TaxTMI 
TaxTMI 
2026 (7) TMI 376
X X X X Extracts X X X X
X X X X Extracts X X X X
....editor - Assam Power Distribution Company Limited, to pay the outstanding dues of Rs. 37,66,906.80 along with applicable interest from 31.12.2014 was allowed while disregarding that parallelly the same group of companies owed the Appellant Rs. 9,07,03,124/-. Submissions of Appellant: 2. In I.A. (IBC) 119/GB/2024 in CP(IB)/16/GB/2022, was allowed and the Respondent Company is directed to pay the admitted dues of Rs. 37,66,906.80 along with applicable interest from 31.12.2014 to the Liquidator of Brahmaputra Rolling Mills Pvt. Ltd. 3. The admitted amount payable to the Appellant from the three (3) entities of the Brahmaputra Group of Industries are as follows: Entity under Liquidation Net claim Admitted in favour of Appellant (Amount in Rs. ) Brahmaputra Galvochem Pvt. Ltd. 18,48,918/- Brahmaputra Iron and Steel Co. Pvt. Ltd. 46,63,326/- Brahmaputra TMT Bars Pvt. Ltd. 8,41,90,880/- Total 9,07,03,124/- 4. The Appellant is a Government company with audited accounts. In the instant case, the Appellant on the representation of the Brahmaputra Group of Industries, provided essential electricity services in the year 2013 to the group entities until....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w in the United Kingdom, which has resulted in enactment of special provisions on set-off in case of insolvency. We need not examine in detail the law as applicable to insolvency set-off in the United Kingdom for the present decision, albeit it is relevant to state that they are broader and wider than the provisions of equitable set-off. 23. Insolvency set-off under the law of the United Kingdom is permitted when there are mutual debts, mutual credits and other mutual dealings between the parties at the relevant cutoff time, which is essentially the stage of commencement of the liquidation process. We shall subsequently examine the term "mutual dealings" as applicable to liquidation proceedings in India... xxx 48. The second exception will be in the case of "equitable setoff" when the claim and counterclaim in the form of set-off are linked and connected on account of one or more transactions that can be treated as one. The set-off should be genuine and clearly established on facts and in law, so as to make it inequitable and unfair that the debtor be asked to pay money, without adjustment sought that is fully justified and legal. The amount to be adjuste....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rocess) Regulation, 2016 by applying it narrowly without considering that the dealings with the Respondent, as a common liquidator, were interrelated and common transaction across the Brahmaputra Group of Industries. The rejection by the learned NCLT of the argument of set-off claims solely on the ground that they arise from different legal entities, despite mutuality of transaction, amounts to a technical interpretation thereby defeating the purpose of the IBC which provides for equal treatment of all stakeholders. b. Appellant is a government-owned power utility entrusted with managing and accounting for public funds. The learned NCLT failed to give any weight to the fiduciary and public interest obligations of the Appellant in ensuring that its dues from various entities within the same group are equitably set off before further disbursement under Regulation 29 of the IBBI (Liquidation Process) Regulations, 2016 thereby, imposing a liability without accounting for such dues violates the principles of equity and justice. c. The learned NCLT has erred in directing the Appellant to pay interest on the amount of Rs. 37,66,906.80/- from 31.12.2014 despite the disput....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er adjustment of the outstanding dues, it was conclusively established that a sum of Rs. 37,66,906.80 is recoverable from the Appellant and payable to the Corporate Debtor. The same was communicated to the appellant company by an email dated 06.01.2023 attaching a detailed response against the claim and further requested the Appellant company to pay a sum of Rs. 37,66,906.80 to the account of the Corporate Debtor. 10. In the meantime, NCLT vide order dated 13.10.2023 ordered liquidation and the erstwhile RP was replaced with the Respondent, who also took utmost effort to recover the same from the Appellant company and in this regard several email correspondences have been exchanged. 11. The Respondent in her capacity as liquidator issued "Form B" and pursuant to this the appellant had again submitted his claim in Form C dated 02.12.2023 for an amount of Rs. 28,39,285.24. After verification of the same the respondent had rejected the said claim and further sent a reminder email to the appellant to pay the outstanding amount which was already stated to the appellant during the CIRP Period. 12. Respondent had sent several reminder emails to the Appellant; however, all efforts....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or counterclaim against those dissolved entities can be adjusted by the Respondent or sought to be set off against the admitted amounts owed by Respondent to the present CD. 19. It is significant to mention that the group companies cannot be tagged along with the Corporate Debtor as the liquidation proceedings of each company were done as separate entity. 20. It is further submitted that as per Regulation 29 of the IBBI (Liquidation Process) Regulations, 2016, it is clearly stated that if the Corporate Debtor and another party owe money to each other, then the amounts should be adjusted against each other. After setting off what each side owes, only the final balance amount either payable to the Corporate Debtor or to the other party will be considered as due. "Regulation 29: Mutual credits and set-off Where there are mutual dealings between the corporate debtor and another party, the sums due from one party shall be set off against the sums due from the other to arrive at the net amount payable to the corporate debtor or to the other party." The benefit of set-off under Regulation 29 is available only if the same parties (i.e. CD and appellant) are invol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eparate legal identity of each Corporate Debtor and undermines its present contention of a collective or consolidated treatment. 4.11. Subsequently, when the Applicant, in its capacity as Liquidator, sought recovery of the balance load security amount from the Respondent Company after adjusting the outstanding electricity dues as on the date of disconnection, i.e. 31.12.2014, the Respondent Company sought to alter its earlier position by raising a defense of set-off against purported dues from other entities of the group. Therefore, the doctrine of approbate and reprobate squarely applies on the Respondent Company itself and it cannot be permitted to blow hot and blow cold at its convenience 4.13. The variance in voting rights further reinforces that each entity is being dealt with separately under the Code, both in SCC constitution and in the application of Section 53 of the Code, i.e. waterfall mechanism. 4.14. Hence, we are of considered opinion that, having filed and pursued separate claims, the Respondent Company is entitled to the benefit under Section 53 of the Code only and set-off as demanded by the Respondent Company is not allowable under the C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 29. Appellant is aggrieved with this order and claims that the same group of companies owed the Appellant Rs. 9,07,03,124 (approximately Rs. 9 crores). The main ground of the Appellant is that the CD namely M/s. Brahmaputra Rolling Mills Pvt. Ltd. is part of a group of companies and that since these groups of entities (apart from CD) totally owed some amount to the Appellant and therefore that Appellant is not liable to pay the admitted amounts to the CD. 30. In the facts and circumstances of the case we find that the CD is a separate juristic person. The CD is distinct from other group entities of the BISCON group [namely Brahmaputra Galvochem Pvt. Ltd., Brahmaputra Iron and Steel Co. Pvt. Ltd. and Brahmaputra TMT Bars Pvt. Ltd. And Brahmaputra Tubulars Pvt. Ltd.] and each of them have undergone separate CIRP and later on liquidation proceedings. It is also brought to our notice that all the group companies have already been dissolved, pursuant to the final order of dissolution passed by NCLT Guwahati Bench on 13.12.2014. Thus, the group companies cannot be tagged along with the CD, as the liquidation proceedings of each company were done as separate entity. We find Responden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y set of before disbursement under Regulation 29 of the liquidation process, 2016 is not a ground sustainable under the Insolvency and Bankruptcy Code. The liquidation process is governed by the liquidation process regulations under the code and the liquidator has proceeded as per that procedure and the Appellant had also filed its claims as per that procedure. At this stage, by clubbing of the claims and setting off against its dues is not sustainable 33. We also find that in the claim form submitted by the Appellant, before the IRP, it is clearly noted at serial No. 7 i.e., details of any mutual credit, mutual debts or other mutual dealings between the CD and the OC which may be set off against the claim and we find there is a "N/A" entry. 34. The Respondent-Liquidator has also brought to our notice that communication dated 06.02.2024, which was received from the Appellant at page No. 126 of the Appeal paper book, wherein the Appellant has calculated its claim basis Electricity Supply Code Of Regulation, 2017, which relates to a single consumer having more than one service connections in his name, and is therefore not applicable in this case as in the present case there are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties having multiple CIRP and liquidation proceedings. Therefore, this judgment is of no assistance to the Appellant. 37. The Appellant is harping on the Group of Companies doctrine and claims that the group of companies' doctrine have been presenting themselves as a singular entity before the Appellant and to substantiate it's claim the Appellant has produced one communication sent by the BISCON Group of companies, which is placed at page No. 128 of the Appeal paper book in which they have shared information with respect to change of the office address. We find that in this communication the BISCON, which is Brahmaputra group of industries, just intimated that that have shifted their registered office from Athgaon to Bora Service and all the units were operating work from the new address. We find that this communication does not change the distinct legal character of these companies and this letter is of no assistance to the appellant. We don't find any infirmity in the finding of the NCLT that CIRP or the liquidation process may involve one RP or one liquidator for more than company as a matter of convenience but the company does not lose its separate legal status in the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... may be specified by the Board and prepare a report; (d) to take such measures to protect and preserve the assets and properties of the corporate debtor as he considers necessary; (e) to carry on the business of the corporate debtor for its beneficial liquidation as he considers necessary; (f) subject to section 52, to sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels in such manner as may be specified; Provided that the liquidator shall not sell the immovable and movable property or actionable claims of the corporate debtor in liquidation to any person who is not eligible to be a resolution applicant. (g) to draw, accept, make and endorse any negotiable instruments including bill of exchange, hundi or promissory note in the name and on behalf of the corporate debtor, with the same effect with respect to the liability as if such instruments were drawn, accepted, made or endorsed by or on behalf of the corporate debtor in the ordinary course of its business; (h) to take out, in....