Antrix Diamond Exports Pvt. Ltd vs Na

Antrix Diamond Exports Pvt Ltd, 407, Panchratna, Opera House, Mumbai-400 004 Corporate Applicant

For Appellant:-Mr Amit Vyas, Mr Monish Panda, Ms Deepti Bhardwaj, Advocates

For Respondents: - Mr.V. Seshagiri, Mr Anchit Tripathi, Ms Anushka Sharma, Mr. Rachit Kumar, Advocates

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

M/s Antrix Diamond Exports Pvt Ltd (corporate applicant) preferred an

application under Section 10 of the Insolvency & Bankruptcy Code, 2016

(hereinafter referred to as the 'I&B Code") for initiation of corporate insolvency

process in respect of it. The Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench, Mumbai vide impugned order dated 20th June, 2017

in CP No.1104/I&BP/NCLT/MAH/2017 rejected the application on the grounds

mentioned therein.

2. The corporate applicant has challenged the impugned order mainly on the

ground that the Adjudicating Authority has relied on facts which are not relevant

for adjudication of an application under Section 10 of the I&B Code.

Company Appeal (AT) (Insolvency) No.107/2017 2

3. On plain reading of the impugned order dated 20th June, 2017 it is clear

that the application was preferred by the corporate applicant in the requisite

form giving details of corporate debtor(s), creditors and other factors as required

under Section 10 of the 'I&B Code' read with Form-6 of the Insolvency and

Bankruptcy (Application to Adjudication Authority) Rules, 2016. The application

is complete. The Adjudicating Authority has also accepted the same and

observed as follows:

"Though the facts of the case fulfil the requirement for initiating a

Resolution Process by a Corporate Debtor to salvage whatever can be

secured and the liability of the creditors liquidated at the earliest,

as also to ensure that its assets do not fell into disarray, what is

noted is that to avail the loan/credit facilities from the Banks, the

Corporate Debtor has offered not only its immovable properties as

securities, but also the personal guarantees of its Directors and

others, mortgaging several immovable properties in favour of the

Banks, apart from fixed deposits and hypothecation of the stock in

trade."

4. At paragraph 6 of the impugned order while the Adjudicating Authority

referred names of 10 Banks which formed the 'Joint Lender Forum' of the

Financial Creditors to whom the corporate debtors owe more than Rs.428 crores,

names of 12 individual personal guarantors have been mentioned therein. Apart

from the same the securities offered by the corporate applicant has been noticed

and recorded at paragraphs 6 of the impugned judgement.

5. The Adjudicating Authority has also noticed the list of 'operational

creditors' other than 'financial creditors'. However, in spite of the same the

Company Appeal (AT) (Insolvency) No.107/2017 3

Adjudicating Authority has rejected the claim on the grounds as mentioned at

para 8 of the impugned order and quoted below:

"8. Given the aforesaid facts, it appears that the Corporate Debtor

is eager to sound its own death knell, presumably to scuttle the

proceedings before SARFAESI as the consequential moratorium

imposed u/s 14 of the Code on admission of this Petition would

automatically stay/stall the proceedings vide which the personal

properties offered as securities are not enforced or taken possession

of. The admission of the Petition shall have a serious impact on the

Financial Creditors who have already set the wheel in motion to

secure their debts. The apprehension, or rather certainty, of taking

away the physical possession of their valuable properties and being

dispossessed appears to be the motivation for the Corporate Debtor

to approach this Tribunal under the Code, rather than ensuring

Resolution of their debts or seeking a turnaround of the Corporate

Business. There is no explanation as to why the FDRs have not been

liquidated to reduce the liability towards the Banks. To stay the

repossession of immovable properties by Banks by resorting to the

provision of Section 10 of the Code would clearly be an abuse of the

process of law to which this Bench certainly cannot be a party to. It

is not sufficient just to meet the requirements under sec. 10 of the

Code which would automatically entitle the Corporate Debtor to

initiate such proceedings. The Adjudicating Authority has to

consider the merits of each case and see beyond what meets the eye,

Company Appeal (AT) (Insolvency) No.107/2017 4

and only after due application of mind, consider the case on its

merits."

6. Learned counsel appearing on behalf of the corporate applicant submitted

that the unrelated facts cannot be looked into by the adjudicating authority while

considering the application under Section 10 of I&B Code.

7. However, according to learned counsel for the respondent, financial

creditors proceeding under SARFEASI Act having initiated by 'financial creditor',

the appellant preferred the application under Section 10 to scuttle such

proceedings by obtaining an order of moratorium under section 14 of the I&B

Code.

8. Similar issue fell for consideration before this Appellant Tribunal in "M/s

Unigreen Global Pvt Ltd Vs PNB & Others, Company Appeal (AT) (Insolvency)

No.81/2017" wherein this Appellate Tribunal vide its judgement dated

01.12.2017 held as follows:

"21. In an application under Section 10, the 'financial creditor'

or 'operational creditor', may dispute that there is no default or

that debt is not due and is not payable in law or in fact. They

may also oppose admission on the ground that the Corporate

Applicant is not eligible to make application in view of

ineligibility under Section 11 of the I & B Code. The Adjudicating

Authority on hearing the parties and on perusal of record, if

satisfied that there is a debt and default has occurred and the

Corporate Applicant is not ineligible under Section 11, the

Adjudicating Authority has no option but to admit the

Company Appeal (AT) (Insolvency) No.107/2017 5

application, unless it is incomplete, in which case the Corporate

Applicant is to be granted time to rectify the defects.

22. Section 10 does not empower the Adjudicating Authority to

go beyond the records as prescribed under Section 10 and the

information as required to be submitted in Form 6 of the

Insolvency and Bankruptcy (Application to the Adjudicating

Authority) Rules, 2016 subject to ineligibility prescribed under

Section 11. If all information are provided by an applicant as

required under Section 10 and Form 6 and if the Corporate

Applicant is otherwise not ineligible under Section 11, the

Adjudicating Authority is bound to admit the application and

cannot reject the application on any other ground.

23. Any fact unrelated or beyond the requirement under I & B

Code or Forms prescribed under Adjudicating Authority Rules

(Form 6 in the present case) are not required to be stated or

pleaded. Non-disclosure of any fact, unrelated to Section 10 and

Form 6 cannot be termed to be suppression of facts or to hold that

the Corporate Applicant has not come with clean hand except the

application where the 'Corporate Applicant' has not disclosed

disqualification, if any, under Section 11. Non-disclosure of

facts, such as that the 'Corporate Debtor' is undergoing a

corporate insolvency resolution process; or that the 'Corporate

Debtor' has completed corporate insolvency resolution process

Company Appeal (AT) (Insolvency) No.107/2017 6

twelve months preceding the date of making of the application;

or that the corporate debtor has violated any of the terms of

resolution plan which was approved twelve months before the

date of making of an application under the said Chapter; or that

the corporate debtor is one in respect of whom a liquidation order

has already been made can be a ground to reject the application

under Section 10 on the ground of suppression of fact/not come

with clean hand.

xxx

25. Similarly, if any action has been taken by a 'Financial

Creditor' under Section 13(4) of the SARFAESI Act, 2002 against

the Corporate Debtor or a suit is pending against Corporate

Debtor under Section 19 of DRT Act, 1993 before a Debt Recovery

Tribunal or appeal pending before the Debt Recovery Appellate

Tribunal cannot be a ground to reject an application under

Section 10, if the application is complete.

26. Any proceeding under Section 13(4) of the SARFAESI Act,

2002 or suit under Section 19 of the DRT Act, 1993 pending before

Debt Recovery Tribunal or appeal pending before Debt Recovery

Appellate Tribunal cannot proceed in view of the order of

moratorium as may be passed.

xxx

28. In a case where a winding up proceedings has already been

initiated against a Corporate Debtor by the Hon'ble High Court or

Tribunal or liquidation order has been passed in respect of

Company Appeal (AT) (Insolvency) No.107/2017 7

Corporate Debtor, no application under Section 10 can be filed by

the Corporate Applicant in view of ineligibility under Section 11(d)

of I & B Code, as quoted below:

"11. Persons not entitled to make application - The

following persons shall not be entitled to make

an application to initiate corporate insolvency

resolution process under this Chapter,

namely:--

(a) a corporate debtor undergoing a corporate

insolvency resolution process; or

(b) a corporate debtor having completed corporate

insolvency resolution process twelve months

preceding the date of making of the application;

or

(c) a corporate debtor or a financial creditor who

has violated any of the terms of resolution plan

which was approved twelve months before the

date of making of an application under this

Chapter; or

(d) a corporate debtor in respect of whom a

liquidation order has been made.

Explanation.-- For the purposes of this section, a

corporate debtor includes a

corporate applicant in respect of

such corporate debtor."

Company Appeal (AT) (Insolvency) No.107/2017 8

xxxx

32. In view of the provisions aforesaid, we hold that, if any

winding up proceeding has been initiated against the Corporate

Debtor by the Hon'ble High Court or Tribunal or liquidation order

has been passed, in such case the application under Section 10

is not maintainable. However, mere pendency of a petition for

winding up, where no order of winding up or order of liquidation

has been passed, cannot be ground to reject the application

under Section 10.

9. In the present case we find that the Adjudicating Authority has noticed

extraneous factors unrelated to Corporate Insolvency Resolution Process

which are not required to be disclosed in terms of Section 10 of I&B Code or

Form 6.

10. It is not the case of the 'Financial Creditor' (Respondent) that a winding

up proceeding under the Companies Act or liquidation proceeding under the

I & B Code has been initiated against the Corporate Debtor. Therefore, we

hold that the Corporate Applicant is eligible to file application under Section

10, there being a debt and default.

11. For the reasons aforesaid, the impugned order dated 20th June, 2017

passed in CP No.1104/I&BP/NCLT/MAH/2017 cannot be upheld and is

accordingly set aside. The case is remitted back to the Adjudicating Authority

for admission of the application under Section 10, if the application is otherwise

complete. In case it is incomplete, the Adjudicating Authority will grant time to

the appellant to remove the defects.

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12. The appeal is allowed with aforesaid observation. However, in the facts and

circumstances of the case there shall be no order as to cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice Bansi Lal Bhat) Member (Judicial) New Delhi 12.01.2018

bm

Company Appeal (AT) (Insolvency) No.107/2017