AI Structured Summary
Not yet generated for this judgment
Judgment
Per: Justice Rakesh Kumar Jain: (Oral)
Clearwater Capital Partners Singapore Fund V Pvt. Ltd. (Financial Creditor) filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) bearing CP (IB) No. 308/MB/2022 before the National Company Law Tribunal, Mumbai Bench (in short ‘Tribunal’) against Renaissance Urban Infra Pvt. Ltd. (Corporate Debtor) which was admitted on 02.05.2023. Divyesh Desai was appointed as Interim Resolution Professional (IRP) who was later on replaced by the CoC in the first meeting held on 01.06.2023 with Mr. Birendra Kumar Agarwal as RP of the CD which was confirmed by the Tribunal on 12.06.2023.
Shorn of unnecessary details, an application bearing I.A. No. 3177 of 2023 came to be filed by the Appellants (Mayur Retilal Suchak and Deepti Mayur Suchak, Promoter and Suspended Director of the CD) under Section 17(2) r/w Section 60(5) of the Code seeking a direction to Respondent (RP) to register the CD under MSME Development Act, 2006. The said application was heard and dismissed by the Tribunal on 02.08.2023 with the following order:-
“1.Mr. Pulkit Sharma a/w Mr. Aniruth Purusothaman, Ld. Counsel for the Applicant in IA present. Ms. Meghna Arvind i/b MDP & Partners, Ld. Counsel for the CoC present. Mr. Kunal Kanungo a/w Ms. Tanushree Sogani, Ld. Counsel for the R1 present.
2.IA-3177/2023: This is an Application filed by the suspended Board of Directors of the Corporate Debtor under Section 17(2) r/w Section 60(5) of the IBC, 2016 seeking directions to the Resolution Professional to register the Corporate Debtor under the MSME Development Act, 2006.
3.The Applicant submits that the Insolvency Law Committee, in its March 2018 report had observed that the MSMEs form the foundation of the Indian economy, and are key drivers of employment, production, economic growth, entrepreneurship and financial inclusion and that the importance of MSMEs hold in the Indian economy cannot be underestimated, as they are the one of the best vehicles for job creation and economic growth.
4.The various benefits of registering the Corporate Debtor under MSME viz. Collateral Free loans from banks, Interest Rate Exemption, Industrial Promotion Subsidy Eligibility, Protection against delayed payments, Saving in electricity bills, Overdraft Interest Rate Exemption will not only unlock various benefits and incentives but will also contribute to the financial stability and recovery with respect to the Corporate Debtor. It is also submitted that upon registering under the MSME Act, the Corporate Debtor can avail various benefits which will not only maximise the value of the assets of the Corporate Debtor but will also benefit the stakeholders at large. Further, as per Section 25(1) of the IBC 2016, it is the duty of the Respondent being the Resolution Professional of the Corporate Debtor to preserve and protect the assets of the Corporate Debtor, including the continued business operations of the Corporate Debtor.
5.The Counsel for CoC and R1 opposed this request contending that whatever benefits may be available to the Corporate consequent to its registration under MSME Act can be availed after registration of Corporate Debtor under MSME by the Successful Resolution Applicant, as benefit mainly in form of concessional interest on credit and priority access to such credit, are not available to the Corporate Debtor presently considering the NPA status of its accounts. This application is nothing but an attempt to further delay the process.
6.This Bench heard both the Counsel. This Bench finds that the Corporate Debtor was outside the definition of Medium, Micro & Small Enterprise under MSME Act, prior to fall in its Revenues arising from its inability to access further credits. It appears that the applicant is taking advantage of temporary closure of business of corporate debtor to plead for directions for registration under MSME Act, which may entitle them to participate in the Resolution of the Corporate Debtor. It is noteworthy that the Applicant never thought of such benefits accruing to the Corporate Debtor prior to its admission into CIRP. Accordingly, this Bench does not find any merit in the contention of the Applicant on the basis of benefits available to MSME enterprises. This Bench feels, that it is RP who is duty bound to take necessary steps to maximise the value of the Corporate debtor, which is underlying argument of the Applicant. In the absence of RP supporting their contention, this Bench is not inclined to issue any such direction.
7.In view of the foregoing, this Application is dismissed.”
There is no dispute that the Appellant challenged the aforesaid order dated 02.08.2023 by way of an appeal which was e-filed before this Tribunal with filing no. 9910110/10769/2023 on 27.12.2023. The said appeal remained in defect which were never cured and thus the appeal was never listed. As a matter of fact, the Appellant did not pursue the said appeal for the reasons best known to them.
The Appellant again filed an application bearing I.A. No. 3362 of 2024 allegedly after the decision of the Hon’ble Supreme Court, rendered in the case of Civil Appeal No. 4422 of 2023, which was decided on 29.11.2023. The said decision have been made the premise to file the subsequent application I.A No. 3362 of 2024 on the ground that for registration of the MSME can be filed even after the commencement of CIRP.
During the pendency of this application, RP filed an application bearing I.A. No. 1452 of 2024 for seeking extension of CIRP period by 60 days from 31.01.2024 to 28.03.2024 on 23.02.2024. The said application was also dismissed by the Tribunal on 21.06.2024 with the following order:-
“1.Mr. Kunal Kanungo a/w Ms. Tanushree Sogani and Mr. Atishay Jain, Ld. Counsel for the Applicant present.
2.IA-1452/2024: This is an Application filed by the Resolution Professional (RP) seeking extension of CIRP period by 60 days from 31.01.2024 to 28.03.2024 after completing 270 days.
3.The Counsel for the RP submitted that the Corporate Debtor was admitted into CIRP on 02.05.2023. The COC was constituted with the five members and the 180 days was completed on 29.10.2023. After completion of 180 days 90 days extension was granted on 06.12.2023 i.e. up to 30.01.2024. Now they are seeking extension of another 60 days from 31.01.2024 to 28.03.2024. The Counsel for the RP further submitted that no EoI has been received after publication of Form G in this CIRP proceedings. He is seeking further extension for invitation of EoIs by publishing the fresh Form G.
4.Heard the Counsel for the RP. This Bench feels that even if 60 days extension is granted in this application, 330 days have ended by 28.03.2024. After 28.03.2024 up to 20.06.2024 already another 80 days have passed. The RP has not filed any application for extension of this interregnum period. If they file for extension of this 80 days, it comes to 410 days. There is no progress till today in the CIRP proceedings. This Bench feels that it is not a case for giving extension for any further period and it is a fit case for liquidation on the ground that the Corporate Debtor is not functional and there is no assets with the Corporate Debtor. The Counsel also stated that the Corporate Debtor has no business activities.
5.In view of the above reasons, this bench is not inclined to grant any further extension for conducting the CIRP. Hence, the IA is hereby dismissed.”
Thereafter, in the 8th meeting of the CoC held on 26.06.2024, the CoC resolved for filing of an application for liquidation of the CD under Section 33(2) of the Code. Consequently, I.A. No. 68 of 2024 was filed by the RP on 02.07.2024 seeking liquidation of the CD.
I.A. No. 3362 of 2024 which was though filed on 30.03.2024 by the Appellant was not put up before the Tribunal because it was allegedly lying in defect but ultimately in this application, it is submitted that, notice was issued on 03.07.2024 and the case was listed for hearing on 06.08.2024.
The application bearing I.A No. 68 of 2024 was reserved on 12.07.2024. After the order was reserved in the said application, an application was alleged to have been filed on 20.07.2024 for preponement of hearing in I.A No. 3362 of 2024.
It is also submitted that the 9th CoC meeting was held on 24.07.2024 in which it was decided to seek extension of CIRP period because CoC member Catalyst Trusteeship Limited having 87.05% voting share had received an EOI for assignment of their debt which was ultimately assigned to Parijat Trading.
It is also submitted that RP filed an application vide diary no. 2709138077272024 on 01.08.2024 for extension of CIRP time in lieu of the resolution passed by the CoC in the 9th CoC meeting.
However, on 02.08.2024 the order on the application bearing I.A. No. 68 of 2024 was passed pronounced by the Tribunal and the order of liquidation of the CD was passed. Thereafter on 06.08.2024 the application bearing I.A. No. 3362 was also dismissed as infructuous. The said order is reproduced as under:-
“1.Mr. Nishit Dhruva a/w Ms. Khushbu Chhajed & Mr. Yash Dhruva i/b MDP Legal, Ld. Counsel for CoC present (VC). Mr. Nausher Kohli a/w Mr. Yash Pandya i/b Jayakar & Partners, Ld. Counsel for the Applicant present. Mr. Kunal Kanungo a/w Ms. Tanushree Sogani and Mr. Atishay Jain, Ld. Counsel for the Respondent/RP present.
2.IA-3362/2024: The Counsel for the Applicant submits that this Bench vide an order dated 02.08.2024 admitted the Corporate Debtor into liquidation. In view of the same, the present application is rendered infructuous.
3.In view of the above submission, IA is dismissed as infructuous.”
Aggrieved against the order dated 02.08.2024 by which I.A. No. 68 of 2024 was allowed and the order of liquidation was passed and also order dated 06.08.2024 by which I.A. No. 3362 of 2024 was dismissed as infructuous, the present appeal has been filed by the ex-director/promoter of the CD.
Sr. Counsel for the Appellants has vehemently argued that the Tribunal has committed an error while passing the order dated 02.08.2024 without deciding the application I.A No. 3362 of 2024 which was though pending at that time and after allowing the application I.A. No. 68 of 2024, I.A. No. 3362 of 2024 by which the Appellants have requested for registration of the CD as MSME was dismissed as infructuous, is patently illegal. He has also submitted that though the order in I.A No. 68 of 2024 was reserved yet before the order could have been pronounced on 02.08.2024, the 9th CoC meeting was held on 24.07.2024 in which it was decided that one of the CoC member Catalyst Trusteeship Limited had assigned its debt to Parijat Trading. It is submitted that the Tribunal should have taken into consideration at least the application I.A. No. 3362 of 2024 filed by the Appellant before the order was pronounced in I.A. No. 68 of 2024 because in the application I.A. No. 3362 of 2024 the Tribunal had even issued notice on 03.07.2024 for 06.08.2024. The said order dated 03.07.2024 is also reproduced as under:-
“Senior Counsel, Mr. Prateek Seksaria a/ w Mr. Yash Pandya i/b Jayakar & Partners, Ld. Counsel for the Applicant present through VC. None present for the Respondent.
2.Registry is directed to issue Court Notice to the Respondent clearly intimating the next date of hearing and place the notice along with track report on record before the next date of hearing. The Applicant is also permitted to issue personal notice to the Respondent and file proof of service before the next date of hearing. The Respondent is directed to file reply within two weeks of receipt of Notice and serve copy on the other side three days in advance before the next date of hearing.
3.List this matter for further consideration on 06.08.2024.”
RP has also filed an application for extension of time.
Mr. Monga, Adv. appearing on behalf of the Assignee has also submitted that the Tribunal should have extended the period of CIRP so that resolution plan could have been produced to avoid the liquidation of the CD as the liquidation is the last resort.
Counsel for Respondent/RP has submitted that this appeal is only confined to the order which has been passed on the application filed by the Appellant bearing I.A. No. 3362 of 2024 by which the application for registration of the CD as MSME has been declined on the ground that the said application has become infructuous because I.A No. 68 of 2024 has been allowed prior to it.
He has also submitted that even if the application I.A No. 3362 of 2024, in which notice was issued on 03.07.2024 for 06.08.2024 has not been decided before the application bearing I.A. No. 68 of 2024 yet the fact remains that the application bearing I.A. No. 3177 of 2023 filed by the Appellant under Section 17(2) r/w Section 60(5) of the Code seeking direction to Respondent to register the CD under MSME had already been dismissed by the Tribunal by passing a speaking order on 02.08.2023 which was though challenged in appeal but the appeal was not pursued, therefore, it does not lie in the mouth of the Appellant to allege that I.A. No. 3362 of 2024 should have been considered and decided.
We have heard Counsel for the parties and perused the record with their able assistance.
There is no dispute in this case that on 15.07.2023 an application bearing I.A No. 3177 of 2023 was filed by the Appellant under Section 17(2) r/w Section 60(5) of the Code for a direction to RP to register the CD as MSME. There is also no dispute that the said application dated 15.07.2023 was heard on merit and decided on merit on 02.08.2023. There is again no dispute that the order dated 02.08.2023 was sought to be challenged by the Appellant by way of an appeal through e-filing on 27.12.2023. The said appeal was never pursued by the Appellant as it remained in defects which were neve cured and thus appeal was not listed. Meaning thereby, the Appellant accepted the order dated 02.08.2023 having been passed on their application I.A No. 3177 of 2023 filed on 15.07.2023. In such circumstances, the first question which arises for our consideration is as to whether the Appellant could have maintained the second application I.A No. 3362 of 2024 even on the basis that there was a decision of the Hon’ble Supreme Court in Civil Appeal No. 4422 of 2023 decided on 29.11.2023. In our considered opinion, the second application I.A No. 3362 of 2024 was totally misconceived as the decision of the Hon’ble Supreme Court was only on the issue as to whether an application for registration as MSME can be filed even after the commencement of the CIRP which was not the issue before the Tribunal because I.A No. 3177 of 2023 filed on 15.07.2023 was decided by the Tribunal on 02.08.2023 by passing a speaking order which attained finality as it was not challenged though right to appeal was available and in fact the appeal was also filed as alleged but not pursued for the reasons best known to them.
The question which has now been raised in this appeal that the Tribunal should have postponed the decision in the application no. 68 of 2024 and decided I.A No. 3362 of 2024 at the first instances.
In our considered opinion, once I.A No. 3362 of 2024 itself was misconceived and could not have been filed in view of principle of res-judicata, therefore, even if the said application was not decided before I.A No. 68 of 2024 was decided makes no difference.
In so far as the rights of the assignee etc. are concerned, the assignee have their own remedy but the Appellant who is the suspended director cannot espouse the grievance of the assignee in any manner.
No other point has been raised.
With these observations, we are of the considered opinion that there is hardly any merit in this appeal which calls for any interference and hence, the same is hereby dismissed. No costs.