NCLT Chennai-1(2025.02.19) in Mr. Anil Kumar Ojha, Vs. Ms.Revathi S Raghunathan. & Anr. [IA/725/CHE/2024 in CP/IB/1264/2018], held that;
We are of the view that this Tribunal has no jurisdiction to direct the Liquidator / Respondent No.1 to keep the claim of SFC abeyance pending decision of DRT on the counter claim.
As regards other prayers, the moratorium under Section 14 does not bar the SFC to initiate wilful defaulter proceedings.
The Liquidator has been appearing in the proceedings before the DRT as evident from the report filed. There is no bar to initiate proceedings under IBC pending DRT proceedings. These proceedings are parallel and the independent proceedings.
Excerpts of the order;
This application has been filed under Section 60(5), 35(1)(A), 65 & 74 of the Insolvency and Bankruptcy Code, 2016 r/w Regulations 16 to 30A of IBBI Liquidation Process) Regulations, 2016 by Shri. Anil Kumar Ojha, the Promoter and the Managing Director (Suspended) of the Corporate Debtor, SLO Industries Limited seeking the following reliefs:
i. To direct the 1st Respondent/Liquidator to keep the claim of the 2nd Respondent Bank, in abeyance pending decision of DRT in counter claim of CD in TA/1/2017 of Union Bank of India and accordingly update the details of stakeholders on the website of IBBI.
ii. To take cognisance of the fact that the 2nd Respondent, Union Bank of India, Secured Financial Creditor (SFC), filed Insolvency Application under Section 7 for the purpose other than resolution of the insolvency of the CD and in consequence to impose suitable penalty on the 2nd Respondent Union Bank of India, Secured Financial Creditor, under section 65 and compensate the CD for the depletion of the value of assets of the CD after 04.11.2019.
iii. To take cognisance of the fact that the 2nd Respondent Union Bank of India, Secured Financial Creditor, violated the provisions of Moratorium under section 14 and refer the matter to IBBI (Insolvency & Bankruptcy Board of India) for initiating prosecution of SFC under section 236 r/w section 74 of IBC.
iv. To direct the 1st Respondent to periodically apprise this Hon’ble Tribunal regarding steps taken by the 1st Respondent in the proceedings in IA/1/2017 pending before DRT, Chennai.
v. Pass any other order or orders as this Hon’ble Tribunal may deem fit under that circumstances of this case and thus render justice.
# 2. The case of the Applicant in brief is that the Corporate Debtor was admitted into CIRP on an application filed under Section 7 of IBC, 2016 by the Corporation Bank nowUnion Bank of India vide order dated 04.11.2019. Shri. C. Ramasubramaniam was appointed as the RP. He invited the claims and constituted the CoC in which the Financial Creditor was the sole member. Since no viable Resolution Plan came, the CoC resolved to liquidate the Corporate Debtor.This Tribunal ordered for the liquidation of the Corporate Debtor vide dated 21.01.2022 and appointed Shri. S. Palaniappan as the Liquidator. A Resolution was passed in the 2nd SCC held on 16.10.2023 where the Secured Financial Creditor / Union Bank of India having voting share of 89.175% approved for the change of the Liquidator. The Tribunal thereafter vide its order dated 28.11.2023, appointed Ms. Revathi S Raghunathan as the new Liquidator.
# 3. It is stated that Union Bank of India prior to initiating CIRP against the Corporate Debtor, filed a recovery petition in O.A. No.105 of 2017 for recovery of Rs.236,35,93,324.86/- before the DRT, Chennai against the Corporate Debtor and its suspended directors. On 19.09.2017, the Applicant along with others, filed the written statement before the DRT which also included a counterclaim for Rs.342.04 Crores. However, the DRT ordered that the counterclaim be numbered separately as C.C. No. 1 of 2017 as a separate action and not as a part of the written statement. The Applicant preferred W.P. No. 325 & 326 of 2018 before the Hon'ble High Court of Judicature at Madras where the Hon'ble High Court recognizing the counterclaim of the Applicant and others as part of the written statement in O.A. No. 105 of 2017 vide dated 07.08.2018 ordered as under:
“42. Bare reading of the Rule 12 of the Rules, which has come into force on 04.11.2016, is also indicative that suffice for the defendant to file set off, including claim or counter claim, if any, along with documents in a paper book form.
43. For all the reasons, proceedings dated 02.01.2018, passed in T.A.No.01 of 2017, on the file of the DRT-I, Chennai, directing the defendants to file separate counter claim/proof affidavit, are set aside. Tribunal is directed to take on record, the pleadings and proof affidavit submitted by the petitioners, without insisting for filing separate paper book, one for defence of the claim and another for counter claim, and separate affidavit and proceed with the merits of the case.”
# 4. It is stated that subsequently, the counter claim was entertained by the DRT and OA was re-numbered as TA 1 of 2017. It is alleged that feeling frustrated with the orders of the Hon'ble High Court, the SFC/Union Bank of India filed an insolvency application in CP/1264/2018 under Section 7 of IBC on 10.10.2018.
# 5. It is stated that post-initiation of CIRP, the Applicant informed the RP several times about the counter claim of the Corporate Debtor against the SFC and requested him to pursue the same before the DRT in the interest of the Corporate Debtor, however, the RP did not bother to pursue the counter claim. It is stated that this was against the objects of the CIRP. It is stated that after the liquidation order, he again requested the erstwhile Liquidator to pursue the counter claim of the Corporate Debtor before the DRT but he also did not pay any heed. It is stated that on 14.06.2023, he requested the erstwhile Liquidator to keep the claim of SFC in abeyance till the counter claim of the Corporate Debtor against the SFC is adjudicated. Since the erstwhile Liquidator was not showing any inclination to pursue the counter claim, he filed an application IA/1009/CHE/2023 before the Tribunal. It is stated that on 01.02.2024, the Counsel for the new Liquidator informed the Tribunal that the Liquidator has been impleaded in the matter and participating in the proceedings. The Application was
accordingly disposed of by the Tribunal.
# 6. It is stated that it is a well settled law that the claim of the Claimant cannot be determined till the decision is taken on the counter claim by the Appropriate Authority. It is stated that if the counter claim of the Corporate Debtor is adjudicated in its favour, the Corporate Debtor would be eligible to receive much higher amount from the SFC than the amount claimed by the SFC.
# 7. Reference is made of the cases where :
19.3 The Hon’ble NCLAT (12.06.2023) in Anheuser Busch Inbev India Ltd. Vs. Mr. Pradeep KumarSravanam RP, [Comp.App (AT) (CH) (INS.) No. 12 / 2023] held:
# 40. As far as the present case is concerned, this `Tribunal’, on a careful consideration of the contentions advanced on behalf of the `Appellant / Petitioner’, and also this `Tribunal’, keeping in mind of the stand taken by the `Respondent / Resolution Professional’, before the `Adjudicating Authority’, vide its `Counter’ to the IA (IBC) No. 155 / 2022 in CP (IB) No. 58 / 9 / AMR / 2021, comes to a consequent conclusion that the action of the `Resolution Professional’, in keeping the `Claims’, in `abeyance’, because of the pending `Arbitration Proceedings’, in regard to the `counterclaim’ of the `Corporate Debtor’, only after which, the `Claim Sum’ of the `Appellant’, can be determined with certainty, the `Reliefs’, prayed for, by the `Appellant / Petitioner’, pertaining to `admission’ of the `Claim’, cannot be `acceded to’, in the `eye of Law’. Viewed in that perspective, the `impugned order’, dated 02.12.2022 in IA (IBC) No. 155 / 2022 in CP (IB) No. 58 / 9 / AMR / 2021, passed by the `Adjudicating Authority’ (`National Company Law Tribunal’, Amaravati Bench), in `dismissing’, the `Interlocutory Application’, is free from any flaw. Accordingly, the instant `Appeal’, fails.
19.2.The Hon’ble High Court of Delhi (18.07.2019) in SSMP Industries Ltd. vs. Perkan Food Processors Pvt. [CS (COMM] 470/2016 & CC[COMM] 73/2017] recovery suit filed by the CD, held as under:
# 9. The nature of a counter claim is such that it requires proper pleadings to be filed, defences and stands of both parties to be considered, evidence to be recorded and then issues have to be adjudicated. The proceedings before NCLT are summary in nature and the RP does not conduct a trial. The RP merely determines what payment can be made towards the claims raised, subject to availability of funds. The NCLT/RP cannot be burdened with the task of entertaining claims of the Defendant which are completely uncertain, undetermined and unknown. Moreover, the question as to whether the Defendant is in fact entitled to any amounts, if determined by the NCLT, prior to the adjudication of the plaintiff’s claim for recovery, would result in the possibility of conflicting views in respect of the same transaction. Under these circumstances, this court is of the opinion that the Plaintiff’s and the defendant’s claim ought to be adjudicated comprehensively by the same forum. At this point, till the defence is adjudicated, there is no threat to the assets of the corporate debtor and the continuation of the counter claim would not adversely impact the assets of the corporate debtor. Once the counter claims are adjudicated and the amount to be paid/recovered is determined, at that stage, or in execution proceedings, depending upon the situation prevalent, Section 14 could be triggered. At this stage, due to the reasons set out above, the counter claim does not deserve to be stayed under Section 14 of the Code. The suit and the counter claim would proceed to trial before this Court.
# 8. Reference is also made of the case where
19.3 The Hon’ble NCLAT (03.08.2018) in Jharkhand Bijli Vitran Nigam Ltd. vs. IVRCL Ltd. [Corporate Debtor] &Anr. [Company Appeal (AT) (Insolvency) No. 285 of 2018] held :
# 3. As the claim of the Corporate Debtor can be determined only after determination of counter claim made by the Appellant in the same very arbitral proceeding and if counter claim or part of it is set off with the claim made by the Corporate Debtor, we are of the view that both the claim and the counter claim of parties should be heard together by the Arbitral Tribunal in absence of any bar under Insolvency and Bankruptcy Code, 2016.
# 4. However, on determination, if it is found that the Corporate Debtor is liable to pay certain amount, in such case, no recovery can be made during the period of moratorium.
# 9. It is stated that in view of the above legal position and the fact that counter claim is pending adjudication against the SFC, the claim of the SFC be kept in abeyance and the status of the claim be changed to “Kept in Abeyance” from “Admitted”.
# 10. It is stated that SFC in order to prevent the resolution of insolvency of the Corporate Debtor continued with the willful defaulter proceedings and declared the Corporate Debtor and its Promoters Directors as wilful defaulter on 30.03.2020 while there was a moratorium qua the Corporate Debtor. It is alleged that the procedure followed by SFC in wilful defaulter proceedings is in violation of law laid down by the Hon'ble Supreme Court in the case of “State Bank of India Vs. M/s. Jah Developers Pvt Ltd & Ors (Civil Appeal No. 4776 of 2019).
# 11. It is stated that the Corporate Debtor was not provided any opportunity to represent before the Review Committee.It is stated that the motive of SFC in declaring the Corporate Debtor and Suspended Directors as wilful defaulters was to prevent them from taking part in the resolution of the insolvency of the Corporate Debtor though they were eligible to do so as the Corporate Debtor was MSME unit. It is stated that the said act was in contravention of the moratorium which is punishable under Section 74 of the IBC.It is stated that the SFC did not keep a check on the RP who defrauded the Corporate Debtor during his tenure. The Applicant then made a complaint to CBI on which a case was registered. It is stated that at the time of initiation of CIRP when the RP took the charge, there was a liquidity of Rs.24.92 Crores but while handing over the charge to the 1stLiquidator, the Corporate Debtor had a liability of Rs.53.13 Crores.It is stated that during the CIRP period, the plants were shut down. It is alleged that both RP and the 1st Liquidator acted in a manner which was detrimental to the interest of the Corporate Debtor. It is stated that it is a case of fraudulent and malicious initiation of CIRP proceedings against the Corporate Debtor and the SFC is liable for penalty. It is stated that the 1st Liquidator in his reply dated 08.09.2023 in IA/1009/CHE/2023, had stated that he is not interested in pursuing the counter claim against the SFC. It is alleged that the 1st Liquidator had been working in an arbitrary manner conniving with the SFC, which had been regularly paying his fee in violation of Regulation 4(2) of IBBI (Liquidation Process) Regulations, 2016. It is stated that he did not include the supplies of goods and services during the CIRP period as the CIRP cost and categorize them as Operational Creditors.
# 12. On getting notice of the application, only Respondent No.1 filed the reply. R1/Liquidator denied the averments made in the application and stated that she has been contesting the proceedings before the DRT in TA/1/2017.Respondent No.1 has nothing to do with the averments made against the SFC/Union Bank of India. It is stated that the erstwhile Liquidator had admitted the claim of the SFC for a sum of Rs. 441,39,22,366/- and she is not in a position to revise/or keep it in abeyance.It is stated that the Liquidator had entered appearance before the DRT, Chennai on 21.04.2024 and has been getting along with the matter.
# 13. We have heard the Applicant in person and Ld. Counsel for the Respondent No.1.
# 14. In the instant case, the recovery proceedings against the Corporate Debtor and its Directors were initiated before the DRT, Chennai in TA/1/2017. In the said proceedings, the Corporate Debtor and its Directors had filed the counter claim.The counter claim in that petition is more than the claim of the SFC. In terms of the order of the Hon'ble High Court, the DRT took up the claim and the counter claim together. Thereafter, the SFC filed the application under Section 7 of IBC for initiating CIR Process against the Corporate Debtor. This Tribunal allowed the application and initiated the CIRP vide order dated 04.11.2019. Since no viable Resolution Plan came, liquidation was ordered vide order dated 21.01.2022.
# 15. In the instant case, the Applicant during the adjudication of Application CP/1264/IB/2018 for initiating CIRP against the Corporate Debtor in his reply had highlighted that a counter claim has been filed by the Corporate Debtor by virtue of Writ Petition No.325 and 326/2018 before the Hon'ble High Court of Judicature at Madras and the order passed thereunder dated 07.08.2018 and the counter claim has been taken on file to be considered by the DRT and taking into consideration the above counter claim by the Corporate Debtor, the application as filed is likely to be rejected.
# 16. The Tribunal on considering the submissions vide order dated 04.11.2019, held that they are not convinced by the above ground, namely, that a counter claim of the Corporate Debtor as against the Financial Creditor is pending adjudication. As rightly pointed out by the Financial Creditor, nowhere, has the Corporate Debtor denied the existence of debt and its default.
# 17. The above order initiating the CIRP has not been challenged by the Corporate Debtor and has attained finality.
# 18. It is true that during the CIRP, the moratorium was in force but the said moratorium does not restrict the SFC to initiate the proceedings of wilful defaulter against the Corporate Debtor and its Directors. In Gouri Prasad Goenka Vs. State Bank of India (2021) ibclaw.in 13 HC, the Hon'ble Court held that the moratorium envisaged in section 14 of IBC, 2016 creates no hindrance to a wilful defaulter declaration proceeding. The Hon’ble Supreme Court in the case of “P. Mohanraj and Others v. Shah Brothers Ispat Pvt Ltd (2021) ibc law.in 24SC, held that willful defaulter proceedings is excluded from section 14 moratorium. In the case of “Atibir Industries Company Ltd. and others v. Indian Bank (2024) ibc law.in 245 HC”, it was held that the yardsticks for declaration of wilful defaulter under the Master Circular are different from a recovery proceeding or a relatable proceeding; such declaration is merely to disseminate credit information pertaining to wilful defaulters for cautioning banks and financial institutions so as to ensure that further bank finance is not made available to them.
# 19. A wilful defaulter proceeding is thus not for recovery of debt. It does not directly make a claim for a particular asset or for recovery of any debt. The object and purpose of the Master Circular for wilful default is to inform the other creditors and lenders about the credit information of the wilful defaulter so that other creditors are cautioned and do not lend any further money. The aim of the declaration of wilful defaulter is to prevent fraud and loss of public money.
# 20. It is seen from the reply of the Respondent No.1/Liquidator that Respondent No.1 has been appearing before the DRT, Chennai for the Corporate Debtor in respect of the claim / counter claim before the DRT. Till date, the TA/1/2017 has not been adjudicated. Section 33(5) of the Code provides that the bar/moratorium is only in respect of fresh suits or legal proceedings. The words “continuation of pending suits or proceedings” have been consciously omitted from Section 33(5) of the Code. However, Section 14 explicitly provides for the application of moratorium to the institution of lawsuits or the continuation of pending lawsuits or proceedings against the CD in contrast to Section 14 of the Code, where it is explicitly stated that the moratorium applies to the institution of lawsuits or the continuation of pending lawsuits or proceedings against the CD. To summarize the position, it can be said that the moratorium during liquidation is partial in nature. In the present case, the DRT proceedings were initiated prior to initiation of CIRP where parties had filed the claims and counter claims. Since no viable Resolution Plan came, the Corporate Debtor was liquidated.
# 21. The Hon'ble High Court in the case of “SSMP Industries Ltd.”supra has held that the proceedings before the NCLT are summary in nature and the RP does not conduct a trial. The RP merely determines what payment can be made towards the claim raised, subject to availability of funds. The NCLT/RP cannot be burdened with the task of entertaining claims of the defendant which are completely uncertain, undetermined and unknown. The question as to whether the defendant is in fact is entitled to any amounts, if determined by the NCLT, prior to the adjudication of the Plaintiff’s claim for recovery, would result in the possibility of conflicting views in respect of the same transaction. The nature of a counter claim is such that it requires proper pleadings to be filed, defences and stands of both parties to be considered, evidence to be recorded and then issues have to be adjudicated. It was held that under these circumstances, the Plaintiff and the Defendant’s claim ought to be adjudicated comprehensively by the same forum and the counter claim does not deserve to be stayed under Section 14 of the Code.
# 22. In the case of “Jharkhand Bijli Vitran Nigam Ltd. vs. IVRCL Ltd. (Corporate Debtor) &Anr. supra, it was held that both the claim and the counter claim of the parties should be heard together by the Arbitral Tribunal in the absence any bar under IBC. In the present case, the Liquidator has been appearing before the DRT in respect of the counter claims filed by the Corporate Debtor/Suspended Directors which are being heard together by the DRT. In the case of “Anheuser Busch Inbev India Ltd. Vs. Mr. Pradeep Kumar Sravanam RP” supra, it was held by the Tribunal that the action of the RP in keeping the claims in abeyance because of the pending arbitration proceedings in regard to the counterclaim of the Corporate Debtor, only after which, the claim sum of the Appellant can be determined with certainty, the reliefs prayed for, by the Appellant/Petitioner pertaining to admission of claim cannot be acceded to, in the eyes of law. The Hon'ble NCLAT also dismissed the appeal against the order of the Tribunal.
# 23. Further, this Tribunal has no jurisdiction to review its own order qua initiating CIRP / liquidation proceedings against the Corporate Debtor. No appeal was preferred by the Applicant against the order of the Tribunal initiating CIRP or the liquidation process against the Corporate Debtor. It is also to be noted that the CIRP in the present case was initiated on 04.11.2019. This application has been filed on 13.03.2024 i.e. after about four years of initiation of CIRP. The application also suffers from laches, acquiescence and delay.
# 24. We are of the view that this Tribunal has no jurisdiction to direct the Liquidator / Respondent No.1 to keep the claim of SFC abeyance pending decision of DRT on the counter claim. As regards other prayers, the moratorium under Section 14 does not bar the SFC to initiate wilful defaulter proceedings. The Liquidator has been appearing in the proceedings before the DRT as evident from the report filed. There is no bar to initiate proceedings under IBC pending DRT proceedings. These proceedings are parallel and the independent proceedings.
# 25. In the light of above discussions, we do not find any merits in the application. The application is dismissed with no orders as to Costs.
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