Bharat Heavy Electricals Limited Vs V. Mahesh, Liquidator of NOCL - Appeal under section 42 of the Code.

NCLT Chennai-1(01.06.2021) in Bharat Heavy Electricals Limited Vs  V. Mahesh, Liquidator of NOCL [IA/840/IB/2020 in MA/289/2018 in TCP/10/IB/2019] while placing reliance on the decision of the Hon'ble Supreme Court in the matter of Committee of  Creditors of Essar Steel India Limited Vs Satish Kumar Gupta  & Ors. in Civil Appeal No. 8766 – 67 of 2019, the successful scheme  proponent cannot be suddenly faced with an ‘undecided’ claim, which  would amount to an hydra head popping up, ordered as under;

• # 14. Further, even though the claim of the Operational Creditor is  admitted then as per the waterfall mechanism which has been provided  under the Scheme none of the Operational Creditor would have been paid and only the dues of the Financial Creditors have been settled by  the Scheme proponents. 

• # 15. Thus, taking into consideration the aforesaid reasons and the  decision of the Supreme Court in the matter of Committee of Creditors  of Essar Steels (supra), the Appeal as filed by the Appellant stands  dismissed, however without costs.  

 

Facts of the case;

1. Tribunal passed orders for liquidation of the CD on 111.12.2018.

2. Liquidator, issued public announcement to  submit the claim forms on or before 10.01.2019.

3.  Appellant submitted the  claim before the Liquidator in Form - C by way of email on 09.01.2019.

4.  By an e-mail dated  23.02.2019, the Liquidator has stated that the claim of the Appellant  is still under verification.

5.  On 28.08.2020, the Liquidator informed the Appellant for the first time that its claim  had been rejected in its entirety.

6.  The Appellant filed the present application U/s. 42 of the Code.

7.  Scheme in relation to the Corporate Debtor viz. NOCL which has been  proposed under Section 230 of the Companies Act, 2013 read with the  attendant provisions of Insolvency and Bankruptcy Code, 2016 was  approved by this Tribunal vide its order dated 18.03.2021.

Excerpts of the order;

# 1. IA/840/IB/2020 is an Appeal filed by Bharat Heavy Electricals  Limited under Section 42 of IBC, 2016 seeking relief as follows; 

• (i) Set aside the decision of the Respondent rejecting the  Appellant’s claim as Operational Creditor of the Corporate  Debtor and direct the Respondent to admit the  Appellant’s claim; and 

• (ii) Pass such further and / or other orders as in the facts  and circumstances of this application may be deemed  necessary; 

 

# 8. Thereafter, it is seen that the Corporate Insolvency Resolution  Process (CIRP) of the Corporate Debtor viz. M/s. Nagarjuna Oil  Corporation Limited (NOCL) was initiated by this Tribunal vide order dated 25.09.2017 in TCP/10/IB/2017 and one Mr. V. Nagarajan was  appointed as the “Interim Resolution Professional” (IRP) and  subsequently Mr. S. Rajendran was appointed as the “Resolution  Professional” (RP) of the Corporate Debtor with effect from 22.09.2017.  It was submitted by the Learned Counsel for the Appellant that they  have filed the claim before the RP on 20.01.2018 and the RP has partly  admitted the claim of the Appellant. Subsequently, the Corporate  Debtor was ordered for Liquidation by this Tribunal vide order dated  11.12.2018 passed in MA/289/2018 and the Respondent herein was  appointed as the Liquidator, who has issued public announcement to  submit the claim forms on or before 10.01.2019. It was submitted by  the Learned Counsel for the Appellant that they have submitted the  claim before the Liquidator in Form – C by way of email on 09.01.2019  within the prescribed period for a sum of Rs.15,73,52,709/- comprising  of a Principal amount of Rs.9,00,60,000/- and interest for an amount of  Rs.6,72,92,709/-. It was submitted that by an e-mail dated  23.02.2019, the Respondent has stated that the claim of the Appellant  is still under verification and thereafter the Appellant has received no  information about its claim. However, on 28.08.2020, it was stated that  the Respondent informed the Appellant for the first time that its claim  had been rejected in its entirety and the reason stated by the Respondent was that “Recycle compressor manufactured by the  Operational Creditor were not delivered at site and hence not  admitted.” Thereafter, it is seen that the Appellant has sent an e-mail  to the Respondent that they have not received about their rejection of  claim prior to 28.08.2020 and that they dispute the rejection of its  claim. Aggrieved by the decision of the Respondent in rejecting its  claim, the Appellant has filed the present Appeal challenging such  rejection made by the Respondent.  

 

# 12. The Appellant has filed rejoinder and it was submitted by the  Learned Counsel for the Appellant that the Respondent has raised  various grounds in their counter for the first time which was not stated  at the time of rejection of the claim on 28.08.2020 and thus the  Respondent cannot seek to justify its rejection on the Appellant’s claim  for entirely new reasons. Thus, the Appellant in their rejoinder has  sought to contend and reject each and every defence raised by the  Respondent in their counter.  

 

# 13. Heard the submissions made by the Learned Counsel for both the  parties. Before venturing to the merits of the submission made by the  Learned Counsel for the Appellant, it is pertinent to note here that the Scheme in relation to the Corporate Debtor viz. NOCL which has been  proposed under Section 230 of the Companies Act, 2013 read with the  attendant provisions of Insolvency and Bankruptcy Code, 2016 was  approved by this Tribunal vide its order dated 18.03.2021 passed in  CP/546/CAA/2020. As per the said Scheme proposed by the Scheme  proponent viz. M/s. Haldia Petrochemicals Limited, the Project Assets of the Corporate Debtor stands vested with the Scheme Proponents and  as such the Scheme as sanctioned by this Tribunal in respect of the  Corporate Debtor is also binding upon the stakeholders of the  Corporate Debtor which also includes the Appellant herein. Further as  per the decision of the Supreme Court in the matter of Committee of  Creditors of Essar Steel India Limited –Vs- Satish Kumar Gupta  &Ors. in Civil Appeal No. 8766 – 67 of 2019, the successful scheme  proponent cannot be suddenly faced with an ‘undecided’ claim, which  would amount to an hydra head popping up.  

 

# 14. Further, even though the claim of the Operational Creditor is  admitted then as per the waterfall mechanism which has been provided  under the Scheme none of the Operational Creditor would have been paid and only the dues of the Financial Creditors have been settled by  the Scheme proponents. 

 

# 15. Thus, taking into consideration the aforesaid reasons and the  decision of the Supreme Court in the matter of Committee of Creditors  of Essar Steels (supra), the Appeal as filed by the Appellant stands  dismissed, however without costs.  

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Blogger’s comments; I am of the opinion that the application of the operational creditor could have been decided by AA on merits of the case. 

In another case NCLT Kolkata (17.05.2021) in Tantia-MPPL (WILO) JV & Anr. Vs. Kshitiz Chhawchharia, RP [IA No. 1840/KB/2019 & IA No.497/KB/2020 in CP (IB) No.148/KB/2018] agreed to consider the application of creditors, which was filed before the approval of Resolution Plan, observing as under.

• Lord Halsbury in the celebrated case of Quinn v Leathem, observed that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found.

• Technicalities should not come in the way of correcting an injustice. The maxim Actus Curiae Neminem Gravabit (an act of the court shall prejudice no man) – founded upon justice and good sense – should be a good guide. Further, in Kalabharati Advertising Vs Hemant Vimalnath Narichania and others, the Hon’ble Supreme Court held that any undeserved or unfair advantage gained by a party invoking the jurisdiction of the Court must be neutralised, as the institution of litigation cannot be permitted to confer any advantage on a party by the delayed action of the Court.

• In this view of the matter, the answering Respondent’s objections on the maintainability of the applications on the sole ground that such applications cannot survive after the Resolution Plan has been approved, is hereby overruled. We hold that the present applications are maintainable and are required to be answered on merits judicially.

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