TaxTMI 
TaxTMI 
2025 (12) TMI 11
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....ed Order dated 09.10.2023 as it was passed by the Adjudicating Authority, NCLT Chennai, in CP/IB/81/CHE/2023 whereby the Application filed by Respondent No. 1, IDBI Trusteeship Services Limited under Section 7 of the I & B Code, 2016, had been directed to be admitted, to be carried against the M/s. Tuscan Consultants and Developers Private Limited of which the present Appellant, is the suspended director. 2. The Respondent No.1 had executed a Debenture Trust Deed (DTD) with Ozone Projects Pvt Ltd., (the Principal Borrower) on 29.06.2016 under the terms and conditions as recorded therein in the said Debenture Trust Deed. Under the said Debenture Trust Deed, the debenture holders had extended financial assistance to the tune of Rs. 1,26,30,00,000/- to Ozone Projects on the terms and conditions as it was recorded in the Debenture Trust Deed (DTD). As per the terms of the said Debenture Trust Deed, the principal amount along with the redemption premium was due to be paid within 40 months from the date of disbursement, which fell due to be paid on 29.10.2019. This Redemption Date was extended on seven occasions and was ultimately revised to be 30.09.2021. The obligation of Ozone Proj....
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....NCLT, Chennai, admitted the Ozone Projects into the Corporate Insolvency Process and appointed an Interim Resolution Professional (IRP). Aggrieved against the said order of admission of the Section 7 Application and consequent commencement of CIRP proceedings, the Suspended Director of, the Ozone Projects filed a Company Appeal being CA (AT) (CH) (Ins) No. 134/2023, before this Appellate Tribunal, where an Interim Order was granted on 10.05.2023, whereby the further proceedings were directed to be kept in abeyance. 6. As regards the Section 7 proceedings against the Corporate Debtor herein before the learned Adjudicating Authority, the Corporate Debtor was granted two weeks' time to file a reply to the Company Petition filed by Respondent No.1, but owing to the averment that the Ozone Group and India Bulls Group (the Debenture Holders), were said to be engaged in settlement talks, making efforts for an amicable settlement, the Corporate Debtor did not file a reply or a Counter Affidavit to the proceedings of the said Company Petition. The Appellant on 04.08.2023 was granted last opportunity by the learned Tribunal to file the reply/counter to the Company Petition, subject to the....
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....ai, by Respondent No.1, would not be maintainable, for the reason being, that since the registered office of the Corporate Debtor M/s. Tuscan Consultants and Developers Private Limited, is situated in Bangalore, the said proceedings ought to have been instituted before the learned NCLT, Bangalore, which is the competent forum available to Respondent No.1, owing to the provisions and restrictions contained under Section 60(1) of the I & B Code, 2016. If the provisions contained under Section 60(1) of the I & B Code, 2016, is read in context by the arguments that has been raised by the Ld. Counsel of the Appellant, it is that insolvency proceedings against a corporate person shall be carried on before the Ld. NCLT having territorial jurisdiction over the place where the registered office of the corporate person is located and that therefore the application under Section 7 of the I & B Code, 2016, against the CD should have been filed before the Ld. NCLT, Bengaluru. The Appellant submits that the said application was filed before the Ld. NCLT, Chennai on the plea that CIRP proceedings had already been initiated against the Principal Borrower, Ozone Projects by filing Application under....
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.... (3) An insolvency resolution process or 2 [liquidation or bankruptcy proceeding of a corporate guarantor or personal guarantor, as the case may be, of the corporate debtor] pending in any court or tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency resolution process or liquidation proceeding of such corporate debtor. (4) The National Company Law Tribunal shall be vested with all the powers of the Debts Recovery Tribunal as contemplated under Part III of this Code for the purpose of sub-section (2). (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of- (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corpora....
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.... of the Code was filed before the learned NCLT, Chennai, on 19.09.2022, the said application got registered on 02.05.2023, the first hearing was conducted on 11.05.2023, and the application was admitted by the learned NCLT on 09.10.2023 by an order which is the Impugned Order in the instant Appeal. Learned counsel for the Appellant contends that on the date when the application under Section 7 of the Code was filed against the Corporate Debtor, that is, 19.09.2022, no CIRP proceedings against Ozone Projects was pending before the learned NCLT, Chennai, as the said CIRP proceedings commenced only on 01.05.2023, that only Section 7 Application was pending and hence learned NCLT, Chennai, lacked jurisdiction to permit the filing of the Section 7 Application against the Corporate Debtor. 12. There are three terms used in the statute, as listed below, on which the entire argument of the learned counsel for the Appellant is constructed. a) the word 'pending' as used under Section 60(2) of the I & B Code, 2016, b) the phrase 'initiation date' as referred to under Section 5(11) of the I & B Code, 2016, and c) the phrase 'insolvency commencement date' as referr....
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....d. NCLT, Chennai, the learned counsel for the Appellant has argued that, if the implication of Section 60(2) of the I & B Code, 2016, is taken into consideration, it clearly prescribes that in case the CIRP or liquidation process of a Corporate Debtor is pending before a NCLT, then an application relating to insolvency resolution of a Corporate Guarantor or Personal Guarantor shall be filed before such NCLT, that, in the instant case, only an application under Section 7 had been filed on 05.08.2022 against the Principal Borrower, pendency of such application cannot be termed as pendency of CIRP proceedings within the ambit of Section 60(2) of the code and hence the initiation of the CIRP against M/s. Tuscan Consultants & Developers Pvt. Ltd., the Corporate Debtor herein before learned NCLT, Chennai by way of CP/IB/01/CHE/2023 was bad in the eyes of law, owing to the fact that the office of the Appellant was situated in Bangalore. 16. He has submitted that the aforesaid principle could be very well culled out from the Judgement, rendered by the learned NCLAT in the matter of State Bank of India Vs. Mahendra Kumar Jajodia as rendered in CA (AT) (Ins) No. 60/2022. In particular, he....
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.... 19. The schedule of dates as given by the Appellant, shows that the CIRP process, as against the Ozone Projects, i.e., the Principal Borrower under same financial assistance agreement stood initiated from the date of filing of Section 7 Application, i.e., 05.08.2022. As against the above, the date of filing of the Section 7 application against the present Corporate Debtor (M/s. Tuscan consultants and Developers Pvt. Ltd.,) is 19.09.2022, which is much later to the date of filing of Section 7 application against the Principal Borrower, that is, 05.08.2022, which makes it clear that the proceedings against the Principal Borrower is already "pending" adjudication before the learned NCLT, Chennai, when Section 7 application was filed against the present Corporate Debtor. Hence, in the light of the provisions contained under Section 60(2) of the I & B Code, 2016, since a prior proceedings as against the Principle Borrower, already stood instituted before the learned NCLT Chennai, on 05.08.2022, and was pending and since the liabilities were flowing from a common Debenture Trust Deed and its terms contained therein, the implication of Section 60(2) of the I & B Code, 2016, would be a....
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....rincipal Borrower and its guarantors where the rights or the liabilities flowing from the relevant documents are required to be interpreted commonly in all connected cases. The ratio in this regard, as laid down by the Hon'ble Apex Court in para 33 of its Judgment in Embassy Property Development Private Limited Vs State of Karnataka & Others, is extracted hereunder: - "33. Sub-section (4) of Section 60 of the IBC, 2016 states that the NCLT will have all the powers of the DRT as contemplated under Part III of the Code for the purposes of sub- section (2). Sub-section (2) deals with a situation where the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor of a corporate debtor is taken up, when CIRP or liquidation proceeding of such a corporate debtor is already pending before NCLT. The object of sub-section (2) is to group together (A) the CIRP or liquidation proceeding of a corporate debtor, and (B) the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor of the very same corporate debtor, so that a single forum may deal with both. This is to ensure that the CIRP of a corporate debto....
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....s Appellate Tribunal as the same is against basic objective of the Code. As the applications praying for initiation of CIRP both against the Principal Borrower and its Corporate Guarantor (Corporate Debtor herein) on account of default are emanating from the same Debenture Trust Deed and as the application against the Principal Borrower has been filed earlier before NCLT, Chennai and is pending consideration, the proceedings in respect of the Corporate Debtor (M/s. Tuscan Consultants and Developers Private Limited) will have to be instituted before the learned NCLT, Chennai, and not before the learned NCLT, Bangalore as argued by the learned counsel for the Appellant. 23. The learned counsel for the Appellant for attempts to interpret the word 'pending' used under Section 60(2) of the I & B Code, 2016, as pendency of the corporate insolvency resolution process which has been commenced by borrowing the provision contained under Section 5(12) of the I & B Code, 2016. This has already been answered by the Principal Bench of NCLT, New Delhi, in the matter of IDBI Trusteeship Services Limited Vs DSS Infrastructure Private Limited (CP(IB) No.446/2023) in para 4 of its order wh....
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....Chennai. Purpose of Section 60 (2) is to avoid multiplicity of forum for deciding the similar nature of dispute and to facilitate avoidance of contradictory determination of the documents in relation to same transaction, which would not have been possible if the contention of the Appellant is accepted. 25. In the earlier part of the Judgment, we have already dealt with three expressions which required consideration in the instant Company Appeal, to determine, at what stage the implication of Section 60(2) of the I & B Code, 2016, will come into play, for the purposes of initiation of a CIRP proceeding in an event when there already exists a pending proceeding against a Corporate Debtor. However, to answer the questions raised by the Learned Counsel for the Appellant with respect of 'initiation' and 'commencement', we will have to have reference to Section 7(6) of the I & B Code, 2016, the provision with which we are concerned Section 7 is titled as "Initiation of the Corporate Insolvency Resolution Process by Financial Creditor"; as per Section 7(1), the Financial Creditor, is to file an application for initiating the CIRP process; under Section 7 (5), Learned Adjudicating....
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....is expression has been dealt with in a Judgment reported in 2001 Volume 7 SCC page 549, Pallav Sheth Vs Custodian & Ors. where it has been provided that initiating of any proceedings only aims to introduce or to lay down the first step to start the proceedings. The same expression has been given in the Black's Dictionary which defines to initiate means "to start or to originate or to introduce" and the said expression has been dealt in para 10 of the Judgment as reported in 2000 Volume 3 SCC page 171 Om Prakash Jaiswal Vs D.K. Mittal & Anr. which has dealt with it describing it as to be "in initio and initiation" that means, to begin. Relevant para 10 of the Judgment of Om Prakash Jaiswal is extracted hereunder:- "10. The expression "initiate any proceedings for contempt" is not defined in the Act. Words and Phrases (Permanent Edition) defines "initiate" to mean an introductory step or action, a first move; beginning; start, and "to initiate" as meaning to commence. Black's Law Dictionary (6th Edn.) defines "initiate" to mean commence; start; originate; introduce; inchoate. In Section 20, the word "initiate" qualifies "any proceedings for contempt". It is not the i....
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....om the date of commencement. The appointment of IRP, and the operation of moratorium start from date of commencement. Management of Corporate Debtor, definition of related party, eligibility of resolution applicant and many such process are influenced by date of commencement. Since CIRP is a time bound process, many of the activities of CIRP have to be linked to a date, which is the Date of commencement of CIRP as per the Code. However, for the purpose of section 60(2), to determine whether there is a pending CIRP proceeding, it is enough to establish that CIRP proceedings has already been initiated under Section 7 to be read with section 5(11) of the Code and it is pending adjudication. Therefore, the argument of Learned Counsel for the Appellant that pendency of a CIRP proceeding has to be reckoned from the date of commencement as defined in Section 5(12) to be read with Section 7(6) of the Code cannot be accepted. 29. The word 'pendency' has been considered in various judicial platforms, which means that, it is nothing but a pending matter, which has not yet been decided, that it is pending and adjudication is remaining under consideration at the stage of 'undecided' ....
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....oceedings. Similar view has been expressed in the judgment reported in AIR 1965 Supreme Court page 1449 in the matter Raja Soap Factory and Ors. Vs. S.P. Shantharaj and Ors., which was dealing with in the context of the provisions contained under Section 24 of the Code of Civil Procedure, which is that "pending proceedings in fact is not a concluded proceeding", and that the court having taken cognizance of it can make an order on the matter until and unless it is concluded in shape of an adjudication. In the light of what has been observed above by us, the definition of "initiation" and "commencement" ought not to be confused as 'commencement' has got different legislative intent and a purpose to be achieved and therefore, the word "pendency" as used under Section 60(2) of the I & B Code, 2016, will mean the period from the date of starting of the proceedings (date of initiation) by filing of the Application till it is concluded by a decision rendered by a court of law (Tribunal), in the manner prescribed by the Code, that is, rejection of Application, approval of Resolution Plan or order of liquidation as the case may be. If that be the situation, the pendency of Section 7 Applic....
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....e Petition before this Bench of the Tribunal on the ground that the Respondent /Corporate Debtor in the present case the corporate guarantor is having registered office situated in Bengaluru and therefore how this Petition could be maintainable before NCLT Chennai. The Financial Creditor / Applicant states that the Corporate Debtor in the present case is corporate guarantor to M/s. Ozone Projects Private Ltd having registered office following the jurisdiction of NCLT Chennal Bench. Case against Ozone Projects Private Ltd. (Corporate Debtor) is pending adjudicating before NCLT Chennal In main CP/(IB)49/2023. Therefore in terms of Section 60(1) and 60(2) since the case against the Corporate Debtor / Ozone Projects is pending before NCLT Chennai the case of the corporate guarantor will also lye before NCLT Chennai Bench.. Section 60(2) is reproduced below: "without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating t....
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....n order passed on 17.04.2023 by the learned NCLT on a judicial side holding the proceedings to be maintainable before the learned NCLT Chennai, and that he has not filed any counter/reply before the learned NCLT, specifically raising the question of jurisdiction, then too there cannot be any bar against him from agitating the question of jurisdiction before the Appellate Tribunal and for the aforesaid purpose he makes reference to the Judgment of the Hon'ble Apex Court, where it has been laid down that the question of jurisdiction, could be agitated at any stage or at any point of time and even at the stage of an appeal. This contention seems to be quite laudable, but it would be a question to be considered as to whether, it could have been considered when the Appellant himself has acceded to the question and had not raised any objection, against order dated 17.04.2023, but has rather voluntarily participated in the proceedings and have invited the order to be rendered on merits on admission of the application under Section 7 of the I & B Code, 2016. The Judgment as relied by the learned counsel for the Appellant, is that as reported in 2020 120 taxman.com 178 (Calcutta) in the....
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....being a judicial order passed by the Tribunal on 17.04.2023 deciding the question of jurisdiction, not challenging it, and still choosing not to file any objection raising a question of territorial jurisdiction particularly, when it becomes a subject matter of consideration based upon the determination of facts and law, the Appellant cannot place this instant Company Appeal on a common pedestal as that of the Judgment relied by the Appellant in the matters as rendered, Atin Arora (Supra). The Appellant has relied on yet other authority, as rendered, by the Hon'ble Apex Court as reported in 2007 Volume 1 SCC page 732 Arunkumar & Ors. Vs. Union Bank of India, where the Appellant has made reference to para 84 of the said judgment, as extracted hereunder. "84. From the above decisions, it is clear that existence of "jurisdictional fact" is sine qua non for the exercise of power. If the jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of "jurisdictional fact", it can decide the "fact in issue" or "adjudicatory fact". A wrong decision on ....
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.... of the Corporate Debtor as provided under Section 60(1) of I & B Code, 2016, determining place of suing will stand overridden due to existence and pendency of an earlier CIRP proceeding. In other words it could be said that a bar of territorial jurisdiction provided under Section 60(1) is not absolute and is rather concurrent in nature, due to the provisions of Section 60(2). Hence, none of the authorities relied by the Appellant on the issue of territorial jurisdiction would apply, because this would be a case where both the Tribunals under law would be having concurrent territorial jurisdiction, which would be a question to be raised at the earliest possible opportunity, which was not done by the the Appellant. The issue of concurrent territorial jurisdiction has not been the bone of contentions in any of the authorities, cited by him. 39. As far as this Appellate Tribunal is concerned, we are of the view that, a question of concurrent territorial jurisdiction is a question, which has to be agitated and settled at the first given instance or an opportunity, when both Tribunals under law are competent to decide a controversy for the reason being that, a long drawn judicial pro....
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....16, will have its general application. In a nutshell, it prescribes for that the question of jurisdiction has to be raised at the very first available instance before the proceedings moves into the stage of contest on merits and once a party to the proceedings becomes conscious of the question of lack of territorial jurisdiction of the learned Tribunal, he has to raise the said issue at an initial stage and not at the stage when the proceedings have been concluded. The aforesaid principle had been settled by the judgment of the Hon'ble Apex Court as reported in 1981 Volume 3 SCC page 589 in the matter Koopilan Uneen's Daughter Pathumma & Ors. Vs Koopilan Uneen's Son Kuntalan Kutty & Ors. relevant paragraphs 5 & 6 are extracted here under: - "5. In order that an objection to the place of suing may be entertained by an appellate or revisional court, the fulfilment of the following three conditions is essential: "(1) The objection was taken in the Court of first instance. (2) It was taken at the earliest possible opportunity and in cases where issues are settled, at or before such settlement. (3) There has been a consequent failure of ju....