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Judgment
Per: Justice Rakesh Kumar Jain:
This appeal is filed by the Resolution Professional (in short ‘RP’) of the Corporate Debtor ‘S.K. Wheels Pvt. Ltd.’ to challenge the orders dated 13.11.2019, 25.11.2019 and 18.12.2019 passed by the Adjudicating Authority (National Company Law Tribunal, Mumbai Bench, Mumbai) and also for expunging the observations made against him in the said orders.
In brief, ‘M/s BMW India Financial Services Pvt. Ltd.’ (Financial Creditor) filed an application under Section 7 of Insolvency and Bankruptcy Code, 2016 (in short ‘Code’) against the Corporate Debtor which was admitted on 29.03.2019 and the Appellant was appointed as the Interim Resolution Professional (in short ‘IRP’) to conduct the Corporate Insolvency Resolution Process (in short ‘CIRP’) of the Corporate Debtor. There was an agreement between the Corporate Debtor and the Respondent (Amar Universal Pvt. Ltd.) of lease dated 07.08.2015 in respect of RCC Industrial Shed admeasuring 39,100 sq. ft. and open space of Plot No. D-42 in TTC Industrial Area, MIDC, Sanpada, Navi Mumbai (hereinafter referred to as ‘the said premise’) for a period of five years starting from 01.09.2015 to 31.08.2020 for sum of Rs. 13,68,500/- per month. The Corporate Debtor deposited an amount of Rs. 82,11,000/- as security with the Respondent. The Respondent filed its claim to the RP (Appellant) for a sum of Rs. 2,30,92,536/- on 04.06.2019 and also filed a Miscellaneous Application No. 2319 of 2019 in CP (IB)-4301 of 2018 before the Adjudicating Authority for acceptance of the amount claimed in Form-B dated 04.06.2019. The said application was allowed on 16.10.2019 with the following observations:
“13.The Resolution Professional in all his pleadings has made a submission that the Claim of the Applicant is under process and that a part of the Applicant's claim has already been admitted. However, it is to be noted herein that the claim of the Applicant was filed in 04.06.2018, it has been more than 4 months since then, the Resolution Professional has not yet decided the claim of the Applicant. 14. It is an undisputed fact that the land on which the Resolution Professional/Corporate Debtor currently has his possession on, belongs to the Applicant herein. Keeping in mind that the Applicant is being deprived from his right of using the land that owns is patently illegal and wrong, therefore cannot be allowed.
15.It is trite law that this tribunal has been provided with vast powers under section 60 (5) of the Code. Therefore, based on the above this bench is of the view that the actions or rather inaction on the part of the Resolution Professional in not taking a decision with respect to the claim of the Applicant is an abuse of the powers given to him under the code and contrary to justice and public policy. His actions are nothing more but an abuse of his dominant position.
16.Furthermore, the arguments raised by the counsel representing Resolution Professional cannot be at all considered since the Applicants has complete right over the possession of his land and his dues, hence we are of the view that since the Resolution Professional seems to have been sitting over the claim of the Applicant for a long time and this cannot be allowed since the same would cause heavy prejudice to the Applicant and defeat the purpose of the Code.
17.Furthermore, it is undisputed that there is a civil suit pending before the Court of law. Based on the agreement between the parties is clear that the tenancy/license fee is to be paid on 7th of every month, which entitles the owner of the land to re-claim the property if the rent is not paid. This is a very peculiar case where the Resolution Professional maliciously neither paid the rent nor vacated the premises and on the other hand, he wanted to hand over the said premises to the successful Resolution Applicant as a going concern, putting the landowner to further trouble.
18.This kind of injustice carried out by the Resolution Professional herein is completely unacceptable. The landowner is just not entitled to receive the license fee but also, he has to right to receive the possession of the said premises. The tenancy rights automatically get terminated, the moment default in payment of rent is committed.
19.Hence, this Miscellaneous Application is allowed with cost, and the Resolution Professional is directed to hand over of the possession of the said premises forthwith to the Applicant and pay the claim amount as raised by the Applicant in his claim within a week from the date of this order.
20.Accordingly based on the above discussion, this Application is allowed with cost of Rs. 1,00,000/- to be paid by the Resolution Professional to the Applicant within a week from the date of this order.”
Being aggrieved against the aforesaid order, the Appellant filed an appeal before this Tribunal bearing CA (AT) (Ins) No. 1324 of 2019. However, before the aforesaid appeal could have been decided in one way or other, a Contempt Petition was preferred by Respondent for alleged non-compliance of the order dated 16.10.2019, which came up for hearing before the Adjudicating Authority on 11.11.2019, in which the Adjudicating Authority passed the order “RP is directed to personally present on the next date of hearing. List this matter on 13.11.2019.”
On 13.11.2019, the Adjudicating Authority passed the following orders:
“Since the order dated 11.11.2019 has not been uploaded on the website, we are not sure whether the same has been served on the RP or not. At the same time Counsel informed that the RP is present in the court and when the matter is called out, our staff found that the RP is sitting outside the court room but refused to come inside. We believe the RP is very much aware that the matter is called upon for hearing, but he has deliberately refused to appear before this bench nor made any endeavour comply with the orders of this bench dated 16.10.2019. In view of the same we once again direct the applicant in this matter to serve one more notice on the RP directing him to be present in person before this bench and explain the reason why the order dated 16.10.2019 could not be complied with or else this bench will be left with no other option but to his secure is presence as per law. Apart from this the impertinent, carelessness indifferent attitude on the part of the RP is highly deplorable and the conduct of RP shall be reported to IBBI for taking or initiating disciplinary proceedings against RP. When the court was about to rise, the RP against whom the order is passed had appeared and sought for recall of order passed by this bench. The recall of order shall be considered on the next date of hearing. List this matter on 25.11.2019.”
While the aforesaid matter for the alleged non-compliance of the order dated 16.10.2019 was posted for 25.11.2019, the appeal filed by the Appellant against the order dated 16.10.2019 was disposed of by this Tribunal on 20.11.2019. The relevant paragraphs of the order dated 20.11.2019 are also reproduced as under:
“8.In that view of the matter, we are not inclined to interfere with substantive part of the order. However, we are of the view that it was not the case to impose any cost on the Resolution Professional. Therefore, we are inclined to interfere with such part of the impugned order.
9.Further we make it clear that the Resolution Professional who has been asked to pay the dues and hand over the possession of the land, will be paying the current rent of the period of Resolution Process, as in terms of Section 14 of the I&B Code, earlier claim amount cannot be returned to any Operational Creditor or other Creditors. Therefore, the Direction at para 19 should be read as “pay the claim amount as raised by the Applicant for current period after initiation of the Corporate Insolvency Resolution Process”.
10.The Resolution Professional will determine the claim of the 1st Respondent and communicate the same to the 1st Respondent and may approach the 1st Respondent - ‘Amar Universal Private Limited’ for renegotiation and settlement of any grievance in terms of earlier agreement. ‘Amar Universal Private Limited’ in such case may reach new Terms of Settlement uninfluenced by the order passed by the Adjudicating Authority or this Appellate Tribunal.
11.For the reason aforesaid, the impugned order so far as it relates to imposition of cost of Rs.1 Lakh is set aside. The said order stands modified. The appeal stands disposed of with aforesaid observations and directions.”
Thereafter on 25.11.2019 the Adjudicating Authority passed the following orders:
“The matter had come up for compliance of the orders on 13.11.2019 wherein on the earlier occasion the Court directed the RP to be personally present. Initially when the matter was called and kept aside for considerable time the RP had deliberately stayed away and did not attend the court. Counsel for the Applicant submits that the RP is within the premises of the Court but stayed away outside the court without any reasons even though the matter is called. At one point of time we also required to send our staff members to search the RP and it was reported that the RP is not inclined to come inside because he is having some problem with his hand. Later when the court about to rises he appeared and submitted that the order has to be set-aside and we posted this mater today for further consideration. In the mean-while the order of Hon'ble NCLAT made available to us and it very clear from the order itself is that if there is any possibility of re-negotiation between he owners of the premises and the RP they can do so or else logical conclusion that can be deduced from the order itself is that the premises of the court corporate Debtor must be vacated and handed over to the owner of the premises. It is very clear that the Hon'ble NCLAT had directed the RP to forthwith make the payment from the date of initiation of CIRP. They are very clear that they are not inclined to handover the premises and for past 9 months no payments have been made to them nor the premises have been put to use as claimed by the RP. It seems there is some deliberate and malicious idea is floating in the mind of the RP and his conduct is highly deplorable and unbecoming of a professional at alone as capacity as IRP. The RP is an officer of the officer of the Court and we expect the IRP would help this Bench in achieving the object of the code i.e. maximization of assets but at the same time with adhere to the legal provisions. But at the present situation the RP seems to be have his own personal interest in the whole episode and even though the order of this Bench and NCLAT are very clear the RP is not inclined to comply the same and in the open court it was argued that they tried for re-negotiation even though the owners of the premises are present and doesn't want any re-negotiation In view of the same we hereby direct the RP to handover the possession and in the event the RP disobey our order we will be constrained to proceed against him as per law. It will be recalled on the earlier occasion also the conduct of the RP was not proper and at least now we expect from the RP to mend his base and assist this bench in the interest of justice. List this matter on 18.12.2019 for further consideration.”
And further on 18.12.2019, the Adjudicating Authority passed the order in M.A No. 3558 of 2019, which read as under:-
“It has been brought to the knowledge of this bench that the RP has handed over the possession of the property to the owners of the premises and furnishes a compliance report of the same. Apart from that the RP is willing to make the payment only with regard to the due amount post CIRP period and further it has been interpreted from our orders that liability of the corporate debtor is only with regard to post CIRP and not from CIRP period. In view of the same we hereby clarify that the RP shall make the payment of entire amount due with regard to the rent after deducting any amount like GST etc. as per law.”
The resume of the orders, which have been reproduced hereinabove, passed both by the Adjudicating Authority and this Tribunal is that in the order dated 16.10.2019 the Adjudicating Authority had observed that (i) the Respondent had filed the claim on 04.06.2018 but despite the expiry of 4 months since then the RP did not decide the claim. (ii) the RP is in possession of the said premises of the Respondent depriving it from its right to use the same (iii) the inaction on the part of the RP in not taking a decision with respect to the claim of the Respondent is an abuse of the powers (iv) the RP maliciously neither paid the rent nor vacated the premises and rather wanted to hand it over to the SRA as a going concern, putting the landowner to further trouble (v) The RP was directed to handover the possession of the said premises forthwith and to pay the claim amount as raised within a week from the date of passing of the order. (vi) the application was allowed with costs of Rs. 1,00,000/- to be paid by the RP to the applicant within a week from the date of passing of the order.
In the order dated 13.11.2019 passed on the application for seeking issuance of contempt for non-compliance of the order dated 16.10.2019. The Adjudicating Authority has observed that (i) since the order dated 11.11.2019 has not been uploaded on the website, therefore, it is not clear as to whether the RP has been served or not (ii) Counsel for the Appellant informed that the RP is present in the Court and when the matter is called out, the staff of the court found that the RP is sitting outside the court room but refused to come inside and thus, the RP was very much aware of the hearing but deliberately refused to appear before the court despite the order dated 11.11.2019 (iii) a fresh notice was issued to the RP as to explain why the order dated 16.10.2019 was not complied with (iv) observation were made about the impertinent, carelessness indifferent attitude on the part of the RP and was deprecated with further reporting to the IBBI for taking necessary disciplinary proceedings (v) the RP appeared when the Court was about to rise and sought for recall of the order. (vi) the recall of the order shall be considered on the next date of hearing.
In the order dated 20.11.2019 the following observations have been made (i) no interference with substantive part of the order (ii) it was not the case to impose any cost on the RP. (iii) the RP shall pay the current rent of the period of resolution process and it was ordered that direction at para 19 of the order dated 16.10.2019 is modified to the extent “pay the claim amount as raised by the Applicant for current period after initiation of the CIRP” (iv) the RP shall determine the claim of the Respondent and may approach it for renegotiation and settlement of any grievance in terms of earlier agreement (v) the impugned order was set aside in so far as the imposition of cost of Rs. 1 Lakh is concerned and rest of the order remained in fact.
In the order dated 25.11.2019 the following observations were made (i) the matter was called and kept aside for considerable time and RP did not attend the court (ii) at one point of time, the court was inclined to sent staff members to search the RP but it was reported that the RP do not incline to come inside because he was having some problems with his hand. (iii) when the court about to rise the RP appeared and submitted that the order has to be set aside (iv) the RP seems to be have his own personal interest in the whole.
In the order dated 18.12.2019 the following observations were made (i) the RP handed over the possession of the property to the owners of the premises and submitted a compliance report. It was clarified that the RP shall make the payment of entire amount due with regard to the rent after deducting any amount like GST etc. as per law.
Counsel for the Appellant has submitted that the Appellant is aggrieved from certain observations made against him and has prayed for expunging the same and on merits it is submitted that the Adjudicating Authority has committed an error in directing that the entire amount of rent has to be paid despite the fact that this Tribunal had earlier vide its order dated 20.11.2019 directed to pay the rent of the current period after initiation of the CIRP.
He has particularly pointed out the observations to be expunged which reads thus: “Apart from this the impertinent, carelessness indifferent attitude on the part of the RP is highly deplorable and the conduct of RP shall be reported to IBBI for taking or initiating disciplinary proceedings against RP and at the present situation the RP seems to be have his own personal interest in the whole”
At the time of preliminary hearing on 29.01.2020, this Tribunal had passed the following orders:
“Learned Counsel for the Appellant submits that in so far as delivery/ possession of the premises in question is concerned, the same has been complied with and this fact has also been reflected in the order dated 18.12.2019 passed by the learned Adjudicating Authority in M.A. 3558/2019.
Learned Counsel for the Appellant submits that the Appellant is aggrieved of the direction in terms of the Impugned Order so far as the same relates to the clarification regarding payment of entire amount claimed by the Operational Creditor. It is submitted that in the light of the order passed by this Appellate Tribunal on 20.11.2019 in Company Appeal (AT) (Ins) No. 1324 of 2019, such amount cannot be inclusive of the pre Corporate Insolvency Resolution Process claims.
Let notice be issued on Respondent by Speed Post. Requisites along with process fee, if not already filed, be filed by tomorrow. If the Appellant is able to ascertain the email address of Respondent, he may file the same and notice may be issued through email as well.
Meanwhile, the direction in terms of the Impugned order in regard to payment of entire dues shall not be enforced in regard to pre Corporate Insolvency Resolution Process claims in terms of the order passed by this Appellate Tribunal earlier and no coercive steps shall be taken to enforce liability for the pre Corporate Insolvency Resolution Process period, till the next date of hearing.
List this appeal ‘For Admission (After Notice)’ on 14th February, 2020”
Thereafter, the orders were passed for the Corporate Debtor to remove its machines from the demised premises and the Corporate Debtor was taken over by the SRA. During the proceedings, it also transpired that earlier Counsel Ms. Udita Singh had requested for a discharge from the case while she was appearing as Counsel for the Appellant. She was asked to file the necessary application but the same was not filed and ultimately the application was filed by one Mr. Aniruth Purushotham to appear on behalf of the Appellant which was allowed on 19.09.2022.
Counsel for the Appellant has submitted that the Appellant has been proceeding in this case in accordance with law and the observations which are sought to be expunged are very harsh. It is also submitted that the Appellant was unwell as he had some injury in his hand, therefore, he could not appear before the Adjudicating Authority.
We have heard Counsel for the Appellant in this regard and perused the entire record.
It is worthwhile mention that the Adjudicating Authority has made strong observation against the act and conduct of the Appellant on 16.10.2019 which we have reproduced in the earlier part of this order. The Appellant had challenged the order dated 16.10.2019 by way of appeal i.e. CA (AT) (Ins) No. 1324 of 2019, but from the reading of the order dated 20.11.2019 passed by this Tribunal, we could not find that any effort was made by the Appellant for seeking expunction of the observations made against him in the order dated 16.10.2019.
As a matter of fact, when the contempt petition was filed by the Respondent for the non-compliance of the direction it contained in the order dated 16.10.2019, the Adjudicating Authority vide its order dated 11.11.2019 directed the Appellant to appear personally on 13.11.2019. The Adjudicating Authority has observed that the Appellant was found by the staff of the court sitting outside the court room but he refused to appear when he was asked for it and when the court was about to rise after passing the remarks about which the prayer has been made for expunction, the Appellant appeared and prayed for recall of the order. It was also observed in the order dated 25.11.2019 that the Appellant has neither handed over the vacant possession of the premises nor has paid any amount from the last 9 months and in this background it was observed that some deliberate and malicious idea is floating in the mind of the RP and his conduct is found highly deplorable and unbecoming of a professional. It was also observed that the IRP is an officer of the court who is expected to help the court in achieving the object of the court i.e. maximization of the asset but at the same time to adhere the legal provisions.
All these observations were made either in the presence or with the knowledge of the Appellant but at no point of time any application was made by the Appellant before the Adjudicating Authority to expunge those remarks and has now challenged the order dated 13.11.2019 on the ground that he could not appear before the Adjudicating Authority because he was having injury on his hand. In this regard, the Hon’ble Supreme Court in the case of State of Maharashtra Vs. Ramdas Shriniwas Nayak & Anr. (1982) 2 SCC 463, has held that “judgments cannot be treated as mere counters in the game of litigation. We are bound to accept the statement of the Judges recorded in their judgment, as to what transpired in court. “If the judges say in their judgment that something was done, said or admitted before them, that has to be the last word on the subject. The principle is well settled that statements of fact as to what transpired at the hearing, recorded in the judgment of the court, are conclusive of the facts so stated and no one can contradict such statements by affidavit or other evidence. If a party thinks that the happenings in court have been wrongly recorded in a judgment, it is incumbent upon the party, while the matter is still fresh in the minds of the judges, to call attention of the very judges who have made the record to the fact that the statement made with regard to his conduct was a statement that had been made in error. That is the only way to have the record corrected. If no such step is taken, the matter must necessarily end there.”
The very fact that there was no challenge by the Appellant to various observations made against him in the order dated 16.10.2019 and that he did not appear before the Adjudicating Authority on 13.11.2019 despite an order dated 11.11.2019 and was sitting outside the court room and staff of the court had requested him to appear and then appeared suddenly when adverse comments were recorded goes to speak about the personality of the Appellant against whom the observations have been made.
In view of the totality of the facts and circumstances mentioned hereinabove, we do not find any merit in the contention of the Counsel for the Appellant for expunging the remarks which are allegedly adverse to him.
In so far as, the order dated 18.12.2019 is concerned, the Adjudicating Authority has observed that the Appellant had to make the payment of entire amount due with regard to the rent is contrary to the orders passed by this Tribunal on 20.11.2019 when the earlier appeal i.e. CA (AT) (Ins) No. 1324 of 2019 was decided because in that case it was held that “para 19 should be read as pay the claim amount as raised by the Applicant for current period after initiation of the CIRP”. Even otherwise, it was held in the case of Damodar Valley Corporation Vs. Karthik Alloys Limited, CA (AT) (Ins) No. 13 of 2021 that: “We note that DVC has filed its claim of past dues of period prior to initiation of CIRP before the RP, which will be considered by the CoCs and appropriate decision regarding settlement and payment of the claim shall be done in accordance with the resolution plan to be approved by the Adjudicating Authority. In such a situation we do not think that the payment of past dues of the pre-CIRP period have to be paid by the Corporate Debtor when the resolution of the Corporate Debtor is in process.”
Thus, in view of the aforesaid facts and circumstances, the present appeal is allowed only to the extent of setting aside the order dated 18.12.2019 by which the Adjudicating Authority has directed that “in view of the same we hereby clarify that the RP shall make the payment of entire amount due with regard to the rent after deducting any amount like GST etc. as per law”. With these observations, the present appeal is hereby disposed of.