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Judgment
NARESH SALECHA, MEMBER (TECHNICAL)
The present Appeal i.e., Company Appeal (AT) (Insolvency) No. 443 of 2023 has been filed by Glamour India Private Limited under Section 61 of the Insolvency & Bankruptcy Code, 2016 (in short ‘Code’) being aggrieved by the Impugned Order dated 02.03.2023 passed by the National Company Law Tribunal, Mumbai Bench (in short ‘Adjudicating Authority’) in I.A. 1961/ 2022 IN C.P. 289/I&B/MB/2022 where the Adjudicating Authority has allowed the I.A. 1961/ 2022 IN C.P. 289/I&B/MB/2022.
Canara Bank is the Respondent No. 1 herein who is the Financial Creditor and the Respondent No. 2 is the Resolution Professional of Shree Sai OTO Tube Mills Ltd. who is the Corporate Debtor.
Heard, the Counsel for the Parties and perused the record made available including the cited judgements.
It has been brought out that the Corporate Debtor had taken the loan from the Respondent No. 1, however, the Corporate Debtor failed to repay the said loan and defaulted in making payments towards the same. It has also been brough out that the Corporate Debtor made an OTS offer to the Respondent No. 1 which was accepted by the Respondent No. 1 for Rs. 25 Crores. As per the OTS letter dated 17.08.2021 Rs. 3.75 Crores was to be paid as upfront payment to the Respondent No. 1 by the Corporate Debtor and balance amount of Rs. 21.25 Crores was to be paid on or before 16.11.2021. However, the Corporate Debtor failed to meet its obligation as per terms and conditions stipulated in the OTS letter dated 17.08.2021, despite several opportunities granted by the Respondent No. 1 to the Corporate Debtor.
It has been submitted that the Respondent No. 1 extended various financial credit facilities to the Corporate Debtor between 2010 to 2013 totalling Rs. 64 Crores and the said loan was secured by creating equitable mortgage of immovable properties consisting of land, building, plants and machinery of the Corporate Debtor as well as the personal guarantees of Mr. Jai Prakash M. Vyas and Mr. Vipin M. Vyas, Ex- Directors of the Corporate Debtor.
It has been submitted that due to failure of the Corporate Debtor to make the payments, the Respondent No. 1 herein initiated recovery proceedings before the DRT-I at Mumbai. During pendency of the application before the DRT, the Appellant herein being one of the Financial Creditor of the Corporate Debtor, filed the application under Section 7 of the code for initiation of Corporate Insolvency Resolution Process (in short ‘CIRP’) which was allowed by the Adjudicating Authority vide order dated 08.04.2022.
After initiation of the CIRP against the Corporate Debtor, the Respondent No. 2 herein i.e., Mr. Vishnukant Kabra the Resolution Professional asked for claims from the creditors of the Corporate Debtor by making public announcements and in response to the same, the Respondent No. 1 submitted his claim of Rs. 105.53 Crores which was received by the Respondent No. 2 on 24.05.2022. The Respondent No. 1 submitted revised claims of Rs. 130.59 Crores calculated up to 10.05.2022 to the Respondent No. 2 in Form C.
It is the case of the Appellant that the Adjudicating Authority erred in passing the Impugned Order dated 02.03.2023, whereby the Adjudicating Authority directed the Respondent No. 2 to admit the original claims of the Respondent No. 1 as per the claim form submitted by the Respondent No. 1 or as per the books of accounts of the Corporate Debtor.
It is the case of the Appellant that the CIRP was initiated against the Corporate Debtor vide order dated 08.04.2022 and moratorium under Section 14 of the Code came into existence and therefore, the Respondent No. 1 should not have been allowed to take any action after moratorium.
The Appellant further submitted that the OTS was sanctioned by the Respondent No. 1 which was being extended from time to time and correspondence were exchanged by the Respondent No. 1 with the Corporate Debtor and as such the claim or Rs. 130.59 Crores was not admissible.
The Appellant empathetically submitted that as on date of initiation of the CIRP i.e., 08.04.2022, the Respondent No. 1 could not claim more than of balance amount of Rs. 21.25 Crores as per the OTS and it was wrong on the part of the Adjudicating Authority to direct the Respondent No. 2 to admit the claim submitted by the Respondent No. 1.
The Appellant submitted that their claim of Rs. 155.09 Crores was submitted to the Respondent No. 2 on 18.05.2022 which was accepted whereas to the Respondent No. 1 filed it is claim on 24.05.2022. It is the case of the Appellant that only on 25.05.202 the Respondent No. 1 issued a letter withdrawing the OTS which was earlier sanctioned by them in favour of the Corporate Debtor, hence as on date of the CIRP i.e., 08.04.2022 the OTS was in existence.
The Appellant pointed out that the Respondent No. 1 submitted its revised claims on 09.06.2022 of Rs. 130.59 Crores based on the cancellation of OTS letter on 25.05.2022, which was after date of CIRP on 08.04.2022.
The Appellant also submitted that the Respondent No. 2 took correct action in admitting the claims of the Appellant in full and accepting the partial claims of the Respondent No. 1 instead of their claims of Rs. 130.59 Crores.
The Appellant submitted that the Adjudicating Authority committed a mistake in allowing I.A. 1961/ 2022 IN C.P. 289/I&B/MB/2022 of the Respondent No. 1 only on the ground that the OTS automatically stood withdrawn as per the terms of the OTS and ignoring the fact that the OTS was extended by the Respondent No 1 from time to time.
The Appellant submitted that on 08.04.2022, the OTS was in existence and therefore the revised claims of the Respondent No. 1 was without any legal basis. The Appellant submitted that the Adjudicating Authority ignored the e-mail of Respondent No. 1 dated 25.04.2022, whereby the Respondent No. 1 acknowledged the existence of the OTS and further directed the Corporate Debtor to make the payment of various OTS amount.
The Appellant also cited two judgements of Hon’ble Supreme Court of India in the matter of Rajendra K. Bhutta Vs. Maharashtra Housing and Area Development Authority & Anr. [(2020) 13 SCC 208] and Kotak Mahindra bank Limited Vs. Kew Precision Parts Private Limited & Ors. [(2022) 9 SCC 364] to buttress his arguments.
Concluding his arguments, the appellant submitted that the order dated 02.03.2023 deserve to be set aside and requested to allow his appeal before this Appellate Tribunal.
Per contra, the Respondent No. 1 refuted all the averments made by the Appellant and also raised the issue regarding locus of the Appellant herein as he was not party to the order dated 02.03.2023.
The Respondent No. 1 gave a background of the case which led to the filing of their I.A. 1961/ 2022 IN C.P. 289/I&B/MB/2022 before the Adjudicating Authority due to illegal actions of the Respondent No. 2 herein in not admitting their claims of Rs. 130.59 Crores.
The Respondent No. 1 submitted that as on 08.07.2017, total outstanding against the Corporate Debtor was Rs. 63.4 Crores. The Respondent No. 1 elaborated that during the First CoC Meeting held on 09.06.2022, the agenda was approved by the Respondent No. 2 without the consent of the Respondent No. 1 who was the sole Secured Financial Creditor and on 30.06.2022 the Respondent No. 2 vide e-mail informed the Respondent No. 1 that their claim of Rs. 130.59 Crores was verified but admitted only Rs. 22.62 Crores. It is the case of the Respondent No. 1 that such action of the Respondent No. 2 was unlawful and the Respondent No. 2 acted in the role of the Adjudicating Authority which was not permitted under the Code. It is also the case of the Respondent No. 1 that the role of Respondent No. 2 was only to collate the claims after issuance of public notice calling for claims and not to adjudicate.
The Respondent No. 1 also stated that they sought information about the Appellant’s claims of Rs. 155.09 Crores as financial debt since this was not reflected in the balance sheets submitted by the Corporate Debtor to the Respondent No. 1. The Respondent No. 1 alleged that however, the Respondent No. 2 refused to disclose any information to the Respondent No. 1. Aggrieved by the same the Respondent No. 2 filed an Interlocutory Application bearing I.A. 1961/ 2022 IN C.P. 289/I&B/MB/2022 seeking following reliefs :
“a)Directions may be issued to the IRP to admit the entire claim of the Applicant;
(b)Pending the final hearing of this present Interlocutory Application, IRP may direct not to conduct any CoC;”
The Respondent No. 1 refuted the allegations made by the Appellant regarding valid OTS at the time of CIRP and stated that on 17.08.2021, the OTS was sanctioned for Rs. 25 Crores. However, initial cheque furnished by the Corporate Debtor itself bounced on the grounds of “insufficient funds” which was intimated by the Respondent No. 1 to the Corporate Debtor on 28.08.2021 and thereafter the Corporate Debtor made the payment of only Rs. 3.20 Crores against the requirement of upfront payment of Rs. 3.75 Crores, whereby leaving a gap of Rs. 55 Lakhs and to recover this money the Respondent No. 1 wrote several e-mails to the Corporate Debtor on 18.10.2021, 20.12.2022, 03.03.2022 and 25.05.2022.
The Respondent No. 1 submitted that in terms of OTS letter dated 17.08.2021, the upfront payment of Rs. 3.75 Crores i.e., 15% of the OTS was payable immediately upon conveying the sanction dated 16.08.2021 and the balance OTS amount of Rs. 21.25 Crores on or before 16.11.2021.
The Respondent No. 1 empathetically submitted that in terms of Clause 3 of the OTS letter dated 17.08.2021, the concession stood automatically withdrawn in case of the failure of the Corporate Debtor to make the payment within stipulated time. 26. The Respondent No. 1 submitted that the OTS by nature is always a conditional offer which depends upon fulfilling the terms and conditions of the settlement and the such conditional letter cannot be treated as contract. It is the case of the Respondent No. 1 that such OTS proposals merely suspended outstanding loan claims of the Financial Creditors in consideration of the final settlement being complied by the Corporate Debtor and in case of any breach or failure on the part of the Corporate Debtor such OTS stands automatically cancelled. 27. The Respondent No. 1 stated that since the outstanding amount was to be paid on or before 16.11.2021 and undisputedly the Corporate Debtor failed to make such payment in time and therefore the OTS ceased to exist on 16.11.2021 and the averments made by the Appellant on this account, are completely baseless and legally not tenable.
The Appellant submitted that they submitted form C along with revised claims of Rs. 130.59 Crores making it clear that the claims including interest was on the date mentioned in Form C and the averments made by the Appellant on this ground are completely wrong. In fact, they were more transparent.
Concluding his arguments, the Respondent requested this Appellate Tribunal to dismiss the appeal with exemplary costs.
We find that the main issue which requires deliberation is whether the Respondent No. 2 was correct in admitting partial claims of Respondent No. 1 on the plea that this amount was as per the OTS terms by ignoring outstanding amount of the Respondent No. 1 against the Corporate Debtor and whether the Adjudicating Authority committed any error in their finding in the Impugned Order dated 02.03.2023.
We will like to refer to Section 3(6) of the Code, Regulation 8 of the IBBI (CIRP for Corporate Persons) Regulations, 2016 r/w Form C.
“3.Definitions. –
(6)“claim” means –
(a)a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured;
(b)right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured;
Regulation 8. Claims by financial creditors.
(1)A person claiming to be a financial creditor other than a [financial creditor belonging toa class of creditors, shall submit claim with proof] to the interim resolution professional in electronic form in Form C of the Schedule: Provided that such person may submit supplementary documents or clarifications in support of the claim before the constitution of the committee.
(2)The existence of debt due to the financial creditor may be proved on the basis of –
(a)the records available with an information utility, if any; or
(b)other relevant documents, including –
(i)a financial contract supported by financial statements as evidence of the debt;
(ii)a record evidencing that the amounts committed by the financial creditor to the corporate debtor under a facility has been drawn by the corporate debtor;
(iii)financial statements showing that the debt has not been repaid; or
(iv)an order of a court or tribunal that has adjudicated upon the non-payment of a debt, if any.”
(Emphasis Supplied)
152[SCHEDULE-I]
153[FORM C]
SUBMISSION OF CLAIM BY FINANCIAL CREDITORS
(Under Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016)
[Date]
From
[Name and address of the financial creditor, including address of its registered office and principal office]
To
The Interim Resolution Professional / Resolution Professional
[Name of the Insolvency Resolution Professional / Resolution Professional]
[Address as set out in public announcement]
Subject: Submission of claim and proof of claim.
Madam/Sir,
[Name of the financial creditor], hereby submits this claim in respect of the corporate insolvency resolution process of [name of corporate debtor]. The details for the same are set out below:
152 Substituted by Notification No. IBBI/2022-23/GN/REG091, dated 13th September, 2022 (w.e.f. 13.09-2022) Before substitution the words stood as –“Schedule”.
153Substituted by Notification No. IBBI/2020-21/GN/REG070, dated 15th March, 2021 (w.e.f. 15.03.2021).
Relevant Particulars (1) (2) (3) 1. Name of the financial creditor 2. Identification number of the financial creditor (If an incorporated body, provide identification number and proof of incorporation. If a partnership or individual provide identification records* of all the partners or the individual) 3. Address and email address of the financial creditor for correspondence 4. Details of claim, if it is made against corporate debtor as principal borrower: (i) Amount of claim (ii) Amount of claim covered by security interest, if any (Please provide details of security interest, the value of the security, and the date it was given) (iii) Amount of claim covered by guarantee, if any (Please provide details of guarantee held, the value of the guarantee, and the date it was given) (iv) Name and address of the guarantor(s) 5. Details of claim, if it is made against corporate debtor as guarantor: (i) Amount of claim (ii) Amount of claim covered by security interest, if any (Please provide details of security interest, the value of the security, and the date it was given) (iii) Amount of claim covered by guarantee, if any (Please provide details of guarantee held, the value of the guarantee, and the date it was given) (iv) Name and address of the principal borrower 6. Details of claim, if it is made in respect of financial debt covered under clauses (h) and (i) of sub-section (8) of section 5 of the Code, extended by the creditor: (i) Amount of claim (ii) Name and address of the beneficiary 7. Details of how and when debt incurred 8. Details of any mutual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim 9. Details of the bank account to which the amount of the claim or any part thereof can be transferred pursuant to a resolution plan (Signature of financial creditor or person authorised to act on its behalf) [Please enclose the authority if this is being submitted on behalf of the financial creditor]
Name in BLOCK LETTERS Position with or in relation to creditor Address of person signing *PAN, passport, AADHAAR Card or the identity card issued by the Election Commission of India.
DECLARATION
I, [Name of claimant], currently residing at [insert address], do hereby declare and state as follows:
1.[Name of corporate debtor], the corporate debtor was, at the insolvency commencement date, being the...day of...20..., actually indebted to me for a sum of Rs. [insert amount of claim].
2.In respect of my claim of the said sum or any part thereof, I have relied on the documents specified below: [Please list the documents relied on as evidence of claim].
3.The said documents are true, valid and genuine to the best of my knowledge, information and belief and no material facts have been concealed therefrom.
4.In respect of the said sum or any part thereof, neither I, nor any person, by my order, to my knowledge or belief, for my use, had or received any manner of satisfaction or security whatsoever, save and except the following: [Please state details of any mutual credit, mutual debts, or other mutual dealings between the corporate debtor and the creditor which may be set-off against the claim].
5.I undertake to update my claim as and when the claim is satisfied, partly or fully, from any source in any manner, after the insolvency commencement date.
6.I am / I am not a related party of the corporate debtor, as defined under section 5 (24) of the Code.
7.I am eligible to join committee of creditors by virtue of proviso to section 21 (2) of the Code even though I am a related party of the corporate debtor.
Date:
Place:
(Signature of the claimant)
VERIFICATION
I, [Name] the claimant hereinabove, do hereby verify that the contents of this proof of claim are true and correct to my knowledge and belief and no material fact has been concealed therefrom.
Verified at ... on this ... day of ..., 20...
(Signature of claimant)
[Note: In the case of company or limited liability partnership, the declaration and verification shall be made by the director/manager/secretary/designated partner and in the case of other entities, an officer authorised for the purpose by the entity.]]
In this connection, we would like to take on record the OTS proposal of the Respondent No. 1 to the Corporate Debtor dated 17.08.2021 with reference to the Corporate Debtor’s OTS offer of Rs. 25 Crores especially in Paras 3, 6 & 7 which reads as under :-
5.Bank reserves the right for withdrawal of the OTS sanctioned at any point of time even during the period permitted for payment of OTS without assigning any reasons for withdrawal of OTS.
6.In the event of Bank finding any misrepresentation of facts by you, bank reserves the right to withdraw the OTS permitted and proceed legally for recovery of entire dues.
7.In the event of non-compliance with any of the terms of the sanction by you, including payment of the OTS amount as per the stipulated schedule, the OTS sanction stands automatically withdrawn without assigning any reasons for the same and the Bank reserves the right to proceed as it deems fit including proceeding legally for recovery of the entire dues.
8.You have to withdraw appeal/case/claim filed against the Bank, if any, before any court, etc. The statutory dues such as labour payment, provident fund, commercial tax etc shall be outside the purview of this OTS, you have to deal with them separately, and to that effect you have to submit an undertaking.
9.Bank will withdraw the pending DRT case and "NO DUES certificate" shall be issued only upon receipt of entire OTS amount as per the sanction.
10.You have to deposit post dated cheques for the OTS amount coinciding with the due date of payment.
11.You have to file a Consent Term in DRT to obtained compromise decree in the DRT case, with default clause for recovery of full contractual dues, in the event of failure to pay the OTS amount as per terms of this sanction.
12.The aspects of OTS shall be reported to CIBIL/ Credit Risk Rating agency upon payment of entire OTS amount by you as per terms of sanction, the account will appear in the records of the CICs (Credit Information Company) for a minimum period of 7 yrs with remarks "settled", as per CIC (Regulation) Act 2005.
Please acknowledge the receipt of the same.
भूजा वासन / For CANARA BANK
CHIDMAHAGAR Asset Recovery Management Bhd. - 1 भूजा / MUMBAI-20
ASSET RECOVERY MANAGEMENT - I BRANCH, 37, KSHAMALAYA, OPP. PATKAR HALL, NEW MARINE LINES. THACKERSEY MARG, MUMBAI 400 020, TEL: 22005428/30, 22005438 FAX: 22005438 E-MAIL: [email protected]
From the above, it becomes clear that Clause 3 provides for automatic cancellation of OTS if the agreed amount was not paid within the stipulated time and it was prerogative of the Financial Creditor i.e., the Respondent No. 1 herein to proceed legally for recovery of entire dues.
It is undisputed fact that the entire amount was to be paid on or before 16.11.2021, however, the Corporate Debtor could not make the requisites payment despite several opportunities given by the Respondent No. 1 to the Corporate Debtor.
In this connection, we would like to refer to relevant portions of the Impugned Order which reads as under:-
“3.This bench further notes that the bank in its OTS sanction letter dated 17.08.2021 clearly stipulated in clause "7" as under:
"In the event of non-compliance with any of the term of the sanction by you, including payment of the OTS amount as per the stipulated schedule, the OTS sanction stands automatically withdrawn without assigning any reasons for the same and the bank reserves the right to proceed as it deems fit including proceeding legally for recovery of the entire dues."
4.It is very clear from the above clause that if the Corporate Debtor failed to pay the remaining amount under the OTS within stipulated date, the OTS stands automatically withdrawn without assigning any reasons. It is a settled proposition of law laid down by the Hon'ble Apex Court in catena of decisions that the grant of benefit of OTS scheme by the bank is subject to the eligibility criteria and the guidelines issued from time to time and the borrower cannot claim extension of time period under OTS scheme as a matter of right nor courts have power to direct bank to accept OTS after stipulated time or in spite of breach committed by the borrower. The defaulted borrower who failed to honour the terms of OTS has no legal right to contend that the bank is not entitled to recover the original amount even after committing breach by them. The generous extension of time by the bank will not confer any unfettered right on the borrower to defeat the original claim of the bank since grant of OTS scheme is the sole discretion of the bank. The cancellation of OTS by the bank on account of breach committed by the borrower does not amount to initiation of any proceedings and therefore, the question of applicability of moratorium does not arise.
5.The learned RP has miserably failed to notice the above legal position and exceeded his jurisdiction in restricting the claim of the bank only to the extent of OTS amount. It is not the case of the RP that the books of accounts of the Corporate Debtor does not reflect the original outstanding other than the OTS amount. When once the books of accounts of the Corporate Debtor reflects the total outstanding of the bank, the RP has no business nor power to play the role of Adjudicating Authority and restrict the claim of the bank. The above action of the RP would certainly amounts to exceeding his role under the Code.
6.For the aforesaid reasons this tribunal is of the considered opinion that the RP has committed grave error in restricting the claim of the applicant and the said action of the RP needs to be set aside.
Accordingly, this bench hereby direct the RP to admit the original claim of the applicant as per the claim form submitted by the bank or as per the books of accounts of the Corporate Debtor forthwith.
With the above observations and direction, the above Interlocutory Application is allowed and stands disposed of.” (Emphasis Supplied)
We note that the Adjudicating Authority has taken all the facts into consideration and also gone through the terms and conditions as stipulated in the OTS sanction letter dated 17.08.2021 carefully.
We also note from the averments of the Respondent No. 1 that in the First CoC Meeting, the Respondent No. 1 sought clarification regarding their claims from the Respondent No. 2 as Resolution Professional which were not furnished and the Respondent No. 2 also allegedly failed to furnish information to the Respondent No. 1 as why the claims of the Appellant herein amounting to Rs. 155.09 Crores was admitted as the same was not allegedly reflected in the books of account of the Corporate Debtor.
The moot question as to whether the OTS proposal which is not complied by the Corporate Debtor which has explicit clause regarding automatic termination will prohibit the Financial Creditor in claiming the original amount of his outstanding before the Resolution Professional or not.
We observe that the Respondent No. 1 has taken all the efforts to recover the money and agreed for the settlement of Rs. 25 Crores against their original dues of Rs. 60.34 Crores as on 08.07.2017, which became Rs. 130.59 Crores in claims as per Form C.
It is admitted fact that the Corporate Debtor could not meet his obligations of the OTS and therefore, the OTS proposal ceased to be in existence on the last date of stipulated payment were to be made i.e., 16.11.2021. Since this was much before the CIRP date 08.04.2022, moratorium under Section 14 of the Code did not put any adverse impact on the rights of the Respondent No. 1 for its claims as per Form C submitted will in time to the Resolution Plan.
We also find merit in submissions made by the Respondent No. 1 that formal cancellation letter issued to the Corporate Debtor is merely on technicalities and does not infringe the rights of the Respondent No. 1 as Form C submitted by the Respondent No. 1 clearly brought out an amount of Rs. 130.59 Crores plus further interest and costs from 11.05.2022 indicating the total amount of claim as on 30.05.2022, it was in response to the public announcement made by the Respondent No. 2.
The Adjudicating Authority also categorically recorded that once the books of accounts of the Corporate Debtor reflects the total outstanding of the Financial Creditor i.e., Respondent No. 1 herein, the Respondent No. 2 did not have any power to plays the role of the Adjudicating Authority and restrict the claim of the Respondent No. 1.
Now we will refer to cited judgment of the Appellant. These reads as under:-
Rajendra K. Bhutta Vs. Maharashtra Housing and Area Development
Authority & Anr. [(2020) 13 SCC 208]
“25.There is no doubt whatsoever that important functions relating to repairs and reconstruction of dilapidated buildings are given to MHADA. Equally, there is no doubt that in a given set of circumstances, the Board may, on such terms and conditions as may be agreed upon, and with the previous approval of the Authority, hand over execution of any housing scheme under its own supervision. However, when it comes to any clash between MHADA Act and the Insolvency Code, on the plain terms of Section 238 of the Insolvency Code, the Code must prevail. This is for the very good reason that when a moratorium is spoken of by Section 14 of the Code, the idea is that, to alleviate corporate sickness, a statutory status quo is pronounced under Section 14 the moment a petition is admitted under Section 7 of the Code, so that the insolvency resolution process may proceed unhindered by any of the obstacles that would otherwise be caused and that are dealt with by Section 14. The statutory freeze that has thus been made is, unlike its predecessor in the SICA, 1985 only a limited one, which is expressly limited by Section 31(3) of the Code, to the date of admission of an insolvency petition up to the date that the adjudicating authority either allows a resolution plan to come into effect or states that the corporate debtor must go into the liquidation. For this temporary period, at least, all the things referred to under Section 14 must be strictly observed so that the corporate debtor may finally be put back on its feet albeit with a new management. (Emphasis Supplied)
Kotak Mahindra bank Limited Vs. Kew Precision Parts Private
Limited & Ors. [(2022) 9 SCC 364]
41.The corporate insolvency resolution process commences on the date of admission of the application under sub-section (5) of Section 7 IBC. Section 7(7) casts an obligation on the adjudicating authority to communicate an order under clause (a) of sub-section (5) of Section 7 to the financial creditor and the corporate debtor and to communicate an order under clause (b) of sub-section (5) of Section 7 to the financial creditor within seven days of admission or rejection of such application, as the case may be. Sections 8 and 9 IBC pertain to insolvency resolution by an operational creditor and are not attracted in the facts and circumstances of this case. Section 10 pertains to initiation of corporate insolvency resolution process by the corporate debtor itself, and is also not attracted in the facts and circumstances of the case.” (Emphasis Supplied)
As regards above cited two judgments by the Appellant, after perusing the relevant paras quoted, we do not find any direct bearing in the present case. Kotak Mahindra bank Limited (Supra) talks above commencement of CIRP from the date of admission of the application by the Adjudicating Authority and Rajendra K. Bhutta (Supra) addresses the issue regarding implication of Section 14 of the Code i.e., moratorium. These are well settled laws and have been clearly upheld by the Apex Court. The issue in the present appeal is whether claims existed before date of CIRP i.e., 08.04.2021 or not. We have already noted that by legal operation of Clause 3 of OTS sanction letter dated 17.08.2021, the OTS ceased to exist for non-compliance/ non-payment by the Corporate Debtor on last date of stipulated payment i.e., 16.11.2021, hence the Appellant was entitled to get his claims admitted by the Respondent No. 2. Accordingly, these two cited judgments by the Appellant does not help the cause of the Appellant in this Appeal.
We find that the claims of Respondent No. 1 should have been admitted by the Respondent No. 2 as Resolution Professional and which has been correctly allowed by the Adjudicating Authority vide their order dated 02.03.2023 and as such we do not find any error in the Impugned Order.
In fine, the appeal, devoid of any merit, stand dismissed. No Costs. Interlocutory Application(s), if any, are Closed.