Babu Lal Aggarwal vs Manish Kumar & Ors

[Arising out of order dated 04.08.2022 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi in IA No. 1447/2022 in CP(IB) No. 354/2021]

IN THE MATTER OF:

SAJ Housing Pvt. Ltd. (Through Rahul Gupta, Authorized Representative) House No.558, Sector 16A, Faridabad, Haryana - 121002 ...Appellant

Versus

Ms. Priyanka Chouhan, Liquidator, M/s Drishti Industries Ltd. C-161, East of Kailash, New Delhi-110065 ...Respondent No.1

Committee of Creditors of Drishti India Limited Through Ms. Renu Meena, Financial Creditor, 10/536, Kaveri Path, Madhyam Marg, Mansarovar, Jaipur - 302 020 ...Respondent No.2

Present:

Appellant: Mr. Mansumyer Singh, Mr. Shravan Chandra Shekhar, Advocates.

For Respondents: Mr. Sunil Kumar Jain, Advocate For R-2 & 3 Ms. Priyanka Chouhan, Liquidator For R-1

with Company Appeal (AT)(Insolvency) No. 1273 of 2022 & I.A. No.3905 of 2022

[Arising out of order dated 04.08.2022 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi in IA No. 960/2022 in CP(IB) No. 354/2021]

IN THE MATTER OF:

Puneet Aggarwal Director of Suspended Board of Directors C-161, East of Kailash, New Delhi ...Appellant

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

1 Versus

Priyanka Chouhan, Liquidator Drishti India Ltd. At-5, Commanders Colony, Near Annapurna Dharm Kanta, Pachyawala, Sirsi Road, Jaipur - 302 034 ...Respondent No.1

Renu Kumar At-10/536, Kaveri Path, Madhyam Marg, Mansarovar, Jaipur ...Respondent No.2

Present:

Appellant: Mr. Abhijeet Sinha, Mr. Palash Singhal, Mr. Gaurav Singh, Mr. Saikat Sarkar, Advocates.

For Respondents: Mr. Sunil Kumar Jain, Advocate For R-2 & 3 Ms. Priyanka Chouhan, Liquidator For R-1

With Company Appeal (AT)(Insolvency) No. 377 of 2022

[Arising out of order dated 01.11.2021 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi in CP(IB) No. 354/2021]

IN THE MATTER OF:

Puneet Aggarwal Director of Suspended Board of Directors C-161, East of Kailash, New Delhi ...Appellant Versus

Renu Kumar, W/o Shri Manish Kumar, At-10/536, Kaveri Path, Madhyam Marg, Mansarovar, Jaipur ...Respondent No.1

Drishti India Ltd. At-5, Commanders Colony, Near Annapurna Dharm Kanta, Pachyawala, Sirsi Road, Jaipur - 302 034 ...Respondent No.2

Present:

Appellant: Mr. Anurag Ohja, Mr. Deepak Somani, Advocates.

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

2 For Respondents: Mr. Sunil Kumar Jain, Advocate For R-1 & 2 Ms. Priyanka Chouhan, Liquidator For R-3

With Company Appeal (AT)(Insolvency) No. 967 of 2021

[Arising out of order dated 01.11.2021 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi in CP(IB) No. 354/2021]

IN THE MATTER OF:

Babulal Aggarwal, Director of Drishti India Ltd. C-161, East of Kailash, New Delhi ...Appellant

Versus

Manish Kumar 10/536, Kaveri Path, Madyam Marg, Mansarovar, Jaipur ...Respondent No.1

Renu Kumar, W/o Shri Manish Kumar, At-10/536, Kaveri Path, Madhyam Marg, Mansarovar, Jaipur ...Respondent No.2

M/s Drishti India Limited (Through Interim Resolution Professional) 905, 8th Floor, Tower C, Unitech Business Zone, Sector-50, Gurugram, Haryana ...Respondent No.3

Present:

Appellant: Mr. Krishnendu Datta, Sr. Advocate, Mr. Palash Singhal, Mr. Gaurav Singh, Advocates.

For Respondents: Mr. Sunil Kumar Jain, Advocate For R-1 & 2 Ms. Priyanka Chouhan, Liquidator For R-3

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

3 JUDGMENT

[Per: Barun Mitra, Member (Technical)]

Present is a set of four appeals filed under Section 61 of Insolvency and

Bankruptcy Code, 2016 ("IBC" in short) by the Appellant which arises out of

two orders dated 01.11.2021 and 04.08.2022 (hereinafter referred to as "first

and second impugned orders") passed by the Adjudicating Authority

(National Company Law Tribunal, New Delhi) in CP(IB) No. 354/2021 and

related IAs. Aggrieved by the said impugned orders, the present appeals have

been preferred.

2. The brief facts of the case which are necessary for deciding this appeal

are as outlined below: -

 The Corporate Debtor - M/s Drishti India Limited ("Drishti" in short)

had entered into a Development Agreement ("DA" in short) with SAJ

Housing Private Limited ("SHPL" in short) on 29.05.2012. The DA was

for development of a piece of land for a housing society. The sole

ownership of the land was with the Corporate Debtor.

 As per terms and conditions of the DA, SHPL as the Developer was to

bear the cost of construction. The developer paid a total consideration

amount of Rs.16.15 cr to the Corporate Debtor in lieu of

purchase/acquisition of irrevocable development rights. The SHPL had

56% ownership rights while the Corporate Debtor had 44% rights in the

built-up area of the project.

 The Respondent No.2 - Financial Creditor had paid an amount of

Rs.1.90 cr purportedly as loan to the Corporate Debtor on 20.12.2011

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

4 which was duly reflected in the balance sheet of the Corporate Debtor

as "long-term borrowing".

 The Respondent No.2 filed a Section 7 application for admission of the

Corporate Debtor into CIRP as it had defaulted in repaying the amount

taken in the form of long-term borrowing. The Adjudicating Authority

admitted Corporate Debtor into CIRP in the Section 7 application in

CP(IB) No. 354(PB)/2021 on 01.11.2021 hereinafter referred to as the

"first impugned order".

 Following admission of the Corporate Debtor into CIRP, an Interim

Resolution Professional was appointed who was later confirmed as

Resolution Professional - Respondent No.1.

 The Resolution Professional made public announcement on 04.11.2021

and invited claims. This was also uploaded on the IBBI website on

08.11.2021. The last date of submission of claim was 17.11.2021. Till

17.11.2021, only one claim was received which was from the

Respondent No.2. Based on these claims, a single-member CoC was

constituted.

 An IA No. 802/2022 was also filed by the Resolution Professional before

the Adjudicating Authority to direct SHPL to hand over possession,

control and custody of the land of the Corporate Debtor under

development.

 In the meantime, an interim stay was obtained from this Tribunal on

25.11.2021 by the Corporate Debtor on the CIRP process subject to

deposit of Rs.3 crores by the Corporate Debtor before the Adjudicating

Authority within one month. The Corporate Debtor did not deposit the

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

5 requisite amount following which this Tribunal on 20.01.2022 vacated

the stay on the CIRP proceedings.

 The 1st CoC meeting was called on 25.01.2022 and the 2nd CoC meeting

was convened on 15.02.2022. The Resolution Professional also

prepared the Information Memorandum and shared it with the CoC.

 The Resolution Professional convened the 3rd meeting of the CoC on

19.02.2022 wherein the CoC with 100% vote share approved the filing

of an application for liquidation of the Corporate Debtor.

 SHPL filed its claim before the Resolution Professional on 25.02.2022

for an amount of Rs.148,33,59,926/-. The claim was not accepted by

the Resolution Professional on 28.02.2022 on the ground of being time-

barred. SHPL filed IA No. 1447/2022 in CP(IB) No. 354(PB)/2021 on

04.03.2022 against rejection of their claim by the Resolution

Professional on the ground that their claim was within time as the

Adjudicating Authority had excluded 57 days from the CIRP period

because of the interim stay granted by this Tribunal.

 Pursuant to 3rd CoC deliberations, the Resolution Professional filed IA

960/PB/2022 in CP(IB) No. 354(PB)/2021 on which the Adjudicating

Authority ordered liquidation of the Corporate Debtor on 04.08.2022

hereinafter referred to as the "second impugned order".

 Vide the second impugned order, the Resolution Professional was

appointed as the Liquidator and IA 1447/2022 filed by SHPL was

disposed of by giving them an opportunity to make their claim before

the liquidator. The other reliefs sought by SHPL regarding revival of

CIRP was held as not surviving any longer in view of the approval of the

liquidation proceedings.

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

6  Aggrieved by the two impugned orders, following four sets of appeal

have been preferred with the following prayers.

 CA (AT)(Ins.) No. 377/2022 has been filed by the suspended Director of

the Corporate Debtor praying for setting aside the first impugned order

of the Adjudicating Authority dated 01.11.2021 admitting the Corporate

Debtor into CIRP.

 CA (AT) (Ins.) No.967/2021 has been filed by the suspended Director of

the Corporate Debtor praying for staying the operation of the first

impugned order of the Adjudicating Authority dated 01.11.2021 till

disposal of this appeal.

 CA(AT)(Ins.) 1273/2022 has been filed by the suspended Director of the

Corporate Debtor praying for setting aside the second impugned order

of the Adjudicating Authority dated 04.08.2022 allowing liquidation of

the Corporate Debtor.

 CA(AT)(Ins.) No.1093 of 2022 has been filed by SHPL praying for setting

aside the initiation of liquidation proceedings of the Corporate Debtor;

restarting of the CIRP of the Corporate Debtor with a reconstituted CoC

after adding SHPL as a member thereof.

3. For better clarity of understanding and to have a more detailed

appreciation of the facts and contentions raised by all the parties in the

context of the first and second impugned orders, we propose to begin with by

briefly recapitulating the rival submissions made in each of the four appeals

separately and thereafter delineate the common issues which merit our

consideration to decide the matter.

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

7 CA (AT)(Ins.) No. 377/2022

4. It is the contention of the Corporate Debtor that the Respondent No.2

had signed a letter on 26.03.2012 addressed to the Drishti-the Corporate

Debtor stating that Rs.1.90 crore "have been paid under an agreement to

develop your 10 acres of land at village Lakkarpur, Faridabad". This

letter clearly confirms that the money was given for the purpose of

development of land. Moreover, the DA of 29.05.2012 clearly records the

payment of Rs. 1.90 crore by the Respondent No.2 which therefore

substantiates that the payment was made as a consideration amount under

the DA and not as a loan to the Corporate Debtor. This transaction was not a

debt but a consideration paid under a DA on behalf of SHPL. In such

circumstances, even if any liability arises, it arises against the SHPL and not

against the Corporate Debtor.

5. Even the balance sheet of the Corporate Debtor which has been relied

upon by Respondent No.2 to claim that the Corporate Debtor owed a debt to

them shows the alleged amount under the head of "Long-term borrowings"

with the sub-head of "Security Deposit - (Under Development of Land

Agreement)". This entry in the balance sheet does not establish the jural

relationship of debtor and creditor between the Corporate Debtor and the

Respondent No.2. Hence, the consideration amount does not fall under the

definition of financial debt under Section 5(8) of the IBC. In the absence of

any contract or understanding fastening any liability upon the Corporate

Debtor, the filing of Section 7 petition by Respondent No.2 was an abuse of

the process of law.

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

8

6. Emphasizing that the key feature of financial transaction as postulated

by Section 5(8) of the IBC is consideration for time value of money, this feature

is glaringly amiss in the transaction of Rs.1.90 crore made by the Respondent

No.2. Moreover, the Respondent No.2 has failed to produce any document that

discloses the nature of transaction to be a loan carrying any interest. Under

such circumstances, it cannot be claimed that there was a time value of

money and therefore the transaction cannot be viewed as a financial debt.

7. Rebutting the above arguments, the Learned Senior Counsel for

Respondent No.2 submitted that the Respondent No.2's passbook of Canara

Bank clearly shows that there was a disbursal of an amount of Rs.1.90 crores

on 20.12.2011 directly to the bank account of the Corporate Debtor by RTGS.

This amount of Rs.1.90 crore paid as long-term loan to Corporate Debtor is

also reflected in the financial statement for the year ending 31 March 2020.

In Part IV of the Section 7 application, it has been clearly specified that the

amount in default is Rs.1.90 crore and the default being of continuing nature,

the date of default was treated as 13.07.2021. Hence the debt stands

established. The default occurred on 13.07.2021. Section 7 application was

filed well in time. All the prerequisites for filing of Section 7 of IBC have been

stands met and satisfied.

8. Moreover, the DA between the Corporate Debtor and SHPL does not

name or acknowledge any agreement between the Respondent No.2 and

SHPL. The Respondent No.2 was therefore in no way connected with the DA

and this agreement was purely between the Corporate Debtor and SHPL. The

Respondent No. 2 is not signatory to the DA and hence no liability can be

fastened upon them qua this agreement. Even the money advanced cannot be

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

9 associated with the DA as DA was not in existence when this money was

transferred to the Corporate Debtor. It was also asserted that Respondent

No.2 was not aware that the Corporate Debtor had fraudulently entered into

a DA with SHPL and used their money without their knowledge for the

purpose of furthering the development agreement. This is a fraud which has

been perpetuated by the Corporate Debtor and SHPL.

9. The Learned Senior Counsel for the Respondent No.2 contended that

the appeal to set aside the admission of the Corporate Debtor into CIRP is not

maintainable since the CoC had already taken a decision that resolution of

the Corporate Debtor was not feasible and had recommended initiation of

liquidation proceedings which has already been approved by the Adjudicating

Authority. It was also submitted that the CoC was formed on 21.11.2021 and

the Corporate Debtor was served with information regarding constitution of

CoC. Corporate Debtor was kept informed of various CoC meetings but they

chose not to participate in these meetings. Having never objected to the

constitution of CoC and having never participated in the said meetings, they

cannot claim entitlement to challenge the decision of the CoC to initiate

liquidation proceedings with 100% vote share. The CoC having applied its

commercial wisdom and proposed liquidation, the CIRP having been

concluded and liquidation proceedings under Section 33(2) of the IBC having

commenced, the appeal has become infructuous by efflux of time.

CA (AT) (Ins.) No.967/2021

10. It is contended by Learned Senior Counsel of Corporate Debtor that

there was no demand of money made by the Corporate Debtor on Respondent

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

10 No.2. Neither was any agreement/ document executed with Respondent No.2

with regard to the transaction of Rs.1.90 crore. It was also submitted that

there was no consent or agreement on the payment of any interest on the

alleged deposit. The said money was not utilized by the Corporate Debtor for

its own advantage or earnings. Moreover, the deposit being in the nature of

non-refundable security deposit having no commercial effect of borrowing, it

cannot be treated as debt amount. Respondent No. 2 does not fall under the

definition of Financial Creditor under Section 5(7) of the IBC and the amount

paid as consideration by them do not fall under the definition of financial debt

under Section 5(8) of IBC. Since the amount paid by Respondent No.2 is not

a debt, it is neither liability nor obligation in respect of a claim as defined in

Section 3(11) of IBC. It has also been contended that the Adjudicating

Authority had wrongly considered the event of debt and default without

looking into the aspect that the Respondent No.2 has no locus as financial

creditor. There is nothing to substantiate that the amount paid by the

Respondent No.2 had time value of money. Neither directorship was offered

to the respondent nor was it assured of 24% interest. This not being a fit case

for admission of a Section 7 application, the operation of the first impugned

order should be stayed.

11. The Learned Senior Counsel for the Respondent No.2 submitted that

the Adjudicating Authority had rightly accepted the Section 7 application filed

by Respondent No.2 having noted that Rs. 1.90 crore had been received by

the Corporate Debtor and remains pending as long-term loan. The loan is also

reflected in the books of accounts and hence amounts to admission of debt

and the default is apparent from the books.

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

11

12. It is further the contention of Respondent No.2 that the Corporate

Debtor made a voluntary statement admitting receipt of Rs.1.90 crore before

the Appellate Tribunal and having also agreed to return the above amount

with reasonable interest, later resiled from the same. No efforts were made for

any kind of settlement with the Respondent No.2 in the matter. Not having

deposited the assured sum of Rs.3 crore, this Appellate Tribunal on

20.01.2022 had rightly vacated the interim orders staying the CIRP

proceedings. It has however been contested by the Corporate Debtor that it

had not made any statement before this Tribunal for any kind of settlement

in the matter but had only agreed to deposit any reasonable amount as

security purpose. Hence, it had filed an application before this Tribunal

seeking modification of the order passe by this Tribunal on 25.12.2021.

CA(AT)(Ins.) 1273/2022

13. The Learned Senior Counsel of Corporate Debtor submitted that the DA

signed on 29.05.2012 with SHPL for a non-refundable consideration amount

of Rs.16.15 crores also included Rs.1.90 crores paid by Respondent No. 2.

Therefore, the amount paid to the Corporate Debtor for development rights

cannot in any manner be considered as financial debt. Furthermore, the

Respondent No.2 had acknowledged in their letter dated 26.03.2012

addressed to the Corporate Debtor that the payment was made under an

agreement to develop 10 acres of land. Hence the amount paid by the

Respondent No. 2 was not a credit given to the Corporate Debtor but a

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

12 consideration amount under the DA which was to be executed between

Corporate Debtor and SHPL. Hence even if any liability arose, it was against

SHPL and not against Corporate Debtor.

14. It was also contended that even the balance sheet entries do not reflect

time value of money as it is captioned 'security deposit for development of

land" which is non-refundable. This clearly shows that it was merely security

deposit and not in the nature of a debt which is subsisting or presently due.

It was stoutly denied that this amount had been given to them as credit with

interest rate of 24% for if it was so there would have been a separate

agreement to that effect. It was therefore contended that the application under

Section 7 of the IBC to initiate CIRP is an abuse of the process of law which

has been overlooked by the Adjudicating Authority.

15. It was also submitted that the prerequisite to initiate liquidation under

Section 33(1)(a) of IBC is that no resolution plan is received before the expiry

of the maximum period permitted for completion of CIRP. In the present case,

the Resolution Professional without exploring the possibility to revive and

rehabilitate the corporate debtor by inviting resolution plans had filed the

application for liquidation on the whims and fancies of the CoC which

comprised of a sole member. In the present case, liquidation was initiated to

usurp the asset of the corporate debtor without exploring the possibility to

revive the corporate debtor.

16. It was also submitted that when the Corporate Debtor had challenged

the first impugned order of the Adjudicating Authority dated 01.11.2021 and

the said appeal was pending adjudication, the order for approval of liquidation

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

13 could not have been passed. It was further submitted by Learned Senior

Counsel of Corporate Debtor that the entire process of CIRP was vitiated due

to unwarranted acts of Resolution Professional who failed to discharge her

duties diligently and acted in collusion with Respondent No. 2 to hastily to

liquidate the corporate debtor with an oblique and ulterior motive for unjust

enrichment.

17. Refuting the above submissions, the Learned Senior Counsel for the

Resolution Professional/Liquidator submitted that that there are limited

grounds of challenging the order of liquidation which is provided in Section

61(4) of the IBC. Liquidation order can be set aside only when there is any

material irregularity or fraud. In the present case neither any material

irregularity nor any fraud has been demonstrated and hence the order passed

by the Adjudicating Authority does not warrant any interference.

18. The third CoC meeting had duly considered all facts and circumstances

and come to the conclusion that it was not feasible to keep the Corporate

Debtor as a going concern and that there was no possibility for resolution

plans in the present matter and hence with 100% voting had recommended

that an application for liquidation of the Corporate debtor be filed before the

Adjudicating Authority. The Corporate Debtor had ample opportunity to raise

objections in the meetings of the CoC but deliberately chose not to appear or

to participate in the meetings and is now trying to reopen the issues at a

belated stage. Moreover, it is the commercial wisdom of CoC whether to

continue with CIRP or to liquidate the company. Once the CIRP has been

concluded, the wisdom of CoC cannot be questioned. Moreover, when the CoC

has resolved to liquidate the company, the Resolution Professional has no

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

14 other option but to move an application under Section 33 of IBC for

liquidation of the Corporate Debtor.

CA(AT)(Ins.) No.1093 of 2022

19. It has been submitted by the Learned Senior Counsel of SHPL, that they

were approached by the Corporate Debtor with the proposal of developing a

land for a housing society. For this purpose, a DA was entered into in 2011

with the Corporate Debtor with 56% ownership rights to SHPL in the built-up

area. A total consideration amount of Rs.16.15 crore was paid by SHPL and

other constituents which also included their share of Rs. 10 crore in lieu of

which the possession of land with irrevocable development rights was to vest

with SHPL with all authority from the Corporate Debtor. It is submitted that

the Corporate Debtor admitted the consideration amount to be an unsecured

loan under the heading of "long-term borrowing" in the balance sheet of the

Corporate Debtor. Since the consideration amount paid by SHPL as well as

the Respondent No.2 was for the same purpose and also appears under the

same heading in the balance sheet of the Corporate Debtor, the Adjudicating

Authority committed a mistake by according differential treatment to SHPL as

Operational Creditor and Respondent No.2 as a Financial Creditor.

20. Submitting further that the project could not progress due to want of

certain clearances and in the meantime pursuant to a Section 7 application

filed by Respondent No.2 in CP(IB) No. 354/2021, the Adjudicating Authority

vide first impugned order initiated CIRP of the Corporate Debtor on

01.11.2021. No intimation was given to SHPL at the appropriate time by the

Resolution Professional to file their claim. When SHPL filed its claim with the

Respondent No. 1 on 25.02.2022 for an amount of Rs. 148,33,59,926 which

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

15 included Rs 10 crores unsecured loan amount, their claim was arbitrarily and

summarily rejected on 28.02.2022 by Respondent No. 1 on the ground of

being time barred. It was claimed that after exclusion of 57 days granted by

the Adjudicating Authority, the date of submission of claim fell very much

within the 90 days period under Regulation 12(2) of the IBBI (Insolvency

Resolution Process for Corporate Persons) Regulations, 2016. By not

considering their claims, they were denied their due place in the CoC. By

excluding SHPL from the CoC, material irregularity and been committed

which vitiated the CIRP process.

21. Aggrieved by the rejection of their claim, the Learned Senior Counsel of

SHPL stated that they filed IA no. 1447/2022 before the Adjudicating

Authority seeking directions to the Resolution Professional to accept their

claim. However, the Adjudicating Authority without going into the merit of

issues raised by them merely stated that since liquidation had been ordered

in IA 960/2022, SHPL could file its claim before the liquidator. It was pointed

out that the Adjudicating Authority ignored the objective of IBC of resolution

and revival of the Corporate Debtor and failed to uphold the settled law that

liquidation is the last resort. The CoC had rushed into liquidation in the 3rd

CoC meeting within 38 days of commencement of CIRP. Thus, liquidation was

resorted to even before the completion of the statutory period of 180 days as

per Section 12 of IBC. The CoC therefore failed to abide by the timelines of

CIRP and frivolously passed the resolution to liquidate the Corporate Debtor.

22. Refuting the above contentions made on behalf of SHPL, the Learned

Senior Counsel of Respondent No.1 submitted that the Resolution

Professional had not only issued a public announcement but email was also

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

16 sent to SHPL on 09.11.2021 and 17.11.2021 to hand over possession of the

land given to them and file their claim respectively. Hence SHPL was fully

aware of the CIRP proceedings. However, they remained silent and did not file

their claim within the prescribed time. Therefore, the Resolution Professional

rejected the claim since SHPL was not vigilant in filing the claim on time

within the statutorily prescribed period.

23. On the stance taken by SHPL that the Adjudicating Authority having

excluded 57 days from the CIRP period and hence the claim filed by them on

25.02.2022 was much on time, it was contended that by then the CoC had

already approved the liquidation of the Corporate Debtor and hence the claim

could not have been accepted by the Resolution Professional. In any case the

SHPL was in no ways restrained from filing their claim even during the period

of time they had applied for exclusion of time before the Adjudicating

Authority. Nothing prevented them from filing their claims but instead they

chose to adopt a wait and watch strategy.

24. We have duly considered the rival submissions and arguments

advanced by respective parties and perused the records carefully.

25. The main issues for our consideration are as outlined below:

I. Whether the admission of the Corporate Debtor into CIRP by the

Adjudicating Authority vide the first impugned order dated

01.11.2021 is sustainable in the eyes of law;

II. Whether the claim made by SHPL that they should be treated as

Financial Creditor and the CIRP be started afresh with a newly

constituted CoC is legally tenable; and

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

17 III. Whether the Adjudicating Authority has erred in affirming the

proposal of the CoC to liquidate the Corporate Debtor vide the second

impugned order dated 04.08.2022.

26. Dwelling upon the first issue before us for determination, we propose

to begin with the findings recorded by the Adjudicating Authority while

admitting the Section 7 application. The relevant extracts from the first

impugned order of the Adjudicating Authority are as reproduced below: -

"11. Considering, the submissions made, and documents placed on record we are convinced that, in the present case the date of default has occurred and with respect to trigger the Corporate Insolvency Resolution Process against the corporate debtor. The pre-requisites of section 7 must be satisfied (a) acknowledgement of "financial debt" (b) default of debt, (c) application shall be within time period. The present application is well versed and fall within the ambit of section 7 and satisfied the conditions. The debt is due of Rs. 1.90 crores, the default has occurred on 13.07.2021 and the present application filed well in time as the date of default is being of continue in nature and still reflecting in the latest Balance Sheet. Therefore, we are supported by the Judgement of Hon'ble Supreme Court in Bank of Baroda v. C. Shivakumar Reddy, 2021 SCC OnLine SC 543 which clearly held that: "The Court also held that an application under Section 7 for initiation of corporate insolvency resolution process against a corporate debtor is not be barred by limitation if there is an acknowledgement of the debt by the corporate debtor before expiry of the limitation period. Such acknowledgment can be by way of statement of accounts, balance sheets, financial statements and offer of one-time settlement."

12. In the present case all the requirements are established. The copy of the passbook of Canera bank annexed by the applicant at page 35 of the paper book shows that the withdrawal of Rs. 1.90 crores i.e., disbursal of the debt amount was made on 20.12.2011. The applicants had considered this amount as the loan given to the respondent which is reflected in the Balance Sheet as on 31.03.2020 at note 3 page 50 under the head note of "Long term borrowing".

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

18

13. This Bench is not satisfied with the arguments of the respondent with respect to the security deposit paid by the applicant to the respondent under the heads of long-term borrowing for development of the Land Agreement reflected in the Balance Sheet. It is nowhere proven by the respondent in the absence of any document how it is considered as the security deposit which is non-refundable to the applicants.

14. Therefore, there is an acknowledgment of debt by way of entries passed in the balance sheets, financial statements. The Respondent has defaulted in the repayment of the amount taken in the form of long-term borrowing even after duly acknowledging the same in the balance sheet prepared by it......"

(Emphasis supplied)

27. The Learned Senior Counsel of Corporate Debtor contended that the DA

signed on 29.05.2012 with SHPL was for a non-refundable consideration

amount of Rs.16.15 crore. A Table finds place in the DA which shows two

RTGS payments of Rs.95 lakhs each dated 20.12.2011 made by the

Respondent No. 2 as part of that consideration amount. It was added that the

Respondent No. 2 had paid this amount on behalf of the developer.

Furthermore, the Respondent No.2 had acknowledged in their own letter

dated 26.03.2012 that the payment was made under an agreement to develop

10 acres of land. The amount of Rs.1.90 crore was therefore nothing more

than an investment to procure development rights under the DA. Hence even

if any liability arose, it was against SHPL and not against Corporate Debtor.

Thus, the Respondent No.2 does not fall under the definition of the Financial

Creditor qua the Corporate Debtor under Section 5(7) of the IBC and the

amount of Rs.1.90 crore paid as consideration does not fall under the

definition of financial debt under Section 5(8) of the IBC. In support of their

contention that any amount paid for development right cannot in any manner

be considered as financial debt, the judgement of the Hon'ble Supreme Court

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

19 in New Horizons Ltd. Vs. Union of India 1995 SCC (1) 478 ("New

Horizons" in short) has been relied upon by the Learned Senior Counsel for

the Corporate Debtor.

28. Advancing their arguments further, it was added that even the balance

sheet entries with respect to Rs.1.90 crore did not reflect time value of money

as it is captioned 'security deposit for development of land" which is non-

refundable. Being a non-refundable security deposit, there is no right to

repayment and therefore does not qualify to be a "claim" under Section 3(6)

of the IBC. Being merely a security deposit, it was asserted that Corporate

Debtor did not owe any amount to the Respondent No. 2 and did not fall under

the definition of Corporate Debtor under Section 3(8) of the IBC.

29. It was further asserted that this transaction was definitely not a credit

with interest rate of 24% as claimed by Respondent No.2 for if it was so there

would have been a separate agreement to that effect. Respondent No.2 has

failed to produce any document that discloses the nature of transaction to be

a loan carrying any interest. Their letter of 26.03.2012 also does not indicate

any terms in the nature of interest, refund, repayment or enhancement in the

value of money is stated to be paid. Under such circumstances, it cannot be

claimed that there was a time value of money. The Learned Senior Counsel

for the Corporate Debtor has relied on the judgment of this Tribunal in Nikhil

Mehta and Sons v. AMR Infrastructure Ltd. 2017 SCC OnLine NCLAT

859 ("Nikhil Mehta" in short) to emphasize that the key feature of financial

transaction as postulated by Section 5(8) of the IBC is its consideration for

time value of money which is lacking in the present case. It has also been

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

20 denied by the Corporate Debtor that any directorship was offered to

Respondent No.2.

30. The Learned Senior Counsel for the Respondent No. 2 vehemently

contesting the above arguments submitted that the entire amount of Rs 1.90

crores has been paid directly to the bank account of the Corporate Debtor by

RTGS on 20.12.2011. Secondly it was pointed out that the claim of the

Corporate Debtor that the payment was done in pursuance to the DA is

misconceived since the DA between SHPL and the Corporate Debtor was

entered into on 29.05.2012 while Rs. 1.90 crore was paid to the Corporate

Debtor three months prior to the DA. Thirdly, it was stated that even the

letter of 26.03.2012 being prior to the DA, it would be far-fetched to link the

payment of Rs.1.90 crore to the DA as the DA was not even in existence on

26.03.2012.

31. After perusing the DA, we find credence in the argument of Respondent

No.2 that the DA which was executed on 29.05.2012 was between Drishti as

"Owners" and SHPL as the "Developer" and there is no reference whatsoever

to Respondent No.2 as a signatory to the said DA. That Respondent No.2 was

not a signatory to the DA is therefore undisputed. There is no other agreement

between Respondent No. 2 and SHPL either prior to or subsequent to the

payment of Rs. 1.90 crore which has been placed on record. We notice that

Respondent No.2 in Part IV had attached copies of their passbook of Canara

Bank which clearly shows that there was a direct disbursal to the Corporate

Debtor and there is no denial on that count by the Corporate Debtor.

Moreover, at item 4(b) of the DA captioned "Consideration", it is mentioned

that a consideration amount has been paid to the "Owners" in lieu of purchase

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

21 of development rights on the land by the "Developer" and there is no reference

to Respondent No.2 therein. We, therefore, have no hesitation in holding that

the Respondent No.2 was in no way connected with the DA and hence no

liability can be fastened upon them qua this DA.

32. It is trite law that under the IBC once a debt which becomes due or

payable, in law and in fact, and if there is incidence of non-payment of the

said debt in full or even part thereof, CIRP may be triggered by the financial

creditor as long as the amount in default is above the threshold limit. It is

also well accepted that debt means a liability in respect of a claim and claim

means a right to payment even if it is disputed. We also notice that the

Adjudicating Authority in the first impugned order has rightly relied on the

judgment of the Hon'ble Supreme Court in Innoventive Industries Ltd. v.

ICICI Bank and Anr. (2018) 1 SC 407 which held that:

"30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise."

33. Viewed against this broad backdrop, we now dwell upon the facts of the

present case to find out whether in this case debt was due and payable. There

is sufficient material on record to prove that there was disbursal of funds by

Respondent No.2 to the Corporate Debtor in their account. Admittedly, the

amount so disbursed is Rs.1.90 crore. The bank transaction details were

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

22 made a part of Part IV before the Adjudicating Authority. In addition, balance

sheet of the Corporate Debtor also acknowledged receipt of this disbursal as

"long-term borrowings". Neither has any claim been made that any part of this

sum was repaid by the Corporate Debtor. That being the case there arises no

doubt in our mind that there was a debt on the part of the Corporate Debtor

qua Respondent No.2 for an amount of Rs.1.90 crore. The Learned Senior

Counsel for the Corporate Debtor has failed to adduce any material on record

to establish that this amount was payable by SHPL and not by the Corporate

Debtor. Hence the submission advanced that Corporate Debtor was not

required to repay Respondent No.2 does not inspire our confidence as it is a

mere assertion not supported by evidence.

34. This now brings us to the concern most justifiably raised by the Learned

Senior Counsel for the Corporate Debtor while relying on the judgment of this

Tribunal in Nikhil Mehta (supra) that the cardinal feature of time value of

money is glaringly amiss in the present transaction. We entirely agree with

the above legal proposition. We also like to add that it is settled law as laid

down by the Hon'ble Apex Court in Pioneer Urban Land and Infrastructure

Ltd. v. Union of India (2019) 8 SCC 416 that any debt to be treated as

financial debt, there must happen disbursal of money and the disbursal must

be against consideration for time value of money. In the matter of Anuj Jain,

Interim Resolution Professional for Jaypee Infratech Ltd. v. Axis Bank

Limited & Ors. (2020) 8 SCC 401, the Hon'ble Supreme Court has held that

the essential condition of financial debt is disbursement against the

consideration for time value of money. Further in the most recent judgment

of Hon'ble Supreme Court in Orator Marketing (P) Ltd. v. Samtex Desinz

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

23 (P) Ltd. (2023) 3 SCC 753, it has been clearly held that financial debt does

not expressly exclude an interest free loan. It has also emphasized that

financial debt includes any amount raised under any other transaction having

the commercial effect of borrowing. It would be safe to infer from the above

judgements that the concept of time value of money would also include a

transaction which does not necessarily culminate into money being returned

to the lender or interest being paid in respect of money that has been borrowed

and can include anything which is equivalent to the money that has been

loaned as long as commercial effect of borrowing or profit as the aim is

discernible.

35. In the present facts of the case, that money had been disbursed by the

Respondent No.2 to the Corporate Debtor is undisputed. It is also an

admitted fact that there is no separate written agreement between Respondent

No.2 and the Corporate Debtor for payment of interest though it is claimed by

Respondent No.2 that the loan was given to the Corporate Debtor on an

assured interest of 24% interest per annum. We also cannot be oblivious of

the fact that while seeking stay of the first impugned order, the Corporate

Debtor had agreed before the Appellate Authority to pay a reasonable amount

of interest. The relevant order of this Tribunal dated 25.11.2021 is

reproduced below: -

"Learned Counsel for the Appellant submits that he accepts that Respondent Nos. 1 and 2 had given the amount of Rs. 1.9 Crore and he is ready to return their amount with reasonable interest. To show his bonafide let the Appellant deposit an amount of Rs. 3 Crores by way of Demand Draft of a Nationalized Bank before the concerned Adjudicating Authority within one month. After deposit of the amount, let an Affidavit along with the photocopy of the demand draft be placed before this Tribunal.

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

24

2. List the Appeal on 10.01.2022.

In the meantime, no further proceedings shall take place in pursuance of the impugned order."

However, we also notice that the Corporate Debtor later took a stand that it

never made a commitment before the Appellate Authority to pay interest and

that they had desired to contest the appeal filed against the first impugned

order admitting them into CIRP. We may for a moment agree to give benefit

of doubt to the Corporate Debtor that they had not admitted before the

Appellate Authority to pay any interest amount. Be that as it may, it does not

take away the character of financial debt merely on the ground that there was

no interest attached to this loan in the light of what has been clearly held by

the Hon'ble Supreme Court in Orator (supra).

36. We therefore now proceed to the next stage to examine whether in the

present case, disbursement of money has taken place against the

consideration for time value of money and whether commercial effect of

borrowing is found to underpin the transaction. Though the concept of time

value of money has not been expressly defined in the IBC, ordinarily

understood, time value of money is not only a regular or timely return received

for the duration for which the amount is disbursed as an amount in addition

to the principal, but also covers any other form of benefit or value accruing to

the creditor as a return for providing money for a long duration.

37. Even if we presume for arguments sake that the loan extended was not

interest-bearing and no time was fixed for repayment, it would be

misconceived to hold that the transaction was made by the Respondent No. 1

without time value of money. From the letter of 26.03.2012, which mentions

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

25 about development of 10 acres of land of the Corporate Debtor, we tend to

subscribe to the plea taken by the Respondent No. 2 that they had advanced

the payment with an intent to gain from the development of the land. As long

as the lender visualized an expectation to benefit from the development of the

land, there was clearly an element of enhancement of economic prospect in

return for the money advanced. Hence, to our mind, in the present context,

the loan in question entails time value of money and acquires the colour of

commercial borrowing and is endowed with all the trappings of a financial

debt and squarely falls within the purview of Section 5(8) of IBC.

38. Thus, to answer the first issue before us, in our considered view, this

is a case where all the pre-requisites for filing a Section 7 stood fulfilled and

the Adjudicating Authority cannot be held to have committed an error in

admitting the Corporate Debtor into CIRP for having defaulted in repaying a

financial debt which was above the threshold and within limitation of time.

39. This brings us to the next question as to whether the Adjudicating

Authority erred in affirming the proposal of the CoC to liquidate the Corporate

Debtor. It has been contended by the Learned Senior Counsel of SHPL that

the CoC had rushed into liquidation within 38 days of commencement of

CIRP. The Learned Senior Counsel for the SHPL submitted that this Tribunal

in Nikhil Tandon (Supra) had set aside the order initiating liquidation on

the ground of material irregularity when the CoC had hurriedly pushed for

liquidation. The CoC in the present case failed to abide by the timelines of

CIRP and frivolously passed the resolution to liquidate the Corporate Debtor.

The Adjudicating Authority by approving the same acted against the objective

of IBC which is to provide an enabling climate for timely resolution and revival

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

26 of the Corporate Debtor. Further, the CoC by sending the Corporate Debtor

abruptly into liquidation, the intent was clearly to sell off the sole asset of the

Corporate Debtor and utilize the proceeds for the personal benefit of

Respondent No.2.

40. Similar views were echoed by the Learned Senior Counsel of the

Corporate Debtor that the entire process of CIRP was vitiated since Resolution

Professional failed to discharge her duties professionally and acted in

collusion with Respondent No. 2 to hurriedly call the 3rd CoC meeting on

19.02.2022 to consider a resolution for liquidation of the corporate debtor.

The Respondent No. 2 being the sole CoC member voted hastily to liquidate

the Corporate Debtor with an oblique and ulterior motive for their unjust

enrichment. It was stated that Adjudicating Authority failed to consider the

fact that the Resolution Professional acted only on the directions of the

Respondent No. 2 to liquidate the Corporate Debtor without taking proper

steps to revive the Corporate Debtor by inviting resolution plans and hence

the liquidation order deserves to be set aside.

41. The Learned Senior Counsel for the Respondents No. 1 and 2 have

contested the contentions of the Corporate Debtor and SHPL. The Learned

Senior Counsel of Respondent No.1 submitted that the Resolution

Professional had acted with due diligence and issued a public announcement

in two newspapers and also uploaded the same on the IBBI website. It has

also been stated that after publication of public announcement, the

Resolution Professional also gave adequate opportunity to file their claim

within the prescribed time. All the borrowers had been informed by email

dated 17.11.2021 regarding initiation of CIRP by the Resolution Professional

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

27 and requested to file their claim. But none of them filed the claim within the

statutory period of limitation.

42. It has been further submitted that when the CoC resolved to liquidate

the company, the Resolution Professional had no other option but to move an

application under Section 33 of IBC for liquidation of the Corporate Debtor.

Reliance has also been placed on the judgement of the Hon'ble Supreme Court

in the case of Committee of Creditors of Essar India Ltd. Vs. Satishkumar

Gupta & ors 2020(8) SCC 531 where it has been held that it is for the CoC

to decide whether or not to rehabilitate the Corporate Debtor. Attention was

also adverted to the judgement of this Tribunal in the case of Amit Bharana

Vs. Gianchand in CA (AT) (Ins) 274/2020 wherein it has been held that the

Explanation which has been added to Section 33(2), empowers the CoC to

decide to liquidate the Corporate Debtor any time even before the confirmation

of the Resolution Plan.

43. At this stage it may be useful to note the contents of the agenda item

No.3 of the 3rd CoC meeting which is as follows:

"Agenda Item No.3- To discuss and approve the liquidation of the corporate debtor in accordance with Section 33(2) of the Insolvency and Bankruptcy Code, 2016 and to approve filing of liquidation application under Section 33 of Insolvency and Bankruptcy Code, 2016.

It is submitted that Corporate Debtor has only one major asset i.e Freehold Land of about 10 acres at Sector 39, Village Lakkarpur, Faridabad. Presently, there are no operations of the company and there have been no operations for at least last 4 years (the RP has the financial statements since FY 2018). Also, from the financial statements it appears that the Corporate Debtor does not have any employee. Further, from the available records, it appears that company entered into a development agreement with SAJ Housing Pvt. Ltd. in 2012 (the Developer) and no development has taken place since then on any application Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

28 of the Corporate Debtor Developer to convert the land for group housing.

The CoC was of the view that considering these circumstances, it is not feasible to keep the Corporate Debtor as going concern and also there is no possibility for Resolution Plans in the present matter. The CoC suggested to file an application for liquidation of the Corporate Debtor before this Hon'ble Tribunal and approved the said agenda by 100% voting in the meeting itself."

(Emphasis supplied)

44. Clearly the CoC had decided in the 3rd CoC meeting after considering

all facts and circumstances that it was not feasible to keep the Corporate

Debtor as a going concern and that there was no possibility for resolution

plans in the present matter and hence with 100% voting had recommended

that an application for liquidation of the corporate debtor be filed before the

adjudicating authority. We also notice that there was due compliance to the

provisions of IBC in terms of publications being made and informing

borrowers to file their claims. Based on available claims filed before the

Resolution Professional, the CoC was constituted and timely CoC meetings

were held. The Corporate Debtor was also given chance to participate though

they did not participate. Once the CoC with 100% vote share had found that

the company is not a running company and cannot be revived as there is no

employee or any business activity, the decision of the CoC becomes a business

decision of the majority of the CoC. Under such circumstances, the Resolution

Professional had rightly placed the liquidation proposal before the

Adjudicating Authority.

45. Undisputedly, in the statutory framework of the IBC, there is only

limited review available which can be exercised by the Adjudicating Authority

without trespassing upon the business decision of the majority of the CoC. Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

29 The decision as to whether the Corporate Debtor is to be revived or not is

essentially a business decision and hence should be left to the CoC so long as

it musters more than 66% vote share. And it is here that primacy of the

commercial wisdom of the CoC comes into play. There can be no fetters on

the commercial wisdom of the CoC. The supremacy of commercial wisdom of

the CoC has been reaffirmed time and again by the Hon'ble Supreme Court.

It is not for the Adjudicating Authority to consider or evaluate on merits the

rationale underlying the commercial decision of the CoC.

46. Thus, to answer the second issue before us, we are of the considered

view that keeping in mind the limited powers of judicial review available to the

Adjudicating Authority, in the given facts of the case, the Adjudicating

Authority has not committed any error in ordering the liquidation of the

Corporate Debtor as decided by the CoC with 100% vote share.

47. Now that we have decided the first two issues, we come to the third

issue as to whether there is force in the contention of SHPL that they should

have been treated as Financial Creditor and that not having taken place, CIRP

should be started afresh with a newly constituted CoC.

48. It is the contention of SHPL that the payment made by them to the

Corporate Debtor was identical in nature to the payment made by the

Respondent No. 2 as both the payments were under the DA to develop the

land of the Corporate Debtor. The audited financial statements of the

Corporate Debtor also treated the payments made by SHPL and Respondent

No.2 in a similar manner as unsecured loan under the heading of "long-term

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

30 borrowing" in the balance sheet and these entries in the balance sheet have

not been disputed by Respondent No.2.

49. We do not wish to repeat the reasoning as recorded at para 31 above

for coming to our findings that the payments were made by the SHPL and the

Respondent No. 2 was not for the same purpose. The DA entered into between

SHPL and the Corporate Debtor was an agreement of reciprocal rights and

obligations wherein both parties entered into a consortium of sorts for

developing the subject land. SHPL clearly being a profit share owner, who in

the event of the success of the project would have received the gains from the

proceeds, the amount invested in the land cannot be said to be a 'Financial

Debt' as defined under Section 5(8) of the Code. Hence the claim of SHPL and

the Respondent No.2 cannot be treated on the same footing. We must add

here that the ratio laid down by the Hon'ble Supreme Court in New Horizons

(supra) as relied upon by the Learned Senior Counsel for the Corporate Debtor

is squarely applicable in the case of SHPL. We therefore are of the view that

the Resolution Professional by admitting the claim of Respondent No.2 as

financial debt while treating SHPL as an Operational Creditor did not act in

an arbitrary manner and cannot be blamed for having defeated the legitimate

claim of SHPL for malafide reasons.

50. It is the case of SHPL that they were not able to file their claims as they

were unaware of the ongoing CIRP and became aware only when the

Respondent No. 1 made a demand to hand over possession of the land in their

possession. It is also contended that their claim was arbitrarily and

summarily rejected by Resolution Professional on the ground of being time

barred though it fell very much within the prescribed time period if the 57

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

31 days period was excluded as granted by the Adjudicating Authority.

Consequentially the process of constitution of CoC was vitiated and rendered

it void ab initio and that this is a case of material irregularity.

51. Refuting these contentions, the Learned Senior Counsel for the

Respondents No. 1 vehemently denied that the SHPL was unaware of CIRP

proceedings since they had been informed by email to file their claims. It has

been claimed by the Resolution Professional that SHPL was at no stage

restrained from filing their claim including the period of time when they had

applied for exclusion of time before the Adjudicating Authority. We are

persuaded from material on record that due opportunity was given to SHPL

to file their claim within the prescribed time. The publication in the

newspapers not having been denied by SHPL is ample proof that wide

publicity was caused to invite claims. SHPL was also sent a written email by

the Resolution Professional to submit claims which has also not been

controverted. Nothing prevented them from filing their claims but instead they

chose to adopt a wait and watch strategy. Moreover, it has been admitted by

SHPL themselves that to begin with they had filed their claim in Form B as

an Operational Creditor and not as Financial Creditor. Thus, having failed to

file their claim in the appropriate format and in a timely manner due to their

own negligence, they should be ready to suffer the consequences of late and

improper filing. The bonafide of the Resolution Professional is also established

by the fact that even when the statutory period prescribed for submission of

claim had expired, the Resolution Professional had advised them in their

email dated 28.02.2022 to seek condonation of delay from the Adjudicating

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

32 Authority as they had no power to condone such delay with respect to their

delayed claim as is reproduced below:-

"From: Priyanka Chouhan drishti.cirp@gmail.com

Subject: Re Claim on behalf of M/s SAJ Housing Pvt. Ltd against: M/s Dirshti India Ltd.

Date: 28th February 2022 at 10:04 AM

To: R.L Bhagat rlbajurist@gmail.com

Dear Sir,

This is in reference to the submission of your claim dated 25th Feb, 2022. It is to inform you that in accordance with Section 15(1) (c) Regulation 6(2) (c) & (12(1) the last date of submission of claims was 17/11/2021 as per the public announcement made by the Resolution Professional.

Further as per Regulation 12(2). If a creditor fails to submit its stipulated time. Who can fo so within 90 days from the insolvency commencement date. I forever you have submitted your claim after ninety days from the date of initiation of CIRP of the Corporate Debtor which is time barred as per rules and regulations provide under the code and the Resolution Professional has no power to condense such delay with respect to your claim. Hence the Resolution Professional has no power admit your claim at this stage.

Further you can to seek directions from the Adjudicating Authority in order to condone this delay.

Priyanka Chouhan Resolution Professional Regn. No.: IBBN/IPA-001/IP-P-02348/2020-2021/13447 Drishti India Limited (In CIRP)"

52. We have already noted in the preceding paragraphs the contention of

the SHPL that though IBC envisages liquidation as the last resort, in the

present case liquidation was resorted to even before the completion of the

statutory period of 180 days without even waiting for resolution plans. We do

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

33 not wish to dilate on this aspect again as we have already recorded our

detailed findings on this matter while answering the second issue.

53. On the issue raised for starting CIRP afresh, the Learned Senior

Counsel for the Respondent No.2 has contended that the appeal to set aside

the admission of the Corporate Debtor into CIRP is not maintainable since the

CoC had already taken a decision that resolution of the Corporate Debtor was

not feasible and had recommended initiation of liquidation proceedings which

has already been approved by the Adjudicating Authority.

54. We also notice that the Adjudicating Authority while deciding on IA

1447/2022 in the second impugned order has noted the admissibility of

exclusion of 57 days from the CIRP period and also held that SHPL was

entitled to get benefit of this exclusion. However, having heard the parties

and taking cognizance of their submissions and pleadings, the Adjudicating

Authority had approved the liquidation of the Corporate Debtor. At this stage,

we refer to judgment of this Tribunal in CA (AT) (Ins.) 296/2022 in Rakshit

Dhirajlal Doshi v. IDBI Bank Ltd. which has been relied upon by Learned

Senior Counsel for the Respondent No.2 wherein it has been held that

admission of the Corporate Debtor into CIRP is not maintainable once the

final order for proceedings under the liquidation have already been passed by

the Adjudicating Authority. Further, we also notice that SHPL has been

allowed by the Adjudicating Authority in the second impugned order to file

claim before the liquidator.

55. Thus, to answer the third issue before us, we are of the considered

view that in the given facts and circumstances of the case, SHPL cannot be

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

34 accorded the status of Financial Creditor and therefore the prayer of SHPL to

reconstitute the CoC does not merit consideration. Further, since the

Adjudicating Authority has already approved the liquidation and allowed

SHPL to file its claim, we are satisfied that the interests of SHPL have not been

put to prejudice.

56. In result, we are of the considered view that the second impugned order

of 04.08.2022 approving the liquidation of the Corporate Debtor has

subsumed the first impugned order dated 01.11.2021 which had admitted the

Corporate Debtor into CIRP. For the reasons discussed above, we find no

reasons which warrant any interference in the second impugned order of the

Adjudicating Authority. We direct the liquidator to continue with the

liquidation process and inter-alia allow SHPL to submit their claim before the

liquidator in terms of the IBC and regulations framed thereunder. The appeals

being devoid of merit are dismissed. No costs.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

Place: New Delhi Date: 01.09.2023

PKM

Company Appeal (AT) (Ins.) No. 1093, 1273, 377 of 2022 and 967 of 2021

35