Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT):  The Coram of Justice Jarat Kumar Jain (Judicial Member) and Dr Alok Srivastava (Technical Member) held that Ola’s below-cost pricing was not predatory pricing with a view to dislodging any competitor from the market but towards establishing itself as an effective and reliable brand in the market and also opening up a latent market to its advantage.

Two appeals filed by appellant Meru Travel Solutions (P) Ltd. and Fast Track Call Cab (P) Ltd. assailed the common order passed by the Competition Commission of India under Section 26(6) of the Competition Act, 2002.

Commission decided that on the basis of information submitted by Fast Track and Meru and analysis of DG’s investigation report, the dominant position of Ola in the relevant market and abuse of its dominant position was not established and Ola had not been found to have anti-competitive agreements with drivers.

By the present decision, both the appeals will be disposed off.

Analysis and Discussion

Technology | Ola v. Other Radio Taxis

Tribunal noted that before the advent of technology-leveraged, network-based aggregator models, taxi services such as Meru, Fast Track, Easy Cab, Taxi For Sure etc. also leveraged technology to pride ease of booking and taxi ride, yet Ola’s model differed from them in many ways, particularly its use of the smartphone-based application which could be used with remarkable ease by the riders and provide taxi services anywhere in the area within minutes of ‘hailing’ through the mobile phone.

Hence, it could not be said that Ola employed technology in a much more effective and enabling fashion to provide services which previous radio taxi operators were not able to.

Market Share

Ola market share is seen to increase from 5-6% in 2012-13 to 59-60% in 2014-15 and to 61% in 2015-16. Thus, there was a significant rising trend noted upto January 2015, whereafter Ola market share had been plateauing or witnessing a gradual decline.

Though the active fleet size increased but in Tribunal’s opinion merely the size of the fleet does not decide the dominant position of a particular radio taxi service provider.

“We note that the technological edge that the platform crested by Ola which provide ease of taxi bookings, rider security, payments, drivers welfare made many riders comfortable with the network of Ola. The customer incentives worked in conjunction with these facilities and conveniences to attract riders to Ola and a certain brand image was created and reinforced over a period of time.”

Further, another highlighting factor noted was that Ola was itself facing competition in the relevant market from established players such as Meru and Fast Track and later from Uber while it was trying to establish its brand.

Below Cost Pricing | Predatory pricing by Ola?

In Tribunal’s opinion, the strategy adopted by Ola was in view of the market conditions, helped by a heavy infusion of foreign funding. Hence, there was no below-cost pricing by Ola for any sustained period of time which could be labelled as predatory pricing and abuse of its dominant position in the market.

Coram also agreed with the finding of DG that the below-cost pricing adopted from May-June 2014 onwards could be treated as the variable cost which, as argued by Senior Counsel of Respondent Ola, was the expenditure that Ola undertook to establish its brand in the market and increase its market share.

It was also noted that Uber also adopted an almost similar network approach for the provision of radio taxi, hence Tribunal was inclined to agree with Ola’s arguments that Uber was a significant competitor in the relevant market and Ola was responding to pricing actions of Uber while trying to establish itself in the Bengaluru market of radio taxi services.

Tribunal found that the situation in the present matter was akin to that in the matter CCI v. Fast Way Transmission (P) Ltd., (2018) 4 SCC 316, wherein the Supreme Court held that when an enterprise enjoys a dominant position in the relevant market, it is enabled to operate independently of competitive forces or affect its competitors or consumers or that relevant market in its favour.

“We do not think that Ola could operate independently of other competitors in the relevant market, and hence it did not enjoy a dominant position in the market.”

Conclusion

Stating that Ola started from a low market share of about 20%, Tribunal held that it cannot agree that Ola was at that initial time in a dominant position and was trying to push out competitors from the market by employing below-cost, predatory pricing.  An increase in its market share over a period of time, was due to a combination of factors, of which below-cost pricing was one.

Another significant factor, with regard to Ola’s agreements with its drivers, Tribunal noted that the agreements cover many aspects, which concern welfare measures for drivers and helping them source credit for buying vehicles. The incentives provided to drivers are dynamic and not constant in time. The drivers have the option to shift to other networks depending on their requirements and convenience.

Hence the driver’s agreement that Ola has with drivers with entirely optional and does not in any way bind the drivers to Ola’s network in any way.

Therefore, Tribunal did not find the driver’s agreements anti-competitive in violation of Section 3 of the Act.

Ola is working on generating demand through customer discounts and then bringing in more drivers to cater to the increased demand. Ola tries to create a win- win for the riders and drivers, and of course to its enterprise.

Lastly, Tribunal held that the Orders of CCI do not require any interference and therefore the appeals were dismissed. [Meru Travels Solution (P) Ltd. v. Competition Commission of India, Competition Appeal (AT) No. 19 of 2017, decided on 7-1-2022]


Advocates before the Tribunal:

For Appellant:

Ms. Sonal Jain, Mr. Udayan Jain, Mr. Abir Roy, Mr. Ishkaran Singh, Ms. Kajal Sharma and Ms. Riya Dhingra, Mr. Vivek Pandey, Mr. Raj Surana, Mr. Ishaan Chakrabarti, Advocates.

For Respondents:

Ms. Shama Nargis, Deputy Director, CCI.

Mr. Ajay Kumar Tandon for R-1, CCI. Ms. Purnima Singh, Ms. Neha Bhardwaj, Ms. Shivani Malik, Ms. Astha Baderiya, Advocate for R-1.

Mr. Rajshekhar Rao, Sr. Advocate with Ms. Nisha Kaur Uberoi, Mr. Gautam Chawla, Mr. Raghav Kacker, Ms. Sonal Sarda and Mr. Samriddha Gooptu, Ms. Sakshi Agarwal, Mr. Ishan Arora, Mr. Madhav Kapoor, Advocates for R-2.

Case BriefsSupreme Court

Supreme Court: In a case relating to Corporate Insolvency, the Division Bench comprising of Indira Banerjee* and J.K. Maheshwari, JJ., quashed the order of NCLAT rejecting the application under S. 60(5) of IBC. The Bench held that the NCLAT and NCLT had failed to consider the law laid down by the Court with regard to extension of limitation period due to Covid-19 pandemic.

The appeal was filed under Section 62 of the Insolvency and Bankruptcy Code 2016 (IBC) against a judgment and order of NCLAT, whereby it had dismissed the application assailing order of NCLT under Section 61 of the IBC, mainly on the ground that the Resolution Process had already been approved by the Committee of Creditors.

The Appellant, an entity indulged in business of Supply and Erection of Piping Systems had entered into a contract with the Rohit Ferro Tech Ltd.-Corporate Debtor, who contacted the Appellant and placed a Purchase Order for design, supply, erection and testing of LP piping system and the commissioning of an LDO (Light Diesel Oil) storage handling system for its IX 67.5 MW Power Plant (Unit-II) for a consideration of Rs.5,37,75,761 excluding taxes and duties. Subsequently, the Corporate Debtor amended the said purchase order to include additional work of the value of Rs.88,64,239 excluding taxes and duties.

Arbitral Award

Some dispute arose between the parties due to failure and negligence of the Corporate Debtor to pay a sum of Rs.76,85,472 in connection with the said purchase order, pursuant to which the appellant invoked the Arbitration Clause and an Arbitrator was appointed by the High Court of Calcutta. The Arbitrator decided the case in favour of the appellant declaring that the claimant-appellant shall be awarded a sum of Rs.55,01,661 along with interest at the rate of two percent higher than the current rate of interest prevalent on the date of the award on and from 08-08-2014 till the date of payment. Further, the costs at Rs. 5,00,000 was also awarded to the claimant-appellant.

Initiation of CIRP

However, the said award was challenged before the Trial Court by the appellant under Section 34 of the Act, 1996. Meanwhile, the respondent 2, namely State Bank of India being a Financial Creditor of the Corporate Debtor, filed an application before the NCLT under Section 7 of the IBC, for initiation of Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor, and one Supriyo Chaudhuri was appointed as Resolution Professional.

Covid-19 and Countrywide Lockdown

The grievance of the appellant was that due to the COVID-19 pandemic and subsequent imposition of countrywide lockdown, it was not aware of the initiation of CIRP against the Corporate Debtor till 27-11-2020 whereafter it came to know the Corporate Debtor had not been taking steps in the Arbitration Proceedings in view of Insolvency process initiated against it.

IBC and Period of Limitation

The appellant’s claim of Rs.1,13,38,651, filed under Regulation 7 of the Insolvency and Bankruptcy Board of India (Insolvency Process for Corporate Persons) Regulations 2016 against the Corporate Debtor was rejected by the Resolution Professional on the ground that it had been filed beyond time. It was this order of the Resolution Professional which was being assailed before NCLT and NCLAT and which was being impugned in the instant appeal.

The Bench observed that the NCLT had failed to consider the order of the Supreme Court in Cognizance For Extension of Limitation: In Re, (2021) 5 SCC 452, wherein, taking cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country the Supreme Court had ordered that for the purpose of counting period of limitation in all proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not the period from 15-03-2020 till 14-03-2021 shall stand excluded. The Court had further declared that in cases where the limitation would have expired during the period between 15-03-2020 till 14-03-2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 15-03-2021.

Therefore, noticing that the NCLAT had also failed to consider the order of the Court extending period of limitation, the Bench held that since the appellant was required to file its claim within 3 months from 11-02-2020, and the appellant actually filed claim well before 14-01-2021, the claim ought not to have been rejected in the light of the above mentioned order.

Conclusion

In the backdrop of above, the Bench held that the NCLAT erred in dismissing the appeal without even considering the effect and impact of the orders of the Court in Cognizance For Extension of Limitation: In Re. Accordingly, the appeal was allowed and the impugned judgment and orders of NCLAT and NCLT were set aside. The application of the appellant under Section 60(5) of the IBC was allowed.

[GPR Power Solutions (P) Ltd. v. Supriyo Chaudhuri, 2021 SCC OnLine SC 1328, decided on 29-11-2021]


*Judgment by: Justice Indira Banerjee


Appearance by:

For Appellant(s): Sumit Kumar, AOR, Rajesh Pathak, Kumari Supriya, Abhishek Chakraborty, Hemant Kumar and Harshita Sinha, Advocates

For Respondent(s): Indranil Ghosh, Orijit Chatterjee, Swati Dalmial, Palzer Moktan, Ojasa Arya,  Akash Yadav, Advocates

Satya Mitra, AOR, Swarnendu Chatterjee, AOR and Naman Kamdar, Advocate


Report by: Kamini Sharma, Editorial Assistant


 

Op EdsOP. ED.

Introduction

The Supreme Court vide judgment dated 15-11-2019, deliberated upon a concatenation of significant issues in the case concerning the Committee of Creditors (CoC) of Essar Steel India Ltd. v. Satish Kumar Gupta[1] under Insolvency and Bankruptcy Code, 2016[2] (IBC). The acquisition of Essar Steel had undergone proceedings under the Code for more than two years and eventually brought clarifications on multiple questions pertaining to the insolvency regime. The article is an attempt to unravel the answer to the issue of whether approval of a resolution plan under the Code results in extinguishment of stamp duty?

Background

The debt amounting to INR 55,000 crores was overdue from Essar Steel and these mounting non-performing assets (NPA) were critically affecting the banking system operations in India. Pursuant to the process of insolvency, in December 2019, a joint venture between ArcelorMittal India (P) Ltd. (ArcelorMittal) and Nippon Steel acquired Essar Steel.

The National Company Law Tribunal (NCLT) issued an order[3] wherein insolvency proceedings were initiated against Essar Steel on the admission of an application which was filed by Standard Chartered Bank and SBI. During its initial phase, resolution plans submitted by ArcelorMittal and Numetal Ltd. (Numetal) were found to be ineligible under Section 29-A[4] of the Code by NCLT order dated 4-10-2018.[5] Section 29-A of the Code states that:

A person or any other person acting in concert joint with such person is not eligible to submit a resolution plan if the person (a) is an undischarged insolvent; (b) in accordance with the guidelines of the RBI under Banking Regulation Act, 1949[6] is a wilful defaulter; or (c) at the time of submission of the resolution plan has an account or an account of a corporate debtor under the control and management of such person or of whom such person is a promoter, classified as NPA in accordance with the guidelines of RBI issued under the Banking Regulation Act, 1949.

The commencement of proceedings before the learned adjudicating authority and Appellate Tribunal

Through an order dated 8-3-2019,[7] NCLT partially approved the resolution plan proposed by ArcelorMittal and recommended CoC to consider the segregation of funds to reduce the discrimination between the creditors and enable higher recovery for the operational creditors with claim value more than Rs 1 crore.

The impugned judgment in this particular case applied the principle of equality. It elaborated that irrespective of the creditors being unsecured or secured, operational or financial, equitable treatment must be accorded to the creditors as they are essentially a group of creditors who are situated in a similar position and based on this, there should be no differences in terms of debt to be repaid to them.

The CoC placed due emphasis on the position of Standard Chartered and stated that it was placed distinctly in terms of other secured financial creditors because of the fact that it was not a direct lender to the company and its debt was secured by the way of a pledge and not in the form of a charge in the project assets of the company. In furtherance of this, vide judgment,[8] the National Company Law Appellate Tribunal (NCLAT) approved the resolution plan of ArcelorMittal and redesigned the manner of distribution of amount so that creditors, irrespective of their group and nature were treated equally.

The Supreme Court further set aside the NCLAT order because if the distinction between the groups of creditors in terms of secured or unsecured operational and secured or unsecured financial creditors is vitiated then the bankers would be hesitant to apply for IBC for stressed assets and they would certainly look for liquidation of the companies which lies in contradistinction to the objective of the Code. The line of distinction between secured and unsecured creditors is pertinent particularly in the banking area as a majority of lending is based on collateral.

Prevalence of creditor-driven process in Indian insolvency landscape

The Code provides the entire process for the corporate insolvency resolution process (CIRP) to find a path for maintaining the viability of the business before undergoing the liquidation process in case of no revival prospects of the corporate persons. The Code mandates that the whole process of CIRP should be completed within the stipulated time of 180 days or an extended period of additional 90 days. Therefore, in total, the CIRP process should be completed anyhow within 330 days, including the period of extension time taken and in the legal proceedings. The time-bound period of CIRP is in line with the objectives enshrined under the Code.

In the process of CIRP, a resolution applicant proposes potential solutions for the revival of the corporate debtor. It is contended that CoC occupies the position of driver’s seat for directing the entire CIRP process. This presumption is driven by the fact that the financial creditors are certainly not unaware of the viability of the corporate debtor and the underlining feasibility of the resolution plan because they are engaged in the money lending business and they always do a due diligence check as a part of their homework before providing loan to the corporate debtor. Therefore, the determination of the route of the corporate resolution process is carried out through the commercial wisdom of the majority of creditors with the prospective resolution applicant.[9] The Court clarified further that the business decision depends upon the CoC; however, sufficient emphasis must be provided to the objectives enshrined in the Code.

In Karad Urban Cooperative Bank Ltd. v. Swwapnil Bhingardevay[10] the Court focused on the primordial right in the hands of resolution applicant to receive substantial and complete information pertaining to the corporate debtor as the prospective resolution applicant suddenly cannot face “undecided” claims because it would cause uncertainty for the applicant who would soon take over the business of the corporate debtor. Through all the pointers mentioned above, it is clear that the process of CIRP should be concluded in a timely fashion, and complete information regarding corporate debtor must be made available in the hands of resolution applicant with final decision making bestowed on CoC.

Stamp duty implications on resolution plan

It is important to understand the ramifications of stamp duty on the resolution plan under the Code. The NCLT via order dated 8-3-2019,[11] rejected the claim of Essar Steel[12] due to the failure to pay requisite stamp duty on the documents and for non-completion of statutory formalities which were necessitated by the Stamp Act, 1899[13]. The Supreme Court also took into consideration this particular fact and rejected the claims on the basis of failure to make payment of respective statutory stamp duty.

Placing reliance on Monnet Ispat,[14] NCLT in the insolvency resolution case rejected its plea for exemption from stamp duty provisions on the transfer of assets pursuant to the resolution plan. In this case, an issue arose wherein an order was sought by the applicant for an exemption from the payment of stamp duty in respect of actions undertaken as per the final resolution plan. The Bench answered the question negatively and stated that in respect of reconstruction and amalgamation as envisaged in the resolution plan, there being no express provision conferring powers to exempt levying stamp duty upon this Bench, an exemption cannot be granted and there is no escape of the resolution applicant from paying taxes and other governmental dues. In furtherance to this, the pivotal case of Synergies Dooray Automotive Ltd. (SDAL)[15] can also be referred. The matter of the case deals a situation wherein Synergies Dooray was placed on the foothold of insolvency proceedings. The debt owed by the corporate debtor to its financial creditors was around Rs 972.15 crores however, the repayment according to the approved insolvency plan by CoC was of the amount Rs 50 crores, consequently an appeal was filed by Edelweiss ARC before NCLAT challenging the order of NCLT that approved SDAL’s resolution plan. The resolution plan also provided for the exemption from payment of stamp duty on the transfer of assets on amalgamation. The NCLAT order deduced upon the issue of statutory dues and whether these statutory dues relating to Central or State Government or legal authority come under the umbrella term of “operational creditors”?

While answering this, the Bench viewed the term “operational debt” as a debt arising during the operation of the company as a going concern. If company remains a going concern, and operational then such statutory liabilities such as income tax payment, VAT, etc. will arise and since, there is a direct nexus between the two, such statutory dues come within the ambit of “operational dues”. The Bench ordered SDAL to pay full payment pertaining to the statutory dues in a staggered manner. In the similar vein, stamp duty is in the nature of a tax which is congruent to sales tax and the income tax collected by the government authorities therefore, it is in the nature of a statutory due. A stamp duty is an important aspect which reflects the evidentiary value of the documents in the court of law and therefore, in the case of Essar Steel[16], by rejecting the claims due to non-payment of requisite stamp duty, the Court had taken a right step.

Analysis

The skeleton of the entire CIRP is formed by a resolution professional, and the Supreme Court substantiated that the roles and responsibilities of a resolution professional entail collection, collation, and admission of claims without getting into the skin of an adjudicatory role. All the claims which are collected are then fully negotiated and decided by the CoC. Theoretically, it may be possible for a resolution professional to restrict to a non-adjudicatory function; however, the restriction seems difficult to follow in practice. Once the determination of the issue pertaining to the going concern of the corporate debtor has been placed before CoC, and it is taken into consideration by the CoC, and CoC takes a conscious decision for the resolution plan, then the adjudicating authority will have to transit to hands-off mode.

The claim of the Essar Steel was rejected by the resolution professional as there was a failure to furnish proof of making payment of requisite stamp duty pursuant to Stamp Act on behalf of the Essar Steel despite repeated reminders to them. Though the proposition is not clear enough on the issue concerning treatment of pending stamp duty on approval of resolution plan, however the stamp duty being in the nature of income tax, and VAT should be considered in line as a statutory due.

The NCLT vide order dated 8-3-2019[17] rejected the subsequent restoration of the application, which was filed by the Essar Steel on the basis of dual grounds claiming that at the belated stage, the application should not be considered and there is no merit in the claim on the failure to produce duly stamped agreements. For the working of the Bankruptcy Code, speed is of the essence and can be attributed to two reasons. Firstly, the claim period is the time where the organisation is afloat without the clarity of control and ownership and hence, during this period no significant decisions are taken. In addition, the liquidation value has the propensity to go down in a situation wherein assets suffer from high economic rate of depreciation. From the creditor’s perspective, good realisation can be carved out provided the firm is sold as a going concern. In the cases of liquidation, delay causes value destruction.[18] Therefore, the stand taken by the Supreme Court is sustainable because the entire objective of the Code rests on the premise of timely resolution for the revival of the company and belated claims made at the final hour should not be entertained because it goes contrary to the objective of the IBC.

Conclusion

Various beneficial outcomes stemmed from the pronouncement of Essar Steel case.[19] The most significant outcome is that the objectives of IBC were unequivocally reaffirmed. The judicial pronouncement also conveyed a clear message to the promoters of the defaulting companies that they could no longer take defaults lightly and there was a real threat and possibility of them losing their companies. The treatment of stamp duty was appreciable in the instant case because the claim was made on a belated stage and entertaining such issue lately despite reminders provided does not justify the act of considering the issue and secondly, the levying of stamp duty being a State subject is also revenue for the government exchequer. There being no express provision to non-application of stamp duty, the courts cannot and should not go beyond the letters of law. This essentially facilitates the establishment of the principles of the Code and deepen its roots.


Principal Associate at Saraf & Partners, New Delhi.

†† Student, National Law University, Nagpur.

[1] (2020) 8 SCC 531.

[2] <http://www.scconline.com/DocumentLink/86F742km>.

[3] Standard Chartered Bank v. Essar Steel India Ltd., 2017 SCC OnLine NCLT 10751.

[4] Section 29-A, Insolvency and Bankruptcy Code, 2016

[5] Arcelormittal India (P) Ltd. v. Satish Kumar Gupta, (2019) 2 SCC 1.

[6] The Banking Regulation Act, 1949.

[7] Resolution Professional for Essar Steel India Ltd., In re,  2019 SCC OnLine NCLT 750.

[8] Standard Chartered Bank v. Satish Kumar Gupta, 2019 SCC OnLine NCLAT 388.

[9] K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150

[10] (2020) 9 SCC 729

[11] Resolution Professional for Essar Steel India Ltd., In re,  2019 SCC OnLine NCLT 750.

[12] 2017 SCC OnLine NCLT 10751.

[13] The Stamp Act, 1899

[14] SBI v. Monnet Ispat & Energy Ltd., 2018 SCC OnLine NCLT 23789

[15] Director General of Income Tax v. SDAL, 2019 SCC OnLine NCLAT 691

[16] Resolution Professional for Essar Steel India Ltd., In re,  2019 SCC OnLine NCLT 750.

[17] Resolution Professional for Essar Steel India Ltd., In re,  2019 SCC OnLine NCLT 750.

[18] Institute for Policy Research Studies, Report Summary: The Financial Sector Legislative Reforms Commission, 2013.

[19] (2020) 8 SCC 531.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal, New Delhi (NCLAT): The Coram of Justice Ashok Bhushan (Chairperson) and Jarat Kumar Jain (Judicial Member) and Dr Alok Srivastava (Technical Member) allowed withdrawal of application for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor.

Two appeals were filed against the same judgment passed by the National Company Law Tribunal, Allahabad Bench.

Whether the approval of the Committee of Creditors for withdrawal of the application was required or not on the present matter?

Supreme Court in Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17, held that at any stage, before a Committee of Creditors is constituted, a party can approach National Company Law Tribunal (NCLT) directly and that the Tribunal may, in the exercise of its inherent powers under Rule 11 of NCLT Rules, allow or disallow an application for withdrawal or settlement.

In the present matter, the Application under Section 12A was filed on 25.08.2021 on which date settlement between the Appellants and the Corporate Debtor had already been entered. On the day when the Application was filed, there was no requirement of approval of ninety percent of the voting share of the Committee of Creditors.

Tribunal expressed that, when the application is filed prior to the constitution of Committee of Creditors, the requirement of ninety percent vote of Committee of Creditors is not applicable and the Adjudicating Authority has to consider the Application without requiring approval by ninety percent vote of the Committee of Creditors.

Another aspect was that, as per the Memorandum of Understanding, two Demand Drafts of Rs 19 Lacs and Rs 6 Lacs were handed over to the Appellant and the cheque of Rs 38,74,000/- was also given. The cheque of Rs 38,74,000 was returned and subsequently, the said payment was made by RTGS before the order was passed by the Adjudicating Authority.

The entire payment as per the Memorandum of Settlement having been paid, there is no debt of the Appellant- ‘M/s. Ashish Ispat Pvt. Ltd.’ due on the Corporate Debtor.

In the instant case, the entire dues of the appellant were paid by the Corporate Debtor under the Memorandum of Settlement. An application was filed before the constitution of the Committee of Creditors. There was no requirement of directing for obtaining approval of ninety per cent vote of Committee of Creditors for considering the application.

Coram held that the NCLT without considering the facts and sequence of the events had refused to entertain the application on the ground that it was not supported by 90% vote of the Committee of Creditors. Hence, Tribunal opined that present is a case where the Application for withdrawal ought to be allowed permitted withdrawal of CIRP.

The appeal was allowed. [Ashish Ispat (P) Ltd. v. Primsuss Pipes & Tubes Ltd., Comp. App. (AT) (Ins.) No. 892 of 2021, decided on 7-1-2022]


Advocates before the Tribunal:

For the Appellant: Mr. Adhitya Srinivasan, Ms. Shalya Agarwal, Mr. Rahul Patel, Mr. Varun Chugh, Ms. Shagun Shahi, Advocates.

Ms. Mrinali Prasad, Advocate for R1.

For the Respondents: Mr. Aditya Gauri, Advocate for R2.
Mr. Abhishek Kumar Advocate for Kotak Mahindra
Mr. Saket Singh, Mr. Ankur Goel, Advocates (Intervenor)

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal, New Delhi (NCLAT): Coram of Justice Ashok Bhushan (Chairperson) and Justice Jarat Kumar Jain, Judicial Member and Dr Alok Srivastava, Technical Member heard appeals filed against the decision passed by National Company Law Tribunal, Mumbai.

A petition was filed under Section 95 of the Insolvency and Bankruptcy Code, 2016 through the Resolution Professional against the three appellants. Adjudicating Authority passed an order on the application filed through the Resolution Professional directing the Resolution Professional to exercise the powers enumerated under Section 99 of the I&B Code and submit the recommendations with reasons in writing for acceptance or rejection of application within the stipulated time as envisaged under Section 99.

Aggrieved by the above order, appeals were filed.

Analysis, Law and Decision

Section 97 of the I&B Code which deals with ‘appointment of resolution professional’ with reference to Insolvency Resolution Process under Chapter III, following is a statutory scheme as delineated by Section 97(1) and (2).

Appellate Tribunal expressed that there cannot be any dispute with the statutory scheme as contained in Section 97 that when application is filed by the Resolution Professional under Section 95, the Adjudicating Authority shall direct the Board within seven days of the date of the application to confirm that disciplinary proceedings pending against the Resolution Professional or not and the Board was required within seven days to communicate in writing either confirming the appointment of the Resolution Professional or rejecting the appointment of the Resolution Professional and nominating another Resolution Professional.

Coram stated that in the present matter, appellant’s case was not that any disciplinary proceedings were pending against the Resolution Professional who had filed the application, Appellate Tribunal saw no useful purpose in again directing the Adjudicating Authority to send the recommendation to the Board for confirmation.

The order having been passed more than three months’ prior to the passing of the order, hence Appellate Tribunal opined that due to the said reason the order of the Adjudicating Authority does not need to be interfered with.

Coming to another submission that Adjudicating Authority was not required at the stage when report was still to be filed by the Resolution Professional to record a finding regarding default, Appellate Tribunal was of the view that the said submission was fully supported by the decision Ravi Ajit Kulkarni

In the impugned judgment, the Adjudicating Authority had made observations to the following effect at page 33:-

“Based on the submissions made by the Applicant and the documents produced and placed on record before this Bench, the Bench has no doubt in its mind that there is a ‘default’ on the part of the Personal Guarantor by not fulfilling the debt owed to the Corporate Debtor, i.e., Anoushka Medicare & Diagnostics Private Limited as per the Deed of Personal Guarantee entered between the parties through the Deed of Personal Guarantee dated 01.08.2017.”

Appellate Tribunal found substance in the appellant counsel’s submission that the observation regarding default deserved to be deleted from the Judgment and was ordered to be deleted.

Counsel for the Respondent submitted that in the last paragraph, the Adjudicating Authority gave full liberty to the Resolution Professional to make a recommendation with reasons in writing for acceptance or rejection of the Application. The above directions do clearly mention that report has to be submitted as per Section 99, but to avoid any prejudice to any of the parties, Coram opined that the observations as quoted above are required to be deleted from the judgment.

Appeals were partly allowed. [Kanchan Nanubhai Desai Personal Guarantor v. Finquest Financial Solutions (P) Ltd., 2022 SCC OnLine NCLAT 8, decided on 3-1-2022]

Akaant MittalExperts Corner

In this three – part series, I shall be discussing the if a decree or an arbitral award or a settlement deed can form the basis of a financial or operational debt under the IB Code.

 

The Insolvency and Bankruptcy Code, 2016 took effect on 1-12-2016, and the Government of India has since enforced most of the sections of the Code pertaining to corporate insolvency through numerous notifications. The Code has resulted in a paradigm shift in India’s insolvency and bankruptcy law, both for corporate entities and for individuals.

 

The IB Code differentiates between financial creditors and operational creditors. Financial creditors are those having a relationship with the corporate debtor that is purely a financial contract, such as a loan or a debt security. Whereas, operational creditors are those who have due from the debtor on account of transactions made for the operational working of the debtor.[1] In order to seeking a resolution process against a corporate debtor, therefore, a creditor must either have a claim of a financial debt or an operational debt against such debtor.

 

Now issues have arisen when such creditors have sought to base their claims on

(i) a decree by a court; or an arbitral award; or

(ii) settlement agreement between the creditor(s) and the corporate debtor.

The first part of the series shall deal with whether a decree constitutes a financial debt.

 

The jurisprudence on this issue generally has held that it is essential that the claim of a financial creditor must be based on the transaction between the debtor and creditor and not on the decree issued by a court or tribunal in any other case between the debtor and creditor.

 

A decree-holder cannot initiate a corporate insolvency resolution process by using the decree or recovery certificate issued by the Debts Recovery Tribunal or Real Estate Regulatory Authority (RERA) or any other authority under any other law.[2] The rationale is that an “amount claimed under the decree is an adjudicated amount and not a debt disbursed against the consideration for the time value of money”[3]. Resultantly, the same cannot be termed to fall within the ambit of any of the clauses enumerated under Section 5(8), IB Code.[4]

 

The NCLAT has maintained that the proceedings under the IB Code are not recovery proceedings. Therefore, when a creditor seeks indirect execution of such decrees or recovery certificates by filing an application under Section 7, IB Code, the same can tantamount to “fraudulent or malicious initiation of insolvency proceedings for a purpose other than for the resolution of insolvency” and hence, actionable under Section 65, IB Code.[5]

 

In other words, the underlying idea is that the adjudicating authority does not become an executing court wherein any petitioner who obtains a decree instead of getting the same executed before the appropriate civil courts, circumvents and seeks such execution indirectly through the proceedings under Section 7 of the IB Code.

 

Similar opinion was maintained in the matter of Akram Khan v. Bank of India Ltd.,[6] wherein the NCLAT opined that the application under Section 7 of the IB Code seems to be made for the purposes of execution of a decree passed by the Debts Recovery Tribunal in favour of the “financial creditor”. Hence, the creditor approached the adjudicating authority, for the purpose other than for the resolution of insolvency, or liquidation and resultantly falls foul of Section 65 of the IB Code. Similar view was taken in C. Shivakumar Reddy v. Dena Bank.[7]

 

One query that could certainly be posed is that why does a creditor rely on a decree or an arbitral award to establish a financial or an operational debt. One particular reason for that could be to prevent the claim being hit by the law of limitation. According to Section 238-A of the IB Code, the Limitation Act, 1963 applies to the IB Code and therefore, an application under Sections 7 or 9 or Section 10 of the IB Code has to be filed within 3 years of the date of default. Therefore, when the date of default predated the year 2013 but the creditor filed the application under Section 7 of the IB Code on 7-1-2019; the creditor sought to place reliance on the decree by the Debts Recovery Tribunal which was passed on 22-10-2016 to argue that their claim was within limitation.[8] However, the same was still rejected by the NCLAT holding that the limitation will start from the date of default and not the date when the recovery certificate was issued by the Debts Recovery Tribunal.[9]

 

However, a diverging stance was taken in Ugro Capital Ltd. v. Bangalore Dehydration and Drying Equipment Co. (P) Ltd.,[10] where specific argument was taken that the creditor had not prosecuted the judgment and decree obtained in 2015 before a civil court and instead has come before the adjudicating authority by filing an application under Section 7 of the IB Code. The NCLAT setting aside the order of the adjudicating authority, had directed the latter to admit the application under Section 7 of the IB Code. The NCLAT referring to the definition of the term “creditor” in the IB Code, in categorical terms, stated:

 

“[i]t is important to point out that the definition of creditor provided in Section 5(10) of the IB Code provides that “creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder.

 

Based on the decree of the court this petition was filed under Section 7 of the Code. Since the definition of word creditor in IB Code includes decree-holder, therefore if a petition is filed for the realisation of decretal amount, then it cannot be dismissed on the ground that applicant should have taken steps for filing execution case in civil court.”

 

In fact, in the above-mentioned case, the NCLAT calculated the limitation for filing the application under Section 7 from the date of the decree.

 

In conclusion, it can be said that majorly the courts had taken an adverse view when an application seeking initiation of a resolution process is supported by a decree or an arbitral award[11]. The impression that the same seems to be communicated to the courts is that the creditor has approached it with a mala fide motive, which is why the provision of Section 65 IB Code[12] is referred to it.[13]

 

However, the same must now be revisited on account of the ruling of the Supreme Court in Dena Bank v. C. Shivakumar Reddy[14]. One of the issues in this case was the financial creditor had relied on the recovery certificate issued by the Debts Recovery Tribunal to establish the claim of a financial debt and to contend that the application under Section 7 was filed in the period of limitation. Setting aside the ruling of the NCLAT, the Supreme Court accepted the submission of the financial creditor, holding:

126… In this case, the appellant financial creditor had, amongst other documents, also relied upon the final judgment and order dated 27-3-2017 passed by the Debts Recovery Tribunal and the subsequent recovery certificate dated 25-5-2017 which constituted cause of action for initiation of proceedings under Section 7 of the IB Code.

Clearly, therefore, a decree can now constitute a financial debt.

Conclusion

From the foregoing discussion, it is clear that the jurisprudence of the NCLAT wherein claim based on a decree was look with skepticism as to whether the same amounts to misuse of the provision of the IB Code, needs revisiting. In light of the ruling of the Supreme Court in Dena Bank[15], a claim can most certainly be based on a decree. However, it must be mentioned here that the claim upon which a decree is rendered must satisfy the fundamental ingredients of a financial debt, since in Dena Bank[16], it was a financial creditor that had secured the decree.

 


† Akaant Kumar Mittal is an advocate at the Constitutional Courts, and National Company Law Tribunal, Delhi and Chandigarh. He is the author of the commentary “Insolvency and Bankruptcy Code – Law and Practice”.

The author gratefully acknowledges the research and assistance of Sh. Mahesh Kumar, 4th Year, B.A.LLB. (Hons.), student at Sharda University, Greater Noida, Uttar Pradesh, in writing this series.

[1] The Report of the Bankruptcy Law Reforms Committee, Volume 1: Rationale and Design (Nov. 2015), Ch. 5.2.1

[2] See, Sushil Ansal v. Ashok Tripathi, 2020 SCC OnLine NCLAT 680.

[3] 2020 SCC OnLine NCLAT 680, para 20.

[4] 2020 SCC OnLine NCLAT 680.

[5] See, G. Eswara Rao v. Stressed Assets Stabilisation Fund, 2020 SCC OnLine NCLAT 416; Sushil Ansal v. Ashok Tripathi, 2020 SCC OnLine NCLAT 680.

[6] 2019 SCC OnLine NCLAT 1427.

[7] 2019 SCC OnLine NCLAT 907.

[8] Digamber Bhondwe v. JM Financial Asset Reconstruction Co. Ltd., 2020 SCC OnLine NCLAT 399.

[9] Digamber Bhondwe v. JM Financial Asset Reconstruction Co. Ltd., 2020 SCC OnLine NCLAT 399, para 18.

[10] 2020 SCC OnLine NCLAT 149.

[11] See HDFC Bank Ltd. v. Bhagwan Das Auto Finance Ltd., 2019 SCC OnLine NCLAT 1338.

[12] IB Code, S. 65(1) states:

“65. Fraudulent or malicious initiation of proceedings.— (1) If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the adjudicating authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.”

[13] See HDFC Bank Ltd. v. Bhagwan Das Auto Finance Ltd., 2019 SCC OnLine NCLAT 1338; G. Eswara Rao v. Stressed Assets Stabilisation Fund, 2020 SCC OnLine NCLAT 416.

[14] 2021 SCC OnLine SC 330.

[15] (2021) 10 SCC 330.

[16] (2021) 10 SCC 330.

Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of Dr Dhananjaya Y Chandrachud* and A S Bopanna, JJ., held that the powers of NCLT under S. 7(5) of IBC are limited to verifying existence of default and then accordingly, either admit or reject an application. Holding that the Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute, the Bench remarked,

“While the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.”

The question before the Bench for adjudication was whether, in terms of the provisions of the IBC, the Adjudicating Authority (NCLT) can without applying its mind to the merits of the petition under Section 7, simply dismiss the petition on the basis that the corporate debtor has initiated the process of settlement with the financial creditors?

The grievance of the appellants was that on a petition instituted under Section 7 of the IBC for initiating the Corporate Insolvency Resolution Process (CIRP) in respect of the respondent, the NCLT declined to admit the petition and instead directed the respondent to settle the claims within three months which was further affirmed by the NCLAT.

Noticeably, a Master Agreement to sell was entered into between the respondent, IDBI Trusteeship Ltd. and Karvy Realty (India) Ltd. in order to raise an amount of Rs 50 crores for the development of 100 acres of agricultural land. Since the requisite funds could not be generated through the Master Agreement, a Syndicate Loan Agreement was entered into between the respondent, IDBI Trusteeship Ltd. and the Facility Agent for availing a term loan of Rs 18 crores from prospective lenders. It was in that background that the petitioners-appellants had instituted a petition under Section 7 of the IBC before the NCLT due to the respondent’s default in making the re-payment of an amount of Rs 33,84,32,493.

Decisions of NCLT

The Adjudicating Authority listed the petition for admission on diverse dates and had adjourned it, inter alia, to allow the parties to explore the possibility of a settlement yet no settlement was arrived at by all the original petitioners who had instituted the proceedings. Though, the Adjudicating Authority noticed that joint consent terms had been filed before it but it was common ground that those consent terms did not cover all the original petitioners who were before the Adjudicating Authority. Eventually, the Adjudicating Authority did not entertain the petition due to following factors:

  • Respondent’s efforts to settle the dispute were bona fide, as evinced by the fact that they had already settled with 140 investors, including 13 petitioners before it;
  • The settlement process was underway with 40 other petitioners;
  • The procedure under the IBC was summary in nature, and could not be used to individually manage the case of each of the 83 petitioners before it; and
  • Initiation of CIRP in respect of the respondent would put in jeopardy the interests of home buyers and creditors, who have invested in the respondent’s project, which was in advanced stages of completion.

IBC Mandate

On a bare reading of the provision, Section 7 (5) Clauses (a) and (b) use the expression “it may, by order” while referring to the power of the Adjudicating Authority. Section 7(5)(a) states that the Adjudicating Authority may, by order, admit the application while Section 7(5)(b) states that it may, by order, reject such an application.

Thus, two courses of action are available to the Adjudicating Authority in a petition under Section 7. The Adjudicating Authority must either admit the application under Clause (a) of sub-Section (5) or it must reject the application under Clause (b) of sub-Section (5). The statute does not provide for the Adjudicating Authority to undertake any other action, but for the two choices available.

Factual Analysis

Observing that no settlement had been arrived at by the respondent with all the appellants and impleadment applications had also been filed on behalf of an additional set of individuals claiming non-payment of their dues by the respondent, the Bench held that the order of the Adjudicating Authority, and the directions which eventually came to be issued, suffered from an abdication of jurisdiction.

The Appellate Authority was cognizant of the fact that even the time schedule for settlement which had been indicated by the Adjudicating Authority had elapsed, but then noted the impact of the outbreak of COVID-19 pandemic on the real estate market, including on the respondent. Therefore, the Adjudicating Authority failed to exercise the jurisdiction which was entrusted to it. Furthering, holding that the Adjudicating Authority’s observation that the appeal was not maintainable was erroneous, the Bench remarked,

“While acknowledging that the consent terms were “filed by some of the stake holders though may not be all encompassing”, the Appellate Authority nonetheless proceeded to dismiss the appeal as not maintainable.”

Findings of the Court

IBC is a complete code in itself and the Adjudicating Authority and the Appellate Authority are creatures of the statute and their jurisdiction is statutorily conferred, the Bench stated that the statute which confers jurisdiction also structures, channelises and circumscribes the ambit of such jurisdiction. Thus, while the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity.

Referring to the IBC mandate, the Bench opined that the Adjudicating Authority had clearly acted outside the terms of its jurisdiction as it is empowered only to verify whether a default has occurred or if a default has not occurred and accordingly, it must then either admit or reject an application.

There are the only two courses of action which are open to the Adjudicating Authority in accordance with Section 7(5), therefore, the Adjudicating Authority cannot compel a party to the proceedings before it to settle a dispute.”

Further, opining that undoubtedly, settlements have to be encouraged because the ultimate purpose of the IBC is to facilitate the continuance and rehabilitation of a corporate debtor, as distinct from allowing it to go into liquidation, the Bench stated, what the Adjudicating Authority and Appellate Authority, however, had proceeded to do was to abdicate their jurisdiction to decide a petition under Section 7 by directing the respondent to settle the remaining claims within three months and leaving it open to the original petitioners, who were aggrieved by the settlement process, to move fresh proceedings in accordance with law.

Conclusion

Consequently, the appeal was allowed and the impugned judgments of NCLT and NCLT were set aside. The petition was restored to the NCLT for disposal afresh. [E S Krishnamurthy v. Bharath Hi Tech Builders Pvt. Ltd, 2021 SCC OnLine SC 1242, decided on 14-12-2021]


Kamini Sharma, Editorial Assistant has put this report together


Appearance by:

For the Appellants: Srijan Sinha, Advovate

For the Respondent: Aakanksha Nehra, Advocate


*Judgment by: Justice Dhananjaya Y Chandrachud

Op EdsOP. ED.

The contours of enquiry as per the Supreme Court and NCLAT’s response

The order dated 13-4-2021 passed by National Company Law Appellate Tribunal (NCLAT) in Union of India v. Vijaykumar V. Iyer1 and connected matters, seeks to reopen questions which were settled by the  Supreme Court after multiple protracted round of litigations witnessed during 2016-2019. The aforesaid order throws open a lot of questions especially in relation to the objections/challenges that can be raised by various stakeholders in a resolution process at an advance stage or even in concluded resolution processes.

The NCLAT was seized, inter alia, of an appeal arising from an order approving the resolution plan for Aircel group. In the meantime, the Supreme Court of India (Supreme Court) in Union of India v. Association of Unified Telecom Service Providers of India,2(Unified Telecom) directed NCLAT to consider certain questions which inter alia include:

  • whether the licence to use the spectrum is a contractual relationship between Department of Telecommunications (DoT) and telecom service providers i.e. corporate debtor;
  • whether the spectrum on the basis of right to use is an asset of licensee/corporate debtor;
  • whether the spectrum can be subjected to proceedings under the Insolvency and Bankruptcy Code, 20163 (I&B Code); and
  • whether dues towards the spectrum under the licence can be said to be operational dues.

To sum up the findings, NCLAT came to the following conclusions:

  • relationship between DoT and corporate debtor is contractual;
  • spectrum is an intangible licence of the corporate debtor;
  • spectrum, being an intangible asset of the licensee i.e. corporate debtor, can be subjected to insolvency/liquidation proceeding; and
  • dues of DoT under licence are in the nature of operational debt.

NCLAT venturing beyond the scope of reference and mandate of the I&B Code

After having provided the responses to the questions framed by the  Supreme Court, the NCLAT went ahead and rendered observations on the validity of the admission order passed under Section 10 of the I&B Code4. It was observed that since the resolution plan would have the effect of wiping out the dues payable to DoT/Central Government (which was nothing but an operational creditor), the initiation of corporate insolvency resolution process (CIRP) at behest of the corporate debtor under Section 10 of the I&B Code was fraudulent. Such an application was made by the erstwhile management with the malicious intent of withholding the huge arrears payable to the Government. In particular, the NCLAT went ahead to cast a mandate on the adjudicating authorities to examine the bona fides of the applications under Section 10 of the I&B Code at the resolution plan approval stage. In this regard, the observations of the NCLAT in para 87 are of particular importance which reads as:

  1. The adjudicating authority in the given circumstances should have examined the bona fide of the Aircel entities in initiating CIRP by filing applications under Section 10 of the I&B Code which, on the face of it, aimed at monetising most of the assets for meeting obligations of the resolution applicant towards the banks which too would depend on when and how the spectrum would be sold, more so as the Aircel entities had stopped operations before initiating insolvency proceedings and the spectrum continued to go waste and unutilised.5

In our view, the NCLAT ought to have refrained from providing observations which tantamount to reopening the question of validity of initiation of the resolution process, when the entire resolution process had run its course and the resolution plan was being tested on the limited touchstone of Section 30 of the I&B Code6 read with the Regulations framed thereunder.

It seems that while providing its response to the specific queries posed by the Supreme Court, NCLAT lost sight of the contours enshrined in UnifiedTelecom7as well as the legislative intent enshrined under Sections 10, 318, 619. The NCLAT also did not take into consideration the law laid by  the Supreme Court with regard to power of NCLT/NCLAT at time of considering resolution plan under Section 31 in Essar Steel India Ltd. v. Satish Kumar Gupta10, (Essar Steel); Ghanashyam Mishra and Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.,11(Ghanashyam Mishra) and Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC (India) Ltd. 12(Jaypee).

NCLAT’s observations — Impact on the scheme of the I&B Code

NCLAT categorically observed that dues payable to DoT was operational debt and DoT itself had filed its claim as operational creditor which has been factored in the resolution plan by the successful resolution applicant. However, the basis of the imputing malafides to the initiation of CIRP under Section 10 has been traced to the fact that the approved resolution plan envisages wiping out/extinguishment of operational debts.

The Supreme Court in Essar Steel13 had unequivocally pointed out that a successful resolution applicant has to necessarily commence on a fresh slate after the conclusion of CIRP meaning thereby, all/most of the resolution plans would envisage extinguishment/wiping out of claims, in some or the other form. If such is not the case, the successful resolution applicant would be faced with undecided claims i.e. the proverbial “hydra heads” would start popping up, after the implementation of the resolution plan.

If one were to proceed in terms of the dicta of the NCLAT, we are pained to say that none of the CIRPs would ever see light of the day at the end of tunnel. As a result thereof, the very aim and underlying objection of the I&B Code i.e. to (a) promote entrepreneurship and availability of credit; (b) ensure the balanced interests of all stakeholders; and (c) promote time-bound resolution of insolvency in case of corporate persons, partnership firms and individuals, would fall crumbling into the dust.

Approach of the NCLAT vis-à-vis the legislative intent

In fact, at the time of amending Section 31 of the I&B Code through the Insolvency and Bankruptcy Code (Amendment) Bill, 201914, the Finance Minister in Rajya Sabha on 29-7-2019 (which is much prior to Aircel order dated 13-4-202115 passed by NCLAT) stated as under16:

“79. … There is also this question about indemnity for successful resolution applicant. The amendment now is clearly making it binding on the Government. It is one of the ways in which we are providing that. The Government will not raise any further claim. The Government will not make any further claim after resolution plan is approved. So that is going to be a major, major sense of assurance for the people who are using the resolution plan….I would want all the hon. members to recognise this message and communicate further that this Code, therefore, gives that comfort to all new bidders. So now, they need not be scared that the taxman will come after them for the faults of the earlier promoters. No.…”

(emphasis supplied)

The above statement was relied upon by the Supreme Court in Ghanashyam Mishra17 to declare that pre-CIRP claims are governed by the approved resolution plan. Further, all such claims/dues owed to the State/Central Government or any local authority including tax authorities, which were not part of the resolution plan shall stand extinguished.

In view of the above, the treatment of government dues as operational debt is the clear legislative intent and if all other operational debt is being extinguished, government dues cannot be accorded any favourable treatment. Such a resolution plan would ex facie be in teeth of Section 30(2) of the I&B Code. Therefore, no malice to the initiation of a CIRP could be imputed on such a ground and such an extraneous criterion (which finds no mention in either Sections 718, 919 or Section 10 of the I&B Code) for determining fraud or malice would throw the otherwise settled jurisprudence, into a realm of uncertainty.

NCLAT’s observations are in teeth of doctrine of finality of a lis

We believe that the NCLAT ought to have considered the doctrine of finality in relation to a lis based on interest reipublicae ut sit finis litium and nemo debet bis vexari, si constet curiae quod sit pro una et eadem causa, before rendering its findings.

One cannot be oblivious of the provisions of Sections 10 and 61, respectively. It is only at the stage of application under Section 10 that NCLT has the power to examine whether the initiation of insolvency proceedings was fraudulent or malicious. NCLAT at the time of considering an appeal under Section 61 impugning the order admitting Section 10 application, can conduct a similar enquiry. NCLAT ought not to have lost sight of the fact that if no appeal was preferred against an order admitting Section 10 application or appeal was preferred and dismissed, neither NCLT nor NCLAT, in subsequent proceedings, have any power to re-examine any issue surrounding the initiation of the insolvency proceedings much less, the issues of malicious or fraudulent intent (and that too on its own accord).

It is pertinent to mention that NCLAT was considering the appeal against approved resolution in terms of Sections 30(2) and 31 and was not dealing with an appeal against the order admitting insolvency proceedings under Section 10. Hence, NCLAT while wearing a different jurisdictional  ought not to have ventured into the issue of fraudulent or malicious commencement of insolvency proceedings.

In view of the aforesaid, NCLAT not only travelled beyond the directions of the Supreme Court in Unified Telecom20 but also the express provisions of the I&B Code as expounded by the Supreme Court in the abovementioned catena of judgments. In our view, NCLAT ought to have, as a matter of judicial propriety, limited its inquiry to the questions framed by the Supreme Court.


*Alumni (2009-2014) National Law University Odisha. Currently working as In-house Counsel at an Indian Conglomerate and may be reached at anuragnluo@gmail.com. The views expressed herein are personal and do not represent views of any organisation.

**(2010-15) National Law University Odisha. Currently working as Managing Associate at L&L Partners Law Offices. The views expressed herein are personal and do not represent views of any organisation.

12021 SCC OnLine NCLAT 355.

2Union of India v. Assn. of Unified Telecom Service Providers of India, (2020) 9 SCC 748.

3 Insolvency and Bankruptcy Code, 2016.

4 Section 10, I&B Code.

5Union of India v. Vijaykumar V. Iyer, 2021 SCC OnLine NCLAT 355.

6 Section 30, I&B Code.

7 Union of India v. Assn. of Unified Telecom Service Providers of India, (2020) 9 SCC 748.

8 Section 31, I&B Code.

9 Section 61, I&B Code.

10(2020) 8 SCC 531.

112021 SCC OnLine SC 313.

122021 SCC OnLine SC 253.

13(2020) 8 SCC 531.

14 Insolvency and Bankruptcy Code (Amendment) Bill, 2019.

15Union of India v. Vijaykumar V. Iyer, 2021 SCC OnLine NCLAT 355.

16Ghanashyam Mishra, 2021 SCC OnLine SC 313, para 72.

17Ghanashyam Mishra, 2021 SCC OnLine SC 313, para 72.

18 Section 7, I&B Code.

19 Section 9, I&B Code.

20 Union of India v. Assn. of Unified Telecom Service Providers of India, (2020) 9 SCC 748.

Case BriefsSupreme Court

Supreme Court: The Division Bench of M.R. Shah* and Sanjiv Khanna, JJ., directed to speed up the insolvency resolution process of Amtek Auto Ltd., one of the largest integrated automotive component manufacturers in India. Pointing at the long litigation delay, the Bench stated that any further delay would defeat the very object and purpose of providing specific time limit for completion of the insolvency resolution process, as mandated under Section 12 of the IBC.

Initiation of Insolvency Process

Pursuant to an application made under Section 7 of the Insolvency and Bankruptcy Code, 2016, the corporate insolvency resolution process was initiated against Amtek Auto Limited – Corporate Debtor. Accordingly, the resolution professional invited prospective resolution applicants to submit a Resolution Plan. The Resolution Plans submitted by Deccan Value Investor LP (DVI) and M/s Liberty House Group Private Limited (Liberty) were considered by the Committee of Creditors of Amtek (COC). However, DVI withdrew its Resolution Plan and therefore the revised plan of Liberty was considered.

DVI’s attempt to Renege

Subsequently, Liberty did not acted as per the approved plan and a prayer was made by the COC before the Adjudicating Authority to grant 90 days to the resolution professional to make another attempt for a fresh process. The Adjudicating Authority, though granted liberty to the COC and the resolution professional to approach the appropriate authority under the IBC for the determination of the wilful default by Liberty, it did not accede to the request for carrying out a fresh process by inviting the plans again but directed the reconstitution of the COC for re-consideration of the Resolution Plan submitted by DVI. The appeal of COC got rejected by NCLAT as well and the NCLAT virtually ordered the liquidation of the Corporate Debtor.

Noticeably, the liquidation proceeding was stayed by the Supreme Court’s interim order dated 06-09-2019. Similarly, the Court permitted the resolution professional to invite fresh offers within a period of 21 days. DVI also submitted the fresh resolution plan which was approved by the COC with 70% majority.  Later on, DVI tried to withdraw from resolution plan, which was disallowed by the Court.

Since the approved resolution plan submitted by the DVI was not acted upon, the COC filed Contempt Petition before the Supreme Court. Similarly, DVI also filed an application for rectification of the earlier order dated 18-06-2020 by which the Supreme Court had rejected  DVI’s prayer for withdrawal of the offer. The Supreme Court rejected both the application observing that DVI’s application for rectification was an attempt to renege from the resolution plan which it submitted and to resale from its obligations.

Grievances of the Parties

The appellant contended that was not acting as per the approved resolution plan.  Under the Resolution Plan, the one of the steps to be undertaken by the DVI was to deposit Rs.500 crores “Upfront Cash Amounts” but the same was not done.

The submission on behalf of the DVI was that the said amount was lying in a deposit account in India with their custodian Standard Chartered Bank and was ready for disbursement to lenders but unless and until the other steps were undertaken as per the Resolution Plan, the aforesaid amount of Rs.500 crores would not be transferred to Amtek Auto Limited.

Findings and Decision

Considering that that contentions of the respective parties was that the obligations be performed mutually and simultaneously, the Bench held that the Corporate Debtor had also to perform its obligations simultaneously so that the amount of Rs.500 crores be transferred to the financial creditors/lenders of the Corporate Debtor.

The Bench reminded the parties that the approved resolution plan had to be implemented at the earliest and that is the mandate under the IBC. As per Section 12 of the IBC, subject to sub-section (2), the corporate insolvency resolution process shall be completed within a period of 180 days from the date of admission of the application to initiate such process, which can be extended by a further period of 180 days.

Thus, the Bench stated that entire resolution process had to be completed within the period stipulated under Section 12 of the IBC and any deviation would defeat the object and purpose of providing such time limit. Therefore, the Bench directed the parties concerned to the approved resolution plan and/or connected with implementation of the approved resolution plan to complete the implementation of the plan within a period of four weeks, without fail.

[Committee of Creditors of Amtek Auto Ltd. v. Dinkar T. Venkatsubramanian, 2021 SCC OnLine SC 1151, decided on 01-12-2021]


Kamini Sharma, Editorial Assistant has put this report together


*Judgment by: Justice M. R. Shah

Know Thy Judge | Justice M. R. Shah

Case BriefsSupreme Court

Supreme Court: In a landmark case the Division Bench of Dhananjaya Y Chandrachud* and A S Bopanna, JJ., clarified the residuary powers of NCLT under Insolvency and Bankruptcy Code (IBC). The Bench stated,

“In terms of Section 238 and the law laid down by this Court, the existence of a clause for referring the dispute between parties to arbitration does not oust the jurisdiction of the NCLT to exercise its residuary powers under Section 60(5)(c) to adjudicate disputes relating to the insolvency of the Corporate Debtor.”

Factual Background

The appellant and the Corporate Debtor had entered into a Build Phase Agreement followed by a Facilities Agreement whereby the Corporate Debtor was obligated to provide premises with certain specifications and facilities to the appellant for conducting examinations for educational institutions. Clause 11(b) of the Facilities Agreement states that either party is entitled to terminate the agreement immediately by written notice to the other party provided that a material breach committed by the latter is not cured within thirty days of the receipt of the notice.

Invoking the termination clause, a termination notice was issued by the appellant owing to multiple lapses in fulfilling its contractual obligations; i.e. insufficiency of housekeeping staff and their malpractices in respect of entering attendance etc. by the Corporate Debtor when the malpractices were not rectified by the Corporate Debtor despite being highlighted from time to time. The said notice came into effect immediately.

Proceedings before the NCLT and NCLAT

The Corporate Debtor instituted a miscellaneous application before the NCLT under Section 60(5)(c) of the IBC for quashing of the termination notice. The NCLT passed an order granting an ad-interim stay opining that the contract was terminated without serving the requisite notice of thirty days. In appeal, the NCLAT upheld the interim order NCLT.

Question of Law

Based on the appeal, two issues had arisen for consideration:

(i) Whether the NCLT can exercise its residuary jurisdiction under Section 60(5)(c) of the IBC to adjudicate upon the contractual dispute between the parties; and

(ii) Whether in the exercise of such a residuary jurisdiction, it can impose an ad-interim stay on the termination of the Facilities Agreement.

Is NCLT empowered to intervene where the agreement expressly provides for Arbitration?

Although, Clause 12 (d) of the Facilities Agreement provides that the disputes between the parties shall be a subject matter of arbitration, Section 238 of IBC provides that the IBC overrides other laws, including any instrument having effect by virtue of law.

While considering whether a reference to arbitration made under Section 8 of the Arbitration and Conciliation Act 1996 in terms of the agreement between the parties would affect the jurisdiction of the NCLT, the Supreme Court in Indus Biotech (P) Ltd. v. Kotak India Venture (Offshore) Fund, (2021) 6 SCC 436, had held that “even if an application under Section 8 of the 1996 Act is filed, the adjudicating authority has a duty to advert to contentions put forth on the application filed under Section 7 of IB Code, examine the material placed before it by the financial creditor and record a satisfaction as to whether there is default or not. If the irresistible conclusion by the adjudicating authority is that there is default and the debt is payable, the bogey of arbitration to delay the process would not arise despite the position that the agreement between the parties indisputably contains an arbitration clause.”

Further, Section 60(5) (c) grants residuary jurisdiction to the NCLT to adjudicate any question of law or fact, arising out of or in relation to the insolvency resolution of the Corporate Debtor. Therefore, despite Clause 12 (d) providing that any dispute between the parties relating to the agreement could be the subject matter of arbitration, the Facilities Agreement being an ‘instrument’ under Section 238 of the IBC can be overridden by the provisions of the IBC.

NCLT’s Residuary Powers under IBC    

In Gujarat Urja Vikas v. Amit Gupta, (2021) 7 SCC 209, it was held that the NCLT’s jurisdiction is not limited by Section 14 of IBC in terms of the grounds of judicial intervention envisaged under the IBC. It can exercise its residuary jurisdiction under Section 60(5)(c) to adjudicate on questions of law and fact that relate to or arise during an insolvency resolution process.

Therefore, rejecting the argument of the appellant that the NCLT and NCLAT had re-written the agreement changing its nature from a determinable contract to a non-terminable contract overlooking the mandate of Section 14 of the Specific Relief Act 1963, the Bench opined that IBC is a complete code and Section 238 overrides all other laws. Therefore, the NCLT in its residuary jurisdiction is empowered to stay the termination of the agreement if it satisfies the criteria laid down in the Gujarat Urja’s case. Hence, the Bench stated,

“In any event, the intervention by the NCLT and NCLAT cannot be characterized as the re-writing of the contract between the parties. The NCLT and NCLAT are vested with the responsibility of preserving the Corporate Debtor’s survival and can intervene if an action by a third party can cut the legs out from under the CIRP.”

Factual Analysis

Noticeably, the Corporate Insolvency Resolution Process (CIRP) was initiated against the Corporate Debtor and electricity supply was disconnected for the Corporate Debtor by the Electricity Board. The Corporate Debtor in its email alleged that the appellant had failed to make the requisite payments and the electricity was disconnected as a result.

Before the initiation of the CIRP, the appellant had on multiple instances communicated to the Corporate Debtor that there were deficiencies in its services. The Corporate Debtor was put on notice that the penalty and termination clauses of the Facilities Agreement may be invoked. The termination notice dated 10 June 2019 also clearly laid down the deficiencies in the services of the Corporate Debtor.

Therefore, the Bench opined that there was nothing to indicate that the termination of the Facilities Agreement was motivated by the insolvency of the Corporate Debtor. The Bench observed,

The trajectory of events makes it clear that the alleged breaches noted in the termination notice dated 10 June 2019 were not a smokescreen to terminate the agreement because of the insolvency of the Corporate Debtor.”

Thus, the Bench held that the NCLT did not have any residuary jurisdiction to entertain the instant contractual dispute which had arisen dehors the insolvency of the Corporate Debtor and in the absence of jurisdiction over the dispute; the NCLT could not have imposed an ad-interim stay on the termination notice.

A Cautionary Note to NCLT and NCLAT

Additionally, the Bench issued a note of caution to the NCLT and NCLAT regarding interference with a party’s contractual right to terminate a contract; i.e. even if the contractual dispute arises in relation to the insolvency, a party can be restrained from terminating the contract only if it is central to the success of the CIRP. Crucially, the termination of the contract should result in the corporate death of the Corporate Debtor. The Bench added,

“The narrow exception crafted by this Court in Gujarat Urja (supra) must be borne in mind by the NCLT and NCLAT even while examining prayers for interim relief.”

Verdict

The Bench held that the NCLT had merely relied upon the procedural infirmity on part of the appellant in the issuance of the termination notice, i.e., it did not give thirty days’ notice period to the Corporate Debtor to cure the deficiency in service but there was no factual analysis on how the termination of the Facilities Agreement would put the survival of the Corporate Debtor in jeopardy to invoke residuary powers of NCLT. Accordingly, the judgment of NCLT and NCLAT was set aside with a direction to dismiss proceedings initiated against the appellant. [TATA Consultancy Services Ltd. v. SK Wheels Pvt. Ltd., 2021 SCC OnLine SC 1113, decided on 23-11-2021]


Kamini Sharma, Editorial Assistant has put this report together


Appearance by:

For the Appellant: Advocate Fereshte D Sethna

For the Respondent: Advocate Sowmya Saikumar


*Judgment by: Justice Dhananjaya Y Chandrachud

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Coram of Ashok Bhushan, J (Chairperson), Jarat Kumar Jain, J (Judicial) and Dr Ashok Kumar Mishra (Technical) while dismissing an appeal found no infirmity in the order of the Adjudicating Authority.

In the pertinent matter, the application filed by the Appellant under Section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code) was rejected by the impugned order. A notice under Section 8 of the Code was issued by the Applicant claiming dues to the extent of the total amount. While the reply referred to a Resolution deciding that till the situation improves no Director would be paid any salary and interest on deposits. The reply further stated that due to actions of the Appellant he was removed from the directorship. Several other allegations regarding withdrawal of money from accounts and misappropriation were made in the reply.

While referring to Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd., (2018) 1 SCC 353, the Tribunal observed that the dispute was in existence prior to receipt of the demand notice. The Adjudicating Authority had rejected the prayer of the Applicant to initiate CIRP proceedings under IBC against the Corporate Debtor.

The Coram while dismissing the appeal after considering the relevant arguments stated, “We are satisfied that there was existence of dispute prior to issuance of Demand Notice. The Adjudicating Authority after considering all the relevant materials has rightly taken the view that Application under Section 9 cannot be accepted.”

[Hukum Singh v. Adaab Hotels Ltd., 2021 SCC OnLine NCLAT 382, decided on 11-11-2021]


Agatha Shukla, Editorial Assistant has reported this brief.


Counsel for the Parties:

For Appellant: Mr. Indranil Ghosh and Mr. Palzer Moktan, Adv

Op EdsOP. ED.

Introduction

Even though with the introduction of the Insolvency and Bankruptcy Code, 20161 (hereinafter referred to as “the Code”), a composite way to put through in charge those who default in payments of debt has been exclusively followed, multiple amendments have been already introduced with an aim to eliminate loopholes that do not follow the objective of the Code. One such amendment is the inclusion of Section 29-A2 with retrospective effect from 23-11-2017 by the Insolvency and Bankruptcy Code (Amendment) Act, 20183. The reason for including this was to list down persons who are ineligible to present resolution plans because they are initial contributors to the default of the corporate debtors. The undesirability of such persons through this amendment ensures protection to the creditors of the company from the misconduct and fraudulent motives of such individuals who try to take undue advantage of the provisions of the Code. The restrictive nature of Section 29-A has evolved since its inception and has recently been extensively discussed in Martin S.K. Golla v. Wig Associates (P) Ltd.4 dated 4-6-2021. This judgment arose out of the original order dated 4-6-2018 by the National Company Law Tribunal (NCLT), Mumbai Bench in Wig Associates (P) Ltd., In re5 and held that ineligibility under Section 29-A IBC would get attached at the time when the resolution plan is submitted by the resolution applicant.

The present article aims to (1) analyse the evolution of the famous Wig Associates judgment6 since 2017; (2) identify the issues from the findings of the NCLT and National Company Law Appellate Tribunal (NCLAT), Delhi; (3) discuss the retrospective nature of Section 29-A through various judgments; and (4) discuss the concept of connected persons and related party in the view of the present judgment.

Factual background

The present judgment arose from the order dated 4-6-2018 wherein, Wig Associates (P) Ltd.7 (corporate debtor) filed an application under Section 108 of the Code to initiate corporate insolvency resolution proceedings (CIRP) against itself on 24-8-2017. His application was admitted and Mr S.K. Golla was appointed as the interim resolution professional (RP) vide order dated 24-8-20179. Bank of Baroda was the sole financial creditor and had informed the RP that it had approved a “one time settlement” offer issued by Mr Mahendra Wig. Meanwhile, Section 29-A IBC came into existence with retrospective effect from 23-11-201710 and prescribed that “connected persons” shall not be eligible to submit a resolution plan. The fact being unprecedented, Mr Mahendra Wig fell within the meaning of such “connected persons” and despite that the said resolution plan was accepted by the Committee of Creditors by 100% votes on 20-4-2018. Vide order dated 4-6-201811, the NCLT, Mumbai recorded satisfaction in accepting the resolution plan and held that once CIRP has commenced, the provisions of the Code as existing on the date of admission of petition would continue to apply even though an amendment such as Section 29-A has been introduced. Pursuant to such order, an appeal was preferred by the Insolvency and Bankruptcy Board of India (IBBI) against order dated 4-6-201812 which resulted in the selection of an ineligible resolution applicant, and further resulted in approval of an ineligible resolution plan. The NCLAT, Delhi passed an order on 1-8-2018 that IBBI does not have locus standi to file such an appeal and requested the RP to file an appeal and hence, this present appeal is filed by the resolution professional to seek clarity on the substantive question of law involved in the controversy.

The NCLAT, Delhi made the following observations:

  • Once CIRP is commenced, provisions existing on the day of admission of the petition would continue to apply even on the face of the amendment, cannot be maintained.” The ineligibility under Section 29-A IBC would get attached at the time when the resolution plan is submitted by the resolution applicant.
  • “Mr Wig could not have been acted upon and the appellant erred in presenting the same before the Committee of Creditors.” The resolution applicant is a connected party to the corporate debtor, therefore, the ineligibility under Section 29-A IBC attaches to the resolution applicant.

Issues considered by the NCLAT, Delhi 

(a) Whether Section 29-A will be applicable with retrospective effect in Section 1013 proceedings which were initiated prior to Section 29-A coming into force?

Since, Mr Mahendra Wig was related to the director promoters of the corporate debtor company, the NCLT, Mumbai also discussed the concept of “connected persons” which made him ineligible under Section 29-A of the Code.

Section 29-A explains the connected persons as:

Explanation.— For the purposes of this clause, the expression “connected person” means— (i) any person who is the promoter or in the management or control of the resolution applicant; or

(ii) any person who shall be the promoter or in management or control of the business of the corporate debtor during the implementation of the resolution plan; or

(iii) the holding company, subsidiary company, associate company or related party of a person referred to in clauses (i) and (ii): 

The NCLAT, Delhi in the recent case of Navneet Jain v. Manoj Sehgal, RP of Sarbat Cotfab (P) Ltd.14 also observed that,

“Respondents were connected parties as per Section 29-A IBC at the time the resolution plan was submitted by Respondent 2. This leads to the obvious and inevitable conclusion that Tejinder Singh Kocher was not eligible to submit the resolution plan and hence the resolution plan so submitted and approved by the adjudicating authority was bad in law.”

Mr Wig clearly fell within the meaning of “connected persons” and despite that the adjudicating authority went on to examine the resolution plan which was only a one-time settlement and the resolution plan was accepted. The impugned order dated 4-6-2021 eventually ruled out that the approved resolution plan shall be quashed and set aside.

With respect to the main question of law involved here, the Supreme Court of India, in Arcelormittal India (P) Ltd. v. Satish Kumar Gupta15 and Swiss Ribbons (P) Ltd. v. Union of India16 ruled that the date of commencement of the insolvency proceedings is only to classify a person as a non-performing asset (NPA). Ineligibility criteria attaches when the resolution plan is submitted by the resolution applicant. With this, the retrospective effect of Section 29-A was upheld by the Supreme Court.

It was observed by the NCLAT in the present case that the financial creditor i.e. Bank of Baroda asked the appellant to explore the possibility of treating the one time settlement as a resolution plan subsequent to the passing of the amendment which inserted Section 29-A on 18-1-2018. Extending more transparency to the retrospective nature of Section 2917, heavy reliance was placed on the Insolvency Law Committee Report of March 2018. That report clearly stated:

“In relation to applicability of Section 29-A(c), the Committee also discussed that it must be clarified that the disqualification pursuant to Section 29-A(c) shall be applicable if such NPA accounts are held by the resolution applicant or its connected persons at the time of submission of the resolution plan to the RP.”

Thus, in the light of the above judgments, the rulings of the NCLT, Mumbai were dismissed and the true nature of Section 29-A was accepted.

Has the ambiguity around the retrospective nature of Section 29-A resolved?

While the NCLT, Mumbai digressed not only from the amendment that inserted Section 25-A18, but also from the very object of the Code, it also clarified certain fundamental concepts through its order. Firstly, a condition precedent to approval of the resolution plan by the adjudicating authority is that it has to record “satisfaction” by carefully examining the terms of the plan under Section 3119 of the Code. Secondly, the approval of a resolution plan is ought to be accepted after a proper due diligence and this duty primarily lies with the RP and the Committee of Creditors as well to carry out proper assessment. With these two findings the adjudicating authority failed to ignore the continuity of the proceedings in IBC and that such acceptance of an erroneous plan would defeat the purpose of the establishment of this Code and promote misconduct. Surprisingly, the provisions of Section 30(4)20 also inserted by the Amendment Act which clearly states that: Provided that the Committee of Creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017 (7 of 2017), where the resolution applicant is ineligible under Section 29-A and may require the resolution professional to invite a fresh resolution plan where no other resolution plan is available with it: were also ignored by the ruling. Time and again, the constitutional validity of the insertion of section has been challenged and it has been contended that it promotes a blanket ban on all the promoters and other related parties who may actually have a resolution plan worthy of approval and resulting in maximisation of value of assets. But the Supreme Court has stood by the purpose of such an amendment through its various rulings and has effectively held that whoever contributes to the defaults of the corporate debtor are capable misusing the Code to participate in the resolution process, and gain or regain control of the corporate debtor. In the present ruling as well, the NCLAT stood up to two of the most prominent rulings to observe the rectifying nature of the said amendment. Hence, it can be concluded that even though the famous Wig Associates judgment21 might have created a passage of ambiguity for the new amendment, but the present ruling and its fair interpretation by the Tribunal extends valuable clarity to the new provisions and prevents the misuse of the existing ones.


Principal Associate, Hammurabi and Solomon Partners.

[*] 4th year Student, B.B.A. L.L.B,   Bharati Vidyapeeth

1 <http://www.scconline.com/DocumentLink/86F742km>.

2 <http://www.scconline.com/DocumentLink/Z90T7GCq>.

3 <http://www.scconline.com/DocumentLink/EZoXB3Oy>.

4 2021 SCC OnLine NCLAT 300

5 2018 SCC OnLine NCLT 19396.

6 2018 SCC OnLine NCLT 19396.

7 2018 SCC OnLine NCLT 19396.

8 <http://www.scconline.com/DocumentLink/Kp5IKPzm>.

9 2018 SCC OnLine NCLT 19396.

10 The Insolvency and Bankruptcy Code (Amendment) Act, 2018.

11 Wig Associates (P) Ltd., In re, 2018 SCC OnLine NCLT 19396.

12 Wig Associates (P) Ltd., In re, 2018 SCC OnLine NCLT 19396.

13 <http://www.scconline.com/DocumentLink/Kp5IKPzm>.

14 2019 SCC OnLine NCLAT 1260

15 (2019) 2 SCC 1.

16 (2019) 4 SCC 17.

17 <http://www.scconline.com/DocumentLink/PlJRsynl>.

18 <http://www.scconline.com/DocumentLink/1oA52TQl>.

19 <http://www.scconline.com/DocumentLink/gvPKCciX>.

20 <http://www.scconline.com/DocumentLink/zB7sr53j>.

21 2018 SCC OnLine NCLT 19396.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT) -The Coram of Justice Jarat Kumar Jain and Alok Srivastava, Technical Member while deciding an appeal denied to put a stay on the CIRP proceedings. The Tribunal was of the opinion that the alleged ‘pre-existing-dispute’ was raised at such a late stage even though it was a spurious dispute, only with an intention to avoid action under IBC. The Tribunal further made it clear that the order will not have any effect on the final outcome of the

In the instant matter the Corporate Debtor (Appellant) alleged that the Appellant had repeatedly sought reconciliation of the invoices that were presented by the Operational Creditor (Respondent No. 1) and in the absence of non-production of work completion reports relating to the invoices under question, the requisite payments could not be made. His argument was that it was a ‘dispute’ as defined in Insolvency and Bankruptcy Code, 2016  and in accordance with the Supreme Court’s judgment in Mobilox Innovations vs. Kirusa Software Civil Appeal, (2018) 1 SCC 353 the application for insolvency under Section 9 of IBC cannot be admitted. While the counsel for the Appellant submitted that the it was only after the two letters of the Operational demanding pending payments and threat of legal action before the NCLT that the Corporate Debtor started sending communications for reconciliation and submission of supporting documents. And cited the same case, claiming that a spurious dispute cannot come in the way of admission of the operational creditor’s application u/s 9 of IBC.

The Tribunal considering the relevant arguments and the same case that both the parties referred to in favour of their arguments stated, “We are, therefore, at this stage persuaded by the argument of the Ld. Counsel of Respondent No. 1 that this alleged dispute has been raised at this late stage only after the Operational Creditor started asking for his pending payments to show that a pre-existing dispute was present even though it is a spurious dispute, to avoid action under IBC. Thus we find that a prima facie case doesn’t exist in favour of the Appellant”.

[Amit Wadhwani v. Global Advertisers, 2021 SCC OnLine NCLAT 325, decided on 28-09-2021]


Agatha Shukla, Editorial Assistant has put this report together 


Counsel for the Parties:

For Appellant:-

Mr. Ramji Srinivasan, Sr. Advocate, Mr. Dharam Jumani, Mr. Kunal Mehta, Mr. Rajshree Chaudhary, Mr. Suraj Iyer, Ms. Priyashree Sharma, Ms. Gauri Joshi, Mr. Kush Chaturvedi, Ms. Rushall Agarwal, Advocates

For Respondent:-

Mr. Krishnendu Datta, Sr. Advocate with Mr. Girish Kedia, Ms. Shivangi Kedia, Mr. Mohit Chaudhary, Ms. Garima Sharma, Mr. Amir Ariswala, Advocates for R1 Mr. Ami Jain, R2 for IRP

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal-The Coram of Justice M. Venugopal, Acting Chairperson and Kanthi Narahari, Technical Member while concurring with the adjudicating authority’s order and dismissing the appeal, held,

“in the light of the detailed upshot, and considering the facts and circumstances of the instant case in a conspectus fashion and keeping in mind the ingredients of the ‘Articles of Association’ to the effect that the nominee Directors have a vital influence in regard to the working of the ‘Corporate Debtor’, this Tribunal unhesitatingly comes to a consequent conclusion that the Appellant is a ‘related party’ and the view arrived at by the ‘Resolution Professional’ to include the Appellant/TSTPCL as member of the ‘Committee of Creditors’ is clearly unsustainable in the eye of law”.

In the pertinent matter impugned order of the NCLT, Hyderabad Bench, Hyderabad was challenged where it refuted the submission of the Resolution Professional that they are only the nominated members with no say in the functioning of the company and the Corporate Debtor. The appellants contended that the adjudicating authority had failed to appreciate the term ‘related party’ as construed under Section 24(5) of the Insolvency and Bankruptcy Code, 2016 in consideration of the Memorandum of Understanding, Articles of Association, Loan Agreement, Shareholding Agreement and Share Transfer Agreement.

The adjudicating authority was of the opinion that the Resolution Professional squarely fits into the definition of ‘related party’ under Section 5(24) (a), (h), (j), (l) and (m) of the Code. It even stated that, “ the role and responsibility of the Directors is to protect the interests of the Corporate Debtor and not to merely sit in the Board meetings of the corporation”. 

The Tribunal while concurring with the adjudicating authority, opined,

“the expression ‘control’ in Section 29A(c) of the ‘I&B’ Code symbolizes only the positive control i.e. that the mere power to block special resolutions of a Company cannot amount to control. In reality, the word ‘control’ juxtaposed with the term ‘management’ means ‘De facto control of actual management or policy decisions that may be or are in reality taken”.

It further stated that,

“To put it precisely, the part played by the two nominee Directors clearly point out that the first Respondent / Company acts on the advice, direction and instructions of the Appellant in its normal business affairs relating to the first Respondent. As such, this Tribunal is of the earnest opinion that the Appellant ‘squarely comes within the ambit of related party as per clause (f) of Sub Section 24 of section 5 of the Code”.

The Tribunal, therefore, considering the circumstantial matrix, summed up by stating,

“as perceived from the ‘Articles of Association’ and the requisite majority needed for taking important business decisions, the conduct of the business of the First Respondent, the establishment of First Respondent Company, all considered in an integral and cumulative manner will exhibit the noteworthy influence of the Appellant in issues concerning the First Respondent. In this manner also, the First Respondent is treating the Appellant as ‘Related Party’”.

[Telangana State Trade Promotion Corporation v. A.P. Gema & Jewellery Park Private Limited, Company Appeal (AT)(CH) (Ins.) No.54 of 2021, decided on 21-09-2021]


Agatha Shukla, Editorial Assistant has reported this brief.


Counsel for the Parties:

For the Appellant:

Mr. Ravi, Senior Counsel For R.S. Associates, M.

Naga Deepak, B. Lokeshwar Reddy, Rohan Aloor

and Himangini Sanghi, Advocates.

For the Respondents:

Mr. Y. Suryanarayana, Respondent No. 1

Mr. Satish Parasaran, Senior Advocate for M/s.

Ravindra Bose & R. Saravanan, Respondent No.2

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT)- The Coram of Justice Jarat Kumar Jain (Judicial Member), Ashok Kumar Mishra (Technical Member), and Alok Srivastava (Technical Member) while dismissing an appeal summarily without notice to the Respondent was of the opinion, that there was no need to interfere with the impugned order since the adjudicating authority had rightly held that the petition was not maintainable.

In the pertinent matter, it was alleged that the adjudication authority had erroneously dismissed the Petition as not maintainable. Appeal was filed by the Shareholder of the Financial Creditor Company, and it was submitted that the petitioner can initiate action on behalf of the Company if the same is in the interest of the Company and the Board is not pursuing the same, as per the doctrine of derivative action. The adjudicating authority was of the opinion that such person does not come within the definition of aggrieved person under Section 61 of the IBC. Therefore, the Appeal was not maintainable. The adjudicating authority held that no Board Resolution was filed in regard to advance loan to Corporate Debtor Company as required under Section 186 of the Companies Act, 2013.

The Tribunal held that

“we have considered the submissions, undisputedly there is no board resolution authorising the appellant to file the petition under Section 7 of the IBC and filed this Appeal as there is deadlock in the Financial Creditors Company”.

The Court further held that,

“The facts of the cited cases are quite different and in theses citations it is held that a shareholder has no locus standi to maintain the suit, affirmed one of the exceptions to the aforesaid rule that where a shareholder can show that the wrong doers are in control of the defendant company and hence the company would be unable to maintain the action. So far as the Petition under Section 7 of the IBC is concerned, there is a specific notification by the Central Government under sub-section (1) of Section 7 of the IBC that on behalf of the Financial Creditor a guardian, an executor or administrator of an estate of a financial creditor, a trustee and a person duly authorized by the board of directors of a company may file Application for initiation of CIRP against the Corporate Debtor. In such situation, doctrine of derivative action cannot be applied in Petition under Section 7 of the IBC.”

[M Sai Eswara Swamy v. Siti Vision Digital Media Pvt. Ltd., Company Appeal (AT) (Ins) No. 706 of 2021, decided on 09-09-2021]


Counsel for the Parties:

For Appellant:

Mr. P Nagesh, Sr. Adv. with Mr. Harshal Kumar, Mr. Shivam Wadhwa

For Respondent:

Mr. Arvind Nayar, Sr. Adv. with Mr. Shivam Singh, Mr. Abhinav Singh, Advocates


Agatha Shukla, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Coram of Justice A.I.S. Cheema, Officiating Chairperson and Alok Srivastava, Technical Member while dismissing an appeal affirmed adjudicating authority’s impugned order on not finding any substance in the appeal.

In the pertinent matter the impugned order of NCLT, Mumbai Bench, Mumbai was challenged where the adjudicating authority disagreed with the Committee of Creditors which had approved ‘success fees’ to the Resolution Professional of an amount of  ₹ 3 Crore. The adjudicating authority had opined, “We believe that if the RP was so certain, he should have claimed/ asked for the success fees in the beginning itself and now when the plan is approved. It was only in the distribution matrix that he/CoC had approved the success fees to the RP. With this observation RP and the CoC to proportionately distribute the said amount of Rs 3 Cr. among the employees/ underpaid operational creditors/unsecured creditors of the corporate debtor and if left, it is to be proportionately distributed among the underpaid operational creditors”. The appellants submitted that the approval of the success fees was a commercial decision of the CoC and the adjudicating authority could not have interfered with the same. To which the adjudicating authority replied in its order that, “…Fixation of fee is not a business decision depending upon the commercial wisdom of the Committee of Creditors”.

Interestingly, Amicus Curiae submitted that there were many instances of exorbitant charging of fees by the resolution professional and the adjudicating authority has interfered so as to rationalise the same. In the present matter, at the last stage when Resolution Plan was being approved the Resolution Professional without putting on record necessary particulars for the success fee got the same included. CoC may be approving the fees but as it has to be reasonable under the provisions of the Code and Regulations, it is justiciable.

The Tribunal while appreciating the support of the Amicus Curiae and concurring with the NCLT’s order opined,

“we hold that ‘success fees’ which is more in the nature of contingency and speculative is not part of the provisions of the IBC and the Regulations and the same is not chargeable. Apart from this, even if it is to be said that it is chargeable, we find that in the present matter, the manner in which, it was last minute pushed at the time of approval of the Resolution Plan and the quantum are both improper and incorrect”.

And further stated that,

“The argument that the Adjudicating Authority should have sent the matter back to the CoC if it was not approving the success fee deserves to be discarded as the Adjudicating Authority while not accepting the success fee merely asked proportionate distribution which would even otherwise have happened if ‘success fee’ was set aside as the money would become available improving percentage of other creditors’ dues”.

[Jayesh N. Sanghrajka v. Monitoring Agency nominated by the Committee of Creditors of Ariisto Developers Pvt. Ltd., Company Appeal (AT) (Insolvency) No. 392 of 2021, decided on 20-09-2021]


Agatha Shukla, Editorial Assistant has reported this brief.


Counsel for the Parties:

For Appellant:

Mr Dhruv Mehta, Senior Advocate with Mr Tishampati Sen, Ms Riddhi Sancheti, Mr Ashish Perwani, Mr Devesh Juvekar, Ms Jyoti Goyal and Mr Dikshat Mehra, Advocates.

For Respondents:

(Notice not issued)

Mr. Sumant Batra, Ld. Amicus Curiae

Case BriefsSupreme Court

Supreme Court of India: The Bench of M.R. Shah and Aniruddha Bose, JJ., observed that,

“Appellate Tribunal has jurisdiction or power to condone the delay not exceeding 15 days from the completion of 30 days, the statutory period of limitation.”

Aggrieved and dissatisfied with impugned order passed by the National Company Law Appellate Tribunal by which NCLAT refused to condone delay of 44 days in preferring the appeal against the order passed by the National Company Law Tribunal rejecting the claim of the appellant. Appellant has preferred the present appeal.

Factual Background

State Bank of India (SBI) had initiated the insolvency proceedings before the NCLT under Section 7 of the Insolvency and Bankruptcy Code, 2016 against Dunar Foods Limited (Corporate Debtor) on the ground that Corporate Debtor had taken credit limits by hypothecating the commodities kept in the warehouses of the appellant.

It was stated that there was a delay of 44 days in preferring the appeal before NCLAT as the said appeal was required to be filed within a maximum period of 45 days (30 days + 15 days). However, there was a further delay of 44 days beyond a total period of 45 days.

Therefore, considering Section 61(2) of IBC which provides for powers to the Appellate Tribunal to condone delay of only 15 days which it can condone over the period of 30 days, if there is a sufficient cause, by impugned order, the Appellate Tribunal dismissed the appeal on the ground that the tribunal had no jurisdiction to condone the delay beyond 15 days and thereby the appeal was barred by limitation.

Analysis, Law and Decision

Bench noted that the appellant had applied for the certified copy of the order passed by the adjudicating authority after a delay of 34 days. Hence the said copy of the order was applied beyond the prescribed period of limitation i.e. beyond 30 days.

As the Appellate Tribunal can condone the delay up to a period of 15 days only, the Appellate Tribunal refused to condone the delay which was beyond 15 days from completion of 30 days, i.e., in the present case delay of 44 days and consequently dismissed the appeal.

 Hence, the appellate tribunal did not commit any error.

Further, the Court stated that in a case there may arise a situation where the applicant may not be in a position to file the appeal within a statutory period of limitation and even within the extended maximum period of appeal which could be condoned owing to genuineness, viz., illness, accident, etc. However, Parliament has not carved any exception of such a situation.

“…courts have no jurisdiction and/or authority to carve out any exception. If the courts carve out an exception, it would amount to legislate which would in turn might be inserting the provision to the statute, which is not permissible.”

In the decision of Popat Bahiru Govardhane v.  Special Land Acquisition Officer, (2013) 10 SCC 765, this Court has observed and held that it is a settled legal position that the law of limitation may harshly affect a particular party but it has to be applied with all its rigour when the Statute so prescribes.

Further, in the decision of this Court in Oil & Natural Gas Corporation Limited v. Gujarat Energy Transmission Corporation Limited, (2017) 5 SCC 42, the question was with respect to delay beyond 120 days in preferring the appeal under Section 125 of the Electricity Act and the question arose whether the delay beyond 120 days in preferring the appeal is condonable or not. After considering various earlier decisions of this Court on the point and considering the language used in Section 125 [2] of the Electricity Act which provided that delay beyond 120 days is not condonable, this Court has observed and held that it is not condonable and it cannot be condoned, even taking recourse to Article 142 of the Constitution.

Hence, Supreme Court held that delay beyond 15 days in preferring the appeal is uncondonable, the same cannot be condoned even in exercise of powers under Article 142 of the Constitution.

Conclusion 

“…considering the fact that even the certified copy of the order passed by the adjudicating authority was applied beyond the period of 30 days and as observed hereinabove there was a delay of 44 days in preferring the appeal which was beyond the period of 15 days which maximum could have been condoned and in view of specific statutory provision contained in Section 61(2) of the IB Code, it cannot be said that the NCLAT has committed any error in dismissing the appeal on the ground of limitation by observing that it has no jurisdiction and/or power to condone the delay exceeding 15 days.”

In view of the above discussion, the appeal failed and was dismissed. [National Spot Exchange Ltd. v. Anil Kohli, 2021 SCC OnLine SC 716, decided on 14-09-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Coram of Justice Jarat Kumar Jain, Judicial Member and Dr Ashok Kumar Mishra, Technical Member while dismissing as appeal released the Corporate Debtor Company from the rigours of CIRP, and allowed the Board to function through its Board of Directors from immediate effect. The Appellate Tribunal also remitted back the matter to the Adjudicating Authority to decide the fees and costs of CIRP payable to IRP, to be borne by the Corporate Debtor.

In the instant matter, K. Srinivas Krishna, the Suspended Director of Corporate Debtor, filed an appeal against the order passed by the Adjudicating Authority before the Appellate Tribunal. Further, a civil appeal was filed before the Supreme Court challenging the Appellate Tribunal’s impugned order. The appeal was dismissed on the ground that the claim of the Operational Creditor for Rs, 50,32,028 was not tenable and other claim was paid. Further, the interim stay passed by the Tribunal was vacated and IRP was directed to take further action against the CIRP. Further, the objections raised by the Operational Creditor were rejected by the adjudicating authority on the grounds of material error, where the form FA (application for withdrawal of CIRP) was not signed by the Operational Creditor (applicant) on whose application CIRP was initiated. Therefore, the application was dismissed for not being maintainable.  Being aggrieved by the order, the Suspended Director of the Company filed an appeal where the impugned order was challenged.

The Tribunal was of the opinion that, to prevent abuse of process, setting aside the impugned order and the order of initiating CIRP against the Corporate Debtor was more conducive. Therefore, the Corporate Debtor Company was released from the rigours of the CIRP and was allowed to function through its Board of Directors from immediate effect.

Further, the Tribunal remitted back the matter to the Adjudicating Authority to decide the fees and costs of CIRP payable to IRP which shall be borne by the Corporate Debtor.[K. Srinivas Krishna v. Shyam Arora, Company Appeal (AT) (Insolvency) No. 221 of 2021, decided on 02-09-2021]


Agatha Shukla, Editorial Assistant has reported this brief.


Counsel for the Parties:

For Appellant :

Mr. P Nagesh, Sr. Advocate with Mr. Srinivas Kotni, Mr. Shantam Gorwara, Advocates and Mr. Srinivas Krishna, in person.

For Respondents :

Mr. Shyam Arora, Respondent No. 1 in person, Mr. Sharad Tyagi, Mr. K. Gayatri, Advocates for Respondent No. 1. 2

Mr. Sanjay Kapur, Mr. V M Kannan, Ms. Shubhra Kapur, and Mr. Arjun Bhatia, Advocates for Respondent No. 2.

Dr. Laxhmi Narashimha, Advocate for RP.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Coram of Justice Jarat Kumar Jain, Judicial Member and Ashok Kumar Mishra, Technical Member, dismissed an appeal on no finding any infirmity in the impugned order. However, requested the adjudicating authority to consider the application before approving any Resolution Plan.

In the instant matter an impugned order of the National Company Law Tribunal, Guwahati was challenged on the ground that the Resolution Plan was accepted by 91.84% of the members of the ‘Committee of Creditors’ (CoC) but the approval for the same is pending before the Adjudicating Authority.

The Adjudicating Authority was of the opinion,

“…we are of the considered view that the Suspended Management of the Corporate Debtor (CD) be given a chance to submit Resolution Plan as prayed for. And go by the set precedents the pleadings of the Suspended Management to give him a chance for submitting a Resolution Plan, after the final judgment, being as an MSME Unit is reasonable”.

The Adjudicating Authority had also raised an issue of how the ‘Financial Creditor’ claimed 43 times of the amount of loan disbursed 21 years back when the Financial Creditor was under RBI Regulations, and the issue that the guarantee was invoked by the original lenders – IBBI for an amount of Rs.5,42,94,868, which was 24 times of the claimed amount in 18 years.

While referring to the judgments cited by the Appellants, the Tribunal stated that the applicability of the same was under dark as the Adjudicating Authority had only permitted for giving an opportunity to MSME to submit a concrete, composite, feasible and a viable resolution plan, and no other one was allowed to submit any plan other than the Resolution plan already submitted by the Resolution Applicant.

The Tribunal further noted,

“…there is no harm in giving an opportunity to the MSME in accordance with the provisions of the Code for keeping the promotion of entrepreneurship alive. The Adjudicating Authority has only provided an opportunity to the MSME and has given the liberty to the CoC to negotiate with existing Resolution Applicant and MSME unit also and accept the one which is commercially viable and technically feasible”.

On not finding any infirmity in the order, the Appellate Tribunal dismissed the appeal[PLBB Products Pvt. Ltd. v. Piyush Periwal, Company Appeal (AT) (Insolvency) No. 160 of 2021, decided on 07-09-2021]


Agatha Shukla, Editorial Assistant has reported this brief.


For the Appellant :

Mr Abhijeet Sinha, Mr Lzafeer Ahmad BF and Mr Aditya Shukla, Advocates.

For the Respondents :

Mr Jishnu Saha, Sr. Advocate with Mr Abhijit Sarkar, Advocates for Respondent No. 1.

Mr Sidhartha Barua and Mr Praful Jindal, Advocates for Respondent No. 2.

Mr Anand Verma and Mr Abhishek Prasad, Advocates for Respondent No. 3.

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Coram of Justice Jarat Kumar Jain, Judicial Member and Ashok Kumar Mishra, Technical Member while disposing of an appeal challenging an impugned order of the National Company Law Tribunal, Kolkata Bench. Kolkata stated,

“There is no bar in merging unhealthy company with healthy company to come over the crisis. There was no need perhaps to pass this specific direction”.

In the instant case two appeals under Section 421 of the Companies Act, 2013 were clubbed together. The appeals had challenged the impugned order of the National Company Law Tribunal, Kolkata Bench, Kolkata wherein the Tribunal [in para

23 (xviii)] directed that “part III and part IV of the creditors of the applicant Company shall maintain status quo till further orders with respect to their respective contractual terms dues claims and rights and are estopped from taking any coercive steps including reporting in any form and /or changing the account status of the Applicant Company and its holding Company (SREI Infrastructure Finance Limited) from being a standard asset, which will prejudicially affect the implementation of the Scheme and render the said Scheme ineffective”. The appellant raised an issue of material irregularity in exercising the jurisdiction by the Tribunal under Section 230 of the Companies Act, 2013. Both the appeals arising out of the same impugned order were clubbed and heard together for disposal of the case.

The Coram, while disposing of the appeals, left many aspects of the impugned order untouched except the direction in para 23 (xviii) of the order. The Tribunal made certain observations regarding the aspects enunciated in the impugned order and accepted and rejected them with sound reasons.

Observations:

-The Tribunal to issue notice under Section 230(5) of the Act, requiring representation to all the authorities concerned, and which were likely to be affected by the compromises or arrangements

-To dispense with calling of meetings of creditors having at least 90% value agreed to the scheme

-The Tribunal was right in calling the meeting of creditors and appointing ‘Chairperson’ and ‘Scrutiniser’ etc.

-The direction, not to classify loan amount as NPA, till further orders and stopping from taking coercive steps including reporting in any form was not in order.

Therefore, keeping all the other aspects intact, Coram refuted the direction on the grounds that there is no harm in merging unhealthy company with healthy company to survive.[UCO Bank v. SREI, Company Appeal( AT) No. 232 of 2020, decided on 07-09-2021]


Agatha Shukla, Editorial Assistant has reported this brief.


For Appellant:

Mr. C.A. Sundaram, Sr. Advocate with Mr. P.C. Ghosh, Mr. Partha Sil and Mr. Tavish Bhushan Prasad Advocates.

For Respondents:

Mr. Joy Saha, Sr. Advocate with Mr. Abhijeet Sinha, Mr. Dipen Chatterjee, Ms. Rusha Mitra, Mr. Saptrshi Mandal, Ms. Shreyas Edupuganti, Advocates for Respondent No. 1.

Mr. Kumar Anurag Singh, Mr. Zain A. Khan and Mr. Saikat Sarkar, Advocates for Respondent No. 2.