Chetan Bhanushali vs Ashapura Options Private Limited

Nippon Life India AIF Management Ltd. & Ors. ....Appellants

Vs.

Ashapura Options Pvt. Ltd. ....Respondent Present: For Appellants: Mr. Amit Agarwal, Ms. Reaa Mehta, Advocates For Respondent: Ms. Dyuti Ghai, Advocate

With Comp. App. (AT) (Ins) No. 478 of 2023

IN THE MATTER OF:

Chetan Bhanushali ....Appellant

Vs.

Ashapura Options Pvt. Ltd. & Anr. ....Respondents Present: For Appellant: Mr. Zeeshan Hashmi, Mr. Ankit Parashar, Mr. Neel Kothari, Advocates. For Respondents: Ms. Dyuti Ghai, Advocate for R-1/IRP Mr. Aditya Vashisth, Advocate for R-2.

ORDER

(Hybrid Mode) Per: Justice Rakesh Kumar Jain (Oral)

CA (AT) (Ins) Nos. 711, 478 of 2023 2

16.05.2024: This order shall dispose of two appeals bearing CA

(AT) (Ins) No. 478 of 2023 (herein after referred to as the first

appeal) and CA (AT) (Ins) No. 711 of 2023 (herein after referred to as

the second appeal), filed against the order passed by the National

Company Law Tribunal, Mumbai Bench in CP (IB) No. 1089/MB-

IV/2022 dated 30.03.2023 and CP (IB) No. 439(MB)/2022 dated

10.04.2023.

2. In so far as the first appeal is concerned, it is filed by the

Suspended Director of Ashapura Options Pvt. Ltd. (Corporate

Debtor) to challenge the admission of an application filed under

Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short

'Code') by Omkara Asset Reconstruction Company Ltd. (Financial

Creditor) for the resolution of an amount of Rs. 65,30,77,490/-.

3. While admitting the petition filed by the Omkara Asset

Reconstruction Company Ltd. (Financial Creditor), the Tribunal

declared moratorium and appointed Mr. Bijendra Kumar Jha, as

the IRP. The first appeal was filed on 15.04.2023 which came up for

preliminary hearing on 18.04.2023 in which the following order was

passed.

CA (AT) (Ins) Nos. 711, 478 of 2023 3

"Learned counsel for the Appellant contends that after issuance of notice by the Adjudicating Authority to the Corporate Debtor, there has been series of correspondence between the Corporate Debtor and the Financial Creditor for settlement and an OTS proposal was forwarded to the Financial Creditor, which was entertained and the Financial Creditor took cognizance of the OTS proposal and asked for certain information and in none of the correspondence, any information about filing of section 7 application or proceeding before NCLT was intimated. It is submitted that due to the aforesaid reason the Appellant could not appear and file reply. It is submitted that the OTS proposal has neither been accepted nor been rejected by the Financial Creditor and the Appellant was awaiting the outcome of the OTS proposal. Learned counsel for the Appellant submits that two other Section 7 proceedings against the Corporate Debtor have also been filed and are pending. Submission needs Scrutiny.

Issue notice. Requisites alongwith process fee be filed within three days.

Respondents may filed reply within three weeks. Rejoinder be filed within two weeks thereafter.

List this Appeal on 29.05.2023.

In the meantime, in pursuance of the impugned order if CoC has not been constituted, the same shall not be constituted till the next date".

CA (AT) (Ins) Nos. 711, 478 of 2023 4

4. The CoC was not constituted by that time and it was ordered

that it shall not be constituted and the order dated 18.04.2023 is

still operative.

5. The IRP, soon after his appointment, invited claims pursuant

to which he received claims from five secured financial creditors

and nine unsecured financial creditors.

6. The subject matter of the second appeal is that an application

was filed by M/s Nippon Life India AIF Management Ltd., Nippon

Life India Asset Management Ltd. and Vistra ITCL (India) Ltd.(FCs)

Out of the aforesaid three, the first two are the financial creditors

who had filed the application under Section 7 of the Code bearing

CP (IB) No. 439(MB)/2022 before the NCLT, Mumbai against

Ashapura Options Pvt. Ltd. (CD).

7. Since, the CP (IB) No. 1089/NCLT/MB/C-IV/2022 was

admitted on 30.03.2023, therefore, CP (IB)-439 (MB)/2022 filed by

the aforesaid financial creditors was dismissed by the Ld. Tribunal

on 10.04.2023 with the following order:

CA (AT) (Ins) Nos. 711, 478 of 2023 5

"Mr. Malhar Zatakia, Counsel appearing for the Petitioner and Mr. Aman Kacheria, Counsel appearing for the Corporate Debtor/Respondent are present through virtual hearing.

Counsel appearing for the Petitioner brought to the notice of this Bench that the Corporate Debtor is already undergoing CIRP before Court No. IV in another Company Petition bearing CP No. 1089/2022 vide admission order dated 30.03.2023.

In view of the above admission order, the present Company Petition along with all pending applications if any becomes infructuous and disposed of granting liberty to the petitioner to put forth their claim before the IRP".

8. Aggrieved against the order dated 10.04.2023, the aforesaid

financial creditors filed the second appeal in which notice was

issued. It is submitted that during the pendency of the appeal, One

Time settlement (OTS) was proposed by the Suspended Director

which was accepted by the financial creditor (Omkara Asset

Reconstruction Company Ltd.) on 16.09.2023 for an amount of Rs.

17 Crores which was ultimately paid on 30.03.2024 regarding

which the Omkara Asset Reconstruction Company Ltd. issued a

letter dated 24.04.2024 which read as under:

CA (AT) (Ins) Nos. 711, 478 of 2023 6

To, Mr. Pravin Chamaria (Gurantor and Ex Promoter of M/s Ashapura Options Pvt. Ltd.) 901, 9th Floor, Hallmark Business Plaza, Gurunanak Hospital Road, Bandra (East) Mumbai- 400064

Ref:

1. Letter dated 16th March 2024 addressed by M/s 7Fireflies Production LLP

2. Sanction Letter dated 30th March 2024 Referenced as Omkara/R1158/2023-24.

Dear Sir/s,

1. In light of the referenced letters, we hereby confirm the receipt of Rs. 10,00,00,000/- (Rupees Ten Crore Only) by way of RTGS in the account number 344905001082 held with ICIC0003449 bank on 30.03.2024 on behalf of M/s. Charmee Enterprises in accordance with the provisions of the sanction letter dated 30.03.2024. Further, we confirm that we hereby release all our rights, title, interest, share, claim, charge or encumbrance in respect of the said project and file necessary applications to withdraw all the litigations/proceedings filed by us in respect of the said project and further take all necessary steps to release our charge and encumbrance in respect of the said project before the appropriate authority.

2. As per the terms of the sanction letter dated 30 th March 2024, the obligation and sole responsibility for payment of IRP dues will be of Mr. Pravin Chamaria and/or Ashapura Options Pvt. Ltd. and/or any other person representing the aforesaid. Pursuant to the foregoing, we shall take all necessary steps to withdraw the proceedings filed by us under NCLT against Ashapura Options Pvt. Ltd; and (ii) Issue No Dues Certificate to M/s Charmee Enterprises under the Loan Agreement.

CA (AT) (Ins) Nos. 711, 478 of 2023 7

3. In view of the above you are requested to adhere to the terms of the OTS sanction letter referenced as Omkara/R1158/2023-24.

Thank you,

For Omkara Asset Reconstruction Company Ltd.

(Acting in capacity as trustee of Omkara PS 04/2021-22 Trust)

9. It is argued by the Appellant that the entire payment has been

made to Omkara Asset Reconstruction Company Ltd. (Financial

Creditor) and thus they shall approach the IRP with form FA along

with the Bank Guarantee for submitting the same to the Tribunal

for obtaining the order as per law. Counsel for the IRP has

submitted that though the Appellant in the first appeal has settled

with the financial creditor but the IRP cost of Rs. 30,00,000/- has

not been paid. This submission is strongly opposed by the

Appellant on the ground that the IRP has worked only for 8 days

because the constitution of the CoC was stayed by this court on

18.04.2023 which is continuing.

10. In rebuttal, it is argued by the Counsel for the IRP that he has

been working in collating the claims as well as doing other various

compliances, therefore, entitled to the cost which has been claimed.

CA (AT) (Ins) Nos. 711, 478 of 2023 8

11. On the other hand, Shri Amit Agrawal, appearing for the other

financial creditors in the second appeal opposed the prayer made by

the Appellant in the first appeal and submitted that even though

CoC was not constituted but they are also entitled for the

settlement of their amount and no preferential treatment can be

given by the corporate debtor to one of the financial creditor.

12. In support of his submission, he has relied upon a decision of

the Hon'ble Supreme Court in the case of "Swiss Ribbons Pvt. Ltd. &

Anr. vs. Union of India & Ors". (2019 4 SCC 17) and has drawn our

attention to paragraph 82 of the said decision which read as under:

"82. It is clear that once the Code gets triggered by admission of a creditors 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 Rule 11 of the NCLT Rules, 2016, allow or disallow an application for withdrawal or settlement. This will be decided after hearing all the CA (AT) (Ins) Nos. 711, 478 of 2023 9

concerned parties and considering all relevant factors on the facts of each case".

13. In reply to this argument, Mr. Hashmi, Advocate has relied

upon a latest Judgment of the Hon'ble Supreme Court given in the

case of "Abhishek Singh vs. Huhtamaki PPL Ltd. & Ors." Civil Appeal

No. 2241 of 2023 decided on 28.03.2023 and contended that the

facts of the present case and that of the cited case are identical

which covers the controversy.

14. We have heard Counsel for the parties in both the cases and

perused the record with their able assistance.

15. The facts are not in dispute as M/s Ashapura Options Pvt.

Ltd. is the Corporate Debtor against which Omkara Asset

Reconstruction Company Pvt. Ltd. filed CP (IB) No. 1089 of 2022

which was admitted on 30.03.2023 and the Corporate Debtor was

slipped into CIRP. However, it is pertinent to mention that two of

the financial creditors filed CP (IB) No. 439 of 2022 earlier to the CP

(IB) No. 1089 of 2022 but it remained pending for adjudication

whereas CP (IB) No. 439 of 2022 was admitted earlier, therefore, it

was disposed of as infructuous on 10.04.2023. However, the

Suspended Director of the Corporate Debtor was not satisfied with CA (AT) (Ins) Nos. 711, 478 of 2023 10

the admission, therefore, the first appeal and similarly the financial

creditors who had filed CP (IB) No. 439 of 2022 also challenged the

order of the tribunal resulting into the second appeal.

16. It is also not in dispute that the IRP in the first appeal, soon

after his appointment, made publication for inviting claims and

received claims from the five secured financial creditors and nine

unsecured financial creditors including the Appellants in the

second appeal.

17. At this stage, we may clarify that the first two companies

namely Nippon Life India AIF Management Ltd., Nippon Life India

Asset Management Ltd., are the debenture holders and the third

Company namely Vistra ITCL (India) Ltd. is the debenture trustee.

It is also not in dispute that the CoC was not constituted and by

virtue of the order passed by this court in the first appeal stay

regarding the constitution of the CoC is continuing.

18. One of the Suspended Director of the CD made a proposal on

08.08.2023 for the OTS to the financial creditor of the first appeal

which was considered as accepted on 16.09.2023 and was admitted

on 30.03.2024 at an amount of Rs. 17 crores which is stated to

have been paid in the month of March itself in pursuance of which CA (AT) (Ins) Nos. 711, 478 of 2023 11

letter dated 24.04.2024 has been written by the financial creditor of

the first appeal. The Appellant in the first appeal was thus awaited

the no due certificate from the financial creditor in the first appeal

only after the disposal of the petition filed under Section 7 against

which the appeal has been filed.

19. Although, Counsel appearing on behalf of the secured

financial creditors in the second appeal has submitted that as per

Swiss Ribbons (supra), judgment of the Hon'ble Supreme Court, the

proceedings before the Adjudicating Authority, triggered by Section

7 or 9 is a collective proceeding, a proceeding in rem and 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. But in Judgment relied upon by the Appellant in

the case of Abhishek Singh (Supra), the petition was filed by an

Operational Creditor (OC) which was admitted on 01.03.2021 by

the Tribunal and thereafter the settlement was arrived at between

the OC and the CD, prior to the constitution of CoC and in terms of

the settlement the amount was paid. The IRP filed the application in

terms of the Code and the Regulations for withdrawal of the CIRP

against the CD and also an application under Section 12A of the CA (AT) (Ins) Nos. 711, 478 of 2023 12

Code. In the meanwhile, appeal was filed by the CD against the

order of admission before the Tribunal on the ground that Section 9

application was not maintainable because there was a pre-existing

dispute. But the said appeal was withdrawn with liberty to apply for

revival of the appeal in case the settlement fails.

20. The application under Section 12A was dismissed by the

Tribunal on 13.04.2021, appeal preferred against it was dismissed

by this court. The Tribunal recorded the following findings.

i. The facts relating to the settlement and the fulfilment of the terms of the settlement are not disputed; ii. The suspended directors of the CD despite the moratorium having commenced with effect from 01.03.2021 have not only made transactions of deposit but also withdrawal from the account of the CD. They have thus violated the directions contained in the admission order dated 01.03.2021;

iii. Although the IRP had made submissions that the suspended director having transferred huge amount from the account of the company to his personal account and from there having made the payment to the OC under the settlement but the same was not conclusively proved; iv. The suspended director and their counsel made frivolous arguments before the NCLT which were contrary to record in order to obtain favourable orders; v. As many as 35 claims of creditors both operational and financial have been filed in the meantime. As such

CA (AT) (Ins) Nos. 711, 478 of 2023 13

withdrawal of the proceedings would adversely affect their rights;

vi. The proceedings once admitted and IRP having initiated, such proceedings are in rem and all stake holders can participate in the proceedings with their respective claims; and vii. Regulation 30A of IBBI Regulations was not binding upon it and such provision would not be of any help to the CD or its suspended Directors;

21. The finding recorded by the Ld. Tribunal was that there were

35 claims of the creditors both operational and financial have been

filed in the meanwhile, therefore, withdrawal of the proceedings

would adversely affect their rights. It was also an objection that

proceedings initiating the CIRP are proceedings in rem and all the

stakeholders can participate in the proceedings with their respective

claims. However, in this regard, the Hon'ble Supreme Court

recorded a finding in para no. 27, 28 which are reproduced as

under:

"27. With respect to the said objection, it only needs to be mentioned that other creditors would have their own right to avail such legal remedies as may be available to them under law with respect to their claims. The rights of the creditors for their respective claims do not get whittled down or adversely affected if the settlement with the OC in the present case is accepted and the proceedings allowed to be withdrawn.

CA (AT) (Ins) Nos. 711, 478 of 2023 14

Claims for expenses for IRP

28. Any amount spent by the IRP legally admissible to him could always be recovered in the same proceedings and the NCLT or the Adjudicating Authority would be well within its power to get the same cleared Under Clause 7 of Regulation 30A of IBBI Regulations".

22. In paragraph 27 it has been observed by the Hon'ble Supreme

Court that other creditors would have their own right to avail such

legal remedies as may be available to them under law with respect

to their claims. In so far as the expenses of the IRP are concerned, it

has been held that it can be recovered by approaching the Tribunal.

The Hon'ble Supreme Court has also recorded the following finding

which read as under:

"35. Section 12A of IBC permits withdrawal of applications admitted Under Sections 7, 9 and 10 of IBC. It permits withdrawal of such applications with approval of 90 percent voting share of CoC in such manner as may be specified. The role of CoC and 90 percent of its voting share approving the said withdrawal would come into play only when CoC has been constituted. Section 12A did not specifically mention withdrawal of such applications where CoC had not been constituted but at the same time it does not debar entertaining applications for withdrawal even before constitution of CoC. Therefore, the application Under Section 12A for withdrawal cannot be said to be kept pending for constitution of CoC, even where such application was filed before constitution of CoC. The IBBI

CA (AT) (Ins) Nos. 711, 478 of 2023 15

which had the power to frame Regulations wherever required and in particular Section 240 of IBC for the subjects covered therein had accordingly substituted Regulation 30A dealing with the procedure for disposal of application for withdrawal filed Under Section 12A of IBC. The substituted Regulation 30A of IBC as it stands today clearly provided for withdrawal applications being entertained before constitution of CoC. It does not in any way conflicts or is in violation of Section 124 of 1BC. There is no inconsistency in the two provisions. It only furthers the cause introduced vide Section 12A of IBC. Thus, NCLT fell in error in taking a contrary view".

23. Ultimately, the following findings have been recorded at para

40 to 44 which are reproduced as under:

"40. Both the parties have relied upon paragraph 82 of the judgment in the case of Swiss Ribbons (supra). According to the Appellant, the NCLT ought to have exercised its inherent powers Under Rule 11 of the NCLT Rules whereas for the intervenors it is submitted that this Court had observed that power Under Rule 11 would be exercised after hearing all concerned parties. It may be noted that at the time when the application for withdrawal of the proceedings was filed the CoC was not constituted as such there could not have been any other concerned parties except the OC, CD and IRP. It was only because of the delay caused by the NCLT in disposing of the applications Under Section 12A of IBC and Regulation 30A of IBBI Regulations that large number of creditors filed their claims. The inherent powers are to be invoked in order to meet the ends of justice which, in our opinion, the NCLT failed to invoke.

41. Regulation 30A of IBBI Regulations provide a complete mechanism for dealing with the applications filed under such provision. The issue raised by the IRP regarding its CA (AT) (Ins) Nos. 711, 478 of 2023 16

claim for expenses is well taken care of under the said provision. Various safeguards have been provided in Regulation 30A of IBBI Regulations to be fulfilled by the OC which apparently have been fulfilled as there is no complaint in that regard either by the IRP nor it is apparent from the impugned order of the NCLT. Thus, the objection raised by the IRP does not merit any consideration in this appeal.

42. For all the reasons recorded above, the impugned order of the NCLT cannot be sustained. The application filed Under Regulation 30A of IBBI Regulations deserves to be allowed.

43. Accordingly, the appeal is allowed and the impugned order of NCLT is set aside. Further, the Application No. 196 of 2021 also deserves to be allowed along with the application Under Regulation 30A of IBBI Regulations. The Application Under Section 9 of IBC filed by the OCs shall stand withdrawn. It is further provided that any claim for expenses incurred may be dealt with by the NCLT in accordance with law.

44. We make it clear that any observations made in this judgment will not, in any manner, affect the claim of other creditors of whatever category and they would be free to raise their own independent claims in appropriate proceedings which would be dealt with in accordance with law".

CA (AT) (Ins) Nos. 711, 478 of 2023 17

24. The facts of this case are almost akin to the facts of the case of

Abhishek Singh (Supra) because in both the cases the CoC was not

constituted and settlement was arrived at but the only

distinguishing feature is that in the case of Abhishek Singh (Supra)

the proceedings of settlement were taken up immediately whereas

in the present case it took some time and the moratorium remained

operative to the benefit of the CD. However, in our considered

opinion the facts of the present case are squarely covered by the

decision of the case of the Abhishek Singh (supra).

25. Consequently, in view of the settlement arrived at and the

money having been paid, duly received by the creditor (Omkara

asset Reconstruction Company Pvt. Ltd.), order of admission passed

against the CD in CP (IB) No. 1089 of 2022 does not survive and

hence CA (AT) (Ins) No. 711 of 2023 is hereby allowed. CP (IB) No.

439 of 2022 has been disposed of as infructuous because of the

admission of CP (IB) No. 1089 of 2022, can be revived for pursuing

their remedy against the corporate debtor for the resolution of their

claim/debt. In so far as, issue regarding the dues of the IRP are

concerned, it can be taken care of by the Adjudicating Authority, if CA (AT) (Ins) Nos. 711, 478 of 2023 18

and when the IRP file an application on form FA and put up his

claim for the CIRP cost.

26. In view of the aforesaid facts and circumstances, the first

appeal is allowed. The order dated 30.03.2023 is set aside. The FC

shall file the form FA along with the bank guarantee to the IRP who

shall in turn file the same to the Adjudicating Authority for an order

regarding to the withdrawal of the petition. It is needless to mention

that the IRP may also, at that stage, file its claim for the IRP cost

which shall be considered and decided by the Adjudicating

Authority. It is further directed that if any such application is filed

within a period of one month from the date of passing of this order,

the same shall be decided by the Adjudicating Authority as early as

possible but preferably within a period of two months from the date

of filing of the said application.

27. In so far as, the second appeal is concerned the same is also

allowed and the impugned order is hereby set aside because the

admission order dated 30.03.2023 has been set aside. The parties

in the said petition are directed to appear before the Tribunal on

01.07.2024. The tribunal is further directed to decide the said

CA (AT) (Ins) Nos. 711, 478 of 2023 19

petition in accordance with law expeditiously but preferably within

a period of three months from the date of appearance of the parties.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Arun Baroka] Member (Technical)

sr/kam

CA (AT) (Ins) Nos. 711, 478 of 2023