Bhaskar Biswas vs Devi Trading & Holding Pvt. Ltd. & Anr

IN THE MATTER OF: Bhaskar Biswas .....Appellant Vs. M/s. Devi Trading & Holding Pvt. Ltd. & Anr. ......Respondents

Present : For Appellant: Mr. Abhijeet Sinha, Ms. Debamitra Adhikari, Mr. Aditya Shukla, Ms. Upama Bhattacharjee, Advocates Mr. Aditya Sinha for Intervenor

For Respondents: Mr. Chayan Sarkar, Mr. Konark Bhatnagar, Mr. Rakesh Kumar, Mr. Anupamprakash, Advocates for R-2 Ms. Soumya Roy, Advocate for SBI

29.08.2019 - Learned Counsel for the Appellant submits that the Appellant

settled the matter on behalf of the 'Corporate Debtor with 1st Respondent - 'Devi

Trading & Holding Pvt. Ltd.' and 'Financial Creditor' prior to the constitution of

the 'Committee of Creditors' and filed application under Rule 11 of the NCLT

Rules, 2016.

2. The Adjudicating Authority taking into consideration the fact that at the

time of hearing of the application a number of allottees (home buyers of the

Company Appeal (AT) (Insolvency)No. 823 of 2019 'Corporate Debtor') appeared before the Adjudicating Authority and opposed the

prayer for withdrawal on the ground that their claim is settled by the 'Corporate

Debtor', the Infrastructure Company / builder. In view of the same, the

Adjudicating Authority referred to the decision of Hon'ble Supreme Court in

"Swiss Ribbons Pvt. Ltd. Vs. Union of India" refused to invoke the inherent

power under Rule 11 of the NCLT Rules, 2016 by impugned order dated 5th July,

2019.

3. The Hon'ble Supreme Court in "Swiss Ribbons Pvt. Ltd. Vs. Union of

India" held that the Directors or the shareholders of the 'Corporate Debtor'

may settle before the constitution of the 'Committee of Creditors' and it was

observed that in such case, it was open to the Adjudicating Authority to exercise

its inherent jurisdiction under Rule 11 of the NCLT Rules, 2016. The relevant

observation of Hon'ble Supreme Court is quoted below:-

"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

Company Appeal (AT) (Insolvency)No. 823 of 2019 2 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 Rule 11 of the NCLT

Rules, 2016, allow or disallow an

application for withdrawal or

settlement. This will be decided

after hearing all the concerned

Company Appeal (AT) (Insolvency)No. 823 of 2019 3 parties and considering all relevant

factors on the facts of each case."

4. Normally, before the constitution of 'Committee of Creditors' if on behalf of

the 'Corporate Debtor' a shareholder or Director settles the claim of the Applicant

who files an application u/s 7 or 9 of the 'I&B' Code, the Adjudicating Authority

in normal course can exercise its inherent power under Rule 11 of the NCLT

Rules, 2016. However, it is seen that when allowing an application under Rule

11 of the NCLT Rules, 2016 may result into triggering a large number of cases

as a number of creditors, including the 'Financial Creditors' (allottees) are also

in the queue to trigger the process against the 'Corporate Debtor', it is open to

the Adjudicating Authority to refuse to exercise its inherent power under Rule

11 of the NCLT Rules, 2016 otherwise it may result into triggering number of

cases.

5. For the reasons aforesaid, we are not inclined to interfere with the

impugned order dated 5th July, 2019, however we allow the Appellant or

shareholders on behalf of the 'Corporate Debtor' to move an application u/s 12A

for settling the claim of all the Creditors particularly the allottees stating how

they will take care of the allottees and other lenders and in such cases the

'Committee of Creditors' uninfluenced by the order passed by the Adjudicating

Authority and this Appellate Tribunal may consider the same and if it is feasible

and viable may approve 90% of its voting shares u/s 12A to enable the Applicant

Company Appeal (AT) (Insolvency)No. 823 of 2019 4

- Devi Trading & Holding Pvt. Ltd.' to withdraw the application u/s 7 of the 'I&B'

Code through the 'Resolution Professional'.

6. We make it clear that we have not stayed the 'Corporate Insolvency

Resolution Process' and the 'Resolution Professional' as also the 'Committee of

Creditors' are required to proceed in accordance with law. The 'Resolution

Professional' will ensure that the Company ('Corporate Debtor') remains a going

concern. In case the records and projects / assets have not been handed over

to the IRP / RP, the Appellant and other Promoters will hand over the same

immediately and co-operate with the 'Resolution Professional'.

The appeal stands disposed of. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice A. I. S. Cheema] Member (Judicial)

[Kanthi Narahari] Member (Technical)

ss/gc

Company Appeal (AT) (Insolvency)No. 823 of 2019 5