Anil Chhabria vs Sbicap Trustee Company Limited & Ors

Anil Chhabria ...Appellant Vs. SBICAP Trustee Company Ltd. & Ors. ....Respondents Present:

For Appellant: Mr. Kumar Anurag Singh, Zain A Khan, Advocates For Respondents: Ms. Aastha Kaushal and Mr. Amogh Joshi and Ms. Sneha Jaisingh, Mr. Anshul Singh, Advocates for R1 Mr. Yash Jariwala, Advocate for R2 Mr. Nausher Kohli and Mr. Jash Shah, Advocate for R3 ORDER

(Virtual Mode)

02.06.2022: This Appeal is preferred under Section 61 of the Insolvency

and Bankruptcy Code, 2016 (for short 'Code') against the impugned order

dated 28th March, 2022 passed by the 'Adjudicating Authority' (National

Company Law Tribunal, Mumbai Bench-V) in I.A. NO. 122 and 164 of 2022

C.P.(IB) No. 380(MAH)/2021 (for short "Impugned Order") whereby the

application filed under Section 12A of the Code read with Rule 30A of the

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process

For Corporate Persons) Regulations, 2016 (for short 'Regulation') seeking

withdrawal of the 'Corporate Insolvency Resolution Process' (for short 'CIRP')

against the Corporate Debtor (for short 'CD') on account of a settlement

having been arrived at between the CD and the Financial Creditor (for short

'FC') on 05th January, 2022.

In brief, an Application under Section 7 of the Code was filed by the

SBICAP Trustee Company Ltd (for short 'SBICAP')/FC before the 1

Company Appeal (AT) (Ins) No. 378 of 2022 Adjudicating Authority. The Adjudicating Authority admitted the application

and initiated CIRP on 06th September, 2021 against the Respondent therein,

namely, M/s.Radius Estate Projects Private Limited (for short 'Radius Private

Limited'). Consequent thereupon, on 14th September, 2021, the Insolvency

Resolution Professional (for short 'IRP') issued a public announcement calling

upon all the 'Creditors' to submit their proof of claim on or before 27th

September, 2021.

One of the 'Creditor' namely, 'Dewan Housing Finance Corporation Ltd'

(DHFL), allegedly taken over by 'Piramal Capital and Housing Finance

Limited' (Piramal), submitted the proof of their claim of Rs. 2343,90,99,483/-

The Appellant herein filed an Appeal i.e. CA(AT) (Ins) No. 820 of 2021

against the order dated 06th September, 2021 before this 'Appellate Tribunal'

in which, vide order dated 05th January, 2022, in view of the settlement, said

to have been arrived between SBICAP and Radius Private Limited, stay was

granted regarding Constitution of 'Committee of Creditors' (for short CoC).

The Appeal i.e. CA(AT) (Ins) No. 820 of 2021 was ultimately disposed of with

the order dated 05.01.2022:

"It is represented on both sides that the matter has been

settled between the parties and as such, the Learned

Counsel for the Appellant seeks permission from this

Tribunal to withdraw the instant Comp. App. (AT) (Ins) No.

820 of 2021. Acceding to his said request, the instant

Comp. App. (AT) (Ins) No. 820 of 2021 is dismissed as

withdrawn. No Costs. It is open to the parties to file the

Settlement terms copy before the 'Adjudicating Authority'

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Company Appeal (AT) (Ins) No. 378 of 2022 and to seek appropriate remedy in the manner known to

Law and in accordance with Law. If they so

desire/advised. All connected Interlocutory Applications

are closed."

Apropos, the Financial Creditor - SBICAP moved an application to the

IRP under Section 12A of the Code with Form FA and Consent form of 'Radius

Private Limited'. On 12.01.2022 while the said application was pending, an

application bearing no. IA No. 164 of 2022 came to be filed at the instance of

Piramal to intervene in the said proceedings. It is pertinent to mention here

that admittedly, post public announcement, the IRP had received 134 claims

aggregating to Rs. 5326.66 Crores out of which Rs. 2632.86 Crores was

admitted, claim of Rs. 398.56 Crores was not admitted and claim of Rs.

2305.36 crores were kept under verification. The application filed under

Section 12A of the Code, bearing I.A No.122 of 2022, did not find favour and

the same was dismissed by the Adjudicating Authority, vide impugned order

dated 28th March, 2022 with the following observations:

"30.This bench is conscious of the fact that the IRP

has received 134 claims aggregating to Rs. 5326.66

crores, out which claims of Rs. 2632.86 crores have

been admitted, claims of Rs.398.56 crores were not

admitted and claims of RS. 2305.36 crores were kept

under verification, cannot be brushed aside. This

raises a red flag and is of serious concern in view of

the factual matrix that Radius Group is undergoing

financial turmoil and if the withdrawal of CIRP is

permitted, it will lead to multiplicity of proceedings

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Company Appeal (AT) (Ins) No. 378 of 2022 and the Creditors are seeking effective Resolution of

the CD.

31. This Bench notes that there has been

unconscionable settlement between the parties by

virtue of the settlement agreement which proposes

the payment of Rs. 3 crores as against the entire

claim of Rs. 23,85,42,463/- and offers staggered

payment to be paid in six instalments. Therefore, the

purported settlement lacks bona fide. Hence, this

Bench is of the opinion that the interest of the

Creditors will not be protected if the withdrawal of

the CIRP against the CD is allowed. The Bench has

no doubt in its mind that considering the CIRP

proceedings are in rem, the substantial claims of the

Financial Creditors cannot be disregarded, in view

of part settlement of a single Creditor."

Aggrieved against the impugned order, the present appeal has been

preferred and counsel for the Appellant has argued that after the amendment

in Rule 30A of the Regulations w.e.f. 25th July, 2019, the application under

Section 12A can be made before the Adjudicating Authority in two situations

i.e. before the Constitution of CoC and after the Constitution of CoC. It is

submitted that Section 12A only enables the Adjudicating Authority to allow

the withdrawal of the application, admitted under Section 7, 9 or 10 of the

Code, if an application is made by the Applicant with the approval of CoC by

voting share of 90%.

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Company Appeal (AT) (Ins) No. 378 of 2022 It is further submitted that in the present case CoC was not

constituted. Therefore, the rigor of voting share of 90% will not apply and

thus the application was filed in view of Rule 30A(1)(a), 3 & 6 of the

Regulations which has not been looked into by the Adjudicating Authority

while passing the impugned order. Learned counsel for the Appellant has

further submitted that the findings recorded by the Adjudicating Authority

in para 31 of the impugned order are also unwarranted and unfounded.

It is submitted that there is only one creditor who had filed the

application under Section 7 of the Code, agreed to settle the financial dispute

with the CD by staggering the amount due to be paid in stages and had not

made any complaint about bona fide of the settlement arrived at, the

observations of the Adjudicating Authority that the settlements lack bona

fide is totally unwarranted and uncalled for. Counsel for the Appellant, in

support of his submission has relied upon the decisions of this Appellate

Tribunal in the case of Gouri Prasad Goenka Vs. Surenda Kumar Agarwal &

Anr. CA(AT)(Ins) No. 105 of 2020 and Arun Tejpal Vs. Rakesh Yadav

CA(AT)(Ins) No. 298 of 2021.

In reply, counsel appearing on behalf of the Intervener has vehemently

argued that once the CIRP has been initiated, all the creditors have a right

to lodge their claim before the IRP and in that process, they do not require to

file any separate application under Section 7 of the Code. It is also submitted

that the intervener has a major part of recovery running into Rs. 2444/-

Crore approx. which constitutes 60% part of the total outstanding to be paid

by the CD. He has refereed to the decision of Swiss Ribbons Pvt. Ltd. and

Anr. Vs Union of India and Ors. 2019 4 SCC 217 to contend that once the 5

Company Appeal (AT) (Ins) No. 378 of 2022 Code gets triggered by admission of a Creditors petition under Section 7 to

9, the proceedings before the Adjudicating Authority, being a collective

proceeding, is proceedings in rem. He also submitted that ignoring claim of

the intervener at this stage and asking him to take his remedy under Section

7 of the Code would cause multiplicity of litigation and also lift the

moratorium which has been created on account of the appointment of IRP

with the initiation of the CIRP. The anxiety of the intervener is that the CD

may not dispose of his assets in order to deprive the Financial Creditor like

the Intervener who is to recover huge amount of the dues.

We have heard learned counsels for the parties and perused the

records.

At the outset, we may make it clear that we are not touching the inter

se merits of the issues raised by both the parties before us as we are not

satisfied with the finding recorded by the 'Adjudicating Authority' in para 31

of the impugned order wherein it has been observed that application filed

under Section 12A lacks bona fide without their being any material before it.

Secondly, the 'Adjudicating Authority' has not taken into consideration

Regulation 30-A and discussed its import in a case like in hand in which the

counsel for the Appellant has vehemently argued that Application filed before

the constitution of the CoC has to be treated differently and the Adjudicating

Authority is not supposed to sway with the amount involved which is to be

recovered by various claimants who are already before the IRP.

Therefore, in the facts and circumstances of the case, we deem just

and expedient to set aside the impugned order dated 28th March, 2022 and

remand the case back to the Adjudicating Authority with a direction to decide 6

Company Appeal (AT) (Ins) No. 378 of 2022 it once again after taking into consideration the import of Regulation 30A

which has been substituted in the Regulations w.e.f 25.07.2019 and has

come post decision in Swiss Ribbion (supra).

The parties are directed to appear before the Adjudicating Authority on

13th June, 2022. The Adjudicating Authority is further directed to decide

the matter afresh as early as possible.

It is made clear that we have not expressed any opinion on the merits

of the case. The Appeal is allowed with the aforenoted direction.

The Registry is directed to send a copy of this order to the 'Designated

Registrar' of concerned 'Adjudicating Authority'. No order as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Kanthi Narahari] Member (Technical)

[Dr. Ashok Kumar Mishra] Member (Technical)

Raushan/RR

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Company Appeal (AT) (Ins) No. 378 of 2022