UPDATES

IBC Case Laws

Supreme Court of India
Greater Noida Industrial Development Authority Vs.
Prabhjit Singh Soni & Anr, Civil Appeal Nos.7590-7591
of 2023, Date of Supreme Court Judgement: February
12, 2024.

Facts of the Case

The appeals under Section 62 are filed by the Greater

Noida Industrial Development Authority (Appellant)
against the order of the NCLAT whereby its appeal, Courts/Tribunal in various cases, the Supreme Court held
against the order of the AA, has been dismissed. The that a Court or a Tribunal, in absence of any provision
Appellant being a statutory authority acquired land for to the contrary, has inherent power to recall an order to
setting up an urban and industrial township and one of secure the ends of justice and/or to prevent abuse of the
the plots was allotted to M/s. JNC Construction Pvt Ltd process of the Court. Further the Supreme Court held
(CD) for a residential project, by charging premium, that Section 60(5)(c) of the IBC, which opens with a
payable in instalments. non-obstante clause, empowers the AA to entertain or
dispose of any question of priorities or any question of
The CD committed default in payment of instalments and law or facts, arising out of or in relation to the insolvency
was served with demand cum pre-cancellation notice. resolution of the corporate debtor or corporate person
Later, CIRP against the CD was admitted and claims under the IBC.
were admitted. The Appellant in the capacity of Financial
Creditor, submitted a claim of ₹43,40,31,951/- being Further the Supreme Court observed that the Rule 11
unpaid instalments payable towards premium. However, of the NCLT Rules, 2016 preserves the inherent power
the RP requested the appellant to submit its claim as an of the Tribunal and therefore, in the absence of any
Operational Creditor. The appellant did not submit its specific provision, the Tribunal has power to recall its
claim afresh and the AA vide its order dated August 04, order. The Supreme Court held that the grounds taken
2020, approved the Resolution Plan. Subsequently, the by the Appellant qualify as valid grounds and therefore
Appellant filed I.A. No.344 of 2021 questioning, inter the recall application is maintainable, notwithstanding
alia, the resolution plan, the decision of the RP to treat that an appeal lay before the NCLAT against the order
the appellant as an operational creditor. Another I.A. dated August 04, 2020. Further, it was held that both the
No.1380/2021 was filed on March 15, 2021, seeking, appeals were not barred by time.
inter alia, to recall of the AA’ order dated 04.08.2020. The Supreme Court allowed both the appeals of the
The Respondent relying on New Okhla Development Appellant and held that neither AA nor NCLAT took
Authority vs. Anand Sonbhadra submitted that the dues note of the fact that,- (a) the appellant had not been
payable to an Industrial Area Development Authority, served notice of the meeting of the CoC; (b) the entire
like the appellant, would not be a financial debt. proceedings up to the stage of approval of the resolution
plan were ex parte to the appellant; (c) the appellant
The main issue before the Apex Court are: (i) Whether in had submitted its claim, and was a secured creditor by
exercise of powers under sub-section (5) of Section 60, operation of law, yet the resolution plan projected the
the AA can recall an order of approval passed under sub- appellant as one who did not submit its claim; and (d) the
section (1) of Section 31 of the IBC?. (ii) Whether the resolution plan did not meet all the parameters laid down
application for recall of the order was barred by time? (iii) in sub-section (2) of Section 30 of the IBC read with
Whether the resolution plan put forth by the resolution Regulations 37 and 38 of the CIRP Regulations, 2016.
applicant did not meet the requirements of sub-section
(2) of Section 30 of the IBC read with Regulations 37 and Order: The order dated August 04, 2020, passed by the
38 of the CIRP Regulations, 2016? (iv) As to what relief, AA, approving the Resolution Plan, was set aside. The
if any, the appellant is entitled to? Resolution Plan has been sent back to the CoC for re-
submission after satisfying the parameters set out by the
Supreme Court’s Observations IBC.

Citing the judgements of the Supreme Court/other Case Review: Appeals Allowed.

THE RESOLUTION PROFESSIONAL I APRIL 2024 { 54 } www.iiipicai.in

 UPDATES

State Bank of India and Ors. Vs. The Consortium of The same was permitted by NCLAT. Clause 3.13.9
Murari lal Jalan and Florian Fritsch and Anr. Civil of the Resolution Plan specifies that the performance
Appeal Nos 3736-3737 of 2023 with Civil Appeal Nos. security shall not be set off against or used as part of the
4131-4134 of 2023, Civil Appeal Nos 6427-6428 of consideration which the SRA proposes to offer in relation
2023, Date of Supreme Court Judgement: January 18, to the company: The Resolution plan also specifically
2024. contemplates that the performance guarantee provided
by the Resolution Applicant can be invoked in terms of
Facts of the Case RFRP. NCLAT has permitted the SRA to adjust the last
This Batch of appeals arises from three orders of tranche of ₹ 150 Crores by adjusting the PBG of ₹150
the NCLAT. A resolution plan was submitted by the Crores. This forms the subject matter of the appeal before
consortium of Murari Lal Jalan and Florian Fristch in the Court.
respect of the CD (Jet Airways Ltd.) The Plan received Supreme Court’s Observations
the imprimatur of the AA. As per the Resolution plan, the
Successful Resolution Applicant (SRA) was obligated to The Apex Court observed that the impugned order of
recommence operations as an aviation company subject the NCLAT allowed the plea of the SRA for adjustment
to the fulfilment of five precedent conditions. The date of and consequential release of the PBG at the interlocutory
completion of the Conditions precedent was defined as stage. This prima facie would not be in accordance with
the ‘Effective date’. The SRA was then required to infuse the tenor of the affidavit which was filed by SBI in which
funds and fulfil specified payments to stakeholders, it stated that the lenders would not contest the issues in
including disbursements to Employees, Workmen, and the pending appeal conditional on compliance with three
other Operational Creditors, within 180 days from the conditions which were set out in the affidavit. Infusion of
Effective date. Due to contrary belief between the SRA ₹350 crores, as envisaged in the affidavit, could not have
and the consortium of lenders (represented by the SBI) been submitted with a direction for adjustment of the
regarding the completion of the precedent conditions, an PBG, at that stage Infusion meant that the third tranche
IA was filed before the AA. has to be paid in the same manner. Adjustment of the
PBG was not permissible.
The AA held that SRA was compliant with the conditions
precedent and permitted the SRA to take control and The Apex Court held that NCLAT was not justified in
management of the CD. The period of six months for holding, in its order dated August 28, 2023, that the last
implementation would commence from November 16, tranche of ₹ 150 Crores which was to be paid would be
2022. SBI challenged the appeal before the NCLAT adjusted against the PBG. The SRA having deposited the
and on March 03, 2023, the NCLAT declined to stay first two tranches each of ₹ 100 crores must comply with
the AA’s order, which has given rise to the first in the the remaining obligation of depositing ₹150 crores to
three sets of appeals being Civil Appeal Nos 3736-3737 make a total payment of ₹350 cores.
of 2023. By a subsequent order dated May 26, 2023, the
NCLAT allowed an extension commencing from March The Apex Court directed the SRA to (i) The SRA shall
03, 2023, until August 31, 2023. This order has given peremptorily on or before January 31, 2024, deposit an
rise to the second in the batch of appeals being Civil amount of ₹150 crores into the designated account of SBI,
appeal Nos 4131-4134 of 2023. In an effort to resolve failing which the consequences under the Resolution Plan
the imbroglio, an affidavit was filled by SBI that if SRA shall follow: (ii) The PBG of ₹150 crores shall continue
satisfies particular criteria, including infusing ₹350 to remain in operation and effect, pending the final
crores by October 31, 2023, adhering to the Resolution disposal of the appeal before NCLAT: and shall abide by
plan terms, and meeting employee payment obligation the final outcome of the appeal and the directions that
in accordance with the NCLAT order dated October 21, may be issued by the NCLAT and (iii) Whether or not
2022, the lenders will abstain from challenging exclusion/ the SRA has been compliant with all the conditions of
extension of time issues. Following the affidavit, which the Resolution Plan as well as of the conditions set out in
was filled by SBI, an application was moved by the SRA paragraph 8 of the affidavit dated August 16, 2023 shall
on August 18, 2023 seeking liberty to pay the amount of be decided by the NCLAT in pending appeal.
₹350 crores as envisaged in the affidavit of SBI in the
Order: The order dated August 28, 2023 of the NCLAT
following manner (i) The first tranche of ₹100 crores
is modified in part in terms of the above directions and
by August 31, 2023, (ii) The second tranche of ₹100
hence, the permission which was granted to the SRA to
crores by September 30, 2023 and (iii) The balance of
adjust the last tranche of ₹150 crores against the PBG
₹ 150 crores by the adjustment of the Performance Bank
shall stand substituted by the above directions. The
Guarantee issued by SRA in favour of the lenders.
www.iiipicai.in { 55 } THE RESOLUTION PROFESSIONAL I APRIL 2024
 UPDATES

NCLAT is requested to endeavor an expeditious disposal Plan, which forms the crux of the current writ petition.
of the appeal by the end of March 2024. The core issue which arises before the Hon’ble High
court is: Whether the NCLT has the jurisdiction to
Case Review: The appeals are accordingly disposed of direct the ED to release the attached properties once the
and Pending applications, if any, stand disposed of. Resolution Plan in respect of said CD is approved by
invoking Section 32A of the IBC, 2016
High Court
High Court Observations
Shiv Charan & Ors. Vs. Adjudicating Authority under
PMLA, 2022 & Anr. and Directorate of Enforcement The Hon’ble High Court affirmed, NCLT’s jurisdiction in
Vs. Shiv Charan & Ors. W.P (L) NO.9943 OF 2023 and declaring that a CD would be discharged from offenses
W.P. (L) NO.29111 OF 2023, High Court Judgement upon approval of the Resolution Plan under Section 31
dated March 01, 2024. of the IBC, 2016. Hon’ble High Court further stated that
protections to the CD under Section 32A apply upon
Fact of the Case approval of a qualifying Resolution Plan, ensuring a clean
The present cross writ petitions involve WP (L) No. break with a change in ownership. The Hon’ble High
9943 of 2023 filed by Shiv Charan & others, (hereinafter Court further observed that since Section 32A confers
refereed as Petitioner 1,2,3) respectively against the immunity from prosecution, continued attachment under
Adjudicating Authority under the Prevention of Money the PMLA, 2002 would be illogical. It also clarified that
Laundering Act, 2002, Department of Revenue, Ministry the jurisdiction under Section 14 of the IBC, 2016 ceased
of Finance (AA) and the Deputy Director, Directorate of upon the commencement of Section 32A, making conflicts
Enforcement ED, (Respondents), seeking to invalidate irrelevant. The court emphasized that the Approval Order
the Enforcement Case Information Report (ECIR) and for Resolution Plan by the NCLT dated February 17,
orders attaching properties while WP (L) No. 29111 was 2023, was not challenged by the ED, required the release
filed by the ED, (Petitioner 2) challenging the NCLT’s of attached properties under Section 32A. The High
authority to pass the order invoking Section 32A of the Court further concluded that the NCLT’s interpretation
IBC, 2016. and application of Section 32A did not undermine the
PMLA, 2002. The High Court further stated that quasi-
The case concerns the resolution of DSK Southern judicial authorities, when exercising powers akin to civil
Projects Private Limited/CD under the IBC. The CD courts within state agencies like the ED, play a distinct
underwent a CIRP initiated by a financial creditor on role separate from executive functions. They serve as
December 09, 2021. Eventually, a Resolution Plan put a statutory check on the executive, bound by Supreme
forth by petitioners and approved by NCLT on February Court rulings as per Article 141 of the Constitution.
17, 2023, under Section 31 of the IBC, 2016. Prior to It's imperative that such quasi-judicial bodies adhere to
the commencement of the CIRP, on October 20, 2017, Supreme Court decisions to prevent unnecessary legal
various FIR’s alleging offenses including cheating and disputes, ensuring compliance with the rule of law.
criminal breach of trust were filed against the CD and
its former promoters. These offenses fell under the Order: The High Court ruled that the attachment by the
“scheduled offenses” as per PMLA, 2002. Consequently, ED over the Attached Properties, including four bank
an ECIR was filed by ED on March 08, 2018. The ECIR accounts and 14 flats of the CD, ceased on February
estimated the “proceeds of crime” to be approximately 17, 2023, pursuant to Section 32A of the IBC, 2016.
₹ 8,522.27 crores. As a result of the ECIR, the ED It mandated that the Respondents in WP 9943 and the
filed an “original complaint,” leading to attachment Petitioner in WP 29111 must promptly communicate
proceedings against the assets of the CD. This included this release to the CD, with a copy sent to the Petitioner
four bank accounts of the CD totalling ₹3,55,298/-, and in WP 9943, within six weeks of the judgment. This
14 flats constructed by the CD valued at ₹32,47,55,298/- communication is vital for using the Attached Properties
(aggregating to ₹32,51,10,596/-), referred to as the as bankable assets to revive the CD in line with the
“Attached Properties”. The attachment was initially objectives of resolution.
provisional under Section 5 of the PMLA, 2002, on Case Review: Petitions Disposed of.
February 14, 2019, and later confirmed by an order dated
August 05, 2019, passed by the AA.

The attachment persisted even after the initiation of the

CIRP and continued after the approval of the Resolution

THE RESOLUTION PROFESSIONAL I APRIL 2024 { 56 } www.iiipicai.in

 UPDATES

Kunwer Sachdev Vs. IDBI Bank & Ors. W.P.(C) High Court’s Observations
10599/2021 and CM Appls. 32697/2021, 25107/2023,
61523/2023 and 62100/2023 High Court judgement The High court underscores the repeated calls for a
dated February 12, 2024. comprehensive code of conduct for the CoC, highlighted
in the recommendations of the insolvency law
Facts of the Case committee’s reports in 2020 and 2022. Recognizing its
significant impact on CD’s and stakeholders, the court
The present writ petition was filed by Kunwer Sachdev emphasizes the need for fairness, transparency, and
(Petitioner) in the capacity of ex-Director of Su-Kam adherence to due process, including the Wednesbury
Power Systems Ltd./CD, seeking issuance of direction principles of reasonableness. By placing its reliance on
for developing framework/guidelines to ensure effective the judgment delivered by the Apex court in Sashidhar vs.
monitoring and functioning of the CoC. This writ Indian Overseas Bank, the court asserted the importance
petition was filed after the application for liquidation of of upholding CoC decisions within the confines of the law
the CD was approved by AA vide an order dated March and the principles of natural justice. Prioritizing integrity,
27, 2019, and the same was upheld by the NCLAT as professionalism, and confidentiality, the Hon’ble high
well as the Apex court. The entire fulcrum of the dispute court stressed that adherence to these principles enhances
emanates from the insolvency process of the company the credibility and fairness of CoC decisions, ensuring
called Su-kam which was initiated by the AA vide its trust in the outcomes of the CIRP under the IBC. The
order dated April 05, 2018. Thereafter, an advertisement High Court underscores the paramount role of the CoC
inviting EOI was published by the RP (Respondent No. in the CIRP, likening its commercial wisdom to a guiding
12) on June 04, 2018. Further, the RP also issued the GPS for entire voyage CD’s CIRP. It further observed,
request for resolution plans on July 19, 2018, pursuant to given the CoC's crucial role and the legislative protection
which resolution plans were invited in respect of the CD. of its commercial wisdom, there's a pressing need for a
Thereafter, various disputes arose in the CIRP of the CD Code of Conduct to ensure the fulfilment of the IBC’s
like the trademark dispute of brand name “SUKAM”, objectives.
ineligibility of the petitioner’s resolution plan as per
Section 29A(h) of the IBC etc. Order: The High Court has partly allowed the petition
and instructed the IBBI to establish a Code of Conduct/
As no eligible resolution plan could be evolved, the CoC guidelines, aligning with the case's stance, principles
in its meeting held on January 23, 2019, decided to make mentioned earlier, and relevant factors. This should be
another attempt to obtain a resolution plan for the CD, with done within three months from this judgment, ensuring
February 28, 2019, being the last date for the submission the CoC's effective operation while preserving its
of the plans. On March 19, 2019, at a meeting of the commercial wisdom and the legislative intent of the IBC.
CoC, the RP, apprised the CoC of the financial position
of the CD. At this meeting, the CoC was also informed by Case Review: Petition is Disposed of, along with
the RP that since no compliant Resolution Plan had been Pending Applications.
received, the RP would be filing an application seeking
liquidation of CD before the AA on or at the expiry of National Company Law Appellate Tribunal
the CD’s CIRP. Accordingly, in view of the absence of (NCLAT)
any compliant resolution plan, the RP filed an application
seeking for the liquidation of the CD under Section 33(1) Regional Provident Fund Commissioner, EPFO
(a) of the IBC before the AA on March 27, 2019, and the Regional Office, Jamshedpur Vs. Ms. Mamta Binani,
AA approved the liquidation of the CD. The petitioner RP & Ors. Company Appeal (AT) (Insolvency) No. 245
submitted that despite the company’s initial valuation of 2022, NCLAT Judgement dated March 13, 2024
of ₹300 crores, the Committee of Creditors (CoC)
Facts of the Case
significantly diminished its worth, leading to a mere ₹10
crores for Respondents 1-11 from the sale. The present appeal is filed by M/s Regional Provident
Fund Commissioner, EPFO Regional Office, Jamshedpur
They argue that the company’s assets were valued at over
(Appellant) against the Resolution Professional (RP) &
₹274 crores according to its balance sheet. Allegations
Ors. (Respondents) after being aggrieved by the order
of misconduct against the RP and liquidator (Respondent
dated May 11, 2021, passed by Adjudicating Authority/
No: 13) prompted action by the IBBI. The petitioner
NCLT. The case is related to the CIRP initiated against
asserts that this case exemplifies a misuse or neglect of
“R.D. Rubber Reclaim Limited” on October 25, 2019,
power by the CoC, causing immense prejudice to the
following a public announcement made on November
petitioner.

www.iiipicai.in { 57 } THE RESOLUTION PROFESSIONAL I APRIL 2024

 UPDATES

02, 2019. The Appellant submitted claims amounting claim under Section 7Q of the 1952 Act. Concerning the
₹1,02,84,785 under Section 7A, ₹75,62,576 under admitted amount of ₹1,05,63,927/- under Section 14B,
Section 7Q, and ₹1,05,63,927 under Section 14B of NCLAT granted liberty to Respondent No.3 to apply
the Employees’ Provident Funds & Miscellaneous to the Central Board for a waiver of 100% damages.
Provisions Act 1952 (Act of 1952) on August 28, 2020. Respondent No.3 is instructed to file this application
These claims were entirely admitted by the Respondent within 30 days, and the Central Board is urged to
1 as communicated on the same day. Subsequently, a expedite its decision on the waiver within three months
Resolution Plan presented by the Resolution Applicant of receiving the application.
(Respondent No. 3) was approved by the CoC with
Order: The Appellate Tribunal has affirmed the
a unanimous vote share on November 06, 2020.
impugned order dated 11.05.2021 passed by the AA
Respondent No 1 then sought approval of NCLT on
subject to the issued directions. Parties shall bear their
the Resolution Plan, which was granted on May 11,
own costs.
2021. However, the approved Resolution Plan proposed
payment of the amount claimed only under Section 7A, Case Review: Appeal Disposed of.
totalling ₹1,02,84,785. Discontent with the approved
Resolution Plan due to omission of proposed payments Mayank Goyal. Vs. G. Madhusudhan Rao & Ors.
for the amounts claimed under sections 7Q and 14B, this With Suresh More Vs. G. Madhusudhan Rao & Ors.
appeal was filed. Company Appeal (AT) (Insolvency) No. 147 & 148 of
2024 with No. 182 of 2024, NCLAT Judgement dated
The Appellant submitted that while relying on the February 23, 2024.
judgment delivered by Appellate Tribunal in Jet Aircraft
Maintenance Engineers Welfare Association vs. Ashish Facts of the Case
Chhawchharia (2021) said that the dues under Section
The present set of two appeals filed by Mayank Goyal
7Q and Section 14B of 1952 Act are also PF dues and
in the capacity of prospective resolution applicant and
are entitled to be paid. It was further submitted that the
Suresh More, (Appellants) after being aggrieved by
claim was entitled to be paid first and there can be no
the order dated December 04, 2023, passed by the
denial of the amount. The Respondent No: 3 submitted
Adjudicating Authority. The Bil Energy Systems Ltd./
that the Resolution Plan has already been implemented
CD, was admitted into CIRP on December 09, 2022, based
and all employees and workmen were retained. It was on a Section 7 application filed by the State Bank of India
also submitted that the Appeal came nine months after (Respondent No. 2). Initially, the IRP constituted CoC,
the order, when the Resolution Plan was executed. with Respondent No. 2 as its sole member. Subsequently,
Furthermore, it was submitted that demanding full the IRP was replaced by the present RP (Respondent No.
payment at this stage may lead to closure of the company. 1), following unanimous voting in the 3rd CoC meeting.
The Successful Resolution Applicant (SRA) submitted In response to the ‘Form G’ published on 23.03.23,
that all dues under Section 7A of the Provident Fund three Potential Resolution Applicants (PRAs) submitted
were settled and it should be granted exemption from Expressions of Interest (EOIs), including one from
paying damages under Section 14B. Mayank Goyal. However, in its 5th meeting, the CoC
concluded that PRAs would not be able to submit any
NCLATs Observations
effective resolution plan and on June 03, 2023, resolved
The Appellate Tribunal observes that the Appellant’s to initiate the liquidation process of the CD.
entire claim necessitates consideration and payment in
The AA approved IA No. 2947 of 2023, filed by the
the Resolution Plan. It also cites the judgment delivered
Respondent No. 1 seeking liquidation of the CD, and
in Maharashtra State Cooperative Bank Limited vs.
dismissed IA No. 2825 of 2023, filed by the appellant
Assistant Provident Fund Commissioner and Ors. (2022),
seeking to set aside the resolution pertaining to initiating
noting that all amounts claimed under sections 7A, 7Q,
liquidation of the CD. Aggrieved with the impugned
and 14B of the 1952 Act were part of the Provident
orders Appellants preferred two separate appeals before
Fund. Furthermore, the Appellate Tribunal relies on the the NCLAT. The Appellants submitted that the failure
judgments in Jet Aircraft Maintenance Engineers Welfare on the part of Respondent No. 1 to perform his duty of
Association vs. Ashish Chhawchharia (2021) and taking charge of assets of the CD and tracing other assets
C.G. Vijyalakshmi vs. Shri Kumar Ranjan, Resolution cannot be a valid ground for recommending liquidation.
Professional and Ors. The Appellate Tribunal directs Further, it was asserted that there was material irregularity
Respondent No.3 to make a payment of ₹75,62,576/- in conduct of CIRP by Respondent No. 1, which was
within two months to the Appellant for the admitted ignored by the AA.

THE RESOLUTION PROFESSIONAL I APRIL 2024 { 58 } www.iiipicai.in

 UPDATES

The main issues before the Appellate Tribunal were: Ltd. (Appellant) u/s 61 of IBC against the Ninety
Properties Pvt. Ltd. (Respondent) after being aggrieved
(i) Whether the IBC allows CoC to consider liquidation by the impugned order dated March 03, 2023, passed
before inviting resolution plans? by the Adjudicating Authority. In December 2014, Shri
Shabir Nirban, director shareholder, and promoter of
(ii) Whether there were valid reasons for the CoC to
the Respondent offered to sell 100% of its shares along
initiate liquidation in this case?
with all assets and liabilities to the Appellant. The
(iii) Whether there were sufficient grounds for the AA to Appellant agreed to acquire all assets and liabilities of
reject the CoC's recommendation for liquidation of the Respondent as per its audited balance sheet dated
the CD? March 31, 2013, after carrying out valuation of the shares
of the Respondent, for a lump sum consideration of ₹4.50
NCLAT’s Observations Crore. An advance payment of ₹1.25 Crore was made by
the Appellant, subject to execution of a share purchase
The Appellate Tribunal observed that the AA’s findings
agreement after conducting due diligence.
regarding the IBC permitting the CoC to approve
liquidation before taking up any resolution plan for Despite receiving the payment, the Respondent failed
consideration cannot be debunked by the Appellants to provide necessary documents for due diligence or
as being dehors the statutory provisions. However, the execute the agreement, despite reminders from the
decision's conformity with IBC provisions is subject Appellant. The Appellant asked the Respondent to refund
to review by both the AA and this Appellate Tribunal, the amount paid by him along with interest @ 18% p.a.,
depending on the specifics of each case. It was further but when this was not forthcoming, the Appellant filed a
observed that despite numerous attempts by the IRP to petition under section 7 of the IBC. The AA dismissed the
engage the suspended management for the handover of petition without providing any reasoning, stating that the
assets, no cooperation was received. Consequently, the amount in default was not a financial debt. The Appellant
CoC, under its authority granted by Section 33(2) of the submitted that Section 7 application well filled within
IBC, was justified in opting for liquidation of the CD. The limitation accordance with section 18 of limitation act,
Appellate Tribunal further asserted that the Appellant's The Appellant further submitted that the rejection of the
objection to the CoC's decision for liquidation lacks Section 7 application under the IBC lacks valid grounds.
merit, given the CD’s three-year inactivity prior to
initiation of CIRP. Furthermore, the lack of essential The Appellant assert that section 5(8) of IBC covers
information hindered creation of a proper Information payments related to Share Purchase Agreements and
Memorandum (IM). The CoC rightfully noted that the should be considered. The Respondent contends that the
absence of necessary documents for making the prospect transaction with the Appellant isn't a financial debt, and
of a viable resolution plan unlikely. In the 5th meeting, there's been no default in repayment. The respondent
the CoC unanimously decided on liquidation, aligning further submitted that the ₹1.25 Crore was an advance
with Section 33(2) of the IBC. The AA acknowledged for acquiring tenancy rights under a redevelopment
and endorsed the CoC's deliberations, adhering to scheme, where tenants could gain additional area in the
statutory provisions. Since no grounds for judicial review new building. However, the true value of the premises
were established under Section 61(4) of the IBC, the exceeds ₹4.50 Crore.
Appellant's objections hold no merit.
The main issue before the Appellate Tribunal is whether
Order: The Appellate Tribunal did not find any infirmity the ₹1.25 Crore paid by the Appellant to the Respondent
in the impugned order dated December 04, 2023, passed company constitutes a financial debt under the IBC, and
by the AA. There is no ground to interfere with the if the Section 7 application regarding this debt should be
impugned order. admitted or not?

Case Review: Appeals Dismissed. NCLAT’s Observations

Jushya Realty Pvt. Ltd. Vs. Ninety Properties Pvt. Ltd. The Appellate Tribunal said that the Appellant failed
Company Appeal (AT) (Ins.) No. 543 of 2023, Date of to provide any documentation regarding the promised
NCLAT Judgement: February 02, 2024 Share Purchase Agreement, instead relying solely on the
transaction of ₹1.25 crores recorded in balance sheets
Facts of the Case over several years as evidence of financial debt. The
Appellant's only argument in favor of the Share Purchase
The Present appeal is filed by M/s Jushya Realty Pvt.
Agreement is a reminder sent in January 2018, four

www.iiipicai.in { 59 } THE RESOLUTION PROFESSIONAL I APRIL 2024

 UPDATES

years after the alleged promise in 2014, which does not of the CoC. While the plan was pending approval, the
conclusively prove any oral agreement made in 2013 or Appellant, filed an application before the AA for seeking
2014. intervention to exclude the Trademark "GLOSTER" from
the list of assets of the Respondent-1 as the same was duly
Additionally, no Section 7 petition or supporting assigned to the Appellant. However, the AA dismissed
documents were submitted to demonstrate the existence
the application and held that the transaction relied upon
of a Share Purchase Agreement or any borrowing
by the Appellant is an undervalued transaction, being
evidence. Consequently, it is challenging to accept
hit by Section 45(2)(b) of IBC. Further, it held that the
the claim that the ₹1.25 crores transaction constituted
registration was done post the imposition of moratorium
repayment of a financial debt, especially considering the
lack of a default date. The transaction of ₹1.25 crores was therefore all deeds executed between the Respondent-1
purportedly for the purchase of a property situated at Teen and the Appellant were void. Aggrieved by the said
Batti, Walkeshwar Road in Mumbai with redevelopment order, the Appellant has filed the appeal before NCLAT.
potential, valued at over ₹15 crores, consequently the The Appellant asserted that he initially had a Technical
Appellant's claim of a total consideration of ₹4.5 crores Collaboration Agreement (TCA) with the Respondent-1
appears untenable, as this amount would not be adequate allowing the use of the trademark ‘GLOSTER’. Further,
for acquiring such a valuable property. Moreover, if the a loan agreement in 10.11.2006 hypothecated the
transaction indeed occurred in December 2014 as stated, trademark to the Appellant. Later, due to a BIFR order, a
the Appellant should have asserted its rights within Supplementary Trademark Agreement on July 15, 2008,
the stipulated three-year period for specific contract assigned the trademark to the appellant.
purchases, rather than pursuing recourse through the
Insolvency and Bankruptcy Code (IBC) does not appear The Appellant submitted that after the repeal of SICA
to be correct legal course of action. in 2016, the trademark fully belonged to him. The
appellant thereafter executed a Deed of Hypothecation
Order: The Appellate tribunal held that AA didn’t on September 20, 2017, for record of the Trademark
commit any error in dismissing the Section 7 application assignment. Upon the initiation of CIRP in 2018, the
under IBC. trademark had already been firmly transferred to the
appellant, with the registration process completed within
Case Review: Appeal Dismissed.
the same year. The Appellant further asserted that AA has
Gloster Cables Ltd. Vs. Fort Gloster Industries Ltd. and committed an error in declaring that the trademark as a
Ors. Comp. App (AT) (Ins) No. 1343 of 2019 & I.A. No. property of the Respondent-1 because that jurisdiction
3823, 3824, 3825 & 3826 of 2019 & 470 of 2020 & 3655 lies with District court.
of 2023 Date of NLACT’S Judgement Date: January
NCLAT’s Observations:
25, 2024.
The Appellate Tribunal relying on the Supreme Court's
Facts of the Case
judgment in Gujarat Urja Vikas Nigam Ltd. vs Amit
The present appeal is filled by the M/s Gloster Cables Gupta & Ors. stated that under Section 60(5)(c), the AA
Ltd. (Appellant) against M/s Fort Gloster Industries has jurisdiction over questions of law or fact related to
Ltd (Respondent-1) and Gloster Limited (hereinafter insolvency resolution, including the ownership of the
referred as Respondent-2) and IRP (Respondent-3), CD’s property during CIRP. Further, the Tribunal cited
after being aggrieved by the AA’s order dated 27.09.19. the Supreme Court's decision in Thomson Press (India)
The Appellant was incorporated as Crest Cables Private Limited Vs. Nanak Builders & Investors Pvt. Ltd. & Ors.
Ltd in 1995 to take over the assets of the sick company highlighting that the deed of July 15, 2008, stipulated
‘Sputnik Cables Pvt. Ltd.’. In 2004, S. K. Bangur Group the assignment's effectiveness upon the BIFR order's
was included as an investor with equity participation and vacation. With SICA's repeal in 2016, this condition
the name of the entity was changed from Crest Cables to ceased to apply, making Appellant the trademark assignee
Gloster Cables Ltd. as of the agreement's date. Thus, the AA's determination
that the agreement was void due to the BIFR stay was
The Respondent-1 was incorporated in 1890 and owns deemed legally incorrect. Moreover, affirming that the
the Trademark 'GLOSTER' duly registered in Class 9. A Appellant obtained title to the trademark upon executing
former employee of the Respondent-1 filed an application the supplemental trademark agreement dated July 15,
u/s 9 of the IBC and the appointed RP (Respondent-3), 2008, the Tribunal emphasized that trademark ownership
filed a Resolution Plan as shared by Respondent-2, isn't contingent on registration. The Appellate Tribunal
which was duly approved by 73.21% of the members also stated that during its 5th meeting, the CoC was
THE RESOLUTION PROFESSIONAL I APRIL 2024 { 60 } www.iiipicai.in
 UPDATES

informed that the forensic audit report revealed no to submit a plan if such person, or any other person acting
evidence of preferential, undervalued, fraudulent, or jointly or in concert with such person is covered by any
wrongful trading transactions. Additionally, no related of the clauses mentioned from (a) to (g).
party preferential or fraudulent transactions were found.
Hence, the mere difference in amounts between the The Appellate Authority held that the current case is not a
trademark's hypothecation and assignment cannot be a case where it is pleaded or alleged that any of the clauses
basis for deeming it undervalued. (a) to (g) are attracted with respect to Respondent No.2.
Citing the judgement of the Hon’ble Supreme Court in
Order: The Appellate Tribunal set aside the impugned the Hari Babu Thota (supra), the Appellate Authority held
order dated September 27, 2019, passed by AA. that in the present case none of the clauses of Section
29A are being pressed for ineligibility of Respondent-2/
Case Review: Appeal Allowed.
Successful Resolution Applicant. Ineligibility is being
Vishram Narayan Panchpor (RP of Blue Frog Media held only on the ground that Respondent2/Successful
Pvt Ltd.) Vs. Committee of Creditors (Blue Frog Media Resolution Applicant was promoter of the Corporate
Pvt Ltd.) & Anr. Company Appeal (AT) (Insolvency) No Debtor till 2018 when he resigned. The Appellate
1489 of 2023 & IA No 5342 of 2023, Date of NCLAT Authority held the view taken by the AA is not as per
Judgement: January 11, 2024. the true and correct interpretation of Section 29A as
the mentioned section does not make per se Promoters
Facts of the Case
and Directors ineligible to submit a plan unless they are
The present application was filed by the RP (Appellant) of ineligible under clauses (a) to (g).
the Blue Frog Media Pvt. Ltd. (CD) after being aggrieved
Order: The Appellate Authority held that AA has
by the AA’s order of rejecting the resolution plan of
committed error in holding that the Respondent No.2/
Mahesh Mathai, Ex-Director of the CD (Respondent-2)
on the ground that the Respondent-2 is not eligible to Successful Resolution Applicant is ineligible to submit a
submit a Resolution Plan under Section 29A of the IBC. Resolution Plan and therefore the rejection of IA No.2828
The CD filed an application under Section 10 which of 2021 is unsustainable. The Appellate Authority set
was admitted on May 19, 2021, by the AA. The CoC by aside the AA’s order dated 18.08.2023 and revived IA
91.86% vote share approved the resolution plan submitted No.2828 before the AA to be heard and decided afresh in
by the Respondent-2. Accordingly, the Appellant filed an accordance with the law.
application IA No. 2828 of 2021 under Section 30(6) of Case Review: Appeal Dismissed.
the Code seeking approval of the resolution plan. The AA
by impugned order rejected IA No. 2828 of 2021 holding National Company Law Tribunal (NCLT)
that the Respondent No.2- is not eligible under Section
29A as he was one of the ex-promoter/directors of the M/s Neptunus Power Plant Services Pvt. Ltd. Vs. M./s
CD. The AA took the view that Section 29A restricts jagson International Limited IB – 827/ND/2020, Date
those persons from submitting a Resolution Plan who of NCLT Judgement: January 09, 2024.
could have an adverse effect on the entire CIRP. The
Appellant citing the judgement of the Supreme Court Facts of the Case
in Hari Babu Thota vs. Shree Aashraya Infra-Con Ltd. The present application was filed by M/s. Neptunus
cited that the Respondent-2 is not covered by any of the Power Plant Services Pvt. Ltd. (hereinafter referred as
clauses under which ineligibility is attached to promoter/ ‘Applicant’) before the Adjudicating Authority, under
ex-management. Section 29A does not make ineligible Section 9 of the IBC for initiating the CIRP against M/s.
ipso facto all promoters and directors. Ineligibility is Jagson International Ltd. (Respondent). The Applicant
attached if they are ineligible under any of the clauses claimed that the Respondent defaulted to clear the
under Section 29A. The issue raised before the Appellate outstanding amount of ₹1,32,99,727.58/- along with
Authority is that whether ex-promoter/directors are not interest @ 18% p.a. and the date of default being March
eligible to submit a resolution plan under Section 29A if 18, 2020. The entire claim was based on invoices issued
no disqualification is attached in any of the clauses under by the Applicant to the Respondent for the services
Section 29A. rendered by him. The Respondent acknowledged the
NCLAT’s Observations liability by way of acknowledgement letter dated August
29, 2018. The Applicant sent the demand notice to the
The Appellate Authority observed that a plain reading of Respondent on January 03, 2020, and January 24, 2020,
Section 29A indicates that a person shall not be eligible for the debts outstanding since 2015. The Respondent
www.iiipicai.in { 61 } THE RESOLUTION PROFESSIONAL I APRIL 2024
 UPDATES

denied the contentions of the Applicant on the grounds interest. The Corporate Guarantee Deed was executed
that (i) Application is below the statutory limit of Rs 1 between the Applicant and the Respondent for securing
crore, (ii) There was a pre-existing dispute even before the credit facilities granted to the principal borrower i.e.
the issuance of Demand Notice, and (iii) The Application M/s Superfine Metals Pvt. Ltd. The Applicant submitted
is time barred. The Respondent asserted that the debt that as per the guarantee deed, on the occurrence of
mentioned in the first demand notice stood at ₹87.67 Lacs default, the Respondent is liable to pay on demand.
(54.12 Principal +33.54 Interest @18%) and without any Accordingly, a demand notice was addressed to the
prior notice the amount was increased to ₹1.32 Crs in Respondent to pay the outstanding debt claimed. The
the application. Further, the Respondent alleged that the date of default was March 06, 2023, The Respondent
Applicant has wrongly added interest amount as no such submitted that the Petition, based on default and invoking
interest amount has ever been agreed in any invoices nor guarantees dated August 08, 2015, and November 18,
any agreement exists for the same. 2016, is barred by section 10A as the default date is
29.11.2020. Additionally, he further contends that Cash
NCLT’s Observations
Credit, Ad Hoc and Funded Interest Term Loan facilities
The Adjudicating Authority observed that the Applicant were sanctioned in December 2019 and September 2020
has not shown any clause in the invoice which specifies and were not covered in the mentioned guarantees.
that interest is leviable in case of any default. Therefore, The Respondent highlighted missing documents and
in such absence the Applicant cannot claim any interest. incomplete information, labelling the Petition as
inadequate.
The AA also observed that the Applicant has failed to
satisfy the minimum pecuniary threshold for default being NCLT’s Observations
Rs 1 Crore as mandated in the amendment to Section 4 of
IBC. Further, taking note of the averments made by the The AA held that the present petition is not barred by
Respondent and the substantiating documents provide by Section 10A as it is a case of corporate guarantee which
him, the AA stated that the Respondent was not negligent is payable on demand and the default occurs when a
in its obligations and that the dispute existed prior to the demand is made by the Financial Creditor. The AA, based
issue of Demand Notice. on documents presented by the Applicant, held that the
credit facilities were renewed from time to time hence
Order: The Adjudicating Authority held that the filed the submission of the Respondent that guarantee deed
application fails to fulfil the criteria laid under Section dated August 22, 2015 and November 18, 2016 were
9 of the Code. Accordingly, the application for initiating not relevant for transaction of 2019, was not sustainable.
CIRP against the Respondent was dismissed. Citing the judgement of the Hon’ble Supreme Court on
Swiss Ribbons Pvt. Ltd. & Ors. Vs. Union of India &
Case Review: Application Dismissed.
Ors, the AA held that the unlike Section 9, there is no
Central Bank of India Vs. Superfine Profile and scope of raising a ‘dispute’ as far as Section 7 petition
Extrusions Private Limited CP (IB) 692/MB/2023, Date is concerned. And as soon as a ‘debt’ and ‘default’ is
of NCLT Judgement: January 03, 2024. proved, the adjudicating authority is bound to admit the
petition.
Facts of the Case
Order: The AA held that the application made by the
The present CIRP application is filled by the M/s Central Applicant is complete in all respects and it clearly shows
Bank of India in the capacity of financial creditor that the Respondent is in default of a debt due and payable.
(Applicant) against M/s Super profile and Extrusions Pvt. Further, the default is in excess of minimum amount
Ltd. (Respondent) before the Adjudicating Authority. stipulated under section 4(1) of the IBC. Therefore, the
The Applicant filed a CIRP application against the debt and default stands established and there is no reason
Respondent under Section 7 of IBC on July 29, 2023, for to deny the admission of the Petition. Accordingly, the AA
claiming a sum for a Secured Loan of ₹66,21,05,008/- admitted the CIRP application against the Respondent
vide a Corporate Guarantee Agreement dated August 22, and directed the IRP to initiate the process.
2015, and November 18, 2016, for the aggregate debt of
₹73,61,00,000/- including the outstanding principal and Case Review: Application Dismissed.

THE RESOLUTION PROFESSIONAL I APRIL 2024 { 62 } www.iiipicai.in