TaxTMI 
TaxTMI 
2026 (7) TMI 169
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....y") in C.P. (IB) No. 131/KB/2023 ("Company Petition"). The Impugned Order dated 07.04.2025 pertains to an application under Section 7 of the Code filed by Indian Renewable Energy Development Agency Limited ("IREDA" or "Financial Creditor/Respondent No. 1"), wherein the Ld. NCLT admitted the petition, initiating the Corporate Insolvency Resolution Process ("CIRP") against JHV Sugar Limited ("Corporate Debtor") and appointing Mr. Alok Kumar Agarwal ("Respondent No. 2") as the Interim Resolution Professional ("IRP"). Submissions of the Appellant 2. The Appellant contests the Impugned Order for being ex-parte and violating natural justice, as no opportunity for representation was provided. It claims misrepresentations by Respondent No. 1 without counter-arguments. The admission of a functional sugar factory into CIRP has severe socioeconomic consequences, threatening over 25,000 families, sparking industry disruption, and risking non-compliance with Supreme Court directives on farmer payments. 3. In 2011, the Corporate Debtor sought financial assistance from Indian Renewable Energy Development Agency Limited ("Respondent No. 1) for expanding its sugar mill and setting up a 20 ....
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....nt failed, leaving the matter unresolved. 7. On 18.07.2018, Respondent No. 1 filed Company Petition (IB) No. 153 of 2018 under Section 7 of the Code before the Hon'ble NCLT Kolkata Bench, seeking recovery of an escalated loan amount of Rs. 26.41 Crores, including Rs. 19.41 Crores as principal along with interest and charges. The petition was served at the Corporate Debtor's Varanasi Office citing the reason closure of its registered office. The Corporate Debtor filed a reply denying the claims and highlighting concealment of crucial facts and distortion of the case by Respondent No. 1 before the Hon'ble NCLT. 8. Despite the disputes regarding the loan amount and interest, the Corporate Debtor intended to make legitimate payments and proposed a One Time Settlement ("OTS-1"), which was approved on 16.05.2019. Following this, Company Petition (IB) No. 153 of 2018 was withdrawn by Respondent No. 1, as recorded in the Hon'ble NCLT's order dated 17.07.2019. 9. The Corporate Debtor, unable to adhere to the terms of OTS-1 due to financial stress caused by the Covid-19 pandemic, proposed a second One Time Settlement ("OTS-2"), which was accepted by the Financial....
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....he letter disclosed that Rs. 17,82,30,809/- Crores was disbursed by the Financial Creditor, while Rs. 27,46,79,638/- Crores (including Rs. 64,48,829/- Crores towards interest) had already been paid by the Corporate Debtor. This letter, showcases the Corporate Debtor's unawareness of the pending proceedings, and that the Financial Creditor withheld the information in a deliberate effort considering that the Financial Creditor failed to apprise the Ld. NCLT of its existence. This omission highlights procedural lapses and reinforces the Corporate Debtor's claim that the Impugned Order was based on incomplete and distorted facts. 15. On 07.04.2025, the Hon'ble NCLT passed the impugned order ex-parte relying solely upon the inaccurate and incomplete audit report and allowed the said I.A. 16. The Impugned Order dated 07.04.2025 has been passed ex parte, without service of the Company Petition upon the Appellant/Corporate Debtor, despite Respondent No. 1 being aware of the administrative office location of the Appellant. This is a gross violation of the principles of natural justice. Respondent No. 1 was fully aware of the correct address of the Appellant, yet deliberate....
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....eeking recovery of dues. Thus, the proper remedy of Respondent No. 1 lies before the DRT and not under Section 7 proceedings. 18. Appellant also claims that it is a well-settled principle in law that insolvency proceedings cannot be admitted where the principal debt stands discharged and only the interest component remains outstanding. In the present case, outstanding amount undisputed by the Respondent No. 1 is Rs. 2.98 crore which forms the interest component after discharge of the principal amount. Admission of CIRP solely on this ground is contrary to binding precedent. The Appellant places its reliance on the judgement of this Appellate Tribunal in S.S. Polymers versus Kanodia Technoplast Limited 2019 SCC OnLine NCLAT 1310 para 5 and also Steel India v. Theme Developers Pvt. Ltd., 2020 SCC OnLine NCLAT 200. 19. The Appellant/Corporate Debtor contends that it has paid Rs. 27.46 crores against a disbursement amount of Rs. 17.72 crores, including Rs. 9.74 crores towards interest. Respondent No. 1 has itself acknowledged these payments under OTS-2. At best, a marginal interest remains disputed. The Appellant places its reliance on the judgment of the Hon'ble Supreme Court in....
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....s solely to a disputed interest component. Appellant places its reliance on the judgment of the Hon'ble Supreme Court in the matter of Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 352 to support its argument. 22. The present proceedings are not the Respondent's first attempt at recovery. The Respondent No. 1 has filed as many as 8 cases under the Negotiable Instrument Act, 1881 before the Ld. Patiala House Court, New Delhi seeking recovery against the same debt under which the present proceedings are initiated. It is a well settled principle in law that he who comes into equity must come with clean hands. The Hon'ble Supreme Court through catena of judgments has reiterated this principle and emphasized on the fact that those who come before a court of law with unclean hands are not entitle to any relief. Appellant has placed its reliance on the judgment of the Hon'ble Supreme Court in the matter of A.S. Motors (P) Ltd. v. Union of India, (2013) 10 SCC 114 to canvas this argument. 23. The Appellant, through various letters and communications, consistently attempted to reach out to Respondent No. 1 with the objective of settling the matter and tendering the ba....
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....lects the fact that, by way of an email on 06.06.2023, the Answering Respondent had duly served the Company Petition on the official email address of the Corporate Debtor, as available from the records of the Ministry of Corporate Affairs, Government of India ("MCA"). Which is [email protected]. 27. A bare perusal of the Orders dated 06.03.2024 and 10.05.2024 in the Company Petition makes it indubitably clear that the Registry of the Ld. NCLT had also attempted service upon the Corporate Debtor through registered post on its registered address as per the MCA records. However, the said Orders also record the fact that the said service had failed as the Corporate Debtor was not available at its registered address. By way of Orders dated 02.07.2024 and 01.10.2024 passed by the Ld. NCLT in the Company Petition, the Respondent also subsequently made paper publication of the underlying proceedings in the Company Petition against the Corporate Debtor. However, it was only when the Corporate Debtor still failed to mark its appearance before the Ld. NCLT in the Company Petition, that, by way of Order dated 18.11.2024, the Ld. NCLT set the Corporate Debtor ex-parte. 28. In light of th....
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....about the proceedings in the Company Petition, even when the Appellant requested closure of the loan account vide letter dated 27.08.2024, is wholly misplaced, as the Answering Respondent was under no obligation to specifically inform the Corporate Debtor about the Company Petition, as the Answering Respondent had already lawfully effectuated service of the Company Petition on the Corporate Debtor. The said assertion is also a mere afterthought by the Appellant as it seeks to maliciously escape the clutches of the CIRP, as it has no real chance of succeeding in the underlying proceedings before the Ld. NCLT, as the fact of debt and default on part of the Corporate Debtor has, indubitably, been established. 34. The Appellant has alleged that the Impugned Order must be set aside as the Corporate Debtor is a going concern that possesses large stock of sugar and indirectly ensures the livelihood of around 25,000 (Twenty-Five Thousand) families of workers across the state of Uttar Pradesh as the Resolution Professional does not possess the requisite knowledge to effectively run the business of the Corporate Debtor. The Appellant has further alleged that the admission of the Corporate....
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.... debtor keeps operating as a going concern during the insolvency resolution process and must therefore make past and present payments to various operational creditors, without which such operation as a going concern would become impossible. Sections 5(26), 14(2), 20(1), 20(2)(d) and (e) of the Code read with Regulations 37 and 38 of the 2016 Regulations all speak of the corporate debtor running as a going concern during the insolvency resolution process...." 37. The Resolution Professional, is adequately empowered to run the Corporate Debtor as a going concern, and the provisions of the Code provide him with the requisite means to do the same until the resolution of the Corporate Debtor under the provisions of the Code. Thus, assertion raised by the Appellant is wholly frivolous and is an afterthought. In fact, it is the Appellant who has been unable to effectively run the business operations of the Corporate Debtor as the Corporate Debtor has failed to effectively service the instant debt owed to the Answering Respondent. 38. The Appellant has failed to produce even a single piece of evidence to back its purported claim of employing lakhs of people. It is further submitted t....
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....ious reminder letters/emails were exchanged between the Corporate Debtor and the Answering Respondent between the years 2015-2018 with regard to the default committed by the Corporate Debtor and the repayment of the outstanding debt owed by the Corporate Debtor. However, the Corporate Debtor still failed miserably to service the debt owed to the Answering Respondent. 42. Subsequently, due to the failure of the Corporate Debtor to still effectively service the debt owed to the Answering Respondent, the Answering Respondent was constrained to file the initial application under Section 7 of the Code in 2018, bearing C.P. (L.B.) No. 153/KB/2018 ("First Application") before the Ld. NCLT. During the course of proceedings in the First Application before the Ld. NCLT, the Corporate Debtor approached the Answering Respondent for settlement and consequently shared a One-Time Settlement Proposal. Subsequently, the said proposal was deliberated and finalized between the said parties, resulting into the issuance of One Time Settlement Proposal dated 15.05.2019 ("OTS-1") between the parties. Due to the issuance of the OTS-1, the First Application was withdrawn by the Answering Respondent. The....
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....uently, the Answering Respondent was constrained to consistently call upon the Corporate Debtor to fulfill the repayment terms contained in the Effective OTS. Pertinently, by way of a response to such emails issued by the Answering Respondent to the Corporate Debtor, the Corporate Debtor categorically admitted the debt owed to the Answering Respondent, along with the default committed by it. By way of various emails issued in the said period by Answering Respondent (specifically emails dated 25.11.2022 and 09.11.2022), the Corporate Debtor was repeatedly warned to fulfill the conditions contained in the Effective OTS, otherwise the Answering Respondent would withdraw the said OTS and proceed with appropriate actions under law. 45. In light of the blatant non-compliance by the Corporate Debtor of the terms of the Effective OTS, despite repeated warnings, the Answering Respondent was constrained to withdraw the Effective OTS by way of its email dated 12.12.2022 issued to the Corporate Debtor. It is further submitted that the terms of the Effective OTS explicitly allowed the Answering Respondent to withdraw the OTS and call upon the Corporate Debtor to pay the entire outstanding am....
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....ntained therein. ii. The Answering Respondent had proceeded to initiate suitable action in law against the entire outstanding debt owed by the Corporate Debtor. iii. The terminal date for honoring the repayment obligations, a sine qua non for the legal existence of the conditional Effective OTS, was 25.11.20222. iv. No other legally binding and concluded one time settlement agreement remained in effect between the Corporate Debtor and the Answering Respondent subsequent to the withdrawal of the Effective OTS on 12.12.2022. 50. Since the Effective OTS was withdrawn on 12.12.2022, the Appellant's assertion that its purported payments made in the time period of 02.01.2023 to 24.03.2023 must be read to be adjusted against the outstanding amount under the terms of the Effective OTS are wholly devoid of merit and contrary to established principles of contract law. It is reiterated that the Appellant has failed to produce a single document that could establish a binding one-time settlement agreement between the Answering Respondent and the Corporate Debtor subsequent to the withdrawal of the Effective OTS. 51. The factum of the outstanding debt above t....
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.... secondly, the facts of the present case do not attract the provisions of Section 7 of the Code. 57. With respect to proceedings against the Appellant being ex-parte, the main argument canvassed is that the Appellant were not served the Section 7 petition. Since they were not served and for that reason, they could not defend and therefore the order passed by the Adjudicating Authority is against the principles of natural justice. And for this reason, they vehemently conclude that the matter may be remanded back to the Adjudicating Authority. 58. We observe that the Appellant's contention that the Corporate Debtor was not served with the notice of the underlying Company Petition is contrary to the record. Even prior to filing, the Petition was sent to the Corporate Debtor at the e-mail address [email protected], as reflected in the records of the Ministry of Corporate Affairs ("MCA") We agree with the argument of the respondent that it is no longer res-integra that service of the Section 7 Petition effected on the e-mail address of the Corporate Debtor, as reflected in the records of the MCA, constitutes valid and sufficient service. This Appellate Tribunal in Rajnish Gupta (....
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....aintained with the MCA. For its own non-compliance, the respondent cannot be faulted. 62. The Appellant has placed reliance on this Appellate Tribunal in Sunil Sanghavi vs. Cytecch Coatings Pvt. Ltd. in CA (AT)(Ins) No. 635 of 2018, para 8 and 9. The relevant extract of the judgment is as follows: XXX 8. From the provision of Section 8, it is clear that the legislature intended to put the 'Corporate Debtor' on notice that the amount due having defaulted if the amount is not paid. The 'Operational Creditor' may take steps for 'Corporate Insolvency Resolution Process' against the 'Corporate Debtor'. It is not a mere formality but mandate of law that such notice is actually served on the 'Corporate Debtor' who may act accordingly. For the said reason, the Adjudicating Authority is required to record its satisfaction that the records, including service of demand notice are in order. The Adjudicating Authority is required to satisfy Company Appeal (AT) (Insolvency) No. 635 of 2018 itself that the notice was actually served on the 'Corporate Debtor' not that technically it was served in the address. 9. The Adjudicati....
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....s e-filed on 14.11.2024 for perusal of the Court. Service report indicates that the address as entered on the address as registered with the financial creditor. The premises of the corporate debtor was visited, however, entry was not allowed on the premises. Along with the affidavit of service, notice and photographs were also annexed. 16. We have noted above the submissions of the appellant that corporate debtor having not filed any application, petition or reply service by email address cannot be accepted. In Rule 38(1), the expression "at the email address as provided in the petition or application or in the reply". It clearly refers to petition which was filed by the financial creditor under Section 7 and email address as provided in Section 7 is the address on which process can be served on the corporate debtor. Thus, we are not persuaded to accept the submission of the appellant that in the present case service under Rule 38(1) was not possible, the corporate debtor having not been filed any petition, application or reply. The authorised representatives of the bank also physically visited the premises who have submitted a report. 17. We, thus are satisfied t....
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....rting to Section 7 of the IBC for recovery purposes is impermissible as in terms of OTS-2, essentially it concerns recovery of alleged interest dues with principal already paid. Such an argument is untenable as the Insolvency and Bankruptcy Code is a self Company Appeal (AT) (Insolvency) No. 594 of 2025 33 of 37 sufficient code and does not have any bar to the filing of the Section 7 proceedings even in case of debt and default of interest. For debt and default of interest also, as noted by us here earlier, there is no bar and the respondent could have initiated the Section 7 proceedings. 70. Appellant has also questioned the malicious conduct of Respondent No. 1 and claims that Respondent's first attempt is at recovery. We do not find the conduct of Respondent No. 1 to be malicious and therefore such an argument is untenable and is dismissed. 71. We also note that Section 12 of the Companies Act, 2013 places the onus on the company to maintain a registered office capable of receiving and acknowledging all communications and notices addressed to it. Therefore, the Appellant had to ensure that the CDs registered address remained functional for receiving notices or in case ....
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....ceased operations there, or the postal article is returned with endorsements such as "left," "shifted," or "left without instructions," provided the sender has acted correctly. The law does not require separate personal service upon every director at his or her residential address where the company itself has been validly served under Order XXIX Rule 2 CPC. 76. We further note that the Appellant was communicating from the CDs registered address as early as August, 2024, which is evident from letter dated 17.04.2024 at page 175 to 191 APB and also letter dated 27.08.2024 at page 184 to 202 APB. Therefore, Appellants contention is devoid of any merit and cannot be countenanced. 77. We further observe that the determining factor for admission of section 7 petition is the existence of debt and default, which in the facts and circumstances of the case is clearly established as the debt and default has been admitted by the Appellant. Appellant has on its own admitted that the CD owes an amount of Rs. 2,98,85,658/- towards interest to the Respondent this amount is above the threshold of Rs. 1 crore. 78. Furthermore, we note that the Section 7 petition is maintainable even on the ....