Asl Enterprises Ltd. Vs. Mr. Daulat Ram Jain, Liquidator - Any decision post the date of such transfer regarding the management of such assets, including that of the subsequent transfer of the said assets to another company, lies with the company. The same is not covered within the jurisdiction of the Adjudicating Authority under the IBC and as such, the prayers sought in the instant application cannot be granted.

 NCLT Kolkata (18.10.2023) in Asl Enterprises Ltd. Vs. Mr. Daulat Ram Jain, Liquidator [I.A. (I.B.C.) 703/KB/2023 in CP(IB) No. 1172/KB/2019] held that;

• Any decision post the date of such transfer regarding the management of such assets, including that of the subsequent transfer of the said assets to another company, lies with the company. The same is not covered within the jurisdiction of the Adjudicating Authority under the IBC and as such, the prayers sought in the instant application cannot be granted.

Excerpts of the Order;    

1. This Court convened through hybrid mode. 

2. The interlocutory application being I.A. No. 703/KB/2023 has been filed by the Applicant herein being the guarantors of the Corporate Debtor under section 60(5) of the Insolvency And Bankruptcy Code, 2016 (“IBC”) seeking the following reliefs: (a) An order and/or direction upon the liquidator to ef ect registration of the land and other assets of the Corporate Debtor sold in liquidation in favour of the applicant to be done in the name of the respondent no. 2 herein; (b) Direction upon the Liquidator to issue, execute and register the Sale Certificate The name of the respondent no. 2 herein; (c) Stay on dissolution of the Corporate Debtor till disposal of the present application;(d) Ad-interim orders in terms of Prayers above. (e) Such further and/or other directions be passed as this Adjudicating Authority May Deem fit and proper. 

3. Submissions of the Applicant: 

3.1 Adi Ispat Private Limited (the Corporate Debtor) was admitted into CorporateInsolvency Resolution Process (CIRP) vide this Adjudicating Authority’s order dated 22.11.2019.1 Thereafter, this Adjudicating Authority passed an order allowing the liquidation of the Corporate Debtor vide order dated 27.09.2022.2 The respondent herein was appointed as Liquidator of the Corporate Debtor. 

3.2 By virtue of Section 35 of the Code, the Liquidator is empowered to sell the moveable and immoveable properties and assets of the Corporate Debtor Undergoing liquidation by public auction or by private contract or to sell the same in parcel in such a manner as may be specified. 

3.3 In accordance with the provisions of the Code and the Regulations framedthereunder, the Liquidator caused valuation of the moveable and immoveable properties of the Corporate Debtor (in liquidation) and thereafter, the Liquidatormade public announcement3 on September 29, 2022 in newspapers for sale of assets 4 of the Corporate Debtor (in liquidation) on AS IS WHERE IS BASISandAS IS WHAT IS BASIS and WHATEVER THERE IS BASIS and NO RECOURSE BASIS for auction, which was to be held on November 28, 2022. 

3.4 It is stated that the applicant participated in the said public auction heldonNovember 28, 2022 and was declared as the successful H1 bidder with abid amount of Rs.15 crore. After conclusion of the public auction on November 28, 2022, the Liquidator issued a Letter of Intent5 to the successful auction purchaser on November 29, 2022. The said Letter of Intent was duly accepted by the applicant on November 30, 2022 by endorsing on the copy of the Letter of Intent dated November 29, 2022. 

3.5 The entire sale consideration amount of Rs.15 crore has been deposited/paid by the applicant successful auction purchaser. In terms of the Expression of Interest, the applicant had already submitted Rs.1.5 crore as Earnest Money Deposit (for short, "EMD") prior to auction on November 28, 2022. Thereafter, in terms of the Letter of Intent it had deposited Rs.10 crore on December 21, 2022, Rs.3 crore on December 28, 2022 and the balance sum of Rs.50 lakh on December 31, 2022. As the 30 days' period to make payment of the total consideration amount expiredonDecember 29, 2022, the applicant made further payment of Rs.3,333/- towards interest on the amount paid after 30 days. The Liquidator by a letter 6 datedDecember 31, 2022 has acknowledged and confirmed receipt of the full consideration amount. 

3.6 It has been submitted that the Liquidator/the vendor has already delivered actual physical possession 7 of the assets of the Corporate Debtor to the applicant onASISWHERE IS BASIS & WHAT IS BASIS and WHATEVER THERE IS BASISandNO RECOURSE BASIS without any warranty and/or indemnity on February 4, 2023. Further the Liquidator has also executed a Sale Agreement8 on March 20, 2023 in favour of the applicant being the successful auction purchaser. 

3.7 In order to revive the Unit and setting up a rolling mill, the Applicant has incorporated the Respondent no. 2 herein, which is the 100%subsidiary company of the Applicant. On March 15, 2023, the Respondent no. 2 was incorporated under the Companies Act, 2013, having his Corporate IdentityNo. U29301WB2023PTC260399. The respondent no. 2 has been incorporated tocarryon the business of manufacturers of, dealers in, exports and importers of all varieties of iron, steel and TMT bar, which is in the identical line of business as that of the Corporate Debtor. 

3.8 The Applicant and the Respondent no. 2 are in the same "ASLE Group" having the same Registered Office, same e-mail address and common directors on the board. The applicant intends to do the business of rolling mill through the new100%subsidiary company, which is the respondent no. 2 herein, for better efficiency and management of the new business. As such, the applicant has filed the instant application, praying for registration of the Sale Agreement in the name of the6 Annexure “F” 7 Annexure “G” 8 Annexure “H” respondent no. 2 so that the land and assets can be transferred and registered in the name of the respondent no. 2. 

3.9 The Respondent no. 2 is neither a related party of the Corporate Debtor nor of theLiquidator or any other professional appointed by the Liquidator. The respondent no. 2 is not ineligible under Section 29A of the said Code to run the CorporateDebtor. In this regard, a copy of the Certificate and/or Declaration made by way of an affidavit by the respondent no. 2 that it is not ineligible to revive the Unit and operate a rolling mill with the assets and properties of the Corporate Debtor sold in liquidation, has been provided by the Applicant 9 . 

3.10 In order to operate a rolling mill, various statutory clearances from the Government Authorities like Ministry of Environment, Forest and Climate Change, StatePollution Control Board and other Licensing Authorities are required and it will be convenient if new business is being run by way of a separate entity. Further, since the parent company i.e. the Applicant herein, is the successful auction purchaser of the assets and properties of the Corporate Debtor, it is just, fit and expedient to pass an order and/or direction for registration of the land and other assets of the Corporate Debtor in the name of the Respondent no. 2 herein whichis the 100% subsidiary of the applicant. 

4. Analysis and Findings: 

4.1 Heard the Ld. Counsel on behalf of the Applicant and the Ld. Counsel on behalf of the respondents and perused the records. 

4.2 The instant matter came up for hearing on 26.05.2023 wherein it was noted that theLiquidator had no objections to the prayers of the instant application. On perusal of the records it can be seen that a sale agreement for the assets of the CorporateDebtor was executed between the Applicant herein and the Liquidator of theCorporate Debtor on 20.03.2023. Further, the assets are in possession of theApplicant herein as is clear from the possession letter dated 04.02.2023. As such, there is no doubt that the assets have been transferred to the Applicant. 9 Annexure “K” 

4.3 Further, the Applicant, under section 179 of the Companies Act, 2013, has filed an extract of the its board resolution dated 27.03.2023 wherein it had resolved to file the instant application seeking the registration of transfer of the sale agreement dated 20.03.2023 and transfer of the land in the name of ASLE Rolling Mills PrivateLimited. 

4.4 Be that as it may, since the assets in question have been transferred vide sale agreement dated 20.03.2023 to the Applicant, i.e. a private company, any decision post the date of such transfer regarding the management of such assets, including that of the subsequent transfer of the said assets to another company, lies with the company. The same is not covered within the jurisdiction of the AdjudicatingAuthority under the IBC and as such, the prayers sought in the instant application cannot be granted.

4.5 Accordingly, I.A. (I.B.C.) 703/KB/2023 is dismissed. Needless to mention, theApplicants are at liberty to take other steps in accordance with law in order to pursue any other remedy available to them. 

4.6 CP (IB) No. 1172/KB/2019 shall be listed for further consideration on 24.11.2023. 

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

4.8 Certified copy of this order may be issued, if applied for, upon compliance of all requisite formalities

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Shri Ramachandra D. Choudhary Vs. Bansal Trading Company - We hold that the remedy for recovery of debts, disputed or not, cannot be determined in summary proceedings and the Code does not contemplate adjudication of any such nature. Any such steps taken under Section 60(5) of the Code before the Adjudicating Authority, would tantamount to bypassing/short-circuiting the Judicial Proceedings.

 NCLAT (01.09.2022) in Shri Ramachandra D. Choudhary Vs. Bansal Trading Company [COMPANY APPEAL (AT) (INSOLVENCY) No. 810 of 2020] Held that;

• Under Section 25(2)(b) of the IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings.

• ………This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5).

• Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016, it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right.

• Therefore, considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. 

• However, in doing do, we issue a note of caution to the NCLT and NCLAT to ensure that they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor.The nexus with the insolvency of the Corporate Debtor must exist.

• We hold that the remedy for recovery of debts, disputed or not, cannot be determined in summary proceedings and the Code does not contemplate adjudication of any such nature. Any such steps taken under Section 60(5) of the Code before the Adjudicating Authority, would tantamount to bypassing/short-circuiting the Judicial Proceedings.

Excerpts of the order;

# 1. These Appeals have been preferred by the Liquidator of M/s. Oasis Tradelink Ltd./the ‘Corporate Debtor, aggrieved by the Orders dated 26.06.2019 passed by the Learned Adjudicating Authority (National Company Law Tribunal, Ahmedabad Bench, Court -I), whereby I.A. Nos. 319, 318, 316 & 317 of 2020 in C.P. (IB) No.- 433 of 2018 were dismissed by the Adjudicating Authority on the ground that the Applications were not maintainable as they have been filed by the Liquidator for recovery of outstanding amounts from ‘Sundry Debtors’ under Section 60(5)(b) of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as ‘The Code’).

 

# 2. For the sake of convenience Comp. App. (AT) (Ins.) No. 810 of 2020 being taken as a lead case and since all these Appeals deal with common facts and point of law, they are being disposed of by this common Order.

 

# 3. By the Impugned Order, the Adjudicating Authority, while dismissing the Applications observed as follows:

• “We have gone through applications. This application has been filed by Liquidator for recovery of outstanding amount of Rs.4,25,90,475.00 from Respondent No. 1, namely, M/s Bansal Trading Company & Ors. It is noted that direction/order is sought from this Authority under Section 60(5)(b) of Insolvency and Bankruptcy Code, 2016. On our considered view, the said Application is not at all maintainable. The liquidator is required to recover their sum by way of filing application under Section 7 or 9 of Insolvency & Bankruptcy Code, 2016 or in alternative he can approach Civil Forum for the recovery of the same, which he is obliged to do as per provisions of the section 35(1)(k) of Insolvency and Bankruptcy Code, 2016.

• We also held that there is no bar under Section (11) of Insolvency and Bankruptcy Code, 2016 to proceed under Section 7 or 9 as Insolvency & Bankruptcy Code, 2016 as per explanation II, thereto which has been incorporated w.e.f. 28.12.2019. Further, we also consider it pertinent to mention that term “claim” used in Section 60(5)(b) has been defined under Section 3(6) of Insolvency and Bankruptcy Code, 2016 and that has to be read for the purpose of Section 7/9 with other relevant Sections and Regulations made under Insolvency and Bankruptcy Code, 2016.

• We are further of the view that if respondent is already under CIRP under Insolvency and Bankruptcy Code, 2016 then claim by the liquidator has to be filed in accordance with the provisions of Insolvency and Bankruptcy Code, 2016 read with relevant Regulation against such Corporate Debtor in prescribed form before IRP/RP/Liquidator in that case for consideration of its claim.”

 

# 4. Learned Counsel for the Appellant submitted that CIRP commenced against the ‘Corporate Debtor’ vide Order dated 26.02.2019 and subsequently vide Order dated 04.12.2019, the ‘Corporate Debtor’ went into Liquidation and a Liquidator was appointed. The first Respondent/Sundry Debtor of the ‘Corporate Debtor’ owes the ‘Corporate Debtor Company’ a sum of Rs.4,25,90,475/- against goods supplied to them by the ‘Corporate Debtor’. It is submitted that the recovery of the said amount would immensely aid the Creditors of the ‘Corporate Debtor’ and realizing the maximum value during Liquidation. It is the responsibility of the Appellant herein to realize and recover dues on behalf of the ‘Corporate Debtor’ as laid down under Regulation 39 of the Insolvency and Bankruptcy Board of India (Regulation Process) Regulations, 2016.

 

# 5. It is further submitted that the Statutory Audit of the accounts of the ‘Corporate Debtor’ reflects that an amount of Rs.4,25,90,475/- is due and pending to the ‘Corporate Debtor’. Learned Counsel placed reliance on Section 60(5)(b) in support of his case that the only remedy available to the Appellant was to approach the Adjudicating Authority by way of an Interim Application seeking a direction for recovery of the debt from the Sundry Debtors. Learned Counsel place reliance on the Judgements of this Tribunal in ‘Devmata Exim Pvt. Ltd.’ Vs. ‘Ms. Kavitha Surana, RP of Shri Veerganapathi Steels Pvt. Ltd.’, which Order was upheld by the Hon’ble Supreme Court in Civil Appeal No. 8855 of 2019 dated 26.11.2019, whereby the Hon’ble Apex Court has dismissed the Civil Appeal confirming the Order of this Tribunal. The Learned Counsel for the Appellant concluded his arguments referring to Section 63 of the Code which reads as follows:

• “63. No civil court or authority shall have jurisdiction to entertain any suit or proceedings in respect of any matter on which National Company Law Tribunal or the National Company Law Appellate Tribunal has jurisdiction under this Code. Civil Court not to have jurisdiction.”

 

# 6. It is submitted that a conjoint reading of Section 60(5)(b) with Section 63 of the Code reveals that the only remedy available to the Appellant was to approach the Adjudicating Authority for recovery of the said amounts.

 

# 7. The first Respondent/Sundry Debtor in this Appeal was set Ex-Parte, but however since it is a common Order and the Sundry Debtors have filed their Replies in the other Appeals their submissions are being taken into consideration. It is the case of the Sundry Debtors that the ‘Corporate Debtor’ had failed to supply the requisite goods despite entering into a transaction for supply of Crude Edible Oil and Palm Oil, thereby causing huge losses to the Sundry Debtor. Eventually these amounts were squared off and adjusted against the dues of the ‘Corporate Debtor’. Whether any amounts are due or not by the Sundry Debtor would require Adjudication after calling for evidence and therefore can be proceeded only in a Civil Suit. Reliance was placed on the Judgements of the Hon’ble Supreme Court in ‘Embassy Property Development Private Limited’ Vs. ‘State of Karnataka’, (2020) 13 SCC 308 and also on ‘Mobilox Innovations Private Limited’ Vs. ‘Kirusa Software Private Limited’, (2018) 1 SCC 353.

 

# 8. Learned Counsel for the Respondents 2 & 3 submitted that the Adjudicating Authority has rightly dismissed the Application on merits as not maintainable and the Liquidator is required to recover the said amounts by way of filing an Application under Section 7 or 9 of the Code. Respondents 2 & 3 in their capacity of erstwhile Directors of the ‘Corporate Debtor’ have provided all the information available relating to the Sundry Debtors and have also given detailed reasons for the default of payment by them. Upon further enquiry of the Appellant/Liquidator, Respondents 2 & 3 vide email dated 21.03.2020 have stated the reasons for delay in providing documents relating to the Sundry Debtors as several documents were ceased/impounded by the VAT Department during the raids and also because of the Liquidation Process.

 

# 9. It is further submitted that vide email dated 17.12.2019, the Ledger Account of the Sundry Debtor together with the copies of invoices of the goods copy of Form No. 402 and acknowledgement of goods sent outside Gujarat were also sent. It is argued that there is no Debtor or Creditor relationship between the Appellant and the first Respondent and that the Appellant has initiated the present proceedings in the capacity of the Liquidator of the ‘Corporate Debtor’ against first Respondent for recovery of outstanding amounts.

 

Assessment:

# 10. The brief point which falls for consideration in these Appeals is whether the Adjudicating Authority has the powers to pass Orders under Section 60(5)(b) of the Code for recovery of amounts by the ‘Corporate Debtor’ against its Sundry Debtors. It is the main case of the Learned Counsel appearing for the Liquidator that the Liquidator is duty bound to prefer Application for recovery of money due to the ‘Corporate Debtor’ under Regulation 39 of the IBBI (Regulation Process), Regulations, 2016. It was strenuously argued by the Learned Counsel that if Liquidators are directed to approach the Civil Court instead of preferring suitable Application under Section 60(5)(b) of the Code, it would frustrate the time bound manner in which the Liquidation is to be conducted. At this juncture, it is relevant to reproduce Section 60(5) of the Code:

• “60. Adjudicating authority for corporate persons.—

• (5) Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of— 

• (a) any application or proceeding by or against the corporate debtor or corporate person; 

• (b) any claim made by or against the corporate debtor or corporate person, including claims by or against any of its subsidiaries situated in India; and 

• (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.”

 

# 11. Counsel for Respondents No. 2 & 3, the erstwhile Directors of the ‘Corporate Debtor’, stated in their email dated 21.03.2020 that there was some delay in providing information to the Liquidator regarding the Sundry Debtors as the documents were ceased by the VAT Department during the raids, but they did submit the Ledger Accounts of the Sundry Debtor, copies of the invoices together with details regarding supply of goods. It is pertinent to mention that Respondents No. 2 & 3 in this Appeal have themselves admitted in their Written Submissions that the Sundry Debtor has held back payment to the ‘Corporate Debtor’ due to supply of inferior quality of goods and non-fulfillment of their Order.

 

# 12. In the case of ‘Devmata Exim Pvt. Ltd.’, (Supra) relied upon by the Appellant, this Tribunal found that the goods supplied by the ‘Corporate Debtor’ were accepted by the Sundry Debtor and were sold. There was a direction by this Tribunal to the Sundry Debtor to deposit the amount in a separate Escrow Account, as the Debtor has received and accepted the goods and not returned the same to the ‘Corporate Debtor’. However, in the instant case, the second and third, erstwhile Directors of the ‘Corporate Debtor Company’ themselves said that there were substantial reasons for the Sundry Debtors not to have paid their dues. As the factual matrix of the present case is different from the facts of ‘Devmata Exim Pvt. Ltd.’, (Supra) the ratio of the said Judgement is not applicable to the facts of the attendant case. Further, it is the case of the Sundry Debtor in the other Appeals that the amounts were squared off and settled. At this juncture, we find it relevant to reproduce paras 40 and 41 of the Judgement of the Hon’ble Supreme Court in ‘Embassy Property Development Private Limited’, (Supra) wherein the Hon’ble Apex Court has discussed the scope of Section 60(5) of the Code and observed that a Resolution Professional cannot short-circuit any Judicial Proceedings by taking advantage of Section 60(5). For ready reference, the paras are detailed as hereunder:

• “40. If NCLT has been conferred with jurisdiction to decide all types of claims to property, of the corporate debtor, Section 18(1)(f)(vi) would not have made the task of the interim resolution professional in taking control and custody of an asset over which the corporate debtor has ownership rights, subject to the determination of ownership by a court or other authority. In fact an asset owned by a third party, but which is in the possession of the corporate debtor under contractual arrangements, is specifically kept out of the definition of the term “assets” under the Explanation to Section 18. This assumes significance in view of the language employed in Section 20. Section 18 speaks about the duties of the interim resolution professional and Section 25 speaks about the duties of resolution professional. These two provisions use the word “assets”, while Section 20(1) uses the word “property” together with the word “vale”. Sections 18 and 25 do not use the expression “property”. Another important aspect is that under Section 25(2)(b) of the IBC, 2016, the resolution professional is obliged to represent and act on behalf of the corporate debtor with third parties and exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial and arbitration proceedings. Sections 25(1) and 25(2)(b) reads as follows:

• ………This shows that wherever the corporate debtor has to exercise rights in judicial, quasi-judicial proceedings the resolution professional cannot short-circuit the same and bring a claim before NCLT taking advantage of Section 60(5).

• 41. Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016, it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right.”

 

# 13. A brief perusal of the Replies filed by the Sundry Debtors in these Appeals showed that there were disputes raised with respect to the dues payable. It is relevant to note that the question of whether the disputes were genuine or not or the merits or the details of the existing disputes or otherwise are not being addressed to in these Appeals.

 

# 14. The only point which is to be examined is whether the Adjudicating Authority was justified in dismissing the Applications preferred by the Liquidator as not maintainable. The Resolution Professional is required under Section 18 of the Code to take control and custody of the assets of the ‘Corporate Debtor’. The amounts stated to be ‘due and payable’ to the ‘Corporate Debtor’ by other Sundry Debtors are required to be included in the Information Memorandum and when included, the person/entity purchasing the assets of the ‘Corporate Debtor’ would have knowledge of the value of the assets/Liquidation Value as stated in the Information Memorandum. The Hon’ble Supreme Court in ‘Gujarat Urja Vikas Nigam Limited’ Vs. ‘Mr. Amit Gupta & Ors.’, Civil Appeal No. 9241 of 2019, in paras 67 & 68 noted as follows:

• “67. The institutional framework under the IBC contemplated the establishment of a single forum to deal with matters of insolvency, which were distributed earlier across multiple fora. in the absence of a court exercising exclusive jurisdiction over matters relating to insolvency, the corporate debtor would have to file and/or defend multiple proceedings in different fora. These proceedings may cause undue delay in the insolvency resolution process due to multiple proceedings in trial courts and courts of appeal. A delay in completion of the insolvency proceedings would diminish the value of the debtor’s assets and hamper the prospects of a successful, reorganization or liquidation. For the success of an insolvency regime, it is necessary that insolvency proceedings are dealt with in a timely, effective and efficient manner. Pursuing this theme in Innoventive (supra) this court observed that “one of the important objectives of the Code is to bring the insolvency law in India under a single unified umbrella with the object of “speeding up of the insolvency process”. The principle was reiterated in Arcelor Mittal (supra) where this court held that “the non-obstante Clause in Section 60(5) is designed for a different purpose: to ensure that the NCLT alone has jurisdiction when it comes to applications and proceedings by or against a corporate debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings”. Therefore, considering the text of Section 60(5)(c) and the interpretation of similar provisions in other insolvency related statutes, NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtor. However, in doing do, we issue a note of caution to the NCLT and NCLAT to ensure that they do not usurp the legitimate jurisdiction of other courts, tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor. The nexus with the insolvency of the Corporate Debtor must exist.

• 68. It is appropriate to refer to the observations in the Report of the BLRC, wherein it noted the role of the NCLT, as the Adjudicating Authority for the CIRP, in the following terms:

• “An adjudicating authority ensures adherence to the process. At all points, the adherence to the process and compliance with all applicable laws is controlled by the adjudicating authority. The adjudicating authority gives powers to the insolvency professional to take appropriate action against the directors and management the entity, recommendations from the creditors committee. All material actions and events during the process are recorded at the adjudicating authority. The adjudicating authority can assess and penalize frivolous applications. The adjudicator hears allegations of violations and fraud while the process is on. The adjudicating authority will adjudicate on fraud, particularly during the process resolving bankruptcy. Appeals/actions against the behavior of the insolvency professional are directed to the Regulator/Adjudicator.”

• As such, it is important to remember that the NCLT’s jurisdiction shall always be circumscribed by the supervisory role envisaged for it under the IBC, which sought to make the process driven by trained resolution professionals.”

 

# 15. Keeping in view the aforenoted ratio in ‘Gujarat Urja Vikas Nigam Limited’ (Supra), we hold that the remedy for recovery of debts, disputed or not, cannot be determined in summary proceedings and the Code does not contemplate adjudication of any such nature. Any such steps taken under Section 60(5) of the Code before the Adjudicating Authority, would tantamount to bypassing/short-circuiting the Judicial Proceedings. Keeping in view the submissions of the Respondents, to adjudicate whether the amount is due and payable by the ‘sundry debtors’ who have raised disputes, would require calling for evidence and cannot be proceeded under the Code. The Appellant is well within its powers to take appropriate steps to file legal proceedings, if the circumstances so warrant. The Code expressly provides for the Liquidator to institute or defend any Suit, Prosecution or other Legal Proceedings, Civil or Criminal, in the name or on behalf of the ‘Corporate Debtor’.

 

# 16. For all the aforenoted reasons, we are of the considered view that the ratio of the Hon’ble Apex Court in ‘Embassy Property Development Private Limited’ (Supra) is applicable to the facts of these Appeals and therefore we are of the earnest view that there is no illegality or infirmity in the direction given by the Adjudicating Authority and hence these Appeals fail and are accordingly dismissed. No order as to costs.

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RPG Industrial Product Pvt. Ltd. Vs. Sh. Harvinder Kumar Jatana - The Adjudicating Authority, which had the powers, to appoint the Liquidator, will also have the powers, to remove the Liquidator for reasons, the Adjudicating Authority, may find fit, just, valid and proper.

 NCLT Chandigarh (30.05.2023) In RPG Industrial Product Pvt. Ltd.  Vs. Sh. Harvinder Kumar Jatana  [IA No. 843/2020 In CP (IB) No.121/Chd/Pb/2018] held that;

• No Liquidator, has any personal rights, to continue in Liquidation and the Adjudicating Authority, can order for replacement of the Liquidator, recording sufficient reasons, as per law.

• Since the Adjudicating Authority, is vested with the power, to appoint a Liquidator, under Section 33 and 34 of the Code, 2016. It is by the virtue of the Section 16 of the General Clauses Act, 1897, that an Adjudicating Authority, who also, has the power, to remove the Liquidator.

• The Adjudicating Authority, which had the powers, to appoint the Liquidator, will also have the powers, to remove the Liquidator for reasons, the Adjudicating Authority, may find fit, just, valid and proper.

Blogger’s Comments; Regulation 31A (11) OF Liquidation Regulations reads as under;

# Regulation 31A(11) The consultation committee, after recording the reasons, may by a majority vote of not less sixty-six per cent., propose to replace the liquidator and shall file an application, after obtaining the written consent of the proposed liquidator in Form AA of the Schedule II, before the Adjudicating Authority for replacement of the liquidator :

Provided that where a liquidator is proposed to be replaced, he shall-

• (a) continue to work till his replacement; and

• (b) be suitably remunerated for work performed till his replacement.

Excerpts of the order; 

This application has been filed by the applicant under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, with a prayer to replace Sh. Harvinder Kumar Jatana-Liquidator appointed in Sahil International Pvt. Ltd. with Sh. Arvind Mital as New Liquidator. 

# 2) It is stated in the application that the CIRP was initiated by order of this Tribunal dated 21.09.2019, and the IRP was appointed and was substituted on the request of the petitioner-operational creditor by this Tribunal by its order dated 29.03.2019. Subsequently, the liquidation order was passed by this Bench on 18.11.2019 on an application by the Resolution Professional. As the outgoing RP did not give his consent to act as a liquidator, the present applicant Sh. Harvinder Kumar Jatana was appointed as liquidator. The RP informed the petitioner-operational creditor by his email dated 06.12.2019 and has invited the claim by 18.12.2019, the requisite claim submitted by the liquidator in time. The liquidator informed the petitioner by email dated 08.01.2020 about the estimated amount of liquidation expenses for a period of 12 months, the said email is attached as Annexure C to the application. Furthermore, by his email dated 28.01.2020, the liquidator intimated the operational creditor to constitute towards the liquidation costs was as to enable him to proceed with the liquidation process. It is also stated that the RP could not find any asset or any liquidity in the account of the respondent. It is stated by the applicant that in the 6th CoC, meeting held on 15.10.2019 under Item 11 to discuss and approve the fee of the liquidator and as per Regulation 39 (d) of the CIRP Regulations, the following decision was taken: 

• “The RP further explained the relevant provisions of the IBC, 2016 and the regulations to the members of the CoC. The CoC after discussions decided not to fix any fees payable to the liquidator.” 

# 3) It is further stated that the demand of the liquidator is illegal and arbitrary, and the liquidator is not pursuing the applications filed under Sections 43 & 66 of the Code, and there has been no progress in the liquidation process. 

# 4) In view of this, the applicant has prayed to appoint Mr. Arvind Mittal as the new liquidator by replacing Sh. Harvinder Kumar Jatana/liquidator. 

# 5) In his reply filed by Diary No. 02050/01 dated 08.04.2022, it is stated that the respondent has taken all necessary steps to discharge his duties as provided under the IBC as well as the IBBI (Liquidation Process) Regulations 2016, including submitting quarterly progress reports. It is stated that the liquidator has not demanded any fee from the applicant and, on request of the applicant, only provided the estimated liquidation cost through his email dated 08.01.2020. 

# 6) We have heard the learned counsel for the parties and have carefully perused the available records. 

# 7) In the course of the present proceedings, it has been stated by the learned counsel for the liquidator that he has no objection to his replacement subject to the payment of his fees. 

# 8) From a perusal of the minutes of the Stakeholders Consultation Committee, it is seen that the liquidator’s request for his fees have not been seriously considered by the operational creditor. In the present case, no decision has been taken by the CoC under Regulation 39 (d) of the IBC, 2016, and therefore, the case squarely falls under Regulation 4 (2) of the Liquidation Regulations. We also note the fact that the corporate debtor has no tangible assets. Be that as it may, under the provisions of the Code, a decision with regard to the fees to be paid in terms of Regulation 4 (2) of the Liquidation Regulations needs to be determined. 

# 9) As regards to the appointment of Sh. Arvind Mittal as the liquidator in place of Sh. Harvinder Kumar Jatana, we are of the view that the Code, 2016 does not explicitly state the grounds for removing the liquidator. In this context, a reference is made to the decision of Hon’ble NCLAT Chennai Bench in case of CA V. Venkata Sivakumar Vs. IDBI Bank Ltd. Company Appeal (AT) (CH) (Ins.) No. 269/2022 & I.A. Nos. 571, 572 & 623/2022 dated 20.12.22 wherein it is held that 

• “I. The Code, 2016 does not explicitly state the grounds for removing the liquidator. In the absence of specific provisions, we may resort to Section 33 & 34 of the Code, 2016 and Section 276 of the Companies Act, 2013, which provides for the removal and replacement of liquidators on various grounds. 

• II. NCLAT also notes the recent judgement passed by Principal Bench, NCLAT vide order dated 13.10.2022 reported at (2022) ibclaw.in 839 NCLAT. This clearly establishes that, no Liquidator, has any personal rights, to continue in Liquidation and the Adjudicating Authority, can order for replacement of the Liquidator, recording sufficient reasons, as per law. 

• III. Further, since the Adjudicating Authority, is vested with the power, to appoint a Liquidator, under Section 33 and 34 of the Code, 2016. It is by the virtue of the Section 16 of the General Clauses Act, 1897, that an Adjudicating Authority, who also, has the power, to remove the Liquidator. 

• IV. Combined reading of above Case Laws and provisions along with Section 33 and Section 34 of the Code, 2016, would make it clear that the Adjudicating Authority, which had the powers, to appoint the Liquidator, will also have the powers, to remove the Liquidator for reasons, the Adjudicating Authority, may find fit, just, valid and proper.” 

# 10) In the present case, the applicant is the sole member of the SCC constituted by the liquidator. Hence, it’s recommendation to appoint Mr. Arvind Mittal in place of Mr. Harvinder Kumar Jatana is accepted. The Law Research Associate of this Tribunal has checked the credentials of Mr. Arvind Mittal, and there is nothing adverse against him. In view of the above, we appoint Mr. Arvind Mittal, Registration No. IBBI/IPA-001/IP-P01358/2018-19/12081, E-mail:arvindmittal81@yahoo.in, Mobile No. 9958061149. The outgoing liquidator is directed to hand over the charges and records to the newly appointed liquidator within the period of seven days from the date of this order. 

# 11) As regards to the payment to the outgoing Liquidator, we have already observed in para 7 & 8 above the legitimate claims regarding Fees etc, of the liquidator have not been seriously considered by the CoC. In view of such facts, we direct the new liquidator to convene the meeting of the stakeholders within 15 days of this order, and the Stakeholders Committee is to decide on the fees of the outgoing liquidator in the said meeting. The necessary payments with regard to the fees to be paid within 30 days of the SCC meeting. 

# 12) In the result, IA No. 843/2020 is allowed and disposed of accordingly. The registry is directed to send a copy of this order to IBBI for its information and records.

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