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Judgment
JUSTICE M. VENUGOPAL, MEMBER (JUDICIAL)
The ‘Appellant/Petitioner’ has preferred the instant Company Appeal (AT)(Inst) No.1084/2023 as an ‘Aggrieved Person’ in respect of the impugned order dated 06.07.2023 in IA No.1020 of 2023 in CP(IB)No.1137 of 2017 passed by the Adjudicating Authority/NCLT, Mumbai Bench.
Earlier, the Adjudicating Authority/NCLT, Mumbai Bench, while passing the impugned order dated 06.07.2023 in IA No.1020/2023 in CP (IB) No.1137/2017 (filed under Section 60(5) and (7) of I&B Code, 2016) had observed the following:-
“Though the Ld. Counsel for the Applicant is present has not mentioned the Appearance in the Attendance Sheet. Ms Kriti Kalyani, Ld. Counsel for the Respondent is present. The present Interlocutory Application has been filed by the Applicant, Africa Power Company CC, seeking direction against the Respondent to pay the Applicant an aggregate amount of ZAR 1,17,81,893.174 (South African Rands One Crore Seventeen Lakhs Eighty One thousand Eight Hundred and Ninety Three and Seventeen Cents) or the equivalent amount in Indian National Rupees, alongwith the applicable interest therein for the dues pending from the Respondent in respect of the equivalent leased by the Applicant top the Respondent, after the admission of the Respondent in Corporate Insolvency Resolution Process (CIRP) and the equipment not returned by the Respondent to the Applicant. The Resolution Plan for the corporate Debtor was approved on 27.03.2019. Hence the present Interlocutory Applicant filed by the Applicant is not maintainable; hence rejected, as per the law laid down by the Hon’ble Supreme Court in the case of Ghanshyam Mishra & sons. Vs Edelweiss Asset Reconstruction Company Limited, wherein the Hon’ble Supreme Court observed that after the approval of the Resolution Plan, all the claims which are not part of the Resolution Plan, stands extinguished. Therefore, IA 1020 of 2023 is dismissed.” and resultantly dismissed the Application.
Appellant’s Submissions
The Learned counsel for the Appellant contends that the impugned order dated 06.07.2023 in IA 1020 of 2023 in CP(IB) 1137/2017 passed by the Adjudicating Authority/NCLT, Mumbai Bench (filed by the Appellant/Petitioner under Section 60(5) and Section 7 of the of I&B Code 2016) in dismissing the application as ‘not maintainable’ and the same being was rejected, is ‘per se’’ an illegal and invalid one in the eye of law because of the fact that the said order is a non-speaking one and the Tribunal while dismissing the application had not applied its judicial mind, which has resulted in serious miscarriage of justice.
According to the Appellant/Petitioner, the facts of the instant case are ‘unique’, and that the Adjudicating Authority/Tribunal should have borne in mind that the principles enunciated in the Judgement of the Hon’ble Supreme Court of India in Ghanashyam Mishra & sons (P) Ltd Vs. Edelweiss Asset Reconstruction Co Ltd, reported in (2021) 9 SCC 657, do not apply, in as much as the Appellant’s claim arose during the ‘Corporate Insolvency Resolution Process’ and after the Resolution Plan for 1st Respondent was approved by the Adjudicating Authority/Tribunal, Mumbai.
It is represented on behalf of the Appellant/Petitioner that it was impossible for the Appellant/Petitioner to have filed the ‘claim’ before the 2nd Respondent. As a matter of fact, even for the ‘claims’ that arose before the approval of the Resolution Plan, the Appellant could not have approached the 2nd Respondent for these claims as it was never informed of the 1st Respondent ‘CIRP’.
The learned counsel for the Appellant, points out that the ‘Reasons’ are the ‘soul of justice’ and the 3rd Pillar of ‘Natural Justice’. In short, it is project on the side of Appellant/Petitioner that ‘No decision of a Court Of Law’ or an ‘Administrative authority’ can be sustained without proper ‘Reasons’.
Advancing his argument, the Learned counsel for the Appellant proceeds to point out that ‘Right to reason’, is an ‘indispensable’ part of a sound ‘judicial system’, ‘reasons’ at least are sufficient to indicate an ‘application of mind’, to the matter before Court and to fortify his plea, relies upon the judgement of the Hon’ble Supreme Court in the matter of UPSRTC Vs Jagdish Prasad Gupta reported in (2009)12 SCC 609(vide paragraph 8 and 9).
According to the Appellant, the Appellant, is not enforcing a ‘Foreign Judgement’ dated 06.10.2020, passed by the Hon’ble High Court of South Africa Gauteng Local Division Johannesburg, through this Tribunal.
Added further, it is the stand of the Appellant that the object of annexing the South Africa Hon’ble High Court Judgement was to disclose in ‘Good Faith’, the action taken by the ‘Appellant’, before approaching the ‘Adjudicating Authority’/’Tribunal’, Mumbai, through an ‘Interlocutory Application’.
It is represented on behalf of the Appellant that the I&B Code, 2016 does not impose ‘any bar’ upon this ‘Tribunal’, to take cognizance of a ‘Foreign Judgement’. In this connection the Learned Counsel for the Appellant, refers to the order of the ‘Adjudicating Authority’/’Tribunal’, Chennai, dated 27.04.2018 in M/s Stanbic Bank Ghana Limited Vs M/s Rajkumar Impex Private Limited (vide Company Petition/670/IB/2017, paragraph No.m).
According to the Appellant, the aforesaid order dated 27.04.2018, in ‘M/s Stanbic Bank Ghana Limited’ case was assailed before this ‘Tribunal’, in an Appeal and this ‘Tribunal’ held that a ‘Record of Decree’, is a ‘Proof of Debt’ and the ‘Appeal’ was dismissed (vide decision in V. R. Hemantraj Vs Stanbic Bank Ghana Ltd & Anr reported in SCC OnLine NCLAT 451 (paragraph No.5) and this order was questioned before the ‘Hon’ble Supreme Court of India’ and the Hon’ble Supreme Court, had refused to interfere with the order of this ‘Tribunal’, as per decision in V. R. Hemantraj Vs Stanbic Bank Ghana Ltd & Anr reported in 2018 SCC OnLine SC 3712.
The Learned counsel for the Appellant points out that the ‘Hon’ble High Court of South Africa’s Judgement’ does not prevent the Appellant from initiating the present proceeding and that the Appellant, had approached the ‘Adjudicating Authority/Tribunal’, Mumbai, independently on the ‘original and underlying cause of action’. Indeed, the I&B Code, 2016, according to the ‘Appellant’, does not contemplate such an exclusion and a reference is made to the decision, in Intesa Sanpaolo S.P.A. V Videocon Industries Ltd, reported in 2013 SCC OnLine Bom 1910 (paragraph No.51).
Continuing further, it is the version of the Appellant that 2nd Respondent in paragraph 10 of the Affidavit in ‘Reply’ dated 23.10.2023 had stated that 1st Respondent, did not have an office at the address mentioned, in the ‘contract’ nor did the 1st Respondent, have ‘Business Operation’ at the ‘Masa Ngwedi C&D sites’, and this is a blatant lie.
According to the Appellant/Petitioner, the 1st Respondent had issued a Press Release dated 27.06.2016 to the Indian Stock Exchanges in respect of the turnkey contract awarded to the 1st Respondent for Masa Ngwedi sites in South Africa.
The Learned counsel for the Appellant points out that in terms of the information available on the portal of the Companies and ‘Intellectual Property Commission’ (which is like the Registrar of Companies in India), South Africa, the ‘Registered Address of the Local office of 1st Respondent’, corresponds to the address, mentioned in the Rental Agreement. In addition, the purchase order issued by the 1st Respondent on its letterhead, do contain the same address, as that of the rental agreement and the ‘CIPC Report’.
The Learned Counsel for the Appellant, points out that the 2nd Respondent in paragraph 9 of the ‘Affidavit’ in Reply dated 23.10.2023, had mentioned that she has not authorised Mr. Sudip Sharma viz. the person who executed the ‘Rental Agreement’, on behalf of the 1st Respondent to enter into the ‘Rental Agreement’, and she has not authorised any payments to be made, to the Appellant/Petitioner and this argument raises a serious question, on the management of the internal affairs of the 1st Respondent, during the ‘Corporate Insolvency Resolution Process’.
It is the version of the Appellant that on appointment, the management of the 1st Respondent was wholly under the aegis of the 2nd Respondent, meaning that the powers of the Board of Directors/1st Respondent were transferred to the 2nd Respondent. Also that Section 18 of the I&B Code, 2016 delineates the 2nd Respondent duties.
The Learned counsel for the Appellant/Petitioner adverts to Section 18 of the I&B Code, 2016, on the aspect of duty of ‘Resolution Professional’ and the same is as under:-
(a)to collect all information relating to the assets, finances and operations of the corporate debtor for determining the financial position of the corporate debtor, including information relating to-
(i)business operations for the previous two years;
(ii)financial and operational payments for the previous two years;
(iii)list of assets and liabilities as on the initiation date; and
(iv)such other matters as may be specified.
The Learned counsel for the Appellant submits that it is the duty of the ‘Interim Resolution Professional’ to collect all the ‘information’ relating to the ‘operation’ and decide the financial position of 1st Respondent. Further, the 2nd Respondent is to know all the existing ‘Business Transactions and Contracts’ that the 1st Respondent may have entered.
The stand of the Appellant, is that the Appellant/Petitioner and the 1st Respondent had entered into a ‘Rental Agreement’, in October, 2017 and January, 2018, which was later, orally, extended to May and August, 2018 and that the formation and execution of these ‘Agreements’ was during 1st Respondent’s CIRP.
According to the Appellant, the Respondent No.2, cannot feign ignorance and deny its existence on the premise, that she had not authorised the execution of these ‘Agreements’ and this is an internal affair of the 1st Respondent, which casts a ‘cloud of doubt’ on how the 2nd Respondent had managed the affairs of the 1st Respondent. In any event, according to the Appellant, it cannot be deprived of its ‘legitimate dues’ under the pretext of ‘Lack of Authority’. Furthermore, the 1st Respondent had effected ‘Partial Payments’, to the Appellant, based on the ‘Rental Agreements’ and these payments were not authorised, how they were made in the first place.
According to the Appellant, even if the 2nd Respondent assertion of not having knowledge of the existence of the rental agreement and Appellant’s dues under it, before the Appellant’s letter dated 07.05.2021, informing the 2nd Respondent of the Appellant’s dues, the 2nd Respondent should have sought the assistance of the Adjudicating Authority/Tribunal, Mumbai as per Section 19 of the I&B Code, 2016, to unearth all the ‘data’ relating to the 1st Respondent’s operations in South Africa.
While summing up, the Learned counsel for the Appellant prays for the allowing of the instant Appeal, by setting aside the ‘impugned order’, passed by the ‘Adjudicating Authority/Tribunal’, Mumbai Bench, in IA No.1020/2023 in CP (IB) 1137 of 2017, in the interest of justice.
1st Respondent’s Plea.
According to the 1st Respondent, the Adjudicating Authority/Appellate Tribunal lacks the necessary jurisdiction to execute a ‘Foreign Judgement, under the I&B Code, 2016. Also that the ‘Claimed Amount’, was never accounted into/or recognised as ‘CIRP Cost/Costs’ incurred during the period when the 1st Respondent, was managed by the ‘Erstwhile Resolution Professional’ coupled with the Monitoring Committee.
According to the 1st Respondent the ‘Adjudicating Authority/Tribunal’, through an order dated 04.04.2017, had directed the initiation of ‘CIRP’, against the 1st Respondent and Ms Vandana Garg was appointed as an ‘Interim Resolution Professional’, and later, confirmed as ‘Resolution Professional’ of the 1st Respondent.
It is represented on behalf of the 1st Respondent that the ‘Erstwhile Resolution Professional’, was Incharge of managing the affairs of the 1st Respondent, post the initiation of ‘CIRP’ and subsequently the ‘Adjudicating Authority/Tribunal’, on 27.03.2019 had ‘approved’ the ‘Resolution Plan’, given by a ‘Resolution Applicant’ and the ‘CIRP’ had concluded.
Since the ‘Plan Approval Order’, the 1st Respondent, was placed under the management and control of the ‘Erstwhile Resolution Professional’, who was performing and discharging the duties, as mentioned by the ‘Monitoring Committee’ comprising of the ‘Erstwhile Resolution Professional’, the ‘Representative’ of the ‘Successful Resolution Applicant’ and the ‘Committee of Creditors’.
According to the 1st Respondent, under the terms of the ‘Resolution Plan’, on 9.11.2021, the transfer of control to the management of 1st Respondent took place, and that on 09.11.2021 the Resolution Plan was implemented and the time period between the ‘Plan Approval Order’ and the ‘date of transfer of control’, to the new management, was referred to as the ‘MC Period’.
The Learned counsel for the 1st Respondent, points out that the new management of the 1st Respondent had paid, all costs, accrued towards ‘CIRP costs’, as defined under the I&B Code, 2016 and had informed to the 1st Respondent. Also that, the costs, as communicated, to have been incurred, during the ‘MC Period’, also had not included ‘any such costs’, allegedly owed to the Appellant.
According to the 1st Respondent, only when the Appellant/Petitioner served a copy of the ‘Adjudicating Authority/Tribunal’ application, on the 1st Respondent, somewhere in February, 2023, only then, the new management of the 1st Respondent was made aware of the purported ‘Rental Agreements’, entered into between the ‘Appellant and the 1st Respondent’, in the year 2017 and 2018.
Also that, according to the Appellant, when the records of the 1st Respondent, was handed over to the new management of the 1st Respondent at the time of ‘transfer of control’, the 1st Respondent was not having the ‘Purported Contract’, or any invoices raised thereunder. In this regard, on 28.9.2021, the Erstwhile Resolution Professional had requested the Appellant, by means of a letter, ‘to provide the copy of the Contract or Agreement between Africa Power Company CC and Jyoti Structures Ltd (Africa Branch), Invoices pertaining to the debt incurred or any other material document you deem fit so as to enable us to provide some insight to the incoming management about the impugned matter’.
The Learned Counsel for the 1st Respondent, points out that all the ‘costs’ incurred by the 1st Respondent, during the ‘CIRP’ and accounted for as ‘CIRP’ costs, by the ‘Erstwhile Resolution Professional’, as per Section 5(13) of the I&B Code, 2016, and informed to the new management of the 1st Respondent that it was paid already and further when the ‘Resolution Plan’, stood ‘implemented’ the ‘claim’ of the Appellant, in this Appeal, is a ‘baseless’ and a ‘frivolous one’, besides the same is not to be entertained against the new management of the 1st Respondent.
The Learned counsel of the 1st Respondent, points out that in regard to the ‘part of the claimed amount’ that was allegedly fell due, during the ‘MC Period’ and not recognised by the ‘Erstwhile Resolution Professional’, the same, cannot be saddled on the new management, especially after four years of the ‘Plan approval order’.
The Learned counsel for the Appellant refers to Section VII(K) and (L) of the Resolution Plan which reads as under:-
“K. The Company, the Proposed Investors, the Founder Promoters, existing guarantors and security providers shall not be liable to meet or discharge any claims raised by any creditors in respect of amounts which have arisen to them prior to the approval of the Final Resolution Plan by the CoC, if such claims neither constitute “insolvency resolution process costs’’ nor have been admitted by the Resolution Professional till the Final Resolution Plan is approved by the CoC(“Excluded Claims’’). The Creditors of such Excluded Claims shall have no claims against the Company, the Proposed Investors, the Founder Promoters, guarantors and/or security providers, employees, directors, in respect of such Excluded Claims.
L. Other than the claims and settlements pertaining to the Company that have been envisaged and set out under this Final Resolution Plan, no other payment or settlement, of any kind, shall be made to any other person or entity in respect of any other claims (whether not admitted or filed with the Resolution Professional) and all such claims against the Company along with any related legal proceedings shall be liable to be irrevocably and unconditionally abated, settled and extinguished. This condition relating to such extinguishment of claims and related legal proceedings being liable to be irrevocably and unconditionally abated, settled and extinguished, shall be deemed to form an integral part of the order by the NCLT approving the Final Resolution Plan and shall accordingly be binding on all the stakeholders including the Company, its employees, workmen, financial and operational creditors, guarantors, security providers, and other stakeholders. The treatment accorded to the persons receiving settlement under this Final Resolution Plan shall constitute an absolute discharge and settlement of the dues.” and submits that ‘no amounts’ other than those covered under the ‘Approved Resolution Plan’, such as the sum, allegedly payable pursuant to the purported contract, can be claimed, from the new management of the 1st Respondent and all such claims stood extinguished under the I&B Code, 2016, upon the Approval of the Resolution Plan by the Adjudicating Authority/Tribunal.
The Learned counsel for the 1st Respondent refers to the Judgement of the Hon’ble Supreme Court in Committee of Creditors of Essar Steel India Ltd. Vs. Satish Kumar Gupta and Others (vide Civil appeal No.8766-8767 of 2019) wherein at paragraph 67 it is observed as under:-
“67.A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to BE paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate, as has been pointed out by us hereinabove.”
The Learned counsel for the 1st Respondent cites the Judgement dated 13.04.2021 of the Hon’ble Supreme Court of India in the matter of Ghanashyam Mishra and sons Private Ltd Vs Edelweiss Asset Reconstruction Company Ltd, (Civil Appeal No.8129/2019) wherein at para 95
“95.(i) On the date of approval of resolution plan by the Adjudicating Authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan”.
According to the 1st Respondent, the scheme of the I&B Code, 2016 is that a ‘Public Announcement’ be issued by the ‘Resolution Professional’, on ‘Admission of a ‘Corporate Debtor’, under Corporate Insolvency Resolution Process and to invite all creditors, to submit their claim, and such ‘Public Announcement’ is published in newspapers with countrywide circulation. Besides this, the information and status of the ‘CIRP’ is regularly updated on the website of the 1st Respondent.
The Learned counsel for the 1st Respondent contends that the IA 1020/2023 in CP (IB) 1137 of 2017 filed by the Appellant/Petitioner (under Section 60(5) and Section 7 of the I&B Code, 2016), under Section 60(5) of the Code covers ‘Applications’ against a ‘Corporate Debtor’, undergoing ‘CIRP’ or ‘claims against such Corporate Debtors’, undergoing ‘CIRP’. More importantly, the ‘Adjudicating Authority/Tribunal’ is given powers, under Section 60(5) of the I&B Code, 2016, to determine ‘any question of law or fact’, arising out of, in/or in relation to the Insolvency Resolution or Liquidation proceedings of the Corporate Debtor or Corporate Person under this Code.
According to the 1st Respondent, the Appellant/Petitioner, is endeavouring to execute the ‘Foreign Judgement’ against the 1st Respondent through specific order of the ‘Adjudicating Authority/Tribunal’ and this Appellate Tribunal, when no such powers are showered either upon the ‘Adjudicating Authority/Tribunal’ or this ‘Appellate Tribunal’, as per Section 60(5) of the I&B Code, 2016.
The Learned counsel for the 1st Respondent seek in aid of the Judgement of this ‘Tribunal’ dated 30.11.2018 in the matter of Usha Holdings LLC & Anr Vs Francorp Advisors Pvt Ltd (vide Comp App (AT)(Ins) No.44 of 2018) wherein at paragraphs 6 and 7 it is observed as under:-
“6.In “Binani Industries Limited Vs. Bank of Baroda & Anr. – Company Appeal (AT) (Insolvency) No. 82 of 2018 etc.”, this Appellate Tribunal by its judgment dated 14th November, 2018 discussed the principles of ‘I&B Code’ and held as follows:
1. The objective of the ‘I&B Code’
As evident from the long title of the ‘I&B Code’, it is for reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons to promote entrepreneurship, availability of credit, balance the interests of all stakeholders. The recent Ordinance explicitly aims to promote resolution over liquidation.
2.The objective of the ‘I&B Code’ is Resolution. The Purpose of Resolution is for maximisation of value of assets of the ‘Corporate Debtor’ and thereby for all creditors. It is not maximisation of value for a ‘stakeholder’ or ‘a set of stakeholders’ such as Creditors and to promote entrepreneurship, availability of credit and balance the interests. The first order objective is “resolution”. The second order objective is “maximisation of value of assets of the ‘Corporate Debtor’’ and the third order objective is “promoting entrepreneurship, availability of credit and balancing the interests”. This order of objective is sacrosanct.
In the matter of “Arcelor Mittal India Pvt. Ltd. v. Satish Kumar Gupta and Ors.”, the Hon’ble Supreme Court observed that “the ‘Corporate Debtor’ consists of several employees and workmen whose daily bread is dependent on the outcome of the CIRP. If there is a resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible”.
3. ‘Financial Creditors’ as members of the ‘Committee of Creditors’ and their Role.
a. The Bankruptcy Law Reforms Committee (BLRC), which conceptualised the ‘I&B Code’, reasoned as under:
i.Under Para 5.3.1, sub-para 4, the BLRC provided rationale for ‘Financial Creditors’ as under:
“4.Creation of the creditors committee …
The Committee deliberated on who should be on the creditors committee, given the power of the creditors committee to ultimately keep the entity as a going concern or liquidate it. The Committee reasoned that members of the creditors committee have to be creditors both with the capability to assess viability, as well as to be willing to modify terms of existing liabilities in negotiations. Typically, ‘Operational Creditors’ are neither able to decide on matters regarding the insolvency of the entity, nor willing to take the risk of postponing payments for better future prospects for the entity. The Committee concluded that for the process to be rapid and efficient, the ‘I&B Code’ will provide that the creditors committee should be restricted to only the ‘Financial Creditors’.
ii.In Para 3.4.2 dealing with ‘Principles driving design’, the principle IV reads as under:
“IV. The ‘I&B Code’ will ensure a collective process.
9.The law must ensure that all key stakeholders will participate to collectively assess viability. The law must ensure that all creditors who have the capability and the willingness to restructure their liabilities must be part of the negotiation process. The liabilities of all creditors who are not part of the negotiation process must also be met in any negotiated solution.”
b. The ‘I&B Code’ aims at promoting availability of credit. Credit comes from the ‘Financial Creditors’ and the ‘Operational Creditors’. Either creditor is not enough for business. Both kinds of credits need to be on a level playing field. ‘Operational Creditors’ need to provide goods and services. If they are not treated well or discriminated, they will not provide goods and services on credit. The objective of promoting availability of credit will be defeated.
c. The ‘I&B Code’ is for reorganisation and insolvency resolution of corporate persons, ….for maximisation of value of assets of such persons to…. balance interests of all stakeholders. It is possible to balance interests of all stakeholders if the resolution maximises the value of assets of the ‘Corporate Debtor’. One cannot balance interest of all stakeholders, if resolution maximises the value for a or a set of stakeholder such as ‘Financial Creditors’. One or a set of stakeholders cannot benefit unduly stakeholder at the cost of another.
d. The ‘I&B Code’ prohibits any action to foreclose, recover or enforce any security interest during resolution period and thereby prevents a creditor from maximising his interests.
e. It follows from the above:
i.The liabilities of all creditors who are not part of ‘Committee of Creditors’ must also be met in the resolution.
ii.The ‘Financial Creditors can modify the terms of existing liabilities, while other creditors cannot take risk of postponing payment for better future prospectus. That is, ‘Financial Creditors’ can take haircut and can take their dues in future, while ‘Operational Creditors’ need to be paid immediately.
iii.A creditor cannot maximise his own interests in view of moratorium.’
iv.If one type of credit is given preferential treatment, the other type of credit will disappear from market. This will be against the objective of promoting availability of credit.
v.The ‘I&B Code’ aims to balance the interests of all stakeholders and does not maximise value for ‘Financial Creditors’.
vi.Therefore, the dues of creditors of ‘Operational Creditors’ must get at least similar treatment as compared to the due of ‘Financial Creditors’.
3. ‘Resolution Plan’
The ‘I&B Code’ defines ‘Resolution Plan’ as a plan for insolvency resolution of the ‘Corporate Debtor’ as a going concern. It does not spell out the shape, colour and texture of ‘Resolution Plan’, which is left to imagination of stakeholders. Read with long title of the ‘I&B Code’, functionally, the ‘Resolution Plan’ must resolve insolvency (rescue a failing, but viable business); should maximise the value of assets of the ‘Corporate Debtor’, and should promote entrepreneurship, availability of credit, and balance the interests of all the stakeholders.
It is not a sale. No one is selling or buying the ‘Corporate Debtor’ through a ‘Resolution Plan’. It is resolution of the ‘Corporate Debtor’ as a going concern. One does not need a ‘Resolution Plan’ for selling the ‘Corporate Debtor’. If it were a sale, one can put it on a trading platform. Whosoever pays the highest price would get it. There is no need for voting or application of mind for approving a ‘Resolution Plan’, as it will be sold at the highest price. One would not need ‘Corporate Insolvency Resolution Process’, ‘Interim Resolution Professional’, ‘Resolution Professional’, interim finance, calm period, essential services, Committee of Creditors or ‘Resolution Applicant’ and detailed, regulated process for the purpose of sale. It is possible that under a ‘Resolution Plan’, certain rights in the ‘Corporate Debtor’, or assets and liabilities of the ‘Corporate Debtor’ are exchanged, but that is incidental.
It is not an auction. Depending on the facts and circumstances of the ‘Corporate Debtor’, ‘Resolution Applicant’ may propose a ‘Resolution Plan’ that entails change of management, technology, product portfolio or marketing strategy; acquisition or disposal of assets, undertaking or business; modification of capital structure or leverage; infusion of additional resources in cash or kind over time; etc. Each plan has a different likelihood of turnaround depending on credibility and track record of ‘Resolution Applicant’ and feasibility and viability of a ‘Resolution Plan’ are not amenable to bidding or auction. It requires application of mind by the ‘Financial Creditors’ who understand the business well.
It is not recovery: Recovery is an individual effort by a creditor to recover its dues through a process that has debtor and creditor on opposite sides. When creditors recover their dues – one after another or simultaneously- from the available assets of the firm, nothing may be left in due course. Thus, while recovery bleeds the ‘Corporate Debtor’ to death, resolution endeavors to keep the ‘Corporate Debtor’ alive. In fact, the ‘I&B Code’ prohibits and discourages recovery in several ways.
It is not liquidation: Liquidation brings the life of a corporate to an end. It destroys organisational capital and renders resources idle till reallocation to alternate uses. Further, it is inequitable as it considers the claims of a set of stakeholders only if there is any surplus after satisfying the claims of a prior set of stakeholders fully. The ‘I&B Code’, therefore, does not allow liquidation of a ‘Corporate Debtor’ directly. It allows liquidation only on failure of ‘Corporate Insolvency Resolution Process’. It rather facilitates and encourages resolution in several ways.”
7.In view of the aforesaid decision in “Binani Industries Limited (Supra)”, we hold that the Adjudicating Authority not being a Court or ‘Tribunal’ and ‘Insolvency Resolution Process’ not being a litigation, it has no jurisdiction to decide whether a foreign decree is legal or illegal. Whatever findings the Adjudicating Authority has given with regard to legality and propriety of foreign decree in question being without jurisdiction is nullity in the eye of law.
The Learned counsel for the 1st Respondent points out that the Appellant is not to be permitted, to circumvent the Law and approach this ‘Appellate Tribunal’, to seek for an enforcement of the ‘Foreign Judgement’.
According to the 1st Respondent, as per Section 44A read with Section 13 of the Civil Procedure Code, 1908, a ‘Foreign Judgement’ where the proceedings, in which the ‘Foreign Judgement’ was obtained, are opposed to the principles of natural justice of ‘Audi Alterem Partem’, cannot be enforced in India. As such, the Foreign Judgement, which was passed by the Hon’ble High Court of South Africa, ‘Ex Parte’, cannot be enforced in India.
CONTENTIONS OF 2 RESPONDENT
The Learned Counsel for the 2nd Respondent, submits that for the first time, the 1st Respondent, through a letter dated 07.05.2021, was informed by the Appellant, in regard to the case filed by the Appellant before the Hon’ble High Court of South Africa Gauteng, Johannesburg, bearing case No.2020/14573 and the Judgement dated 06.10.2020, passed therein. As a matter of fact, the Appellant, had further enquired from the 1st Respondent as to whether it wishes to ‘settle the matter’ amicably and that the 2nd Respondent, gave a reply on 17.05.2021 informing the Appellant about the ongoing ‘CIRP’ of the 1st Respondent and the same was concluded on 27.03.2019, upon the Adjudicating Authority/Tribunal approving the ‘Approved Resolution Plan’.
According to the 2nd Respondent, it was clarified to the Appellant that ‘such claims’ which were not admitted/submitted to the ‘Resolution Professional’, shall stand abated’’, settled and extinguished. Moreover, the Appellant was informed by the 2nd Respondent, that it has ‘no power’ and authority to alter the admitted liabilities of the Corporate Debtor (in the case Jyoti Structures Ltd) which had already formed part of the Approved Resolution Plan.
The Learned counsel for the 2nd Respondent, points out that the 2nd Respondent through a letter dated 01.09.2021, had informed the Appellant, that the impending documentation, for the implementation of the ‘Approved Resolution Plan’, had commenced and the ‘take over process’, was expected to be completed soon.
It is the version of the 2nd Respondent that the CIRP Process was started on 04.07.2017 and the ‘Moratorium’, imposed by the ‘Adjudicating Authority/Tribunal’, was in operation, on the day on which the purported contracts were said to have been executed. In reality, the 2nd Respondent, was in control of its management, pursuant to Section 23(1) of the I&B Code, 2016. Also that the 2nd Respondent, had neither executed the alleged contract nor authorised any personnel of the 1st Respondent to enter into the same.
According to the 2nd Respondent, the two alleged contracts dated 06.10.2017 and 01.01.2018 were concerned, they were executed allegedly on behalf of the ‘Corporate Debtor by Mr. Sudeep Sharma’, the Appellant had not produced any document exhibiting that Mr. Sudeep Sharma had the ‘Authority’, to act on behalf of the ‘Corporate Debtor’ and enter into legal relations on behalf of the Corporate Debtor, by executing ‘Deeds’ and ‘Contracts’.
It is represented on behalf of 2nd Respondent, that the 2nd Respondent, had not authorised Mr. Sudeep Sharma, at any point of time or any other person, to enter into such ‘Contracts’, on behalf of the ‘Corporate Debtor’. Likewise, the 2nd Respondent, had not authorised or made any payment, to be made to the Appellant, in regard to the purported contract or otherwise.
It is pointed out on behalf of the 2nd Respondent that at the relevant point of time, neither did the ‘Corporate Debtor’ had any office, at the address, mentioned in the two purported written contracts nor was the ‘Corporate Debtor’, carrying on ‘Business Operations’ in Masa Ngwedi C&D Cites in South Africa, as mentioned in the ‘Appeal’.
The Learned counsel for 2nd Respondent, points out that only after the conclusion of the ‘CIRP’, through the Appellant letter dated 07.05.2021, it was made aware of the purported contract. Also that through a letter dated 28.09.2021, the 2nd Respondent had requested the Appellant, to provide the copy of the alleged contracts and the ‘relevant invoices’ relating to the ‘claimed amounts’, to it.
According to the 2nd Respondent, Section 13 of the Civil Procedure Code 1908 mentions that a ‘Foreign Judgement’, which has not been passed on ‘merits of the dispute’, shall not be regarded as being ‘conclusive’ and the instant case on hand, a mere perusal of the ‘Foreign Judgement’, makes it clear that the same was not a ‘Judgement’, which was passed on the ‘merit of the dispute’, and it is only a ‘Default Judgement’. Hence, the ‘Foreign Judgements’, which forms ‘substratum’ of the Appellant’s case, is ‘ipso jure not recognisable and/or capable’ of execution in India.
According to the 2nd Respondent, the ‘Foreign Judgement’ cannot be deemed to represent a ‘Debt’ enforceable under ‘Indian Law’. Therefore, the Appellant is not to be allowed to recover amounts, allegedly due to it on the basis of ‘Foreign Judgement’ by invoking the ingredients of Section 60(5) of the Code, 2016 which in any case, does not vest the Adjudicating Authority/Tribunal, as a judicial forum to recognise and enforce a ‘Foreign Judgement’.
The Learned counsel for the 2nd Respondent refers to the Judgement of this Tribunal in Usha Holdings LLC and Ant V. Francorp Pvt Ltd (vide Comp App (At)(Ins) No. 44/2018 dated 30.11.2018) wherein in paragraph 14 observed as under:-
“14.In the circumstances, we answer the first question in favour of the Appellant and hold that the Adjudicating Authority has no jurisdiction to decide the question of legality and propriety of a foreign judgment and decree in an application under Section 7 or 9 or 10 of the I&B Code. The second question relating to maintainability is answered against the Appellants, they being not the ‘Operational Creditors’’
The Learned Counsel for the 2nd Respondent, contends that the purported contract two of which are oral Contracts, cannot be relied upon, having been allegedly entered into during the ‘CIRP’, without the requisite ‘Authorisation’ of the 2nd Respondent.
Section 44A of Civil Procedure Code, 1908
The twin requirements mentioned in Section 44A of the Civil Procedure Code are (i) the place where ‘Decree’ is passed must be a reciprocating territory; (ii) ‘Decree’ must be passed by any of the superior Courts of that reciprocating territory.
Under Section 44A (1) of the Civil Procedure Code, the fiction, is to treat the judgement and ‘Decree’ of superior Court, outside India, as equivalent to those of ‘District Court’, for the purpose of execution in India. Also that, the ingredients of Section 44A of the Civil Procedure Code are mentioned in the decision of Hon’ble Supreme Court in 2000(8) SCC at pgs. 278, 303 and 304.
As a matter of fact, a ‘Foreign Judgement’ has to be executed only before the ‘District Court’, as per decision in Hanifa Kalangattu v. Shaiasta Khan, reported in AIR, 2017, Ker. at page 217.
DISCUSSIONS
The Appellant/Petitioner in IA 1020/2023 in main Company Petition (IB) 1137/2017 before the Adjudicating Authority/Tribunal (filed under Section 60(5) of the I&B Code, 2016) had prayed
(i)for an issuance of direction by the Adjudicating Authority/Tribunal in ordering the 1st Respondent to pay the Appellant/Applicant an amount of ZAR 90,53,355.58/-(South African Rands Ninety Lakhs Fifty Three Thousand Three Hundred and Fifty Five and Fifty Eight Cents only) alongwith interest at the rate of 2% per month, compounded monthly, from 15th June, 2020 till the date of payment, or the equivalent amount in Indian National Rupees;
(ii)in directing the 1st Respondent to pay the Applicant an amount of ZAR 40,66,000 (South African Rands Forty Lakh and sixty thousand only) alongwith interest at 10% per annum, from 14.7.2020, till the day of payment, or the equivalent amount in Indian National Rupees.
In so far as the instant Appeal is concerned, this Tribunal pertinently points out that Section 60(5) of the I&B Code, 2016 concerns with the ‘Applications against a Corporate Debtor’ undergoing ‘CIRP’ or claims against such ‘Corporate Debtor’, undergoing ‘CIRP’. Also that the ‘Adjudicating Authority/Tribunal’ is enjoined with the ‘power to determine any question of ‘Law or Fact’ arising out of in, or in relation to the ‘Insolvency Resolution or Liquidation Proceedings’ of the Corporate Debtor, or Corporate Person under this Code’.
It cannot be disputed that the Company was long out of the Insolvency and CIRP of the Company stood completed upon passing of the Plan Approval Order. Suffice it for this ‘Tribunal’ to point out that the Approved Resolution Plan stood implemented as on date.
Proceeding further, this ‘Appellate Tribunal’ is not the proper and correct Forum to execute the ‘Foreign Judgement’ and in this regard the Appellant/Petitioner is not to be allowed to circumvent the ‘Law’, in the considered opinion of this Tribunal.
One has to keep in mind of a relevant fact that the ‘Adjudicating Authority/Tribunal’ not being a ‘Court’ and the ‘Insolvency Resolution Process’ not being a litigation, the Appellant/Petitioner, cannot invoke, Section 60(5) of the I&B Code, 2016 to project the IA No.1020/2023 in CP (IB) No.1137/2017 before the ‘Adjudicating Authority/Tribunal’ seeking the reliefs in respect of(i) issuance of direction to the 1st Respondent, to pay the Appellant/Petitioner an amount of ZAR 90,53,355.58 alongwith interest @ 2% per month, compounded monthly from 15.06.2020 till the date of payment or the equivalent amount in Indian National Rupees; (ii) in directing the 1st Respondent to pay the Applicant an amount of ZAR 40,66,000 (South African Rands) alongwith interest at 10% per annum from 14.07.2020 till day of payment or the equivalent amount in Indian National Rupees.
At this juncture, this ‘Tribunal’ in a crystalline manner points out that all such ‘claims’ which were not a part of the ‘Resolution Plan’ stood extinguished, on the date of ‘Approval of Resolution Plan’ and further no individual, is permitted to initiate or continue any ‘proceedings’, in regard to a ‘claim’, which was not part of the ‘Resolution Plan’.
Be that as it may, this Tribunal on going through the respective contentions advanced on either side, in the instant ‘Appeal’, bearing in mind the principles laid down by the Hon’ble Supreme Court, in the decision cited in the instant Appeal, taking note of the facts and circumstances of the instant ‘Appeal’ and on going through the ‘impugned order’ passed by the ‘Adjudicating Authority/Tribunal’ dated 6th July, 2023 in IA No.1020/2023 in CP (IB) No.1137/2017 comes to a consequent conclusion that the view arrived at in holding that the IA 1020/2023 in CP No.(IB) 1137/2017 passed by the ‘Petitioner/Appellant’ was ‘not maintainable’ and dismissing the ‘Application’ ultimately does not suffer from any ‘material irregularity or patent illegality’ in the eye of Law. Looking at from any angle, the instant ‘Appeal’ sans merits.
RESULT
In fine, the ‘instant Comp App (AT)(Ins) No.1084/2023 is dismissed. No costs.