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Judgment
[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]
The instant appeal has been filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (In short ‘Code’) read with Rule 11 of the NCLAT Rules, 2016 against the impugned order dated 11.03.2024 passed by the NCLT, Kolkata Bench in I.A No. 1576/KB/2022 in CP (IB) No. 518/KB/2018 whereby the Adjudicating Authority allowed the application bearing I.A No. 1576 of 2022 pertaining to the prayers B, C, D, E, F & I and the judgment was later on corrected by passing a corrigendum order of date 22.03.2024 whereby above mentioned order was corrected and the prayers A, B & C of the aforesaid application were allowed.
Brief factual matrix necessary for the disposal of the instant appeal is that CP (IB) No. 518/KB/2018 was filed by the Bank of India against the CD/Sri Balaji Forest Products Pvt. Ltd. under Section 7 of the Code which was admitted vide order dated 18.10.2019 passed by the Adjudicating Authority and Mr. Aditya Kumar Tibrewal was appointed as the Interim Resolution Professional (IRP) who was later on confirmed as the Resolution Professional of the CD.
The public announcement was made by the IRP on 24.10.2019 in order to collate the claims of the creditors and Form G for inviting Expression of Interest (EOI) from potential resolution applicants was issued on 11.02.2020 and also thereafter on many dates and ultimately last date for receipt of EOI was fixed as 27.09.2020 with the last date of submission of resolution plan as 08.11.2020 which was extended up to 26.11.2020, however, no EOI was received from any prospective resolution applicants.
After the expiry of the last date for submission of EOI by any prospective resolution applicants, Respondent No. 2 i.e Swadeshi Marketing Pvt. Ltd. filed an application bearing I.A No. 1290/KB/2020 for consideration of their resolution plan by the CoC and in this regard the aforesaid application was directed to be considered by the RP by the Tribunal vide its order dated 02.12.2020 and in compliance of the same the resolution plan submitted by the R2 was considered by the CoC and after much deliberations it was ultimately approved by the CoC on 09.03.2021 by voting percentage of 93.46%.
The aforesaid plan was submitted for approval by the RP by filing an application bearing I.A No. 319 of 2021 for approval of the Adjudicating Authority and the Adjudicating Authority vide its order dated 04.07.2022 approved the resolution plan. The relevant part of the judgment passed by the Adjudicating Authority is reproduced as under: -
“45.On hearing the submissions made by the Ld. Senior Counsel for the Resolution Professional, and perusing the record, we find that the Resolution Plan has been approved with 93.46% voting share. As per the CoC, the plan meets the requirement of being viable and feasible for revival of the Corporate Debtor. By and large, all the compliances have been done by the RP and the Resolution Applicant for making the plan effective after approval by this Bench.
46.On perusal of the documents on record, we are also satisfied that the Resolution Plan is in accordance with sections 30 and 31 of the IBC and also complies with regulations 38 and 39 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
47.As far as the question of granting time to comply with the statutory obligations/seeking sanctions from governmental authorities is concerned, the Resolution Applicant is directed to do the same within one year as prescribed under section 31(4) of the Code.
48.In case of non-compliance of this order or withdrawal of Resolution Plan, the CoC shall invoke the Performance Bank Guarantee furnished by the Resolution Applicant.
49.Subject to the observations made in this Order, the Resolution Plan in question is hereby approved by this Bench. The Resolution Plan shall form part of this Order.
50.The Resolution Plan is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect.
51.The Moratorium imposed under section 14 shall cease to have effect from the date of this order.
52.The Resolution Professional shall submit the records collected during the commencement of the proceedings to the Insolvency & Bankruptcy Board of India for the record and also unto the Resolution Applicant or New Promoters.
53.Certified copy of this Order be issued on demand to the concerned parties. upon due compliance.
54.Liberty is hereby granted for moving any Application if required in connection with implementation of this Resolution Plan.
55.A copy of this Order is to be submitted in the Office of the Registrar of Companies, West Bengal.
56.The Resolution Professional shall stand discharged from his duties with. effect from the date of this Order.
57.The Resolution Professional is further directed to handover all records, premises/factories/documents to the Resolution Applicant to finalise the further line of action required for starting of the operation. The Resolution Applicant shall have access to all the records/premises/factories/documents through the Resolution Professional to finalise the further line of action required for starting of the operation.
58.IA (IB) 319/KB/2021 in C.P. (IB) No. 518/KB/2018 shall stand disposed of accordingly.
59.The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.
60.Certified copy of this order may be issued, if applied for, upon compliance of all requisite formalities.
61.File be consigned to the record.”
The appeal against the aforesaid order of the Adjudicating Authority approving the resolution plan bearing CA (AT) (Ins) No. 1267 of 2022 was presented before this Appellate Tribunal and the same was dismissed on 22.08.2023.
An avoidance / preferential transaction cancellation application under Section 43, 45, 49 and 66 of the Code was earlier filed by the RP bearing I.A No. 742 of 2020 which was also disposed of by the Tribunal by passing an order on 04.07.2022 whereby the aforesaid application was allowed and the lease deed dated 30.11.2016 made by the directors of the CD in favour of the Respondent No. 3 of that application was held to have been executed fraudulently and grossly undervalued in order to defraud the creditors of the CD and was set aside by the Adjudicating Authority and certain other transactions pertaining to Respondent No. 6 and 7 of that application were also held preferential and made with related parties and consequential directions were issued to the Respondent No. 6 and 7 of that application to contribute Rs. 11,10,000 and Rs. 5,50,000 only, to the CD with certain other consequential directions. The relevant part of the judgment passed by the Adjudicating Authority is reproduced as under; -
“40.Without even considering the aforesaid facts, the applicant/resolution professional has been successful in showing that the lease deed dated 30th November 2016 itself is grossly fraudulent, illegal and void ab initio in as much as the same has been executed after the issuance of the notice under Section 13 (2) of the SARFAESI Act, 2002 in light of Mannalal Khetan v. Kedarnath Khetan AIR 1977 SC 536.
41.The above facts clearly demonstrate that the lease deed dated 30th November 2016 has been executed fraudulently and is grossly undervalued in order to defraud the creditors of Corporate Debtor and accordingly the such act of respondents is liable to be prosecuted under Section 45, Section 49 and Section 66 of the 1 & B Code, 2016. Accordingly, the lease deed dated 30th November 2016 is hereby set aside by this Adjudicating Authority in light of the powers conferred under Section 45, Section 49 read with Section 66 of the 1 & B Code, 2016.
42.In addition to the above, the Respondent Nos. 6 and 7 have failed to appear and/or place their submissions before this Adjudicating Authority. In the absence of any justification to the transactions entered into with related parties, being Respondent Nos. 6 and 7 within the lookback period, the said transactions fall under the ambit of Section 43 of the 1 & B Code, 2016 and accordingly, Respondent Nos. 6 and 7 are hereby directed to make payments of Rs. 11,10,000/- (Rupees Eleven Lakh and Ten Thousand only) and Rs. 5,50,000/- (Rupees Five Lakh and Fifty Thousand only) respectively for being related party preferential transactions under Section 43 of the I & B Code, 2016.
43.With respect to the reliefs sought pertaining to infringement of trademark, this Adjudicating Authority refuses to interfere in disputes arising out of Intellectual Property Rights. However, we make it clear that in the absence of any valid agreement assigning the trademark of corporate debtor in favour of respondent no. 3, the respondent no. 3 is hereby restrained from using the property of the corporate debtor.
44.In light of the aforesaid, the present application is allowed in terms of the directions aforestated and the Respondent Nos. 3 to 5 are hereby directed to handover peaceful, vacant, undisturbed and unhindered access to the plant, factory, land, building, shed and premises located within the 17.25 acre of land to the resolution professional/applicant.
45.The application is therefore disposed off in terms of the directions aforestated.
46.Certified copy of the order may be issued to all the concerned parties, if applied for, upon compliance with all requisite formalities.”
The appeal bearing CA (AT) (Ins) No. 985 of 2022 was preferred against the aforesaid judgment of the Adjudicating Authority and the same was dismissed by this Appellate Tribunal by passing order dated 14.11.2024.
The Respondent No. 2 (SRA) moved an application bearing I.A No. 1576 of 2022 before the Adjudicating Authority for grant of many prayers mentioned therein from prayer a to n, however, by passing the impugned judgment as corrected by the corrigendum order the Tribunal has granted prayers a, b and c in favour of the applicant/Respondent No. 2. The said prayers are also reproduced as under: -
“(a)Leave be granted for impleadment of the applicant in the matter and to file the instant application;
(b)The Respondent Nos. 7 and 8 be directed for registration of the land at Bighati, Old Delhi Road held in the name of the Corporate Debtor;
(c)The Respondent No. 9 be directed to pay an amount of Rs. 11,10,000/-
Aggrieved by this impugned order of date 11.03.2024, the appellant has filed the present appeal.
Heard. Ld. Counsel for the Appellant as well as Ld. Counsels for the Respondent No. 2 and 6. Perused the record.
Ld. Counsel for the Appellant submits that the Adjudicating Authority has committed a patent illegality in granting relevant prayers of the I.A No. 1576 of 2022 moved by the Respondent No. 2 before it showing to have been passed in compliance with the earlier order dated 04.07.2022 passed in I.A No. 319 of 2021 and the same is unsustainable as the same is entirely founded on the order dated 04.07.2022 which is itself void and per incuriam and have been passed in disregard to Section 18(1)(f) of the Code and explanation appended therewith.
It is further submitted that the resolution plan which has been approved by the Adjudicating Authority vide order dated 04.07.2022 treated the immovable property owned by the Appellant and other 3rd party as assets of the CD and directed the vesting of the same in the CD upon approval of the plan and thus the aforesaid Section 18(1)(f) of the Code has been ignored and the decision rendered in ignorance of mandatory legal provisions is per incuriam and cannot be relied or enforced.
It is further submitted that this Appellate Tribunal by passing an order dated 22.03.3034 in I.A No. 3878 of 2022 moved by the Appellant in appeal i.e. CA (AT) (Ins) No. 985 of 2022 has categorically recorded that the order dated 04.07.2022 passed by the Adjudicating Authority did not question or adjudicate the Appellant’s ownership and this finding affirms and protects the Appellant’s title in the property which is shown to have been vested in the CD and pertaining to which the consequential directions have been passed by the Adjudicating Authority by passing the impugned order.
It is vehemently submitted that the plan approval order dated 04.07.2022 as well as impugned order are ipso facto illegal and are liable to be quashed.
Ld. Counsel for the Respondent No. 2 and 6 submits that it was on 04.07.2022 the Adjudicating Authority has passed two orders i.e. one with regard to I.A No. 319 of 2021 filed by the RP for approval of the resolution plan and second order passed with regard to I.A No. 742 of 2020 with regard to an application filed by the RP for the avoidance of the transaction whereby the CD, Appellant and other ex-promoters of the CD had fraudulently leased out entire business, plant, machinery and subject land etc. of the CD to a related entity at a grossly undervalued lease rent by a fraudulent lease deed dated 30.11.2016.
It is further submitted that both the aforesaid applications were allowed and the resolution plan submitted by the Respondent No. 2 was approved whereby the land on which the premise of the CD was situated was included in the CD, after approval of the resolution plan and by passing the order with regard to I.A No. 742 of 2020 the lease deed dated 30.11.2016 was set aside and the Appeals preferred by the relevant parties against both the orders bearing CA (AT) (Ins) No. 985 of 2022 and 1267 of 2022 were dismissed vide order dated 14.11.2024 and 22.08.2023 and no appeal was preferred against the orders passed by this Appellate Tribunal before the Hon’ble Supreme Court and thus the orders passed by this Appellate Tribunal pertaining to the approval of the resolution plan as well as the order with regard to avoidance of certain transactions has become final and absolute and binding on the parties and by passing the impugned order only consequential directions have been given by the Adjudicating Authority in furtherance of the orders dated 04.07.2022 and thus the Appellant as of now is not having any merit or substance in his submissions.
It is further submitted that any objection with regard to the terms of the resolution plan may not be raised by the Appellant at this stage when the plan has been approved by the CoC, Adjudicating Authority as well as by this Appellate Tribunal and no appeal against the approval order has been preferred before the Hon’ble Supreme Court, therefore, the submission of Ld. Counsel for the Appellant that any condition or content of the resolution plan is illegal may not be considered at this stage by this Appellate Tribunal.
It is vehemently submitted that the resolution plan submitted by the Respondent No. 2 has already stand implemented in full and amount of approximately Rs. 27 Cr. has been paid to the creditors of the CD and also in reviving business operations of the CD.
It is also submitted that by passing the impugned order nothing new has been done but the effect has been given to the provisions of the approved resolution plan by directing the Appellant who had mortgaged the subject matter land to lenders of the CD for loans taken by it and he was also its personal guarantor and to formally effect registration of subject matter mortgaged land in favour of the CD.
It is further submitted that it has been categorically observed by the Adjudicating Authority in the plan approval order of 04.07.2022 that the said land is essential for working of the CD as factory, plant, machinery etc of the CD are built and situated on the same land which has been included in the resolution plan as well as in the IM by the RP as well as SRA and the said plan has been finally approved up to this Appellate Tribunal and thus, the instant appeal is nothing but a mischievous attempt on the part of the ex-promoters of the CD to place hurdles in the implementation of the plan, therefore, the appeal is liable to be dismissed.
Having heard Ld. Counsel for the parties and having perused the record it is evident that the resolution plan submitted by the Respondent No. 2 which was approved by the CoC and was placed before the Adjudicating Authority for approval through an application bearing I.A No. 319 of 2021 contains a provision that land of the personal guarantor as mentioned in the table given in the resolution plan has been made part of the assets of the CD in the IM as stated in detail in the resolution plan. The Adjudicating Authority has taken a note of the same and has reproduced it in the order dated 04.07.2022 passed in I.A No. 319 of 2021 in para 35 and for convenience we also reproduce the same as under: -
“LAND OF THE PERSONAL GURANTOR AS MENTIONED IN THE TABLE HEREIN ABOVE (UNDER SL 3. RESOLUTION PLAN AMOUNT AND PAYMENT THEREOF) STARTING FROM S.N. I TO 40 WHICH HAS BEEN MADE PART OF THE ASSETS OF THE CD IN THE IM AS STATED IN DETAIL HEREIN ABOVE:
A. Upon approval of the plan by the Hon'ble Adjudicating Authority, such land shall stand transferred to the Corporate Debtor and the Corporate Debtor shall be vested to be in possession of and have absolute, good and marketable title, rights and interest in the said landed premises and without any further documentary filing registration, permission, approval or other requirement to be effected by the Corporate Debtor and the personal guarantees given by Satyaprakash Pandey and Murlidhar Pandey in respect of the landed premises as mentioned in the table herein above (under SL 3. Resolution Plan Amount and Payment Thereof starting from S.N. 1 to 40, shall also be transferred in the name of the Corporate Debtor.
B. The approval of the resolution plan by the Hon'ble Adjudicating Authority will be binding on the personal guarantors pursuant to Section 31(1) of the Code and the personal guarantors Mr. Satyaprakash Pandey and Mr. Murlidhar Pandey as stakeholders in respect of landed premises as mentioned in the table herein above (under St.
3.Resolution Plan Amount and Payment Thereof) starting from S.N. 1 to 40 which are included as the assets of the CD In the IM are directed to immediately (1) pass the necessary Corporate Resolutions; (ii) provide all approvals, execute all documents, deeds, instruments, notices, certificates or power of attorney in the format provided by the resolution applicant of the Corporate Debtor; (iii) do all filings and take all actions and do all registration and/or other requirements to be effected for transfer of the landed premises under the applicable laws to the Corporate Debtor; (iv) to take all actions and do all deeds as may be required and/or as directed by the resolution applicant for transferring the aforesaid landed premises to the Corporate Debtor or such person as the resolution applicant may direct within 30 days from the date of order of Hon'ble NCLT.
C. The resolution applicant undertakes to pay the stamp duty and relevant registrar of Assurance fees, if not waived by the concerned authorities, to effect all registration requirements in relation to the transfer of the said land under applicable laws.”
The Adjudicating Authority while approving the resolution plan submitted by the RP as approved by the CoC has taken a conscious decision to include the aforesaid properties of the suspended board of directors and guarantors of the CD for the purpose of smooth implementation of the plan and while doing so the following observations were made by the Adjudicating Authority: -
“37.It was contended that in the present case as well, the properties of the suspended board of directors and guarantors of the corporate debtor have been mortgaged with the Financial Creditors of the Corporate Debtor. It was further contended that notice under Section 13 (2) of the SARFAESI Act, 2002 was issued to not only the corporate debtor but the suspended board of directors and guarantors as well.
38.It is an undisputed fact that the suspended board of directors and guarantors of the corporate debtor have mortgaged the entire land to the financial creditors. It is further an undisputed fact that the entire plant, and factory of the corporate debtor is established on the same land which has been mortgaged to the financial creditors and owned by the suspended board of directors and guarantors to the corporate debtor. It is also an admitted fact that the corporate debtor had an unfettered right to use the plant and factory established at the land of the suspended board of directors and guarantors of the corporate debtor.
39.It is pertinent to mention that Regulation 37 (B) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 provides that "a Resolution Plan shall provide for the measures, as may be necessary for Insolvency Resolution of the Corporate Debtor for maximisation of value of its assets, including but not limited to the sale of all or part of the assets whether subject to any security interest or not."
40.As per Section 31 of the Insolvency and Bankruptcy Code, 2016, the approved Resolution Plan binds all the stakeholders, including the Corporate Debtor's Guarantors. Thus, the suspended board of directors and guarantors to the corporate debtor are bound by the approved resolution plan. In light of the above discussion, we believe that the objections raised by the suspended. board of directors and guarantors to the corporate debtor are not sustainable. It is also pertinent to mention here that the suspended board of directors and guarantors are the persons who have been in complete controlled the corporate debtor till initiation of Corporate Insolvency Resolution Process.
41.It is also important to point out that land is an essential part of the corporate debtor's business. The entire plant and factory of the corporate debtor is being established on the said land sought to be transferred to the successful resolution applicant by virtue of the approval of the resolution plan. Therefore, it is an essential part of the Resolution Process. The value arrived in the 'CIRP', the purported liquidation value, all includes the value of the land and the same has always been the essence of the business of the Corporate Debtor.
42.It has also been contended by the Ld. Senior Counsel appearing for the Resolution Professional that the aforesaid decision of the Hon'ble Appellate Tribunal in Vanguard Credit & Holdings Pvt. Ltd. (supra) has not been interfered with by the Hon'ble Supreme Court in as much as the Civil Appeal being 1688 of 2021 was dismissed by order dated 02.07.2021.
43.In light of the aforesaid, relief and concession sought by the successful resolution applicant at Sr. No. 40 of Annexure 3 of the Resolution Plan is hereby granted in light of the judgment rendered by the Hon'ble National Company Law Appellate Tribunal in Vanguard Credit & Holdings Pvt. Ltd. (supra).”
Thus a conscious decision has been taken by the CoC in its commercial wisdom as well as by the Adjudicating Authority for inclusion of the said land in the CD for the purpose of keeping the CD as a going concern.
Even if it may appear to be a repetition but it is to be recalled that this order of approving the resolution plan dated 04.07.2022 was challenged before this Appellate Tribunal by presenting an appeal bearing CA (AT) (Ins) No. 1267 of 2022 which has been dismissed by this Appellate Tribunal vide order dated 22.08.2023 on the issue of barred by limitation and the order dated 22.08.2023 of this Appellate Tribunal is not shown to have been challenged before the Hon’ble Supreme Court, therefore, so far as the resolution plan is concerned, the same has become final and binding on the parties.
At this stage, it is also to be recalled that by passing the order on the same day i.e. 04.07.2022 in I.A No. 742 of 2020 the Adjudicating Authority has set aside the lease deed dated 30.11.2016 allegedly made by the CD and suspended board of directors in favour of some other persons and by passing that order the said land was vested in the CD. This order of the Adjudicating Authority was admittedly challenged before this Appellate Tribunal by preferring an appeal bearing CA (AT) (Ins) No. 985 of 2022 which has also been admittedly dismissed on 14.11.2024 by this Appellate Tribunal and at the cost of repetition it is reiterated that the judgment of this appellate Tribunal dated 14.11.2024 has not been challenged any further, therefore, the finding of the Tribunal with regard to the vesting of the aforesaid land in the CD has become final and binding on the parties.
Much emphasis has been given by the Ld. Counsel for the Appellant to canvas that the judgment passed by the Adjudicating Authority on 04.07.2022 with regard to the approval of the resolution plan submitted by Respondent No. 2 and setting aside the lease deed are per incuriam and illegal as the 3rd party property cannot be included in the property of the CD and the RP or the IRP could also not take possession of the same and also that the AA is not having any jurisdiction to cancel the lease deed which is only vested in the Civil Courts.
We have already stated that since the resolution plan order and order of the same date pertaining to the setting aside of the lease deed were challenged before this Appellate Tribunal by filing appeals and those appeals have been dismissed by this Appellate Tribunal and no further appeal has been filed before the Hon’ble Supreme Court, therefore, the same has become final and binding on the parties, therefore, as of now this Appellate Tribunal appears to be not having any jurisdiction to enter into those questions which have already become final and binding on the parties, therefore, we do not find any force in the aforesaid submissions of Ld. Counsel for the Appellant.
Now coming to the impugned order dated 11.03.2024 passed in I.A No.1576 of 2022 moved by the Respondent No. 2 whereby the aforestated prayers a, b & c has been allowed would reveal that prayer no. (b) of that application was to the following effect: -
“(b). The Respondent Nos. 7 and 8 be directed for registration of the land at Bighati, Old Delhi Road held in the name of the Corporate Debtor”.
The Adjudicating Authority by passing the impugned order has categorically held that while approving the resolution plan they have taken a decision in the said order dated 04.07.2022 passed in I.A No. 742 of 2020 with regard to this land in para 35 and 43 of the said judgment and after quoting the findings arrived at in the aforesaid paras, the Tribunal has recalled its judgment dated 04.07.2022 passed in I.A No. 742 of 2020 whereby the lease deed with regard to the land in question has been set aside and categorically hold that the prayers a, b & c (as corrected vide corrigendum order) were held maintainable and allowed.
We are of the considered view that the prayers which has been allowed by the Adjudicating Authority by passing the impugned order are only consequential directions which have been passed on the basis of the judgments already passed by the Adjudicating Authority on 04.07.2022 with regard to the I.A No. 319 of 2021 and 742 of 2020 and nothing new has been done and the said orders passed on 04.07.2022 have become final and binding on the parties.
We are of the firm view that any submission with regard to the said judgments of date 04.07.2022 passed by the Adjudicating Authority and not disturbed by this Appellate Tribunal in aforesaid appeals may not be considered by us as the said judgments/orders of the Adjudicating Authority has become final and binding on the parties, as no appeal against the aforesaid judgments of this Appellate Tribunal were preferred before the Hon’ble Supreme Court.
Thus, for the reasons mentioned herein before, we do not find any illegality in the impugned order passed by the Adjudicating Authority, therefore, the appeal lacks merit and the same is hereby dismissed. No costs.