Avishek Roy Shareholder Of Reacon ... vs Diamond Steel Enterprise

[Arising out of Order dated 5th December, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata in Company Petition No. (IB) 476/KB/2017)

IN THE MATTER OF:

Avishek Roy, Shareholder of M/s Reacon Engineers (India) Pvt. Ltd. 520, Dakshinayan, 3rd Floor, Baishnab Ghata, Patuli, Kolkata - 700 094.

Presently at P-82, First Floor, C. R. Park, New Delhi. ...Appellant

Vs

1. Diamond Steel Enterprise Having office at UTSAB BHABAN, Howrah Amta Road, Dasnagar, Howrah - 711 105.

2. Ashok K. Dibrewala, Interim Resolution Professional, 4, Chowringhee Lane, Diamond Chamber, 6th Floor, Unit III, Kolkata - 700 016.

3. Allahabad Bank Stressed Assets Recovery Trust, Kolkata. ....Respondents

Present: For Appellant: Mr. Jayant Mehta, Mr. Dibyadyoti Banerjee, Mrs. Sumedha Banerjee and Mr. Rahul Kukreja, Advocates. For Respondents: Mr. Sermon Rawat, Advocate for R-1. Mr. Pranav Kumar Chakraborty, Resolution Professional in person. Mr. Ashok Kumar Jain, Advocate for Allahabad Bank. -2-

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appellant, shareholder of 'M/s Reacon Engineers (India) Pvt. Ltd.'

has preferred this appeal against order dated 5th December, 2018 passed by

the Adjudicating Authority (National Company Law Tribunal), Kolkata

Bench, Kolkata admitting the application under Section 9 of the Insolvency

and Bankruptcy Code, 2016 (hereinafter referred to as 'I&B Code') filed by

'Diamond Steel Enterprise' (Operational Creditor) against 'M/s Reacon

Engineers (India) Pvt. Ltd.' (Corporate Debtor).

2. Learned counsel for the Appellant has taken plea that parties have

settled the claim prior to constitution of the Committee of Creditors and

therefore the application under Section 9 should be dismissed.

3. The Respondent, Mr. Pranav Kumar Chakraborty, Resolution

Professional submitted that if this Appellate Tribunal allows the appeal in

such case the Appellant or Corporate Debtor should be allowed to pay the

resolution fee and cost incurred by the Resolution Professional.

4. Learned counsel appearing on behalf of the Allahabad Bank, one of

the Financial Creditors, submitted that the Committee of Creditors having

Company Appeal (AT) (Insolvency) No. 794 of 2018 -3-

already been constituted, settlement reached between the parties cannot be

allowed. Further according to him, the settlement is an afterthought.

5. From the record the following fact emerge:

(i) Section 9 application was filed by the Respondent - 'Diamond

Steel Enterprise' (Operational Creditor) which was admitted by

impugned order dated 5th December, 2018. Against the said order,

the Appellant filed appeal and on 19th December, 2018 that is much

prior to constitution of Committee of Creditors, when the matter was

taken up, this court noticed the stand taken by the Appellant while

issuing notice, which reads as follows:

"O R D E R

19.12.2018: Learned counsel for the Appellant submits that the Corporate Debtor has given the undertaking that it will pay total amount to the Operational Creditor who has filed application under Section 9 of the I&B Code, by March, 2019. However it was not accepted by the Adjudicating Authority and impugned order dated 5th December, 2018 was passed for initiation of Corporate Insolvency Resolution Process against the Corporate Debtor. It is informed that the Guarantors have already prepared a Demand Draft in favour of the Operational Creditor for entire principal amount. The Appellant is ready to make settlement with the Operational Creditor.

Company Appeal (AT) (Insolvency) No. 794 of 2018 -4-

Let notice be issued on Respondent also on the question of settlement as proposed by the Appellant, by speed post. Requisites alongwith process fee, if not already file, be filed by tomorrow. If the Appellant provide email address of the Respondent, let notice be also issued through email.

Post the case 'for admission' on 21st January, 2019.

In the meantime, the Interim Resolution

Professional will ensure that the company remains going concern and if so necessary may take assistance of the (suspended) Board of Directors. The person who is authorised to sign the bank cheques may issue cheques only after authorisation of the Resolution Professional. The bank account(s) of the 'Corporate Debtor(s)' be allowed to be operated for day-to-day functioning of the company such as for payment of current bills of the suppliers, salaries and wages of the employees'/workmen, water and electricity bills etc."

(ii) In the meantime, the Appellant prepared a draft dated 18th

December, 2018 for Rs.15,78,762/- (Rupees Fifteen Lakh Seventy

Eight Thousand Seven Hundred and Sixty Two only) in the name of

Company Appeal (AT) (Insolvency) No. 794 of 2018 -5-

'Diamond Steel Enterprises' issued by Bank of India, Beliaghata

Branch, Hatta Road, Kolkata.

(iii) On 26th December, 2018, a 'Deed of Settlement' was reached

(enclosed at page 13 of I.A. No. 11 of 2019), which is in stamp

paper which was purchased by the Operational Creditor prior to

Deed of Settlement dated 26th December, 2018. Pursuant to the

agreement, the Appellant prepared another additional draft for

Rs.6,21,238/- (Rupees Six Lakh Twenty One Thousand Two

Hundred and Thirty Eight Only) on 27th December, 2018 in the

name of 'Diamond Steel Enterprise' (Operational Creditor) issued

by HDFC Bank, U N Brahmachari Street, Kolkata - 700 017.

Thereby, the agreement of settlement reached finality on 26th/27th

December, 2018.

(iv) The Committee of Creditors was subsequently constituted on

28th December, 2018, which was indicated by order dated 4th

January, 2019.

6. From the aforesaid fact it is clear that much prior to constitution of

Committee of Creditors parties reached settlement on 26th December,

2018.

7. The question whether in view of settlement reached between the

parties prior to constitution of Committee of Creditors, the shareholders of

Company Appeal (AT) (Insolvency) No. 794 of 2018 -6-

the Corporate Debtor can be granted relief or not fell for consideration of

Hon'ble Supreme Court in 'Swiss Ribbons Pvt. Ltd. & Anr. Vs. Union of

India & Ors.', Writ Petition (Civil) No. 99/2018 (2019 SCC OnLine SC 73). In

the said case, the Hon'ble Supreme Court observed and held:-

"76. Before this Section was inserted, this Court, under Article 142, was passing orders allowing withdrawal of applications after creditors' applications had been admitted by the NCLT or the NCLAT."

"79. It is clear that once the Code gets triggered by admission of a creditor's petition under Sections 7 to 9, the proceeding that is before the Adjudicating Authority, being a collective proceeding, is a proceeding in rem. Being a proceeding in rem, it is necessary that the body which is to oversee the resolution process must be consulted before any individual corporate debtor is allowed to settle its claim. A question arises as to what is to happen before a committee of creditors is constituted (as per the timelines that are specified, a committee of creditors can be appointed at any time within 30 days from the date of appointment of the interim resolution professional). We make it clear that at any stage where the committee of creditors is not yet constituted, a party can approach the NCLT directly, which Tribunal may, in exercise of its inherent powers under Rule11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the concerned parties and considering all relevant factors on the facts of each case."

Company Appeal (AT) (Insolvency) No. 794 of 2018 -7-

8. In the present case, as we find that the parties have reached

settlement prior to constitution of Committee of Creditors, in view of that

the Appellant is entitled to derive advantage of the settlement. We

accordingly set aside the impugned order dated 5th December, 2018 and

dismiss the application under Section 9 filed by the Operational Creditor.

The Appellant will hand over the drafts to the Operational Creditor, if not

yet handed over, failing which it will be open to the Respondent

(Operational Creditor) to revive its prayer.

9. The appeal is allowed with aforesaid observations and directions.

No Costs. However, this order will not come in the way of other Creditors

(Financial Creditors or Operational Creditors) to move appropriate

application before a court of competent jurisdiction / Adjudicating

Authority.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

NEW DELHI 12th March, 2019

AM

Company Appeal (AT) (Insolvency) No. 794 of 2018