M. P. Agarwal Vs Shri Lakshmi Cotsyn Ltd. & Anr. - Withdrawal Application U/s 12A & Commercial Wisdom of CoC.

NCLAT (27.07.2020) in M. P. Agarwal Vs Shri Lakshmi Cotsyn Ltd. & Anr.  [Company Appeal (AT) (Insolvency) No. 620 of 2020] held that;

• It is the settled law of the land that the Committee of Creditors enjoys primacy in matter of approval or rejection of Resolution Plan/ Settlement Proposal and the Adjudicating Authority as also this Appellate Tribunal would be exceeding its jurisdiction in questioning the commercial wisdom of the Committee of Creditors in approving or rejecting such plan/proposal which is essentially based on business decision.

• This being the business decision based on commercial wisdom of the Committee of Creditors and no material irregularity in Corporate Insolvency Resolution Process culminating in passing of Liquidation Order having been brought to notice of this Appellate Tribunal, we find no justifiable ground for judicial intervention. 

Excerpts of the order;

27.07.2020: Vide impugned order dated 1st July, 2020, the Adjudicating Authority (National Company Law Tribunal), Allahabad Bench allowed application filed by the Resolution professional under Section 33(1)(a) r/w Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (in short ‘I&B Code’) in CP(IB) NO. 142(ALD)/2018 seeking order of liquidation and appointment of Liquidator qua the Corporate Debtor – ‘Shri Lakshmi Cotsyn Ltd.’. It sent the Corporate Debtor into liquidation. Same has been challenged in appeal preferred by one M. P. Aggarwal, Promoter and Member of the suspended Board of Directors primarily on the ground that the Committee of Creditors had failed to take into account the Settlement Offer/ Proposal of the Appellant and the recommendation for Liquidation was based on stale valuations. It is contended on behalf of the Appellant that the I&B Code at its core is to be used for reorganization and resolution of the Corporate Debtor and unless such reorganization is effected in a time bound manner, the value of the assets of such persons will deplete. 

# 2. After hearing learned counsel for the Appellant for a while we find that initially three Expressions of Interest were filed in response to the invitation by the Resolution Professional, by three prospective Resolution Applicants. However, none of them submitted Resolution Plans by the last date. It further appears that two more bids were made to secure Resolution Plans but the same proved abortive. Since even the extended period of Corporate Insolvency Resolution Process was expiring, on 18th February, 2019 the Committee of Creditors in its 9th Meeting resolved to go for Liquidation of the Corporate Debtor. 

# 3. The Appellant’s contention is that its Settlement Proposal of Rs.650 Crores far exceeds the liquidation value of the assets of the Corporate Debtor fixed at Rs.500 Crores and there was no justification on the part of the Committee of Creditors in rejecting the Settlement Proposal. It emerges from Record that even after filing of the application for Liquidation, the Resolution Professional has convened five meetings of the Committee of Creditors to consider the Proposal of Settlement under Section 12A of the I&B Code. Admittedly, the highest offer was made by the Promoter – Appellant for Rs.650 Crores but the same was rejected as the Committee of Creditors had fixed a benchmark of Rs.1000 Crore and Committee of Creditors in its wisdom rejected the aforesaid Settlement Proposal for not complying with the conditions set out for consideration of such OTS/ Settlement Proposal. The Committee of Creditors appears to have taken a commercial call on the OTS Proposal of the Ex-management/Promoter/ Appellant but it found that the investors supposedly giving the funds to the ex-management had been frequently changing and in two proposals even the names of the investors were not revealed. Subsequently, when the name of a foreign investor was disclosed, even the upfront amount was not deposited. Thus, the Committee of Creditors decided to go for liquidation of the Corporate Debtor as it was convinced that the Suspended Management was only delaying the process and could not mobilize resources and arrange the requisite funds for supporting its OTS Proposal/ Settlement Offer. 

# 4. It is the settled law of the land that the Committee of Creditors enjoys primacy in matter of approval or rejection of Resolution Plan/ Settlement Proposal and the Adjudicating Authority as also this Appellate Tribunal would be exceeding its jurisdiction in questioning the commercial wisdom of the Committee of Creditors in approving or rejecting such plan/proposal which is essentially based on business decision. In this regard it would be apposite to extract relevant portion of para 48 of the judgment rendered by the Hon’ble Apex Court in ‘K. Sashidhar’ Vs. ‘Indian Overseas Bank and Ors.’, reported in MANU/SC/0189/2019:-

• “48. …….. Indubitably, the legislature has consciously not provided for a ground to challenge the justness of the “commercial decision” expressed by the financial creditors – be it to approve or reject the resolution plan. The opinion so expressed by voting is non-justiciable.” 

5. The proposition of law enunciated by Hon’ble Apex Court is loud and clear. In absence of a Resolution Plan emanating from an eligible Resolution Applicant within prescribed timelines and not being satisfied with the capacity of the Promoter/Ex-management/Appellant to garner and mobilze an adequate and satisfactory finance provider/investor in support of its OTS Proposal, the Committee of Creditors in its wisdom decided to push the Corporate Debtor into Liquidation. This being the business decision based on commercial wisdom of the Committee of Creditors and no material irregularity in Corporate Insolvency Resolution Process culminating in passing of Liquidation Order having been brought to notice of this Appellate Tribunal, we find no justifiable ground for judicial intervention. The appeal is accordingly dismissed. No costs. 

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Edelweiss Asset Reconstruction Co. Ltd Vs Birla Cotsyn (India) Ltd - Salaries of employees during CIRP.

NCLT Mumbai (09.04.2019) in Edelweiss Asset Reconstruction Co. Ltd Vs Birla Cotsyn (India) Ltd. [MA 1098/2019 in (IB) 579(MB)/2018] held that;

•  the appointment of RP does not amount to a suspension of officers, employees, etc and they continue to function. If RP wishes to terminate the contract of employment of any of employees, the same ought to be done by the contract of employment 

• It is to be clarified that during the pendency of CIRP, the RP must ensure that the company should remain a going concern. Given the decision of Hon’ble NCLAT in the case “Subasri Realty” supra, it is clear that during CIRP the employees of the Corporate Debtor can only be terminated after giving notice as per the terms of the employment. However, since RP has not filed any reply, we direct the RP to disburse the salaries of the employees in accordance with rules and Regulations, to keep the Corporate Debtor a going concern, subject to the availability of the funds.

Excerpts of the order;

MA 1098/2019 has been filed by the employees of the Corporate Debtor under Section 60(5) of IBC, 2016, seeking direction against the Resolution professional in respect of the payment of salaries of the employees by the Resolution Professional.

It is stated in the application that the Corporate Debtor Birla Cotsyn (India) Ltd is undergoing Insolvency Process and the RP has been appointed by the CoC in its meeting dated 20.12.2018. It is further stated that the applicants in the present MA are the employees of the Corporate Debtor, who have not received their salaries for January and February 2019.

The applicants have stated that Resolution Professional has failed to disburse the salaries of the applicants for the said months without assigning any justification for holding back the same, even though the other employees of the Corporate Debtor continue to receive their salaries for the said period.

The applicant has stated that their salaries were proposed to be rationalized by the CoC members for the reasons best known to them, with no go-ahead given to the RP for the same. No justification has been provided by the RP for holding back the salaries of the applicants.

Counsel for the application has relied on the order of the Hon’ble NCLAT passed in appeal No.290/2017 in the matter of Subasri Realty, wherein Hon’ble NCLAT has held that “ the appointment of RP does not amount to a suspension of officers, employees, etc and they continue to function. If RP wishes to terminate the contract of employment of any of employees, the same ought to be done by the contract of employment. Accordingly, RP is required to give notice as per the letter of appointment, and in case of immediate termination of employment, RP is required to pay the said notice period pay. By not doing the same, RP has violated/contravened the provisions of the Contract Act, which is illegal”.

Relying on the above order of Hon’ble NCLAT, the applicant has filed this application.

Ld. Counsel representing the RP submitted that he needs time for filing reply. It is pertinent to mention that the applicant has filed Affidavit of service which shows that notice on RP has been served on 15.3.2019. However to date, no reply has been filed.

It is to be clarified that during the pendency of CIRP, the RP must ensure that the company should remain a going concern. Given the decision of Hon’ble NCLAT in the case “Subasri Realty” supra, it is clear that during CIRP the employees of the Corporate Debtor can only be terminated after giving notice as per the terms of the employment. However, since RP has not filed any reply, we direct the RP to disburse the salaries of the employees in accordance with rules and Regulations, to keep the Corporate Debtor a going concern, subject to the availability of the funds.

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in the matter of Mr. Anil Syal - Insolvency Resolution Process initiated against the Debtor/Personal Guarantor.

NCLT New Delhi-III (28.10.2020) in the matter of Mr. Anil Syal  [CP IB -589(PB)/2020] admitted insolvency application of the applicant/debtor (personal guarantor) filed under section 94 of IBC, 2016.

• Therefore, based on the reasons recorded in the report submitted by the Resolution Professional, the application i.e., CP IB-589(PB)/2020 filed under the provisions of Section 94 of IBC, 2016 is hereby admitted under section 100 of the IBC, 2016. The Insolvency Resolution Process is initiated against the Applicant/Debtor and the moratorium is declared, which begins with the date of admission of the application and shall cease to have effect at the end of the period of 180 days, as provided under Sec 101 of IBC, 2016.

• In terms of the above, CP IB-589(PB)/2020 filed under Section 94 (1) of the IBC, 2016 is admitted and the Insolvency Resolution Process stands initiated against the Debtor/Personal Guarantor.

Excerpts of the order;

# 1. Under consideration is an Application No. IB-589(PB)/2020 filed under Section 94 (1) r/w sections 96, 97, 99 & 100 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as "IBC, 2016") r/w Rule 6 (1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for IRP for Personal Guarantors to Corporate Debtor) Rules, 2019. The prayer made is to initiate the Insolvency Resolution Process (hereinafter referred as "IR Process") against the Applicant/Debtor who is the Personal Guarantor of Union Bank of India (hereinafter referred as the "the Bank") for an amount of Rs. 40 Crores in relation to the credit facility extended by the Bank in favour of FLPL Logistics Pvt. Ltd (formerly Known as Flywheel Logistics Pvt Ltd.) (hereinafter referred as the "the Company").

# 2. On presentation of the application by the Applicant/Debtor, this Authority vide order dated 18th September 2020 has appointed the Resolution Professional viz., Mr. Avneesh Srivastava, Registration No. IBM/IPA-001/1PM01845/2019-20/12869, with address: 310, 3rd Floor, Kalpana Plaza, Birhana Road, Kanpur, U.P.-208001, Phone No.: 9984169645, (512) 2304026, Email: caavneesh11@gmail.com, to file report under Section 99 of Insolvency and Bankruptcy Code, 2016, which has been filed by him through IA-415412020 filed in CP IB-589(PB)/2020 recommending the admission of the application filed under section 94 of IBC, 2016. The grounds for admission of the application recorded in the Report are as follows: -

• The Applicant/Debtor has committed default in repayment of his debts; therefore, first requirement as set out under Section 94 (1) is satisfied.

• That all the debts mentioned in the application are not excluded debts; hence requirement set out under Section 94 (3) is satisfied.

• That the Applicant/Debtor is not an undischarged bankrupt, not undergoing a fresh  start process, not undergoing an insolvency resolution process or bankruptcy process, therefore satisfies requirement set out under Section 94 (4).

• That no application under Chapter III of IBC, 2016 has been admitted in respect of the Applicant/Debtor during the period of twelve months preceding the date of submission of this application under Section 94, therefore, satisfies the requirement set out under Section 94 (5). 

• That the Application has been duly filed in the prescribed "Form A" along with requisite fee of Rs. 2,001- satisfies the requirement under Section 94 (6).

• That the Applicant/Debtor is not eligible under Section 80 for a fresh start process provided under Chapter 11 of IBC, 2016.

# 3. Besides the default in making payment of Rs. 40 cores to the Union Bank of India, the Applicant/Debtor defaulted in making payments for the following debts:

• Sudharshan Syal/Unsecured Loan Rs. 34.00 lakhs (as on 15.02.2020)

• Sumit Syal/Unsecured Loan Rs. 128.00 Lakhs (as on 18.02.2020).

• Luv Bharadwaj/Unsecured Loan Rs. 46.60 Lakhs.

• Rangoli International Pvt Ltd/Unsecured Loan Rs. 275 Lakhs (as on 02.2020).

• Arvind Jain/Unsecured Loan Rs. 57 Lakhs (as on 15.02.2020).

• HDFC Bank/Car Loan Rs. 1.07 Lakhs (as on Feb 2020).

• Union Bank of India/Credit Card.

• Axis Bank/Credit Card Rs. 2.09 Lakhs (as on 17.02.2020).

• SBI Bank/Credit Card Rs. 1.33 Lakhs (as on 17.02.2020).

The Applicant/Debtor is also entitled to receive an amount of Rs. 37.46 Lakhs extended as unsecured Loan to Flywheel Logistics Solution Pvt Ltd.

# 4. From the report there does not appear any request of the Resolution Professional for issuance of the instructions for the purpose of conducting negotiations between the debtor and creditors for arriving at the repayment plan. Therefore, based on the reasons recorded in the report submitted by the Resolution Professional, the application i.e., CP IB-589(PB)/2020 filed under the provisions of Section 94 of IBC, 2016 is hereby admitted under section 100 of the IBC, 2016. The Insolvency Resolution Process is initiated against the Applicant/Debtor and the moratorium is declared, which begins with the date of admission of the application and shall cease to have effect at the end of the period of 180 days, as provided under Sec 101 of IBC, 2016. During the moratorium period;

• a) Any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed; and

• b) The creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt; and 

• c) The debtor shall not transfer, alienate, encumber, or dispose of any of his assets or his legal rights or beneficial interest therein; 

• d) The provisions of this section shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

# 5. The Resolution Professional viz., Mr. Avneesh Srivastava, who has been appointed under Section 97 vide Order dated 18.09.2020, is directed to cause a public notice published on behalf of the Adjudicating Authority within 7 days of uploading of this Order on the website of the NCLT Delhi, inviting claims from all Creditors, who shall register their claims as provided under Section 103 within 21 days of such issuance. The notice shall contain the necessary information as provided under Section 102 (2) of IBC, 2016. The publication of notice shall be made in newspapers, one in English and other in Vernacular which have wide circulation in the State where the Debtor resides. The Resolution Professional shall furnish two spare copies of the notice to the Registry. One shall be place by the Registry on our website and the other shall be affixed in the premises of this Authority.

# 6. The Resolution Professional in exercise of the powers conferred under Section 104 shall prepare a list of creditors within 30 days from the date of the notice. The debtor shall prepare a repayment plan in consultation with the Resolution Professional as provided under Section 105 which shall include the provisions for payment of fee to the Resolution Professional. The Resolution Professional shall submit the repayment plan along with his report on the plan to this Authority within a period of 21 days from the last date of submission of claims, as provided under Section 106.

# 7. In case the Resolution Professional recommends that a meeting of the creditors is not required to be summoned, he shall record the reasons therefor. If the Resolution Professional is of the opinion that the meeting of the creditors should be summoned, he shall specify the details as provided under Section 106(3). The date of meeting should not be less than 14 days or more than 28 days from the date of submission of the Report under Sub-section (1) of Section 106, for which at least 14 days' notice to the creditors [as per the list prepared] shall be issued by all modes. Such notice must contain the details as provided under the provisions of Section 107.

# 8. The meeting of the creditors shall be conducted in accordance with Sections 108, 109, 110 & 111. The Resolution Professional shall prepare a report of the meeting of the creditors on repayment plan with all details as provided under Section 112 and submit the same to this Authority, copies of which shall be provided to the debtor and the Creditors. It is made clear that the Resolution Professional shall perform his functions and duties in compliance with the code of Conduct provided under Section 208 of the IBC, 2016.

# 9. In terms of the above, CP IB-589(PB)/2020 filed under Section 94 (1) of the IBC, 2016 is admitted and the Insolvency Resolution Process stands initiated against the Debtor/Personal Guarantor.

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Yogendra Yasupal Vs. M/s. Jigsaw Solutions & Anr - No dispute can be raised at the stage of submitting reply under sub-section (2) of Section 8 of the ‘I&B Code.

 NCLAT (16.10.2017) in Yogendra Yasupal Vs. M/s. Jigsaw Solutions & Anr.  [Company Appeal (AT) (Insolvency) No. 222 of 2017] held that;

•  …...no dispute can be raised at the stage of submitting reply under sub-section (2) of Section 8 of the ‘I&B Code’. In this regard one may rely on decision of Hon’ble Supreme Court’s in “Mobilox Innovations Private Ltd v. Kirusa Software Private Ltd, (2017) SCC OnLine SC 1154”.

Excerpts of the order;

16.10.2017- 1st Respondent- ‘Operational Creditor’ filed application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘I&B Code’) against 2nd Respondent- ‘Corporate Debtor’. The application having been admitted by impugned order dated 15th September, 2017 passed by Adjudicating Authority (National Company Law Tribunal), Chennai Bench, Chennai in Company Petition No. 559/(IB)/CB/2017, and order of moratorium having been passed with further orders in terms of the ‘I&B Code’, this present appeal has been filed.

# 2. Learned counsel appearing on behalf of the appellant submitted that there is an ‘existence of dispute’ and, therefore, the application under Section 9 of the ‘I&B Code’ was not maintainable. He relied on one or other documents including the order passed by Hon’ble High Court of Judicature at Madras in an Anticipatory Bail Petition preferred by the appellant/director (shareholder) to suggest that there is a ‘dispute in existence’.

# 3. From the enclosure attached to the appeal, we find that the document preferred by ‘Operational Creditor’ was complete. In so far dispute is concerned, any observations with regard to individual officer if made by a court of law or in a communication made by the ‘Operational Creditor’, the same cannot be treated to be an ‘existence of dispute’. As we find that there is no specific objection made by the ‘Corporate Debtor’ in writing, raising any dispute with regard to the quality of services as claimed to have been rendered by the Respondents-‘Operational Creditors’, no dispute can be raised at the stage of submitting reply under sub-section (2) of Section 8 of the ‘I&B Code’. In this regard one may rely on decision of Hon’ble Supreme Court’s in “Mobilox Innovations Private Ltd v. Kirusa Software Private Ltd, (2017) SCC OnLine SC 1154”.

# 4. We find no merit in this appeal. It is accordingly dismissed. However, in the facts and circumstance of the case, there shall be no order as to cost.

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Authorised Person - Section 7. Initiation of corporate insolvency resolution process by financial creditor.

 Insolvency and Bankruptcy Code, 2016.

# Section 7. Initiation of corporate insolvency resolution process by financial creditor.

(1) A financial creditor either by itself or jointly with other financial creditors, or any other person on behalf of the financial creditor, as may be notified by the Central Government may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority when a default has occurred.

Provided that for the financial creditors, referred to in clauses (a) and (b) of sub-section (6A) of section 21, an application for initiation corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such creditors in the same class or not less than ten per cent. of the total number of such creditors in the same class, whichever is less:

Provided further that for financial creditors who are allottees under a real estate project, an application for initiating corporate insolvency resolution process against the corporate debtor shall be filed jointly by not less than one hundred of such allottees under the same real estate project or not less than ten per cent. of the total number of such allottees under the same real estate project, whichever is less:

Provided also that where an application for initiating the corporate insolvency resolution process against a corporate debtor has been filed by a financial creditor referred to in the first or second provisos and has not been admitted by the Adjudicating Authority before the commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such application shall be modified to comply with the requirements of the first or second provisos as the case may be within thirty days of the commencement of the said Act, failing which the application shall be deemed to be withdrawn before its admission.]

Explanation. - For the purposes of this sub-section, a default includes a default in respect of a financial debt owed not only to the applicant financial creditor but to any other financial creditor of the corporate debtor.

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REGD. NO. D. L.-33004/99

The Gazette of India

EXTRAORDINARY

PART II—Section 3—Sub-section (ii)

PUBLISHED BY AUTHORITY

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No. 957] NEW DELHI, FRIDAY, MARCH 1, 2019/PHALGUNA 10, 1940

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2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)]

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MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 27th February, 2019

S.O. 1091(E).—In exercise of the powers conferred by sub-section (1) of section 7 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby notifies following persons who may file an application for initiating corporate insolvency resolution process against a corporate debtor before the Adjudicating Authority, on behalf of the financial creditor: -

• (i) a guardian;

• (ii) an executor or administrator of an estate of a financial creditor;

• (iii) a trustee (including a debenture trustee); and

• (iv) a person duly authorised by the Board of Directors of a Company.

[F. No. 30/25/2018-Insolvency Section]

GYANESHWAR KUMAR SINGH, Jt. Secy.

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Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064 and Published by the Controller of Publications, Delhi-110054.

Interim Finance - Special Window for Affordable and Middle-Income Housing Investment Fund I

Insolvency and Bankruptcy Code, 2016.

# Section 5. Definitions.

(15) “interim finance” means any financial debt raised by the resolution professional during the insolvency resolution process period and such other debt as may be notified;

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REGD. NO. D. L.-33004/99

The Gazette of India

CG-DL-E-19032020-218811

EXTRAORDINARY

PART II—Section 3—Sub-section (ii)

PUBLISHED BY AUTHORITY

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No. 1027]  NEW DELHI, THURSDAY, MARCH 19, 2020/PHALGUNA 29, 1941

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2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)]

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MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 18th March, 2020

S.O. 1145(E).—In exercise of the powers conferred by clause (15) of section 5 of the Insolvency

and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby notifies a debt raised from the Special Window for Affordable and Middle-Income Housing Investment Fund I, for the purposes of the said clause.

Explanation.—For the purposes of this notification, the expression “Special Window for Affordable and Middle-Income Housing Investment Fund I” shall mean the fund sponsored by the Central Government for providing priority debt financing for stalled housing projects, as an alternate investment fund and registered with the Securities and Exchange Board of India, established under sub-section (1) of section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), to provide financing for the completion of stalled housing projects that are in the affordable and middle-income housing sector.

[F. No. 30/9/2020-Insolvency]

GYANESHWAR KUMAR SINGH, Jt. Secy.

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GABS Megacorp Ltd. Vs Sutanu Sinha and Anr - Exclusion of the period of Judicial Intervention during Liquidation Process

 NCLAT (21.12.2020) in GABS Megacorp Ltd. Vs Sutanu Sinha and Anr. [Company Appeal (AT) (Insolvency) No. 1026 & 1027 of 2020] held that;

• It is manifestly evident that prayer in regard to extension of time sought by the Appellant remains uncontested as the ‘Lenders and Stakeholders Committee’ have expressed their interest in getting the sale of the Corporate Debtor, in favour of the Appellant, completed at the earliest. It would be conducive to the interest of justice that period during which the Appellant had been agitating before the judicial apparatus for waiver of interest to achieve the desired objective of completing the sale of Corporate Debtor, is excluded.

• Having regard to the fact that the Lenders and Stakeholders Committee have approved the waiver of interest by 91.59% voting and there is justification for allowing exclusion of the period of judicial intervention, we allow exclusion of 271 days w.e.f. 25th March, 2020 till today,

Excerpts of the order;

21.12.2020: Counter affidavit filed by Respondent No. 1 is taken on record.

# 2. Heard Shri Virendra Ganda, learned senior counsel representing the Appellant and Shri Nirav Shah, learned counsel representing the Respondents.

# 3. The issue raised in this appeal relates to extension of time. According to the Appellant, though time has been extended in terms of the impugned order passed by the Adjudicating Authority (National Company Law Tribunal), Hyderabad Bench, time taken in prosecution of application seeking extension has not been taken care of. Thus, it is contended that the exercise has not yielded the expected benefit.

# 4. After going through the counter affidavit filed by Respondent No. 1, it emerges that the ‘Lenders and Stakeholders Committee’ has approved the waiver of interest. Reference in this regard is made to Annexure 6 and Annexure 7 of the Counter Affidavit at pages 47 and 48 respectively. It is manifestly evident that prayer in regard to extension of time sought by the Appellant remains uncontested as the ‘Lenders and Stakeholders Committee’ have expressed their interest in getting the sale of the Corporate Debtor, in favour of the Appellant, completed at the earliest. It would be conducive to the interest of justice that period during which the Appellant had been agitating before the judicial apparatus for waiver of interest to achieve the desired objective of completing the sale of Corporate Debtor, is excluded. From the minutes recorded on 8th December, 2020 (page 44 to 46 of the counter affidavit), it comes to fore that the 90 days period in terms of Regulation 44 has came to an end on 3rd December, 2020 whereas the Appellant has not deposited any payment by 30th November, 2020 and the voting lines had been extended till 3rd December, 2020. Thereafter, the matter was heard by this Appellate tribunal and order directing status quo came to be passed, which is to expire today. The period sought to be excluded in terms of Regulation 47A has been worked out at page 45 in a tabular form which is reproduced herein Below:-  ………….

# 5. According to this calculation the period required to be excluded is from 25th March, 2020 until today, that is the period of judicial intervention, which has been calculated at 271 days and once this exclusion is permitted, the date of liquidation process to be completed would be 22nd July, 2021. Having regard to the fact that the Lenders and Stakeholders Committee have approved the waiver of interest by 91.59% voting and there is justification for allowing exclusion of the period of judicial intervention, we allow exclusion of 271 days w.e.f. 25th March, 2020 till today, culminating in extending the liquidation process until 22nd July, 2021. Since the notice period would commence from tomorrow, i.e. 22nd December, 2020, the entire amount of Rs.1654.77 Crores minus whatever advance payment has been made shall be paid by the Appellant/Purchaser within a period of 90 days reckoned from 22nd December, 2020. It is being expressly made clear that in the event of such payment being made by the Appellant/Purchaser within 30 days beginning from 22nd December, 2020 no interest will be charged thereon. But in the event of payment being made beyond 30 days but within 90 days, interest will be chargeable as per IBBI Regulations. Appeal is allowed with aforesaid observations and directions.

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Committee of Creditors of LEEL Electricals Ltd. Vs Leel Electricals Ltd. Through its IRP, Arvind Mittal - Appointment of RP, Commercial wisdom of CoC

NCLAT (21.12.2020) in Committee of Creditors of LEEL Electricals Ltd. Vs Leel Electricals Ltd.

Through its IRP, Arvind Mittal [Company Appeal (AT) (Insolvency) No. 1100 of 2020] held that;

• Appointment of RP is governed by Section 22 which provides that the first meeting of CoC shall be held within 7 days of constitution of CoC and the CoC may by a majority vote of not less than 66% of the voting share of Financial Creditors either resolve to appoint the IRP as a Resolution Professional or to replace the IRP by another Resolution Professional. It is now well settled that the decision in regard to appointment of IRP as RP or replacement of IRP by another RP falling within the ambit of Section 22 of I&B Code is a decision based on commercial wisdom of CoC which is not amenable to judicial review.

Excerpts of the order;

21.12.2020: Order dated 14th December, 2020 passed by the Adjudicating Authority (National Company Law Tribunal), Allahabad Bench, adjourning the matter to 20th January, 2021 while granting an opportunity to the Interim Resolution Professional (IRP) to file an affidavit in regard to passing of resolution by the Committee of Creditors for its replacement by Resolution Professional (RP) under Section 22 of the I&B Code, has been assailed in this appeal on the ground that there was no occasion for the Adjudicating Authority to have granted time to Interim Resolution Professional to file any objection/ reply to the resolution of Committee of Creditors.

# 2. Shri Ramji Srinivasan, learned senior counsel representing the Appellant submits that it is settled law that the decision to substitute Interim Resolution Professional by Resolution Professional is a commercial decision, not required to be supported by any reasons. Once the Committee of Creditors has passed a resolution to substitute the Interim Resolution Professional by Resolution Professional, the Interim Resolution Professional has no role to play. It is submitted by learned senior counsel that resolution has been passed by the Committee of Creditors under Section 22 of the I&B Code and not under Section 27 of the I&B Code as was sought to be made out by the Respondent. It is further submitted that in the first CoC Meeting of ‘LEEL Electricals Ltd.’ resolution to confirm IRP as a Resolution Professional failed as the total votes cast in favour of the resolution were 0% (page 45 of the appeal paper book). It is further submitted that Shri Arvind Mittal, IRP had offered himself to be the Resolution Professional of the Corporate Debtor. The resolution, in second COC Meeting was decided to be put to e-voting (page 108-110 of the appeal paper book). With reference to page 70 of the appeal paper book it is submitted that the resolution to confirm IRP as RP failed as slightly over 8% voted in its favour. With reference to page 71 of the appeal paper book, learned counsel for Appellant has demonstrated that the resolution to substitute IRP by RP – Mr. Gangaram Agarwal was voted by CoC with more than 78% vote share. It is further submitted that the CoC had moved application under Section 22(3) ofthe I&B Code for appointment of Mr. Gangaram Agarwal as Resolution Professional in terms of the resolution passed by CoC with 78.28% of voting share. Therefore, it is submitted by Mr. Ramji Srinivasan, learned senior counsel representing the Appellant that harping upon application of Section 27 is devoid of reason. Reference is made to email dated 26th November, 2020 emanating from the IRP, which clearly demonstrates that the IRP was mislead into believing that Section 22 of I&B Code would apply only if IRP is replaced in first meeting of COC and not otherwise. This is clearly borne out by the email forming page 199 of the appeal paper book.

# 3. Shri Ashish Aggarwal, learned counsel appearing on behalf of the Respondent upon service of advance notice by Appellant submits that the impugned order came to be passed in the background of the resolution having been passed under Section 27 and not under Section 22 (3) of the I&B Code.

# 4. The appeal was taken up for final disposal with the consent of learned counsel for the parties. Section 16 (5) of the I&B Code which, in its original form, provided that the term of Interim Resolution Professional shall not exceed 30 days from the date of his appointment came to be amended by Act 26 of 2018 which has been enforced w.e.f 6th June, 2018. In its amended form it provides that the term of IRP shall continue till the date of appointment of RP under Section 22. Appointment of RP is governed by Section 22 which provides that the first meeting of CoC shall be held within 7 days of constitution of CoC and the CoC may by a majority vote of not less than 66% of the voting share of Financial Creditors either resolve to appoint the IRP as a Resolution Professional or to replace the IRP by another Resolution Professional. It is now well settled that the decision in regard to appointment of IRP as RP or replacement of IRP by another RP falling within the ambit of Section 22 of I&B Code is a decision based on commercial wisdom of CoC which is not amenable to judicial review. Reference in this regard can be made to decision of this Appellate Tribunal in Company Appeal (AT) (Insolvency) No. 882 of 2020, “Naveen Kumar Jain vs. Committee of Creditor of K.D.K Enterprises Pvt. Ltd. & Ors.” and Company Appeal (AT) (Insolvency) No. 749 of 2019, “Punjab National Bank vs. Mr. Kiran Shah, IRP of ORG Informatics Ltd.”. In the instant case, it is not in controversy that in the first CoC Meeting appointment of IRP as RP failed to garner any support. Thereafter, the bid made by the IRP offering himself for appointment as RP also did not cut any ice with the CoC. Ultimately, IRP was replaced by Mr. Gangaram Agarwal in terms of resolution passed in second CoC Meeting with 78% vote share of the Committee of Creditors. It is indisputable that these actions are permissible only within the ambit of Section 22 of I&B Code. Therefore, invoking of Section 27 and adopting a protracted procedure in that regard, as appears to have been done by the Adjudicating Authority, is unwarranted. This only has resulted in wastage of time and prolonging the CIRP Process. In the face of CoC resolution passed with more than the requisite majority, it cannot lie in the mouth of IRP that any of his legal rights have been infringed. It would have been wise on his part to bow to the commercial wisdom of the Committee of Creditors and quit gracefully. Be that as it may, there was no merit in the case set up by IRP before the Adjudicating Authority and the same was required to be dealt with without insisting upon filing of affidavit by the IRP in regard to the provision of law invoked to pass the resolution.

# 5. We are accordingly inclined to allow this appeal and set aside the impugned order. Acting accordingly, we direct the Adjudicating Authority to carry forward the Resolution Process in regard to the Corporate Debtor with Resolution Professional – Mr. Gangaram Agarwal discharging functions as the Resolution Professional in terms of resolution passed by the CoC.

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Bishal Jaiswal Vs Asset Reconstruction Company (India) Ltd. & Anr. - Reflection of a debt in the Balance Sheet/ Annual Return of a CD would not be acknowledgement U/s 18 of the Limitation Act

 NCLAT (22.12.2020) in Bishal Jaiswal Vs Asset Reconstruction Company (India) Ltd. & Anr. [Reference made by Three Member Bench in Company Appeal (AT) (Insolvency) No. 385 of 2020] held that;

• As regards the issue raised whether reflection of a debt in the Balance Sheet/ Annual Return of a Corporate Debtor would amount to acknowledgement under Section 18 of the Limitation Act, suffice it to say that the finding has been recorded by the five Member Bench in the context of judgment or a decree passed for recovery of money by Civil Court/ Debt Recovery Tribunal which cannot shift forward the date of default for purposes of computing limitation for filing of an application under Section 7 of the I&B Code and the fact that filing of Balance Sheet/ Annual Report being mandatory under Section 92(4) of Companies Act, failing of which attracts penal action under Section 92(5) & (6).

Excerpts of the order;

A three member Bench of this Appellate Tribunal, which heard Company Appeal (AT) (Insolvency) No. 385 of 2020, was of the view that the judgment rendered by a five member Bench of this Appellate Tribunal in “V. Padmakumar Vs. Stressed Assets Stabilization Fund (SASF) & Anr.”, in Company Appeal (AT) (Insolvency) No. 57 of 2020, requires reconsideration. The issue formulated by the three member Referral Bench, as noticed in the order of reference, is as follows:-

• “Hon’ble Supreme Court and various Hon’ble High Courts have consistently held that an entry made in the Company’s Balance Sheet amounts to an acknowledgement of debt under Section 18 of the Limitation Act, 1963, in view of the settled law, V. Padmakumar’s Case requires reconsideration.”

# 11. Having heard learned counsel for the parties on the limited issue of competence of reference made by the three Member Bench and after fathoming through the relevant material on record, we find that the Referral Bench failed to take note of the fact that the five Member Bench Judgment rendered in ‘V. Padmakumar’s Case’ with a majority of 4:1 was delivered to remove uncertainty arising out of the conflicting verdicts of Benches of co-equal strength in ‘V. Hotel’s Case’ and ‘M/s Ugro Capital Ltd.’s Case’. In view of this factual position, it was inappropriate on the part of the Referral Bench to doubt the correctness of the five Member Bench Judgment, which admittedly has not been appealed against and occupies the field till date. This is besides the fact that the five Member Bench has taken note of the authoritative pronouncements of the Hon’ble Apex Court relevant to the determinable issue. Therefore, relying upon Judgments of various High Courts on the subject is of no consequence. This Appellate Tribunal is not a Constitutional Court. It is the creation of a Statute viz. Companies Act, 2013. Therefore, this Appellate Tribunal has to apply the law as embodied in the Statutes and as laid down by the Hon’ble Apex Court. This Appellate Tribunal only interprets and applies the law as it is. Once a Larger Bench of this Appellate Tribunal came to be constituted in the wake of two conflicting judgments rendered by Benches of co-equal strength on the issue, one of the two Benches having failed to notice the judgment of the Hon’ble Apex Court on the subject, the issue raised by the Referral Bench can no more be said to be res integra, in so far as the jurisdiction exercised by this Appellate Tribunal under I&B Code is concerned. It was a matter of judicial discipline for the Referral Bench to follow the judgment of the five member Bench in ‘V. Padmakumar’s Case’ as a binding precedent and not question the correctness of the Judgment by adopting the ‘cut and paste’ methodology in branding the five Member Bench Judgment in ‘V. Padmakumar’s Case’ as ‘so very incorrect’, divorced of the context in which the Hon’ble Apex Court used this expression in ‘Raghubir Singh’s Case’ (supra) and ‘Pradeep Chandra Parija’s Case’ (supra). While expressing our shock on this aspect, we propose to first deal with the issue that is sought to be raised on the basis of gross misconception and misunderstanding of law before dealing with the aspect of judicial discipline.

# 12. The five Member Bench in ‘V. Padmakumar’s Case’ has expressly referred to the judgment of Hon’ble Apex Court rendered in “B. K. Educational Services Pvt. Ltd. vs. Parag Gupta and Associates, (2019)11 SCC 633” wherein the Hon’ble Apex Court held that for purpose of Section 7 of I&B Code limitation Act, 1963 is applied from the date of inception of the Code. Article 137 of the Limitation Act would be applicable to applications under Section 7, 9 or 10 of the I&B Code. In “Jignesh Shah & Anr. vs. Union of India & Anr., (2019)10 SCC 750”, the Hon’ble Apex Court, after noticing various judgments, observed that when time begins to run it can only be extended in the manner provided in the Limitation Act. An acknowledgment of liability under Section 18 of the Limitation Act would certainly extend the limitation period but a suit for recovery which is a separate and independent proceeding distinct from the remedy of winding up would in no manner impact the limitation within which the winding up proceeding is to be filed, by somehow keeping the debt alive for the purpose of the winding up proceedings. Para’s 21 and 28 of the aforesaid judgment dealing with the issue of limitation have been extracted in the five Member Bench judgment rendered by this Appellate Tribunal in ‘V. Padmakumar’s Case’. The five Member Bench also took note of the Judgment delivered by the Hon’ble Apex Court in “Gaurav Hargovindbhai Dave vs. Asset Reconstructions Company (India) Limited & Another – (2019) 10 SCC 572”, wherein the Hon’ble Apex Court noted that the default having taken place and account having been declared NPA on 21st July, 2011, application filed under Section 7 of I&B Code in 2017 being clearly beyond three years under Article 137 of Limitation Act was time barred. The five Member Bench also took note of the judgment rendered by Hon’ble Apex Court in “Vashdeo R. Bhojwani vs. Abhyudaya Co-operative Bank Limited & Another – (2019) 9 SCC 158”, which laid down that since Limitation Act is applicable to applications filed under Section 7 and 9 of the I&B Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. It is further held that right to sue accrues when a default occurs. The Hon’ble Apex Court relied upon its judgment rendered in “B. K. Educational Services’ Case” (supra), wherein in para 42 it was observed that if the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. The five Member Bench of this Appellate Tribunal also noticed the judgment rendered by this Appellate Tribunal in ‘V. Hotels’ Case’ (supra) wherein after noticing judgment of Hon’ble Apex Court in “Vashdeo R. Bhojwani”, this Appellate Tribunal made following observations in regard to applicability of Section 18 of the Limitation Act for extension of limitation:-

• “22. The aforesaid provision makes it clear that for the purpose of filing a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has to be made in writing duly signed by the party against whom such property or right is claimed.

• 23. In the present case, ‘Asset Reconstruction Company (India) Ltd.’- (‘Financial Creditor’) has failed to bring on record any acknowledgment in writing by the ‘Corporate Debtor’ or its authorised person acknowledging the liability in respect of debt. The Books of Account cannot be treated as an acknowledgment of liability in respect of debt payable to the ‘Asset Reconstruction Company (India) Ltd.’- (‘Financial Creditor’) signed by the ‘Corporate Debtor’ or its authorised signatory.”

The five Member Bench also took note of the observations of Hon’ble Apex Court in “Sampuran Singh and Ors. vs. Niranjan Kaur and Ors.─ (1999) 2 SCC 679”and held:

• 24. In “Sampuran Singh and Ors. v. Niranjan Kaur and Ors.─ (1999) 2 SCC 679”, the Hon’ble Supreme Court observed that the acknowledgment, if any, has to be prior to the expiration of the prescribed period for filing the suit. In the present case, the account was declared NPA since 1st December, 2008 and therefore, the suit was filed. Thereafter, any document or acknowledgment, even after the completion of the period of limitation i.e. December, 2011 cannot be relied upon. Further, in absence of any record of acknowledgment, the Appellant cannot derive any advantage of Section 18 of the Limitation Act. For the said reason, we hold that the application under Section 7 is barred by limitation, the accounts of the ‘Corporate Debtor’ having declared NPA on 1st December, 2008.”

Thus, it was on the basis of the authoritative pronouncements and binding precedents of the Hon’ble Apex Court that the five Member Bench of this Appellate Tribunal arrived at the conclusion that for purpose of computing the period of limitation under Section 7, the date of default is NPA.

# 13. In “Babulal Vardharji Gurjar Vs. Veer Gurjar Aluminum Industries Ltd. & Anr.”, Civil Appeal No. 6347 of 2019, the Hon’ble Apex Court observed that Section 18 of the Limitation Act, 1963 would have no application to proceedings under I&B Code. Therefore, the issue raised as regards acknowledgement of liability by reflection in the Balance Sheet/ Annual Return would be irrelevant.

# 14. ………..   As regards the issue raised whether reflection of a debt in the Balance Sheet/ Annual Return of a Corporate Debtor would amount to acknowledgement under Section 18 of the Limitation Act, suffice it to say that the finding has been recorded by the five Member Bench in the context of judgment or a decree passed for recovery of money by Civil Court/ Debt Recovery Tribunal which cannot shift forward the date of default for purposes of computing limitation for filing of an application under Section 7 of the I&B Code and the fact that filing of Balance Sheet/ Annual Report being mandatory under Section 92(4) of Companies Act, failing of which attracts penal action under Section 92(5) & (6). …………… 

15. We are therefore of the considered view that the order of reference which, in letter and spirit, is more akin to a judgment of an Appellate Court appreciating the findings and judgment in ‘V. Padmakumar’s Case’ is incompetent and deserves to be rejected.

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