Nirmal Kanodia vs Balajee Ingot India Private Limited

Per Cmde. Siddharth Mishra, Member (Technical):

The Court congregated through a hybrid mode.

We have heard Mr. Shaunak Mitra, assisted by Mr. Riyanshu Agarwal, Learned Counsel appearing on behalf of the Resolution Professional Mr. Niraj Kumar Agrawal.

This application has been preferred by Mr. Niraj Kumar Agrawal, the Resolution Professional of Balajee Ingot India Private Limited, under Section 30(6) read with Section 31 of the Insolvency and Bankruptcy Code, 2016, for brevity “I&B Code”, and Regulation 39(4) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, for brevity “CIRP Regulations”, for submission and final approval of the Resolution Plan submitted by the Resolution Applicant.

Mr. Shaunak Mitra, Learned Counsel appearing on behalf of the Resolution Professional (hereinafter referred to as “RP”/ “Applicant”), would submit that the Committee of Creditors, for brevity “CoC”, at its 7^th meeting convened on 21.04.2025, with 100% majority, approved the Resolution Plan dated 08.04.2025, annexed at pages 72-184 to the application, submitted by Aravali Goods & Suppliers Pvt. Ltd. (CIN: U51109WB1995PTC073144), hereinafter referred to as “Successful Resolution Applicant”, for brevity “SRA”, submitted on 12.04.2025 (as per the Compliance Certificate under Regulation 39(4) of the CIRP Regulations, in Form H, annexed at pages 53-71 to the application).

At the 7^th CoC meeting convened on 24.04.2025, the CoC instructed the RP to issue Letter of Intent (“LoI”) to the SRA – Aravali Goods & Suppliers Pvt. Ltd. upon approval of the resolution plan and authorized the RP to file necessary application with the resolution plan as approved by CoC for final sanction. The minutes of the 7^th CoC meeting is annexed at pages 223-236 to the application.

The Corporate Debtor – Balajee Ingot India Pvt. Ltd. (U27310WB1989PTC139464) is a private limited company registered with the Registrar of Companies, Kolkata, incorporated on 07.12.1989, having registered office at 2/7, Sarat Bose Road, 6th Floor Vasundhara Building, Kolkata, West Bengal, Pin Code: 700020, carrying business of manufacturing and trading of iron and steel ingots.

In 2022, the corporate debtor – Balajee Ingot availed a financial credit from its erstwhile director – Mr. Nirmal Kanodia, and on defaulting such financial credit to repay, Mr. Kanodia rushed to this Adjudicating Authority, vide a company petition preferred under Section 7 of the I&B Code, prayed for admission of the corporate debtor into CIR Process. On 25.06.2024, the petition was allowed by this Adjudicating Authority and Mr. Niraj Kumar Agarwal was appointed as Interim Resolution Professional (“IRP”).

The IRP, in terms of Regulation 6 of the CIRP Regulations, made public announcement in Form A on 28.06.2024, for the invitation of claims from the creditors of the corporate debtor, and submit the claimed with proof on or before 09.07.2024 to the IRP.

Upon received claims from the various creditors, the IRP constitutes Committee of Creditors on 14.09.2024, in accordance with Section 18(1)(c) of the I& B Code read with Regulations 13(2)(d) and 17(1) of the CIRP Regulations. The list of the financial creditors of the corporate debtor being the member of the CoC as constituted by the IRP, along with the distribution of voting share, is as under:

As per the latest claim as on 26.03.2025 (Version 4) available with the IBBI official website, the list of unsecured financial creditors (other than financial creditors belonging to any class of creditors):

As per the latest claim as on 26.03.2025 (Version 4) available with the IBBI official website, the list of operational creditors (Government dues):

As per the latest claim as on 26.03.2025 (Version 4) available with the IBBI official website, the list Operational creditors (other than Workmen and Employees and Government Dues):

The IRP convened the 1^st meeting of CoC on 20.09.2024, wherein the CoC with 100% voting majority approved the appointment of IRP as Resolution Professional (“RP”).

It is submitted that the RP in discharge his duty in terms of Regulation 27 read with Regulation 35 of the CIRP Regulations appointed two registered valuers on 01.08.2024 to determine the fair value and liquidation value of the corporate debtor in Plant and Machinery (P&M) and Securities & Financial Assets (SFA). The summery statement of valuation reports along with valuation reports furnished by the registered valuers is annexed at pages 239-292 to the application. The summery statement of valuation reports is as under:

It is submitted that the average fair value and the liquidation value of the corporate debtor as mentioned in Form H is as under:

a. Fair value = Rs. 10,62,361/-.

b. Liquidation value = Rs. 10,00,340/-.

Further, it is submitted that in terms of Regulation 35A read with Regulation 39(2) of the CIRP Regulation, the RP has not found or determine any avoidance transactions (PUFE transactions) under Section 43, 45, 50 and 66 of the I&B Code.

Learned Counsel appearing on behalf of the RP would submit that in compliance of Regulation 36(1) of the CIRP Regulations, the RP prepared the Information Memorandum (“IM”) and submitted to the CoC on 13.01.2025.

In compliance of the Regulation 36A (1) of the CIRP Regulations, the RP issued a public announcement on 22.11.2024, by way of “Form G” in the public newspaper for inviting the Expression of Interest (“EoI”) from the Prospective Resolution Applicants (“PRAs”).

It is submitted that in response of the Form G, twenty (20) Prospective Resolution Applicants expressed their interest and accordingly, the provisional list of resolution applicants was issued in terms of Regulation 36A (10) of the CIRP Regulations on 10.01.2025 and in terms of Regulation 36A (12) of the CIRP Regulations, the final list of eligible Prospective Resolution Applicants was issued on 15.01.2025.

Further, it is submitted that in accordance with Regulation 36B (3) of the CIRP Regulations, the RP issued Request for Resolution Plan (“RFRP”), Evaluation Matrix (“EM”) and Information Memorandum (“IM”) on 17.01.2025. The last date of submission of the resolution plan was fixed on 22.04.2025.

It is asserted that sole Resolution Applicant M/s. Aravali Goods & Suppliers Pvt. Ltd. submitted the resolution plan to the RP, in response to the EoI and RFRP and the same was put up for approval before the CoC at its 7^th meeting convened on 21.04.2025, in terms of Section 30(6) of the I&B Code read with Regulation 39(4) of the CIRP Regulations. The Resolution Applicant furnished an amount of Rs. 10 Lakh as EMD which is accepted by the CoC at its 7^th meeting.

At the 7^th CoC meeting convened on 21.04.2025, the CoC, upon due deliberation and discussion, found the plan of M/s. Aravali Goods & Suppliers Pvt. Ltd. feasible and viable keeping in view the fair value and liquidation value of the corporate debtor and approved the Resolution Plan submitted by sole Resolution Applicant M/s. Aravali Goods & Suppliers Pvt. Ltd. by 100% voting shares. Accordingly, the CoC declared M/s. Aravali Goods & Suppliers Pvt. Ltd. as Successful Resolution Applicant (“SRA”).

It is resolved at the 7^th CoC meeting that the Resolution Applicant will furnish a performance guarantee of 10% within 15 days after approval of the plan keeping in view the undertaking given by the Resolution Applicant. Further, the Resolution Professional is instructed to issue Letter of Intent (“LoI”) to the SRA.

J. Compliances of the Resolution Plan submitted by the SRA with various provisions under the I&B Code and CIRP Regulations:

Learned Counsel appearing for the RP would contend that in terms of Regulation 39(4) of the Insolvency and Bankruptcy Code (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the RP has filed a Compliance Certificate in prescribed form i.e., Form “H”, annexed at pages 53-71 to the application.

It is submitted that the Successful Resolution Applicant has met the criteria approved by the CoC having regard to the complexity and scale of operations of the business of the Corporate Debtor in terms of Section 25(h)(2) of the I&B Code.

Further, it is submitted that the Successful Resolution Applicant is eligible to submit a resolution plan in terms of Section 29A of the I&B Code and accordingly, a declaration has also been furnished by the SRA.

Learned Counsel for the Resolution Professional would submit the details of various compliances as envisaged within the I&B Code and the CIRP Regulations to which a Resolution Plan has been adhered to. Further, it is submitted that the Resolution Applicant has submitted its eligibility in terms of Section 30(1) of the I&B Code, 2016.

It is submitted that the resolution plan does not contravene any of the provisions of law for time being force.

It is further submitted that in terms of Section 30(2) of the I&B Code, 2016, (as amended vide Amendment dated August 16, 2019) the Resolution Plan, submitted by SRA provides the details of various compliances as under:

The SRA - M/s. Aravali Goods & Suppliers Pvt. Ltd. is a private limited company, having registered office at Room No. 102, Gr. Floor, Model House, 40, Strand Road, Kolkata – 700001, is carrying its business of providing cargo handling and supervision service.

The Resolution Plan submitted by the SRA contemplates a Total Resolution Plan Amount to the tune of Rs. 20,00,000/- against the total amount admitted by the RP to the tune of Rs. 20,32,26,727/- and against the total amount claimed to the RP of an amount of Rs. 21,00,02,883/-, leading to haircut of 99% in respect of claim admitted by the RP.

It is stated that the payment of outstanding “CIRP Costs” will be “at actual”. Further, an amount of Rs. 2 Lakh shall be kept for the contingent government liability, if required, for a period of 2 years from the final date which shall be 120 days from NCLT Approval Date or the date on which full and final payment is made whichever is earlier, otherwise to be invested in the business.

Schedule 4 of the Resolution Plan (at page 30 of the plan) provides the financial proposal for all the stakeholders which is as under:

The details of realisable amount under the resolution plan have been provided in Form H furnished by the RP as under:

The Resolution Applicant proposes to implement the resolution plan in the following manners (Implementation Schedule):

The details of implementation of the resolution plan as provided Form H:

It is submitted that in terms of Regulation 35A read with Regulation 39(2) of the CIRP Regulation, the RP has not found or determine any avoidance transactions (PUFE transactions) under Section 43, 45, 50 and 66 of the I&B Code.

Heard the Learned Counsel for the RP and perused the resolution plan submitted by the SRA and the documents on records carefully.

Prior considering the resolution plan for approval and final sanction, certain facts, which have been discerned, require to be discussed that:

a. The average Fair Value of the corporate debtor is determined as Rs. 10,62,361/-.

b. The average Liquidation Value of the corporate debtor is determined as Rs. 10,00,340/-.

c. The total amount claimed by all classes of creditors to the RP is Rs. 21,00,02,883/-.

d. The total amount admitted by the RP is Rs. 20,32,26,727/-.

e. The total claimed admitted by the RP in respect of the Government (GST-WB) is to the tune of Rs. 16.89 Crore, against that the plan is proposed to allocate only Rs. 2 Lakh, resulting a recovery of 0.12%. Further, an amount of another Rs. 2 Lakh has been retained for the contingent government liability, if any, comes within a period of 2 years from the final date which shall be 120 days from NCLT approval date or the date on which full and final payment is made, whichever is earlier.

f. The RP, upon verification, would assert that the GST Department Bihar has a claim of Rs. 1,39,62,077/- and the Income Tax Authority for the financial year of 2015-16, assessment year of 2016-17, has a claim of Rs. 76,52,027/-, however, such claims have not been submitted before the RP, and accordingly, prepared a list of “Contingent Liabilities” of the corporate debtor, as annexed at page 293 to the application.

g. The total resolution or realisable amount (except CIRP cost which would be paid at actual) under the resolution plan is Rs. 20,00,000/-.

h. Resulting a huge reduction or “Haircut” of 99% compared to the claim admitted by the RP.

j. No PUFE transactions have been determined by RP.

Strangely, we have noted that the fair value as well as the liquidation value of the present corporate debtor is nearly Rs. 20 Lakh whereas, the amount admitted by the RP against the amount claimed by the various creditors including financial creditors, operational creditors, Government Bodies etc. is about 20 Crore, and against that huge amount claim, a plan has been received and approved by CoC thereon, realising an amount for resolution of the debtor to tune the tune of Rs. 20 Lakh, leading a huge haircut of 99%.

We find that the RP in terms of Regulation 27 read with Regulation 35 of the CIRP Regulations appointed two registered valuers on 01.08.2024 to determine the fair value and liquidation value of the corporate debtor in “Asset Class Plat and Machinery” (P&M) and further appointed two registered valuers on 01.08.2024 to determine the fair value and liquidation value of the corporate debtor in “Securities & Financial Assets” (SFA). The summery statement of valuation reports along with valuation reports furnished by the registered valuers is annexed at pages 239-292 to the application.

The summery statement of valuation reports furnished by the registered valuers is as under:

We find that the Valuation Report dated 02.12.2024, submitted by CA Ritesh Kumar Gupta, annexed at pages 274-281 to the application, recommends the realizable market value of the financial assets of the corporate debtor based on the status of financial assets as on 02.12.2024 as follows:

a. Fair Value = Rs. 10,62,361/-.

b. Liquidation Value = Rs. 10,62,361/-.

The relevant extract of the Valuation Report dated 02.12.2024, is reproduced hereunder:

We also find that the Valuation Report dated 03.12.2024, submitted by Mr. Pankaj Parakh, annexed at pages 282-292 to the application, recommends the realizable market value of the financial assets of the corporate debtor based on the status of financial assets as on 03.12.2024 as follows:

a. Fair Value = Rs. 10,62,361/-.

b. Liquidation Value = Rs. 10,00,340/-.

The relevant extract of the Valuation Report dated 03.12.2024, is reproduced hereunder:

We note that the Book Value of the realisable financial assets of the corporate debtor as on 31.03.2023 as recorded in both the Valuation Reports, is about Rs. 4.23 Crore, whereas the fair value and liquidation value as determine by the appointed Registered Valuers is about Rs. 10 Lakh. We further note that the Book Value of the “Long-Term Loans and Advances” as on 31.03.2023, as recorded in the Valuation Report is about Rs. 25.28 Lakh, whereas the fair value and the liquidation value of the same is determined as NIL. The appointed Registered Valuers have given justification in this regard that Long-Term Loans & Advances mainly comprises of deposits with different entities and based on the mail confirmation received from RP, the said amounts are not recoverable and hence the value has been considered as NIL.

Similarly, the Book Value of “Trade Recoverable” of the corporate debtor as on 31.03.2023, as recorded in the Valuation Report is nearly Rs. 3.19 Crore, and against that, the fair value and liquidation value of the same has been determined as NIL, by given a justification by the appointed Registered Valuers that as discussed with the RP, the debtors are outstanding for more than 3 years and the same are time-barred in nature and it is assumed the said debts are no more realisable and hence, value of the same has been considered as NIL.

Further, the Book Value of the “Other Current Assets” as on 31.03.2023, is noted as Rs. 51.51 Lakh, whereas the fair value and the liquidation value have been recommended NIL. Reason provided by the appointed Registered Valuers that Short-Term Loan & Advances and Other Current Assets are mainly consist of Prepaid Expenses, Government receivables, Tax receivables (TCS, VAT, Service Tax) and Insurance Claim. As discussed with the RP, the company has a significant amount demand that is due to be paid to GST and Income Tax Department and hence the refund is not expected and non-recoverable. Further, the Insurance claim filed by the Company has been rejected by the Insurer and hence, the value of the Other Current Assets has been considered as NIL.

We infer that:

Firstly, if the “Long-Term Loans and Advances” comprises of deposits with the different entities, which is non-recoverable as confirmed by the RP, we are of the view that what initiatives or recourses was adopted by the corporate debtor prior initiation of CIR Process in respect of it to recover those deposits.

If no proper recourses in accordance with law as well as statutory provisions stipulated in Companies Act, 2013, had been taken by the corporate debtor to recovery the same, we are very clear of the view that the inaction on part of the corporate debtor indicates nothing but to help those entities to whom those deposits are secured or to construct an illegal path to secure those amounts for their personal benefit with an unlawful intend. We are also worried that how these claims have been dealt with in the balance sheets for the respective years of the corporate debtor and whether, the claim was written off in the respective balance sheets of the corporate debtor.

At this juncture, it is appropriate to go through Section 73(1) of the Companies Act, 2013, which stipulates that on and after the commencement of the Companies Act, 2013, no company shall invite, accept, or renew deposits under the Act, 2013, from the public except in manner provided under Chapter V of the Act, 2013. Further, the first Proviso of Section 73(2) of the Companies Act, 2013, provides that in a case where a company does not secure the deposits or secured such deposits partially, then, the deposits shall be termed as “unsecured deposits” and shall also be so quoted in every circular, form, advertisement, or in any document related to invitation or acceptance of deposits. Significantly, Section 73(3) of the Companies Act, 2013, states that every deposit accepted by a company under Section 73(2) of the Act, 2013, shall be repaid with interest in accordance with the terms and conditions of the agreement referred to in Section 73(2). Pertinently, Section 73(4) of the Companies Act, 2013, empowers the depositors to prefer an application before the Tribunal having jurisdiction, where a company fails to repay the deposit or part thereof or any interest thereon under Section 73(3), for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit.

Further, we are of the view that why the Resolution Professional herein did not take any proper legal recourse for recovery of such deposits in accordance with law as well as statutory provisions stipulated in Companies Act, 2013. As per Section 25(2)(b) of the I&B Code, the RP, in discharge of his duty being an insolvency professional to preserve and protect the assets of the corporate debtor, including the continued business operations of the corporate debtor, shall represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings. At least, the RP could have approached this Bench for the appropriate direction to recover of the said loans and advances, before coming to a conclusion that the said amount is not recoverable, and accordingly, assumed that the valuation of such would be NIL.

Secondly, concerning the “Trade Receivables” which is amounting to Rs. 3.19 Crore as per the book value as on 31.03.2023, it is assumed that the same is time barred and accordingly, non-recoverable in nature. Similarly, we are of the view that what legal action was taken by the corporate debtor when those trade receivables are within limitation.

If no proper action was adopted by the corporate debtor within the prescribed limitation, then it is very clear that this huge amount of claim is only for the undue benefit of the corporate debtor, and we are of the view that how these huge amount of claims have been dealt with in the respective balance sheets of the corporate debtor and whether, the claim was written off in the balance sheets of the corporate debtor.

Further, we are of the view that without having an effort to institute proper legal recourse and the outcome of such proceedings, how the RP decided that the same is time barred. It is trite, axiomatic, and settled law that the RP is not vested with adjudicatory powers as decided in the Swiss Ribbons Pvt. Ltd. vs. Union of India reported in (2019) 4 SCC 17, by the Hon’ble Apex Court and the role of the RP becomes vital to the efficient and transparent conduct of the CIRP process, as held in Mr. Umesh Kumar v. Mr. Narendra Kumar Sharma IRP, reported in (2024) ibclaw.in 88 NCLAT. Thus, the role of the RP is only to facilitate the insolvency proceedings, not having any adjudicatory jurisdiction to decide any claim or debt as time barred.

Thirdly, with regard to “Other Current Assets”, again the RP confirmed the appointed Registered Valuers that there are huge GST and other tax demand and thus, the credit is non recoverable. It is also stated that the Insurer rejected the insurance claim of the corporate debtor, and accordingly, the fair value and liquidation value of the same was determined upon consultation with the RP as NIL.

We are of the view that if there is a huge GST and other taxes demand against the corporate debtor, then, whether the said demand has been written off by the concerned Tax Authorities and whether the same has been indicated in the balance sheets for the respective years, and what action has been taken by the Tax or the concerned authorities in this regard.

Notably, GST Authority (West Bengal) submitted its claims to the tune of 16,89,28,059/- to the RP which has been admitted in 100%, however, against that admitted amount only 2 Lakh has been allotted in the resolution plan, leading a haircut of 99%.

Further, we would note that the RP has furnished a list of “Contingent Liabilities” of the corporate debtor, as annexed at page 293 to the application, which indicates that the GST Department Bihar has a claim of Rs. 1,39,62,077/- and the Income Tax Authority for the financial year of 2015-16, assessment year of 2016-17, has a claim of Rs. 76,52,027/-, however, such claims have not been submitted before the RP. We would note that another amount of Rs. 2 Lakh has been kept aside in the resolution plan for any claim received from any other governmental authorities within two years after approval of the plan, otherwise the same will be invested in the business.

As per Regulation 6A of the CIRP Regulations, 2016, the IRP shall send a communication along with a copy of public announcement made under Regulation 6 of the CIRP Regulations, to all the creditors as per the last available books of accounts of the corporate debtor through post or electronic means wherever the information for communication is available. Provided that where it is not possible to send a communication to creditors, the public announcement made under Regulation 6 shall be deemed to be the communicated to such creditors.

In case, the above claim has not been submitted to the RP, why the RP did not intimate the GST and IT Departments communicating the commencement of CIR Process and submission of claim. It is a settled position of law that the ‘Government dues or claim’ under the I&B Code is a “secured debt” and the Code does not prevent any Governmental Authority from treating them as a “secured creditor”. We would refer to the judgment rendered by the Hon’ble Apex Court in State Tax Officer (1) vs. Rainbow Papers Limited reported in (2023) 9 SCC 545: MANU/SC/1109/2022 wherein it has been held that Gujarat State Government is a secured creditor in view of special provisions in GVAT Act to that effect.

Further, as per Section 82 of the Central Goods and Services Tax Act, 2017 (CGST Act)/ West Bengal Goods and Services Tax Act, 2017 (WBGST Act), tax is to be the first charge on the property, save as otherwise provided in the I&B Code. This Bench in the case of Sandip Kumar Kejriwal, Professional (RP) of Indian Mining Works Private Limited reported in MANU/NC/3344/2024: (2024) ibclaw.in 582 NCLT, has held that there is nothing in the I&B Code to negate that position of the CGST Act being treated as secured debt. The provision of Section 82 of the CGST/ WBGST Act is referred to in verbatim:

Further, in Rainbow Papers Limited (Supra), the Hon’ble Apex Court observed that:

Thus, in view of the proposition laid down in Rainbow Papers (Supra), the definition of a “secured creditor” under the I&B Code, 2016 includes the government or governmental authority and thus, the RP must be cautions while dealing with the tax demands and preparing the valuation reports.

Further, the Valuation Reports dated 02.12.2024 and 03.12.2024, indicates that the insurance claim has been rejected, why the same has not been assailed higher up before the appropriate forum in accordance with law, or at least could have approached this Bench to avail an appropriate remedy or a direction to initiate proceedings against such rejection before the proper forum.

Further, we would note that the CoC is comprised of a sole unsecured financial creditor with an admitted claim of Rs. 8,02,228/-, and the resolution plan provides an amount of Rs. 94,053/-, resulting a haircut of 88% comparing with its admitted claim. Further, the resolution plan provides an amount of Rs. 20 Lakh plus CIRP cost at actual, against the total admitted claim of Rs. 20,32,26,727/-, leading to a reduction of 99%.

Surprisingly, the RP has not found or determined any PUFE transactions in the present case, and further, we find that no transactional or forensic auditor has been appointed to that effect. Unless a transactional audit is done by an auditor to the accounts and conduct of the corporate debtor, at least for the period as stipulated under Sections 43(4), 46(1), 50(1) and 66 of the I&B Code, not finding any avoidance transactions it not justifiable.

This is trite, axiomatic, and settled position of law that I&B Code aims only not to protect the rights of the creditor on their dues and but also promotes an effective resolution of a defaulter. The Code caters to a speedy procedure to revolve the corporate persons, firms, and individuals by ensuring maximization of value of the assets, by promoting entrepreneurship, credit availability and most importantly, safeguard the interest of all the stakeholders of the corporate entity. Thus, having a stringent vigilance over the transactions of a corporate debtor during CIRP as well as pre-CIRP stage is highly required.

As per Section 43(1) of the Code the RP or liquidator shall determine the preferential transaction and shall apply to the NCLT for avoidance of preferential transactions. The look back period as per Section 43(4) for determining the preferential transactions for a related party (other than by reason only of being an employee), is two years preceding the insolvency commencement date; and for a person other than a related party is one year preceding the insolvency commencement date. Further, Section 45

of the Code provides the provisions of undervalued transactions and the look back period for determining the undervalued transactions is one year for any person; and for a related party, it is two years preceding the CIRP commencement, in terms of Section 46. Moreover, Section 50 caters to the provisions of the extortionate credit transactions and look back period is two years; and as per Section 66, RP or liquidator finds any fraudulent transaction carried out by the corporate debtor, and accordingly, an application can be preferred and there is no look back period for determining the fraudulent transactions.

The Code envisages the duty of RP under Section 25(2)(j) of the Code to file application for avoidance of transactions in accordance with Chapter III of the Code. As per Regulation 35A (1) of the CIRP Regulations, on or before 75th day of CIRP, RP shall form an opinion whether the CD has subjected any transactions under Section 43, 45, 49, 50 & 66, and in terms of Regulation 35A (2) of the CIRP Regulations, on or before 115th day of CIRP, RP shall make a determination on such transactions and would also inform IBBI. Further as per Regulation 35A (3) of the CIRP Regulations, on or before 135th day of CIRP, RP shall make an application to AA for appropriate relief and order. Notably, as per Regulation 39(2) of the CIRP Regulations, the RP shall submit all the resolution plans along with all transactions under Section 43, 45, 49, 50 and 66 of the I&B Code observed, found, or determined by him. RP need to mention details of application filed/pending or orders obtained in Form H (Compliance Certificate) along with submission of Resolution Plan before NCLT. Moreover, in terms of section 20(2)(a) of the I&B Code the IRP/RP shall have the authority to appoint transactional and forensic auditor to investigate the avoidance transactions as may be necessary.

In a similar circumstance, this Bench, on an earlier occasion, in Rachna Jhunjhunwala, RP of Power Max (India) Pvt. Ltd., reported in MANU/NC/2452/2024: (2024) ibclaw.in 522 NCLT, had directed the RP to form an opinion and determine avoidance transactions and direct the RP to examine the last 6 years Financial Statements, IT Returns, GST Returns, cash flow and fund flow statements in detail, as the resolution plan provides a huge haircut of more than 90% in respect of admitted claim. This Bench has further observed that the I&B Code casts huge responsibilities on the RP to deal with avoidance transactions and if the RP misses to determine the avoidance transactions and fail to file applications before the NCLT, then no way diverted or syphoned the funds if any can be got back and made available for distribution and insolvency resolution of the corporate debtor. The relevant extract of the decision is as under:

Further, in Sandip Kumar Kejriwal, RP of Indian Mining Works Private Limited (Supra), this Bench has observed that the resolution plan provides 99.92% haircut in respect of admitted claim and as per plan therein, SRA shall be beneficiary of the amount to be recovered in PUFE application which contravenes the provision of Section 36(3)(f) of the Code. Significantly, it was the one of the grounds to reject the plan.

We have noted that there are three operational creditors of the corporate debtor namely, Bharat Iron Stores, Krishna Steel Traders and Nirmal Kanodia, and the total amount claimed by the operational creditors to the RP is 2,74,27,630/-, and the RP admitted to the tune of Rs. 2,06,51,474/-, against such claim. We see that in respect of such admitted claim of the operational creditors, the resolution plan proposes a NIL amount on the ground that the liquidation value is NIL for such category.

Prior considering the issue, we would refer to the provision of Section 30(2)(b) of the I&B Code, as under:

Further, Section 53 of the I&B Code stipulates that:

In the landmark judgment rendered by the Hon’ble Apex Court in Committee of Creditors of Essar Steel India Limited vs. Satish Kumar Gupta reported in (2020) 8 SCC 531: MANU/SC/1577/2019, it was held that:

Thus, after perusal of the statutory provisions and the law laid down in Essar Steel (Supra), it is clear that in a resolution plan, a minimum amount shall be paid to the operational creditors towards its claim admitted by the resolution professional in a manner which shall not be less than the amount either to be paid in the event of a liquidation of the corporate debtor or the plan value to be distributed in accordance with the provision of Section 53 of the Code.

As per section 30(2)(b) of the I&B Code, in a resolution plan, the operational creditor and the dissenting financial creditor, shall be entitled to receive either the amount that would be payable to such operational creditor in the event of liquidation and accordingly the distribution should be made as per section 53(1) of the Code or, the amount that would be receivable if the amount paid under the resolution plan is distributed in accordance with the order of priority in section 53(1) of the I&B Code, whichever is higher. The legislative intent as well as the validity of the amendment of Section 30(2)(b) of the Code, by Section 6 of the Amendment Act, 2019, as observed by the Hon’ble Apex Court in Essar Steel (Supra), is that the I&B Code binds the resolution applicant to allocate a minimum amount to the operational creditor, which is either the amount would be paid in an event of liquidation or the minimum amount, the operational creditor will receive if the resolution plan value is distributed in the order of priority mentioned in section 53(1) of the Code. Further, regulation 38(1) of the CIRP Regulations, 2016, mandates the resolution applicant to pay the operational creditor in priority over the financial creditors and also the financial creditor who is dissentient to the resolution plan in priority over the financial creditors who voted in favour of the plan. Thus, a conjoint reading of Section 30(2)(b) of the I&B Code and Regulation 38(1) of the CIRP Regulations, 2016, it can be drawn that the resolution plan must secure an amount, i.e., the not less than the liquidation value, should be paid in priority to the operational creditor as well as the dissenting financial creditors, and the same cannot be a NIL amount.

Further, the Hon’ble Supreme Court of India in DBS Bank Limited, Singapore vs. Ruchi Soya Industries Limited [Civil Appeal Nos. 9133 of 2019 and 787 of 2020] reported in MANU/SC/0012/2024, has dealt with the issue, as:

The Hon’ble Apex Court has observed that:

We have already expressed our view in the Suasth Healthcare Foundation reported in (2023) ibclaw.in 1000 NCLT upon examination of the implication of Section 30(2)(b) of the Code in the light of the decision of the Hon’ble Apex Court in Essar Steel (Supra). It is reproduced hereunder:

We find that decision in Suasth Healthcare Foundation (Supra) has been upheld by the Hon’ble NCLAT on 14.05.2025 in Hari Vitthal Mission v. Ravi Sethia and Ors., reported in (2025) ibclaw.in 386 NCLAT and Shankar Mukherjee and Anr. v. Ravi Sethia RP and Ors., reported in (2025) ibclaw.in 385 NCLAT.

Similarly, we have taken a view in Export-Import Bank of India and Ors. vs. Eastern Silk Industries Pvt. Ltd. and Ors. reported in MANU/NC/0042/2024 that:

Thus, we can conclude after analysing the statutory provisions as well as the legal positions laid down in Essar Steel (Supra), DBS Bank Limited (Supra), Suasth Healthcare (Supra) and Eastern Silk Industries (Supra) that Section 30(2)(b) of the I&B Code enumerates that the resolution plan must ensure the amount to the Operational Creditor which will not be less than the amount to be paid in the event of the liquidation value or the amount that would have been paid to them in the plan as if the resolution plan value had been distributed per the order of priority mentioned in sub-section (1) of Section 53 whichever is higher. We are of the view that the legislative intent to provide the word “not less than” in the first line of Section 30(2)(b) of the I&B Code is contemplating a mandatory allocation to the operational creditors and the dissenting financial creditors. Further, the allocation would be the amount provided in the resolution plan or liquidation value whichever is higher and at any event, such creditors can be paid NIL value because the liquidation value is NIL for them, which would defeat the very purpose of the beneficial amendment made in Section 30(2) of the I&B Code.

This view, we have already taken in the matter of Sandip Kumar Kejriwal, Professional (RP) of Indian Mining Works Private Limited reported in MANU/NC/3344/2024: (2024) ibclaw.in 582 NCLT.

We are conscious of the legal position that the “Commercial Wisdom” of the CoC is supreme and cannot be interfered with when it comes to approving a resolution plan, yet it is incumbent upon this Adjudicating Authority to restrict itself to the four corners of the statute keeping the legislative intent intact and not to render a decision contrary to the view and established as propounded by the Hon’ble Apex Court, when it comes to allocation of an amount to a particular class of creditor. We reiterate that the observation of the Hon’ble Apex Court in the Essar Steel (Supra) and in DBS Bank Limited (Supra) to frame our view.

The Hon’ble High Court of Judicature at Madras in The National Sewing Thread Co. Ltd. v. The Superintending Engineer TANGEDCO and Anr. in W.P. No. 29845 of 2022, has observed that:

In Sandip Kumar Kejriwal, Professional (RP) of Indian Mining Works Private Limited (Supra), this Bench relying on the ratio held in The National Sewing Thread (Supra), laid down the gist of the principles, which could be culled out from the judgment rendered by the Hon’ble Madras High Court supra, would be thus:

In the present case in hand, the NIL allocation against the total admitted claim of the Operational Creditors of about Rs. 2,06,51,474/-, according to us, does not conform to the requirements referred to in Sub-section (1) of Section 31 of the I&B Code.

The Resolution Plan herein does not conform with the requirements of Section 31(1) of the I&B Code:

As per Sub-sections (1) and (2) of Section 31 of the I&B Code, there are certain requirements need to be met to approve a resolution plan by the Adjudicating Authority such as:

Firstly, the resolution plan must be approved by the CoC by the requisite voting shares.

Secondly, the plan meets the requirements as referred to in Sub-section (2) of Section 30 of the Code.

Thirdly, the resolution plan shall be binding on the corporate debtor and its employees, members, creditors, including the Central and State Government, or any local authority to whom a debt in respect of the payment of dues arising under any law in force, such as authorities to whom statutory dues are owed, guarantors and other stakeholders involved in the resolution plan.

Fourthly, the resolution plan shall have a clause of its effective implementation.

We would refer to Section 31(1) and 31(2) of the Code reproduced verbatim hereinbelow:

In Ebix Singapore Private Limited and Ors. vs. Committee of Creditors of Educomp Solutions Limited and Ors. reported in (2022) 2 SCC 401: MANU/SC/0628/2021, the Hon’ble Apex Court observed that:

Further, in. Rainbow Papers Limited (Supra), the Hon’ble Apex Court laid down that:

Further, in Ghanshyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. reported in (2021) 9 SCC 657, the Apex Court has observed that:

In Sandip Kumar Kejriwal, Professional (RP) of Indian Mining Works Private Limited (Supra), this Bench has held that:

In view of above, we would infer that if the resolution plan does not meet the requirements stipulated under Section 31(1) read with Section 30(2) of the Code, and where the irregularities and illegalities in the CIR Process including approval of resolution plan are in galore, the Adjudicating Authority may not be established to function as a rubber stamp fixing authority to allow all the decision of the CoC, and in such case, the NCLT can reject the plan approved by the CoC in terms of Section 31(2) of the I&B Code. We would note that CIRP has been initiated on 25.06.2024, and the resolution plan has been approved by CoC at its 7^th meeting convened on 21.04.2025. We wonder as to how the RP has missed all those significant things to consider, during this period of a long 10 months of CIR Process, which are essential for a fruitful and efficacious resolution of the corporate debtor. At the same time, we are astonished by the conduct of CoC too who is the main stakeholder in the entire process.

In view of the discussions above, we are of the view that:

a. With regard to the “Long-Term Loans and Advances” as indicated in the Valuation Reports dated 02.12.2024 and 03.12.2024, recommending the fair value and liquidation value of the corporate debtor, what action was taken by the corporate debtor to recover such Long-Term Loans and Advances which comprises of deposits with different entities, and if no action was taken by the corporate debtor, then, under CIRP, what action or initiatives has been adopted by the RP to recover such deposit in accordance with law and what recourse has been taken by the CoC for such inaction of the corporate debtor. Further, how the claim has been dealt with in the balance sheet of the corporate debtor.

b. Concerning the “Trade Receivables” which amounting to Rs. 3.19 Crore, as indicated in the Valuation Reports dated 02.12.2024 and 03.12.2024, what legal action the corporate debtor was taken to appropriate remedy against such traders when the claim was within limitation, and similarly, if no action was taken by the corporate debtor that time, then what was the view of the CoC in this regard and what action was adopted by CoC in respect of such claim and against the corporate debtor, as well, for maximization of the value of the assets of the corporate debtor. Further, how the claim has been dealt with in the balance sheet of the corporate debtor.

In terms of the enumerations supra, we are of the considered opinion that present application praying for the final approval of the resolution plan which has been approved by the CoC at its 07^th meeting convened on 21.04.2025, is not allowed and accordingly, the application is dismissed.

Mr. Niraj Kumar Agrawal, Resolution Professional (“RP”) of Balajee Ingot India Private Limited has preferred this application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, for brevity “I&B Code”, praying for a direction to return the possession of the leasehold land situated at Pargana-Salemabad, Tauzi Number 2913, Thana No. 93, Mauza-Khairi and Mahisona, Lakhisarai, Bihar to its lawful owner – Mr. Nirmal Kanodia, Respondent herein, in accordance with the resolution passed by the Committee of Creditors (“CoC”) at its 6^th meeting convened on 19.02.2025.

The Corporate Debtor – Balajee Ingot India Private Limited, operated its manufacturing facility on a parcel of leasehold land owned by the Respondent – Mr. Nirmal Kanodia. The Lease Deed was originally executed on 14.06.2016, granted the corporate debtor a fixed term of 36 months commenced from 01.06.2016 and expired on 31.05.2019. The Lease was renewed on 01.06.2019 for a further 36 months and the same was expired on 31.05.2022, prior initiation of Corporate Insolvency Resolution Process, for brevity “CIRP” admitted by this Adjudicating Authority on 25.06.2024.

Mr. Shaunak Mitra, Ld. Counsel appearing on behalf of the Resolution Professional would submit that the leasehold land in question does not form a part of the assets of the corporate debtor as the lease was expired long two years ago prior commencement of CIRP and termination notice was issued on 03.06.2022 by the respondent landowner. The Respondent submitted his claimed through Form B on 16.12.2024 for the lease rent due, however, since no lease rental liability was found in the books of accounts of the corporate debtor, and no renewal was executed further after 31.05.2022, and thus, the Ld. Counsel for RP would assert that claim of the respondent towards lease rent was not admitted.

Mr. Mitra, Ld. Counsel for the RP would further submit that the CoC, at its 6^th meeting convened on 19.02.2025, unanimously resolved that the leasehold land does not form a part of the assets of the corporate debtor and accordingly, the CoC approved the return of the possession to of the said leasehold land to the respondent, subject to an undertaking made by the respondent that he would have no claim whatsoever on account of rental or lease for the land for any period.

It is further submitted that the respondent, in accordance with the resolution adopted by the CoC at its 6^th meeting convened on 19.02.2025, wrote a letter on 16.04.2025 to the RP, annexed at page 169 to the application, undertook that he shall not raise any claim whatsoever against the corporate debtor or the RP on account of rental or lease charges for the said leasehold land for any period.

We have heard the parties and perused the documents on records very carefully. No reply has been furnished to the application, however, during the course of hearing the Ld. Counsel Mr. Amandeep Singh appearing on behalf of the respondent was present.

The discernible facts are that the lease was originally granted on 14.06.2016, and the same was renewed on 01.06.2019 for a further 36 months, which takes us to 31.05.2022, i.e., the date of expiry of the renewed lease. Notably, respondent issued a letter on 03.06.2022, annexed at pages 41-42 to the application, to the corporate debtor demanding for payment of outstanding dues and handover of peaceful possession of leased property, followed by the reminder letters issued by the respondent on 20.01.2023 and 10.05.2023, annexed at pages 43-44 to the application.

During the ongoing CIRP, the Respondent also issued a letter to the RP on 07.11.2024, annexed at pages 42-42A to this application, claiming for peaceful and vacant possession of the leasehold land in question along with for the payment of outstanding lease rent dues on part of the corporate debtor.

In reply to such letter dated 07.11.2024, the RP issued an email to the respondent on 16.11.2024, asked for furnishing all the documents to fortify respondent’s claim including the copies of lease agreement, ownership proof, proof of rent and letter of termination. The respondent submitted his claim by way of Form B on 16.12.2024, and in reply to such, an email was issued on 21.12.2024 by the RP, annexed at page wherein the RP tendered his decision by way of rejecting the claim of the respondent and informed that during ongoing CIRP when moratorium is in force, the possession of the said leasehold land could not be handed over till the completion of the CIRP.

The CoC at its 6^th meeting convened on 19.02.2025, deliberated on the agenda concerning the handing over of the possession of the said leasehold land to the landowner – Respondent and concluded that:

On 16.04.2025, the Respondent Nirmal Kanodia issued a letter, annexed at page 169 to the application, to the RP, undertook that he shall not raise any claim whatsoever against the corporate debtor or the RP on account of rental or lease charges for the said leasehold land for any period. The letter dated 16.04.2025, is reproduced hereunder:

The issue that has cropped up for determination is whether this Adjudicating Authority has the jurisdiction to consider the transfer of possession of a leasehold property to the lessor whose lease was expired prior commencement of CIRP.

It is a settled position of law that the NCLT is not a court of civil jurisdiction to resolve a civil dispute, thus, termination of any leasehold right including the transfer of the possession of the leasehold land in question cannot be sought for at this Adjudicating Authority. We would note that in Embassy Property Developments Pvt. Ltd. vs. State of Karnataka reported at MANU/SC/1661/2019: (2020) 13 SCC 308, the Hon’ble Apex Court has laid down that:

(Emphasis Added)

In view of the ratio laid down in Embassy Property (Supra), we have already held in H. R. Brothers Ltd. v. Ramachandra Dallaram Choudhary, RP of GIT Textiles Manufacturing Limited and Ors., reported in (2024) ibclaw.in 681 NCLT, that though Section 25 of the I&B Code endows a duty with the RP to represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings, which includes its right to get a lease legally terminated by a competent court of law along with the transfer of possession of the leasehold property whose lease may be expired, but under no circumstances the RP can short circuit the procedure by way of applying to this Adjudicating Authority seeking transfer of possession or termination of leasehold property, on the ground that it has been approved by the CoC with majority. The fate of either the lease, even if contrary to law, may be expired prior to the commencement of CIRP, or transfer of possession of that leasehold property, can only be determined by an appropriate forum having civil jurisdiction. Thus, the RP can approach the appropriate forum for the termination of lease or transfer of possession of the leasehold property to the lessor in accordance with existing laws.

Further, the I&B Code expressly deals with the insolvency and the resolution of the Corporate Debtor or liquidation of the corporate debtor if resolution plan fails. It does not empower this Adjudicating Authority to exercise it inherent power to that extent whatsoever if the issues do not concern with the insolvency and the resolution of the Corporate Debtor or its liquidation.

To fortify our view, we would rely on the judgment rendered by the Hon’ble Apex Court in Gujarat Urja Vikas Nigam Limited vs. Amit Gupta and Ors. reported in MANU/SC/0157/2021, wherein it has categorically held that:

(Emphasis Added) Further, the Hon’ble Apex Court has laid down that:

(Emphasis Added)

Further, in TATA Consultancy Services Limited vs. Vishal Ghisulal Jain, reported in MANU/SC/1118/2021, the Hon’ble Apex Court has observed that:

In Victory Iron Works Ltd. vs. Jitendra Lohia and Ors. reported in MANU/SC/0229/2023, the Hon’ble Apex Court further held that:

The Hon’ble NCLAT in SICOM Ltd. and Ors. vs. Kitply Industries Ltd. and Ors. reported in MANU/NL/0564/2023: (2023) ibclaw.in 236 NCLAT, has held that:

Thus, from the enumerations supra, it can be ascertained that the NCLT being an Adjudicating Authority has the jurisdiction to entertain any application concerning the resolution or liquidation of the corporate debtor, on no occasion, it can exercise its power going beyond the ambit of I&B Code and consider an issue which can only be determine by a court having the civil jurisdiction. Thus, issue, concerning the termination of lease or transfer of possession of the leasehold property having the control of the corporate debtor (lessee) to its landowner (lessor), however, the lease was expired prior commencement of CIRP, can only be consider and determine by a proper court of law as catered to by the law in force. In the present case, notably, the CoC within its ‘commercial wisdom’ has resolved and decided that on receiving the undertaking from the respondent and approval from this Adjudicating Authority, possession of the land may be handover to him as it is where it is whatever it is basis without any further claim to the corporate debtor on any account for the said land. However, albeit having limited scope to interfere with the commercial wisdom, the Adjudicating Authority remains having a revisional jurisdiction to ascertain the correctness of what has been done before and by the CoC, as held in The National Sewing Thread (Supra).

It is further trite and fairly well-settled that the resolution plan must be consistent with the law in force, and the resolution applicant having stepped into the shoes of the corporate debtor, shall make necessary applications along with filing fees to the concerned regulatory or statutory authorities for the renewal of business permits and supply of essential services, and such authority shall also consider the same keeping in mind the objectives of the I&B Code, which is essentially resolving the insolvency of the corporate debtor.

In view of above, the prayer made in this application deserves to be rejected and accordingly, the application is dismissed.

This application has been preferred under Section 19(2) of the I&B Code, by the RP against the suspended board of the corporate debtor seeking for a direction upon the suspended directors to cooperate with the RP and handover/ access to the records and documents for effective conduct of CIRP.

We would note that the Financial Creditor Mr. Nirmal Kanodia is an erstwhile director of the corporate debtor who had directorship from 20.08.2007 to 21.05.2008. Mr. Kanodia had advanced a loan of Rs. 1,14,27,453/- in several tranches from 17.02.2022 to 24.03.2022. The Corporate Debtor failed to repay such amount along with interest by 31 March 2023 as agreed upon. Thus, on default, Mr. Kanodia preferred a petition under Section 7 of the I&B Code to this Tribunal for initiation of CIRP in respect of the corporate debtor which was admitted on 25.06.2024.

During CIRP, Mr. Kanodia’s claim has been admitted as an unsecured financial debt and RP declared him as related party, thus, one Sipra Chouhan Das became the sole member of CoC having claim of Rs. 8 Lakh as unsecured financial creditor.

Notably, the GST Authority West Bengal has a claim to the tune of Rs. 16.89 Crore which has been admitted as operational creditor, against such amount only Rs. 2 Lakh has been proposed to allocate which is resulting to a recovery of 0.12%.

Further, that the GST Department Bihar has a claim of Rs. 1,39,62,077/- and the Income Tax Authority for the financial year of 2015-16, assessment year of 2016-17, has a claim of Rs. 76,52,027/-, however, such claims have not been submitted before the RP. Notably, another amount of Rs. 2 Lakh has been kept aside in the resolution plan for any claim received within two years after approval of the plan, otherwise the same will be invested in the business.

Thus, the Government/ Statutory Authorities have a significant claim which is to the tune of Rs. 19 Crore against the corporate debtor.

Further noted that Mr. Kanodia granted a lease to the corporate debtor on 14.06.2016, for a fixed term of 36 months commenced from 01.06.2016 and expired on 31.05.2019. The Lease was renewed on 01.06.2019 for a further 36 months and the same was expired on 31.05.2022, prior initiation CIRP admitted on 25.06.2024.

Mr. Kanodia issued a letter on 03.06.2022 to the corporate debtor demanding for payment of outstanding dues and handover of peaceful possession of leased property, followed by the reminder letters issued by the respondent on 20.01.2023 and 10.05.2023.

During the ongoing CIRP, Mr. Kanodia also issued a letter to the RP on 07.11.2024, claiming for peaceful and vacant possession of the leasehold land in question along with for the payment of outstanding lease rent dues on part of the corporate debtor. In reply, RP issued an email to the respondent on 16.11.2024, asked for furnishing all the documents to fortify respondent’s claim including the copies of lease agreement, ownership proof, proof of rent and letter of termination.

Mr. Kanodia accordingly submitted his claim by way of Form B on 16.12.2024, which was rejected by RP on 21.12.2024 by way of an email as no lease rental liability was found in the books of accounts of the corporate debtor, and no renewal was executed further after 31.05.2022. Further, the RP informed that during ongoing CIRP when moratorium is in force, the possession of the said leasehold land could not be handed over till the completion of the CIRP.

Very surprisingly, the CoC at its 6^th meeting convened on 19.02.2025, unanimously resolved that Mr. Nirmal Kanodia will provide an undertaking that he will have no claim whatsoever on account of rental or lease for the land for any period. Further, Mr. Nirmal Kanodia needs to make application to NCLT, Kolkata for getting possession of the land, if approved for handover, the CoC has no objection to handing over the land as the same is not an asset of the corporate debtor and the factory is no more running, all the assets, plant and machineries are taken by the auction winner under SARFAESI action of lender. Accordingly, Mr. Kanodia issued a letter on 16.04.2025, undertook that he shall not raise any claim whatsoever against the Corporate Debtor or the Resolution Professional on account of rental or lease charges for the said land for any period.

We have already decided that this Adjudicating Authority lacks jurisdiction to consider an issue concerning the termination of lease or transfer of possession of the leasehold property having the control of the corporate debtor (lessee) to its landowner (lessor), which may be considered by a court of civil jurisdiction.

We wonder that Mr. Kanodia was the unsecured financial creditor (declared as “related party” to the corporate debtor) and also an operational creditor whose claim was rejected by RP, and after rejection of his claim, what was the requirement for the CoC as well as the RP to obtain an undertaking from Mr. Kanodia not raise any further claim against the corporate debtor and the RP on account of rental or lease charges for the leasehold land. If Mr. Kanodia is rightful owner of the leasehold land and if the corporate debtor is wrongfully occupying the said leasehold land, either Mr. Kanodia, who was the director of the corporate debtor once, can take proper recourse in accordance with law against the corporate debtor/ RP just after issuance of termination notice, or the RP upon instruction of the CoC, can take appropriate action before the proper fora. Instead of doing such, CoC upon receiving a ‘no claim’ undertaking from Mr. Kanodia, has resolved beyond the scope of I&B Code, to release the property to Mr. Kanodia and preferred an application through RP to this Tribunal for approval of its decisions. We are not satisfied by this conduct of RP as well as CoC.

Notably, the CoC has been comprised with one unsecured financial creditor having admitted claim of Rs. 8 Lakh and significantly, the Government/ Statutory (GST/ Tax) Authorities have a significant claim which is to the tune of Rs. 19 Crore against the corporate debtor, and under the resolution plan, this huge amount has been satisfied only by a realisation amount of 4 Lakh, which leads a recovery in respect of such government dues at 0.21%. Thus, we are clear of view that the entire process has initiated by Mr. Kanodia for the wrongful gain and to evade the government liabilities as it is a settled position of law that after approval of the plan all the claim prior CIRP shall stand extinguished, and no further claim or proceedings shall sustain against the corporate debtor.

In view of such, we would infer that the CIR Process has been fraudulently initiated, not with an aim or purpose to resolve the insolvency of the debtor, but with a malicious intent to escape from the government dues and for wrongful gain. Hence, we are satisfied enough to invoke Section 65 of the I&B Code for closure of CIR Process, along with our inherent power as enshrined under Rule 11 of the NCLT Rules, for meeting the ends of justice and to prohibit the misuse or abuse the law and accordingly, we deem it fit to recall our Admission Order dated 25.06.2024.

Reliance would be placed on State Bank of India v. Consortium of Murari Lal Jalan & Florian Fritsch, reported in (2024) SCC OnLine SC 3187, wherein it has been held that:

(Emphasis Added)

In Murari lal Jalan (Supra), it has been clearly held that where such cogent reasons or extraordinary circumstances exist warranting the exercise of inherent power to ensure the worthwhile purpose of the Code, the Adjudicating Authority will not be restrained or under the teeth to exercise such inherent power.

In Hindalco Industries vs. Hirakud Industries Works Ltd. in Company Appeal (AT) (Insolvency) No.42 of 2022, reported in MANU/NL/0032/2023, wherein the Hon’ble NCLAT whiling attracting the provision of Section 65 of the Code, held that initiation of CIR Process was done fraudulently by the corporate debtor, working in collusion with financial creditor and accordingly the admission under Section 7 was set-aside. The extract of the judgment is reproduced verbatim as under:

(Emphasis Added)

In view of above, we are of the considered opinion to recall and withdraw our Admission Order dated 25.06.2024 and accordingly direct for the closure of the CIR Process initiated in respect of the corporate debtor.

I.A. (IB) (Plan) No. 10/KB/2025 filed by the RP for the final approval of the resolution plan, as approved by CoC, is dismissed.

I.A. (IB) No. 734/KB/2025 filed under Section 60(5) of the I&B Code is dismissed.

I.A. (IB) No. 1727/KB/2024 filed under Section 19(2) of the Code is dismissed as infructuous in view of above.

Order of Admission dated 25.06.2024 in Company Petition (IB) No. 39/KB/2024 is recalled and dismissed and the CIR Process initiated in respect of the corporate debtor – Balajee ingot India Private Limited is closed accordingly.

Accordingly, the Moratorium imposed under section 14 of the Code by virtue of the order initiating the CIR Process, shall cease to have effect from the date of this order.

Upon lifting of the moratorium, all the government/ statutory authorities shall be free to initiate appropriate proceedings against the corporate debtor, in accordance with law.

The Joint Registrar of this Adjudicating Authority is directed to serve a copy of this Order upon the Insolvency and Bankruptcy Board of India (IBBI) by the Registry for noting the conduct of the RP herein, as he has missed a plenty of statutory provisions for a better resolution and maximization of the value of the assets of the present corporate debtor.

The Joint Registrar is further directed to serve a copy of this Order upon all the Governmental/ Statutory Authorities, viz., Directorate of Commercial Taxes, Government of West Bengal; Bihar Commercial Tax Department; Income Tax Department, West Bengal to initiate appropriate action in accordance with law for recovery of these dues if they deem fit.

The Resolution Professional shall stand discharged from his duties with effect from the date of this Order.

The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Learned Counsels for information and for taking necessary steps.

Certified copy of this order, if applied for with the Registry, be supplied to the parties upon compliance with all requisite formalities.

File be consigned to the record.