OL had already sent t....
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....on plan. 7. Refuting the contentions made by the Appellant, Shri Abhijeet Sinha, Ld. Senior Counsel representing the RP submitted that the Appellant was not entitled to refund of any amount which it had invested in the Corporate Debtor company as the orders of the Single Bench of the Calcutta High Court had clearly stipulated that the liability created by Sylvan shall be their own liability and not that of the company or the OL. Further, it was pointed out that when the Single Bench order of 02.05.1997 clearly held Sylvan to be a 'promoter', it could not claim to be a creditor but was present in the capacity of investor- promoter. While such a claim by an investor-promoter was permissible for collation under Section 528 of the Companies Act, 1956 in winding-up proceedings, IBC only recognizes admission of claim only in respect of creditors. Much emphasis was laid on the fact that the Report of the Administrator, basis a certificate issued by the internal Auditor of Sylvan, without any independent assessment/verification made by the Administrator cannot be held to have substantiated the claim of Sylvan. 8. Furthermore, when the Hon'ble Supreme Court on 06.08.2021 vide its orde....
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.... to revival of the Corporate Debtor but were of a frivolous nature. Under such circumstances, the RP could not have accepted these claims without proper verification. In support of their contention, reliance has been placed on the judgment of this Tribunal in Umesh Kumar v. Narendra Kumar Sharma in CA (AT)(Ins) No. 100 of 2024 in which it has been held that the RP is expected to exercise due diligence while examining invoices and could exercise the discretion of seeking additional information for this purpose. 11. It was further submitted that the Adjudicating Authority had bestowed the indulgence of allowing the Appellant to file their claim even at the stage of approval of the resolution plan by the Adjudicating Authority. No prejudice was caused to the Appellant since adequate opportunity was provided to submit their claim. However, the RP is not expected to wait indefinitely for any claimant to submit their claims. The process of plan approval cannot remain an open-ended and a never-ending process at the whims and fancies of a solitary claimant who falters to file the claim despite being shown leniency to submit belated claims. It was therefore contended that now that the re....
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....ed way back on 18.07.2022 by approving their resolution plan. 14. It was further asserted that the SRA had not only infused the committed amount but had cleared the entire admitted claims of creditors including government dues under the resolution plan without making any haircut. Not only were the admitted claims honoured but done within the committed timelines in accordance with the clauses of the resolution plan. The plan had also been consummated to the satisfaction of the Monitoring Committee. In support of their contention, reliance has been placed on the judgment of this Tribunal in Bharat Petroresources Ltd. v. Monnet Ispat and Energy Ltd. in CA (AT) (Ins) No. 550 of 2018 wherein challenge to a resolution plan was rejected on implementation of the plan having taken place. 15. We have also heard Ms. Madhumita Bhattacharya, Ld. Advocate for the State of West Bengal who has filed an impleadment application. It was submitted that subject land measuring 37.56 acres under Mouza-Rishra and Konnagar, Hooghly was allowed to be retained by the Corporate Debtor for the purpose of running the mill. Hence, the Corporate Debtor was only a retainer and not the owner of the said land,....
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....directions churned out from the time the Corporate Debtor underwent liquidation proceedings and capture the essence of each these orders/directions. 20. The first in the sequence of court proceedings purportedly bearing relevance on the present matter is the decision of the Single Bench of the Calcutta High Court dated 02.05.1997. The relevant excerpts of the said order are as extracted below:- "....... c) The said Promoter Company will restart production for the purpose of providing employment to the workers of the Company in liquidation and will carry on business by utilising the assets, properties, plants and machinery of the said Company under the supervision and control of Shri B.L Jain, a retired Judge of the Court who will act as Administrator and for his services will be entitled to monthly remuneration ........ l) Any liability created by the said promoter company in course of running management and/or controlling the said company will be the exclusive liability of the said promoter company and same shall not be the liability of the official Liquidator or the said company in liquidation or the company in liquidation. Similarly, if any asset is....
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....foregoing, reasons, the impugned order cannot be sustained and is set aside. The matter is remitted back to the learned Company Judge for passing a fresh order in accordance with law and after giving an opportunity of hearing to all concerned. The learned Company Judge may issue an appropriate advertisement. The official liquidator shall take over possession of the properties in question and shall take all steps to preserve the same efficiently and diligently. The learned trial Judge is requested, keeping in view the peculiar facts and circumstances of this case, to give top most priority to the hearing of the matter and disposed of the same at his earliest convenience. We are not unmindful of the fact that in the meantime the Respondent no 1 has incurred certain expenditures. The learned trial Judge, we are sure, would consider the said question as also the question that the workmen are out of employment for a long time. They have also not been paid their dues and allegedly (illegible text) out of starvation and as such it would be fit and proper that the matter is disposed of at an early date......." (Emphasis supplied) When we read the Division Bench order, it is ....
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.... Ghosh, learned counsel, to adjudicate the claim dated 09.07.2008 of the new added respondent viz M/s Sylvan Commercial Pvt. Ltd., within a period of three months from today." (Emphasis supplied) From a plain reading of the above orders, we find that Hon'ble Supreme Court had only observed that certain amount had been invested by Sylvan which required adjudication by OL while leaving it to the OL to crystallize the amount purportedly invested by the Sylvan- Appellant in the Corporate Debtor. 24. In pursuance of the directions of the Hon'ble Supreme Court, the claim of Sylvan of Rs. 2.15 cr. was adjudicated upon by the OL as may be seen at page 206-213 of APB. The relevant portion of OL's report on adjudication of Sylvan's claim is as reproduced below: " ......... Subsequently, hearings have been held on 14.01.2020, 05.02.2020 and 07.02.2020 when the parties for and against the claim have been heard, extensively. Stack of documents relating to the said claim of Sylvan Commercial Pvt. Ltd. were submitted in 11 files bearing Nos. Vol. 1 to Vol. 11 in two sets, one comprising the photocopies of vouchers/ invoices/bills and the other comprising the originals t....
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....of any interest thereon. This order of Hon'ble Apex Court also marks a defining watershed moment in that the ongoing adjudication of claims of the Sylvan under the Companies Act ended and transitioned to adjudication by NCLT under the IBC insolvency regime. 26. Having referred the matter to the fold of the NCLT, the matter was heard by NCLT acting as the Adjudicating Authority and an order was passed on 05.10.2023, the relevant excerpts which are as reproduced below:- "5. The Applicant has annexed several invoices/bills to the said application in question, and even if we consider the fact that the Applicant had filed its claim with the Official Liquidator, and the Official Liquidator had accepted its claim, but the same was done during the winding up period. 6. After the case was transferred to this Adjudicating Authority and the Rishra Steel Limited was admitted into Corporate Insolvency Resolution Process, which is not related to the winding up proceedings. After publication of notice in Form A by the Insolvency Resolution Professional, inviting claims from creditors, it was the responsibility of the Applicant to file its claim in the respective form with the....
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....s 868-877 of APB. 29. It is the contention of the RP that in terms the order of the Single Bench on the event of the Corporate Debtor going back to the hands of the OL or on the abandonment of the revival scheme, the right to refund on the part of Sylvan would stand extinguished. It is also their contention that the role of Sylvan was that of a promoter who had agreed to undertake commercial risk while making investment in the Corporate Debtor. Moreover, no evidence of service rendered had been placed on record before the RP. Hence their claim did not qualify to be that of an Operational Creditor in terms of the statutory construct of IBC. It was also contended that the Report of the Administrator certifying the claim stood clearly supervened by the orders of the Division Bench of the Calcutta High Court which had directed Sylvan to file their claim with the OL. The partial admission of the claim by the OL could not have been accepted by the RP since the OL had acted in terms of the provisions of the Companies Act which did not entail proper scrutiny or substantiation of the evidence of actual disbursement. 30. When we look at the relevant portions of the impugned order of th....
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....submit report on the accounts of Sylvan to the OL. Subsequently on the directions of the Calcutta High Court on 17.08.2006 and of the Hon'ble Apex Court on 26.11.2019, the OL actually verified the Administrator's Report and acknowledged/admitted expenditure incurred by the Appellant to the tune of Rs. 57.68 lakhs. We also notice that when the finding of the OL on Administrator's Report was challenged before the Hon'ble Supreme Court, the latter in its order dated 06.08.2021 did not shun or reject the report of the OL on the claims of Sylvan but only referred it to the NCLT. From a reading of the order of the Hon'ble Supreme Court dated 06.08.2021 it becomes clear that the Hon'ble Apex Court had not rejected or disregarded the Report of the OL but had only desired that the Report be appraised by the NCLT. 33. Given this factual backdrop that expenses incurred by Sylvan on the Corporate Debtor has been acknowledged up to the level of the Hon'ble Supreme Court, we do not find substance in the findings returned by the Adjudicating Authority that the Appellant cannot have right to claim financial or operational debt qua the Corporate Debtor. The emphasis laid in the impugned order on....
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....t post-transfer of the matter to it by the Hon'ble Apex Court, the IBC regime was required to be followed and the claims submitted during winding-up proceedings to the OL, even though accepted partially, would not suffice for the purpose. 37. In pursuance of the order of Adjudicating Authority dated 05.10.2023, the Appellant was required to file a fresh claim under the IBC dehors any claim previously submitted by the Appellant under the winding-up regime. This order not having been challenged has attained finality and cannot be reopened at this stage. The very fact that the Hon'ble Supreme Court had transferred the winding-up proceedings under the Companies Act to the NCLT and directed adjudication under the statutory provisions of IBC, we are inclined to agree with the inference drawn by the Adjudicating Authority that the assessment of the OL having been done under the Companies Act, the same was now required to be seen again from the prism of the IBC. We therefore do not find any irregularity in the RP asking the Appellant to file their claims. 38. This brings us to the bone of contention between the Appellant and the RP which stems from the manner of collation of claims a....
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....per verification and was obligated to seek additional information for this purpose. 39. It is the counter contention of the Appellant that all the documents in support of their claim had been provided by them to the OL which the OL had transferred to the RP. On 14.11.2023, the RP had been informed by the Appellant that the original documents had already been transferred to the RP earlier. Further, on 30.11.2023, the Appellant sent an email providing original balance sheets and Auditor's Report depicting expenses incurred by the Appellant. Hence the repeated demand of original documents made by the RP was an impossible request to be met by the Appellant since all these documents were in the custody of the OL who in turn had already handed over the same to the RP. Hence when relevant documents required for adjudication of their claims was already available with the RP including documents evidencing the disbursal of money from the Appellant to the Corporate Debtor, no further substantiation was required on their part. It was asserted that not only had they submitted substantiated claims but had submitted these claims well within the timeline. Denying the allegation of frivolous cla....
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....d at (2023) 10 SCC 718: 2023 SCC OnLine SC 1147 at page 724, held that "the mere fact that the adjudicating authority has yet not approved the plan does not imply that the plan can go back and forth, thereby making the CIRP an endless process. This would result in the reopening of the whole issue, particularly as there may be other similar persons who may jump onto the bandwagon. As described above, in Essar Steel, the Court cautioned against allowing claims after the resolution plan has been accepted by the COC." l. We are of the view that any expenditure to be reimbursed should be backed by a contract (court order in this case) apart from proof of disbursements. Neither there is any contract, nor the court order supports their case for reimbursement of such expenses and therefore no fault can be attributed on the part of Resolution professional. m. In view of the above, looking at any angle, we find no merit in the application, and accordingly dismiss it." (Emphasis supplied) 41. Before we come to our analysis and findings, it may be necessary to notice whether the Appellant had been able to substantiate their claims. We have no doubts that the RP had sent....
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....dges that it received documents in 11 files in two sets comprising of original and photocopies. It is noteworthy that OL gave detailed reasons for accepting only part of the claims and rejecting the balance Rs. 1.57 Cr. claim of Sylvan. The grounds for rejection were that several vouchers/invoices were beyond the scope of settlement. OL had also noted that though substantial amount was claimed on account of purchase of tools and machinery, no supporting documents of delivery receipts of such machines/tools were available nor money receipts from parties were available on record. Hence, only expenditure of Rs. 57.86 lakhs was admitted by the OL based on supporting vouchers and invoices while the remaining claim amount of Sylvan was rejected. Even the issue of levy of interest was considered by the OL and observed that there was no stipulation for payment of interest in the revival scheme. Further, the interest charged was not only exaggerated but the rate of interest charged was found to be inconsistent varying between 18% to 24% and hence found to be unacceptable. It may also not be out of place to mention here that the Appellant while coming before the Hon'ble Supreme Court challen....
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....nder law. It was contended that because of this material irregularity, their challenge to the approval of the resolution plan should be sustained. 46. Per contra, it is the contention of both RP and SRA that the Appellant was trying to derail and scuttle the resolution plan of the Corporate Debtor with the motive of creating additional liability in the resolution plan which would affect the viability and feasibility of the plan and jeopardise the revival of the Corporate Debtor. It was emphatically asserted by the RP that the CIRP process was conducted in a fair and non-discriminatory manner and the allegations made by the Appellant were unsubstantiated. It was added by the SRA that there is an imperative need to impart finality to the resolution process as the legislative intent behind IBC is to freeze all the claims so that the resolution applicant starts on a clean slate. In the present case, the plan has already been implemented to the satisfaction of the creditors and the Monitoring Committee. 47. Coming to the statutory construct of the IBC, Section 30(2)(b) of IBC requires every resolution plan to provide for payment of at least the liquidation value to all operational....
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....red Financial Creditors (a) Creditors not having a right to vote under Sub- section (2) of section 21 NIL NIL NIL NIL (b) Other than (a) above: (i) who did not vote in favour of the resolution Plan NIL NIL NIL NIL (ii) who voted in of favour the resolution plan NIL NIL NIL NIL Total[(a) + (b)] NIL NIL NIL NIL 3. Operational Creditors (a) Related Party of Corporate Debtor NIL NIL NIL NIL b) Other than (a) above: (i)Government Rs. 9.30 Lakh Rs. 9.30 Lakh Rs. 9.30 Lakh 100% (ii) Workmen Rs. 1.00 Lakh NIL NIL NIL (iii)Employees Rs. 54.25 Lakh NIL NIL NIL (iv) Other than (I, ii, and iii) i.e., Sylvan Commercial Private Limited Rs. 24547.9 7 Lakh NIL NIL NIL Total[(a) + (b)] Rs. 24612. 52 Lakh Rs. 9.30 Lakh Rs. 9.30 Lakh 100% 4. Other debts and ....
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.... to take into consideration any other factor other than the one specified in Section 30(2) or Section 61(3) of the IBC. It has been held that the opinion expressed by the CoC after due deliberations in the meetings through voting, as per voting shares, is the collective business decision and that the decision of the CoC's 'commercial wisdom' is non justiciable, except on limited grounds as are available for challenge under Section 30(2) or Section 61(3) of the IBC. This position of law has been consistently reiterated in a catena of judgments of this Court, including: (i) K. Sashidhar v. Indian Overseas Bank and Others (ii) Committee of Creditors of Essar Steel India Limited Through Authorized Signatory v. Satish Kumar Gupta and Others, (iii) Maharashtra Seamless Limited v. Padmanabhan Venkatesh and others, (iv) Kalpraj Dharamshi and Another v. Kotak Investment Advisors Limited and Another. (v) Ghanashyam Mishra and Sons Private Limited Through the Authorized Signatory v. Edelweiss Asset Reconstruction Company Limited Through the Director & Ors." 52. We are also guided by the legal precepts propounded by the Hon'ble Supreme Court in J....