Canara Bank vs M/S Trn Energy Pvt. Ltd & Ors

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Ins) No. 310 of 2023 IN THE MATTER OF: Canara Bank ...Appellant Versus TRN Energy Pvt. Ltd. &Ors. ...Respondents Present: For Appellant: Ms. Anju Jain, Mr. Hitesh Sachar and Mr. Surender, Advocates. For Respondents: Mr. Rakesh Kumar, Ms. Preeti Kashyap, Mr. Ankit Sharma, Mr. Varun Pandit and Mr. Yash Dhawan, Advocates. Mr. Ramkripal Sharma (IRP). ORDER

Per: Justice Rakesh Kumar Jain:

This appeal has arisen from the order dated 07.02.2023, passed by

the Adjudicating Authority (National Company Law Tribunal, New Delhi

Bench - V) dismissing the application bearing I.A. No. 226 of 2023 filed by

the Appellant, under Rule 11 of the NCLT Rules, 2016 (in short 'Rules') for

revival of the Corporate Insolvency Resolution Process (in short 'CIRP')

against the Corporate Debtor.

2. Brief facts of this case are that M/s Natraj Transport (Operational

Creditor) filed an application under Section 9 of the Insolvency and

Bankruptcy Code, 2016 (in short 'Code') bearing CP (IB) 322/ND/2021 for

initiation of CIRP against M/s TRN Energy Pvt. Ltd. (Corporate Debtor). The

application was admitted on 07.12.2021 and Ramkripal Sharma was

appointed as the Interim Resolution Professional (in short 'IRP').

Company Appeal (AT) (Ins) No. 310 of 2023 2

3. The Operational Creditor submitted Form-FA to the IRP who filed I.A.

No. 5908 of 2021 before the Adjudicating Authority for withdrawal of the

main petition. The Adjudicating Authority permitted the withdrawal of the

main petition bearing CP (IB) No. 322/ND/2022 and disposed of I.A No.

5908 of 2021 with the following order:-

"IA/5908/2021 By filing this application, the applicant has prayed to withdraw thepresent Company Petition bearing No. IB-322/ND/2021.Heard the ld. Counsel appearing for the applicant as well as IRPappeared in person and perused the averments made in the application. Ld.Counsel for the applicant submits that the Form FA is submitted by theapplicant of Company Petition No. IB/322/ND/2021on 16.12.2021,at pageno. 17 and the CIRP was initiated on 07.12.2021. He further submits that theCoC has not been constituted as yet. The IRP has appeared in person andsubmits that he has received fee and cost. So considering this, we permit the applicant to withdraw the application. Accordingly, the Company Petition bearing No. IB/322/ND/2021 is dismissed and withdraw. With this the present IA stands disposed of."

4. However, the Operational Creditor filed RA/82/2022 invoking Rule 11

of the Rules for seeking revival of the CP (IB) No. 322/ND/2021, inter alia,

on the ground that the Corporate Debtor has failed to abide by the terms of

the settlement. The said application was allowed vide order dated

30.11.2022 and the main petition was revived and restored to its original

position with a direction to the RP to continue with the CIRP. The said order

is reproduced as under:-

"RA/82/2022

This is an application filed by Applicant/OC under Rule 11 of the Rules seeking revival of the main petition.

We have heard Counsel for the Applicant. Counsel for the Applicant has submitted that in terms of the settlement agreement between the OC and CD, the CD has failed to abide by the terms of settlement agreement and they have referred to the

Company Appeal (AT) (Ins) No. 310 of 2023 3

judgment of Hon'ble NCLAT in Pooja Finlease Ltd. Vs. Auto Needs (India) Pvt. Ltd. & Anr. by order dated 18.07.2022 in which the Hon'ble NCLAT has revived the application taking into consideration the terms of settlement which contained a clause for revival in case of failure to abide by the terms of settlement by any of the parties, even when in the order of NCLAT, no specific mention had been made for granting the liberty regarding the revival of application. In the light of orders of Hon'ble NCLAT, the petition is revived to its original position and since the petition had already been admitted and RP has been appointed, the RP may continue the process of CIRP for its completion and submit the report. With this order, the present IA stands disposed of."

5. After revival of the main petition, the IRP invited claims on 13.12.2022

and the last date was fixed as 23.12.2022. However, the IRP received 'Form

FA' from the Operational Creditor and filed application bearing I.A. No. 6271

of 2022 under Section 12A r/w Section 60(5) of the Code and Regulation

30A(1)(a) of the IBBI (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016 (in short 'Regulations') for withdrawal of the main petition

on account of settlement between the CD and the OC.

6. While this application was pending, the Appellant being the Financial

Creditor, submitted its claim to the IRP on 21.12.2022 since the last date for

submission of claim was 23.12.2022. The IRP did not bring it to the notice of

the Adjudicating Authority either through an application or orally about the

submission of claim by the Financial Creditor. I.A. No. 6271 of 2022 was

thus allowed on 22.12.2022 prior to the last date of submission of claim.

The order dated 22.12.2022 is reproduced as under:-

"I.A. No. 6271 of 2021

This is an application under Section 12A of IBC r/w 60(5) of the Code and Regulation 30A(1)(a) of the Regulations alongwith affidavit as well as copy of the settlement agreement.

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We have perused the contents of copy of the settlement agreement. Copy of the settlement agreement denotes that the entire principal amount outstanding has been paid by the CD to the OC and the said payment was made towards full and final settlement of the entire outstanding amount. Therefore, the IRP has prayed for withdrawal/termination of CIRP process in view of the Form FA for withdrawal of the CIRP process under Regulation 30A of the Regulations submitted by the OC.

Having heard the submissions made by Counsels present at the time of hearing and having noted the contents of the application and the prayers thereto, this Tribunal allows the present application as the Resolution Professional has confirmed that no CoC is formed till date and no claim has been received from any claimant and also no claim is outstanding. However, since the last date of filing the claim is 23.12.2022, in case, if the RP receives any claim he should pass on the same to the CD to enable the CD to make good of such claim.

Since time granted in paper publication inviting the public claim is up to 23.12.2022, the IRP will be relieved from his duties and responsibilities on the close of the business hours on 23.12.2022. In view of the above, the CD is relieved from the clutches of CIRP process. Dasti of this order is allowed."

7. It is pertinent to mention that the Adjudicating Authority allowed the

application observing thus 'this Tribunal allows the application as the RP

has confirmed that no CoC is formed till date and no claim has been

received from any claimant and also no claim is outstanding'. The

Adjudicating Authority further observed that 'however, since the last date of

filing the claim is 23.12.2022, in case, if the RP receives any claim he should

pass on the same to the CD to enable the CD to make good of such claim'

The Adjudicating Authority further observed that 'since time granted in

paper publication inviting the public claim is up to 23.12.2022, the IRP will

be relieved from his duties and responsibilities on the close of the business

hours on 23.12.2022. In view of the above, the CD is relieved from the

clutches of CIRP process'.

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8. The Appellant filed an application bearing 226 of 2023, invoking Rule

11 of the Rules, for the revival of CIRP against the Corporate Debtor, inter

alia, alleging that the IRP has failed to discharge his statutory duty in

accordance with law in not brining to the notice of the Adjudicating

Authority, before the order was passed in I.A. No. 6271 of 2022, that the

Appellant had already submitted its claim on 21.12.2022 to the IRP rather

this fact has been concealed because of which the Adjudicating Authority

has observed that 'as the RP has confirmed that no CoC is formed till date

and no claim has been received from any claimant and also no claim is

outstanding'

9. The IRP filed his reply to the application in which he made the

following averments in para 12 of the reply "that during the course of the

proceedings, a query was raised by the Hon'ble NCLT whether the CoC was

constituted or not. It was apprised to the Hon'ble NCLT that no CoC has

been constituted. The answering Respondent was not present during the

course of hearing in person due to some personal difficulty. It was

erroneously submitted that no claims were received wherein the intent was

to apprise the Tribunal that no CoC has been formed."

10. The IRP has thus in his reply admitted that it was erroneously

mentioned before the Adjudicating Authority that no claim was received

whereas the claim by the Appellant had already been received by the IRP on

21.12.2022 and the order on the application was passed on 22.12.2022 in

which it has been specifically observed by the Adjudicating Authority that no

claim has been received from any claimant as confirmed by the IRP.

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11. The application bearing I.A. No. 226 of 2023 has been dismissed by

the Adjudicating Authority by the impugned order dated 07.02.2023 but the

following observations have been made "as the CD is already discharged

from the clutches of CIRP and Resolution Professional is also discharged

from his duties and responsibilities as RP, this Tribunal cautions the RP for

allowing his counsel to act without proper instructions which resulted in

slippage of claim filed by the Canara Bank during consideration of Section

12A application by this Adjudicating Authority". It further observed that "as

the present application has come for consideration after discharge of the

CIRP process, this Tribunal directs the Canara Bank/Applicant to file a

fresh Section 7 application, if permitted by law against the CD, if the Canara

Bank is entitled to do so as on date" It also observed that "we do not find

any justifiable reason to allow the prayers made in this application". It also

observed that "Once again the RP who acted as IRP is directed to act with

due care and caution in future while exercising his functions and

discharging the duties as IRP. Corporate Debtor is also directed to look into

the matter of Canara Bank's claim and discharge the same as per the terms

of repayment of the loan/credit facilities availed from the Canara Bank".

12. Aggrieved by the impugned order dated 07.02.2023, the present

appeal has been filed.

13. Counsel for the Appellant has submitted that the Adjudicating

Authority has committed a patent error in dismissing the application

bearing 226 of 2023 holding that there is no justifiable reason to allow the

same whereas the reason is writ large because the order dated 22.12.2022

was passed in I.A. No. 6271 of 2022 under a wrong impression given by the

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IRP that he has not received any claim from any claimant and no claim is

outstanding which is a fact admitted by the IRP in his reply to the

application filed under Rule 11 of the Rules that there was an error on his

part when it is submitted that no claim was received. Counsel for the

Appellant has thus submitted that an order obtained by the OC against the

CD on an application filed under Section 12A by misleading the

Adjudicating Authority is no-nest in law. In this regard, he has referred to a

decision of this Court rendered in the case of CoC of Shree Maheshwar

Hydel Power Corporation Vs. Entegra Ltd. &Ors. (CA (AT) (Ins) No. 480 of

2023) and referred to para 16 of the said order which read as under:-

"In our considered opinion, keeping in view the decision of Hon'ble Supreme Court rendered in the case of Amar Singh Vs. Union of India (2011) 7 SCC 69, it is an act of concealment of fact on the part of the respondent because the Hon'ble Supreme court has time and again held that a litigant when comes to the court has to bring all the facts to the notice of the court and if some facts which are relevant, are concealed then the litigant is guilty of concealment of facts"

14. It is submitted that the Respondents cannot be given premium of their

misdeeds by dismissing the application filed by the Appellant who has been

unnecessary relegated to its remedy to file an application under Section 7

whereas the OC could not have been given a priority in payment of dues

over and above the financial creditor (Canara Bank). It is further submitted

that once the CIRP is initiated, it is a proceeding in rem and in this regard,

the Appellant has drawn our attention to a decision of this Court rendered

in the case of Jai Kishan Gupta Vs. Green Edge &ors. CA (AT) (Ins) No. 969-

970 of 2019 to contend that "once the Code gets triggered by admission of a

creditor's petition under Sections 7 to 9, the proceeding that is before the

Company Appeal (AT) (Ins) No. 310 of 2023 8

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" It is submitted by the Appellant that by

way of settlement an amount of Rs. 12 Cr. has been given to the OC out of

the kitty of the Financial Creditor which has caused a substantial prejudice

to the Appellant being a financial creditor, even if the Appellant has filed a

petition under Section 7 before the Adjudicating Authority after the

impugned order was passed.

15. In reply, Counsel for Respondent No. 1 has submitted that the

application bearing 6271 of 2022 was rightly decided by the Adjudicating

Authority because nothing was there before the Adjudicating Authority as a

fact that any claim made by the Appellant was received by the IRP. It is also

submitted that the Appellant being a complete stranger to the main petition

cannot ask for restoration of the main petition especially when the Appellant

has already filed an application under Section 7 in which the pleadings of

the parties are complete. He has also submitted that once the CIRP has

been withdrawn then a separate fresh application can be filed before the

Adjudicating Authority and main petition cannot be revived.

16. We have heard Counsel for the parties and perused the record with

their able assistance.

17. The admitted facts of this case are that the application under Section

12A was filed by the IRP at the instance of the OC. It is also an admitted fact

that the Adjudicating Authority allowed the application bearing 6271 of

2022 after confirming from the IRP that he has not received any claim from

Company Appeal (AT) (Ins) No. 310 of 2023 9

any claimant and no claim is outstanding. The IRP has also confirmed that

he has not constituted the CoC till date whereas it is also a fact that the last

date for the submission of claim was 23.12.2022 and the claim was

submitted by the Appellant on 21.12.2022 and the order was passed on

22.12.2022 on the application bearing 6271 of 2022. It is also an admitted

fact that the IRP, in his reply filed to the application under Rule 11 of the

Rules for revival of the application, has admitted that he has committed an

error in submitting to the Court that no claim has been received. Thus,

there is not even an iota of a doubt that the Adjudicating Authority has been

grossly misled by the IRP at the time when the order was passed on

22.12.2022 but instead of rectifying its mistake and or to undo the injustice

caused to the Appellant, the Adjudicating Authority has dismissed the

application bearing 226 of 2023 holding that it could not find any justifiable

reason to allow the prayer made in the application and rather in the entire

impugned order expressed its anguish and dissatisfaction about the working

of the IRP and repeatedly cautioned him to be careful while exercise of his

functions and discharging his duties. The prejudice shown by the Appellant,

having been caused to it on account of withdrawal of the petition after

receiving about Rs. 12 Cr. as an operational creditor over and above the

claim of the Appellant being a financial creditor is well made out which

should not have been ignored by the Adjudicating Authority while

dismissing the application of the Appellant for revival of the main petition

which appears to be an act of connivance of the IRP with the OC so that the

OC may settle its dues before the dues of the Appellant (Canara Bank) are

considered. The filing of application under Section 7 by the Appellant is in

no way causes any hindrance in maintaining the present application by the Company Appeal (AT) (Ins) No. 310 of 2023 10

Appellant because the said application has been filed in terms of the order

passed in the application bearing 6271 of 2022. If the

misrepresentation/concealment of any fact by the IRP to the Adjudicating

Authority is considered lightly by relegating the Financial Creditor to any

other remedy as it happened in the present case, to take his other remedy in

accordance with law then it would be giving a premium to the statutory

authority for his lapses and unprofessional act and conduct.

18. Thus, looking from any angle, it is a fit case for interference by this

Court in this appeal and thus, the appeal is allowed and the impugned order

is hereby set aside though without any order as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

New Delhi 04th April, 2024 Sheetal

Company Appeal (AT) (Ins) No. 310 of 2023