D & I Taxcon Services Pvt Ltd vs Vinod Kumar Kothari

(Arising out of order dated 16th October, 2019 passed by the National Company Law Tribunal, Kolkata Bench, Kolkata in CP (IB)03/KB/2017 & CA (IB) No. 1335/KB/2019)

IN THE MATTER OF:

D & I Taxcon Services Private Limited, Nicco House, 2, Hare Street, 2nd Floor, Kolkata - 700 001. ...Appellant

Versus

Mr. Vinod Kumar Kothari, Liquidator of Nicco Corporation Limited, ...Respondents

Present: For Appellant : Mr. Tapas Dutta, PCS

For Respondent : Mr. Anirudh Wadhwa, Advocate with Mr. Bunny Sehgal, PCS

JUDGMENT

BANSI LAL BHAT, J.

The Appellant - 'D & I Taxcon Services Pvt. Ltd.', claiming to be an

'Operational Creditor' for an amount of Rs. 3.20 crores is aggrieved of

dismissal of its application challenging the actions of liquidator - 'Mr. Vinod

Kumar Kothari' (Respondent) appointed in C.P. (IB) No. 3/KB/ 2017 of 'Nicco

Corporation Limited' whereby and whereunder the Adjudicating Authority

(National Company Law Tribunal), Kolkata Bench, Kolkata ('Tribunal', for

short) passed impugned order dated 16th October, 2019 while holding that all 2

the actions of the 'Liquidator' strictly confirmed to Regulations under the

'Insolvency and Bankruptcy Code' and the Appellant had no locus standi

under Section 47(1) of the 'Insolvency and Bankruptcy Code, 2016' ('I&B

Code', for short) to seek any direction against the 'Liquidator' further holding

that the Appellant is guilty of levelling vague and baseless allegations against

the 'Liquidator' and slapped costs of Rupees One Lakh on the Appellant which

was directed to form part of the 'Liquidation' estate. Aggrieved thereof the

Appellant has filed the instant Appeal assailing the impugned order on the

ground that the Tribunal failed to appreciate the statutory provision as also

the fact that the 'Liquidator' had reduced the price below 75% of the reserved

price bypassing the provisions of Regulation 33 (2) and without obtaining

permission from the Tribunal.

2. For better understanding of the controversy involved at the bottom of

this matter, it would be appropriate to make a brief reference to the factual

matrix of the case. The 'Corporate Applicant' - 'Nicco Corporation Limited'

was directed to undergo liquidation proceedings in terms of the order dated

17th October, 2017 passed by the Tribunal. Respondent - 'Mr. Vinod Kumar

Kothari' was appointed as 'Liquidator' to prepare the list of assets of the

'Corporate Debtor' and for liquidating its assets for discharging the liabilities

of the 'Corporate Debtor' in terms of 'The Insolvency and Bankruptcy Board

of India (Liquidation Process), Regulations, 2016. The 'Liquidator' made

paper publication for selling the 'Nicco House'. The Appellant appears to have

resisted such move on the part of the 'Liquidator' (in proceeding with the sale)

on the plea that the building in question had been constructed without

Company Appeal (AT) (Insolvency) No. 1347 of 2019 3

obtaining a building plan as regards 4th, 5th, 6th and top floor. As the

Appellant's objections did not find favour with the 'Liquidator', he appears to

have approached the Hon'ble High Court of Calcutta with the Writ Petition.

The Appellant alleged that the 'Liquidator' had made an unholy nexus with

the third party for disposing of the said building as the intending purchasers

would not participate in the bidding process on account of building being

partially constructed without any approved building plan. It further emerges

from the record that 'M/s. Narnolia Financial Advisors Pvt. Ltd.' emerged as

the 'successful bidder'. However, it was appointed as the sole selling agent

which participated in the next e-action becoming the successful bidder for an

amount of Rs.28.25 crores against the reserved price of Rs.27.50 crores. The

Appellant contended before the Tribunal that the appointment of 'M/s.

Narnolia Financial Advisors Pvt. Ltd.' as 'sole selling agent', barred it from

participating in the bidding process. It was contended that the building value

at Rs. 55 crores was reduced to a value of Rs. 27.45 crores. The Tribunal, in

terms of its order dated 25th June, 2019, relied upon the 'successive value

reports' holding that the value of the property is reduced according to the

valuation reports. The Appellant challenged the order dated 25th June, 2019

passed by the Tribunal in this regard before the Hon'ble High Court of

Calcutta which came to be dismissed, however, liberty being granted to the

Appellant to assail the order in appeal before this Appellate Tribunal. The

appeal preferred before this Appellate Tribunal came to be dismissed as being

barred by limitation vide order dated 29th September, 2019. The 'Liquidator'

is alleged to have executed 'Deed of Conveyance' in respect of second floor of

the said building far below the 'Fair Market Value'. The Appellant objected

Company Appeal (AT) (Insolvency) No. 1347 of 2019 4

to such 'Deed of Conveyance' being executed by the 'Liquidator' as SLP was

pending before the Hon'ble Apex Court. Admittedly, the 'Liquidator's action

was not stayed in any judicial proceedings.

3. The Tribunal, while dismissing the plea of the Appellant, observed that

all stakeholders including the Appellant, who admittedly was a tenant

occupying the tenanted portion, had been addressed while passing order

dated 25th June, 2019. It declined to address the issue raised which had

already been adjudicated upon further observing that the Appellant had no

locus standi, to seek any direction against the 'Liquidator' who had been

performing his duties strictly as per Regulations under the 'I&B Code'. Being

convinced that the allegations were baseless, it slapped costs upon the

Appellant as noticed hereinabove.

4. Heard the learned counsel for the parties.

5. Learned counsel for the Appellant submitted that the Appellant suffered

massive loss when his office situated in 2nd Floor of Nicco House was engulfed

in flames as fire broke out in the building. It is contended that initially the

Appellant had lodged the claim with 5th Metropolitan Magistrate, Calcutta for

compensation amount of Rs. 3.20 Crores against the 'Corporate Debtor'.

However, after appointment of 'Liquidator', the Appellant lodged claim before

the 'Liquidator' who did not settle its claim till date. It is further contended

that the Appellant had approached the Tribunal for seeking remedy as the

'Liquidator' did not settle its claim and the same was pending for

consideration before the Tribunal. Meanwhile, the 'Liquidator' initiated steps

to effect sale of the entire building. It is contended that the 'Liquidator' could

Company Appeal (AT) (Insolvency) No. 1347 of 2019 5

not have proceeded to sell 4th, 5th, 6th and roof top floors of the said building

as those were unauthorised construction and the 'Corporate Debtor' did not

possess any right, title or interest therein. The Appellant did not participate

in the said e-auction and the 'Liquidator' executed an agreement of sale on

15th March, 2019 in regard to the said premises. It is contended that the

'Liquidator' has been conducting the sale of the premises without following

fair practice and transparency and at a reduced price from Rs. 50 Crores to

27.25 crores within a span of five months in utter disregard to the

Regulations.

6. Per contra, it is submitted on behalf of the Respondent that the

Appellant is barred by the principle of res judicata from raising the issue when

its earlier application being C.A. 604/KB/2019 has been rejected by the

Tribunal with observations that the same appears to have been filed out of ill

will and the appeal carried from such order to this Appellate Tribunal was

also dismissed. It is thereafter that the instant application was filed resulting

in passage of impugned order. It is further submitted that the Appellant has

agitated the same matter again and again indulging in Forum shopping. That

apart, it is submitted that the Appellant being a mere occupier of a portion of

the property comprising the liquidation estate has no locus standi in the

matter. It is pointed out that the Appellant has claimed compensation in the

criminal proceedings and in that way of the matter, it cannot claim to be an

'Operational Creditor'.

7. We have given our anxious consideration to the issue raised in this

appeal. Admittedly, the Appellant was occupying a portion of the 'Nicco

Company Appeal (AT) (Insolvency) No. 1347 of 2019 6

House' as a tenant and its claim is relatable to the damage suffered by the

tenanted premises due to a fire incident. On his own showing, the Appellant

initially approached a criminal court for award of compensation and

subsequently staked its claim before the 'Liquidator'. The liquidation estate

comprising of 'Nicco House' admittedly does not belong to the Appellant and

in its capacity as tenant, the Appellant having no right, title or interest in

'Nicco House' other than the right of occupation in accordance with the terms

of 'Lease Agreement does not fall within the ambit of 'Operational Creditor'

under Section 5(20) of the 'I&B Code'. It is absurd to assert or even to suggest

that by using the demised premises as a tenant, the Appellant was rendering

any "services" so as to bring its claim within the fold of 'operational debt'. The

argument raised on this score being fallacious is rejected.

8. Insofar as the liquidation proceedings are concerned, it is for the

'Liquidator' to form the 'liquidation estate' in relation to the 'Corporate Debtor'

as mandated under Section 36 of the 'I&B Code' which include assets over

which the 'Corporate Debtor' has the ownership rights. The 'Liquidator' is

required to access any information systems for the purpose of admission and

proof of claims and identification of the liquidation assets relating to the

'Corporate Debtor', receive and collect the claims of the creditors within 30

days of commencement of the liquidation process, verify such claims and

finally either admit or reject the claim either in whole or in part. The

determination of valuation of claims, as mandated by Section 41 of the 'I&B

Code', falls within the domain of the 'Liquidator' who is supposed to follow the

Regulations framed by 'the Insolvency and Bankruptcy Board of India' in this

Company Appeal (AT) (Insolvency) No. 1347 of 2019 7

regard. A plain reading of Section 38 of the 'I&B Code' lays it bare that such

claims may be submitted to 'Liquidator' by a 'creditor' who may be a 'financial

creditor' or an 'operational creditor' or partly a financial creditor or partly an

operational creditor. Thus, for being entitled as beneficiary to the proceeds

from sale of liquidation assets, it is essential that such beneficiary is either a

creditor or belongs to any of the categories enumerated in Section 53 of the

'I&B Code'. Once it is found that the Appellant is not an 'operational creditor'

as claimed by it on the strength of 'Lease-hold Rights' in 'Nicco House', it

cannot seek declaration to adjudge a sale transaction affected by the

'Liquidator' in respect of liquidation estate as being void within the ambit of

Section 47 of the 'I&B Code'. Admittedly, the Appellant is also not a member

or partner of the 'Corporate Debtor'. Therefore, it has rightly been held to

have no locus standi under Section 47(1) of the 'I&B Code' to seek any

direction against the 'Liquidator' as regards alleged undervalued sale

transaction. That apart, it appears that the Appellant has taken varying

stands mutually exclusive and inconsistent. 'Claim of compensation' in its

capacity as tenant is incompatible with its lately projected claim of being an

'operational creditor' qua the 'Corporate Debtor'. Both stands can't co-exist.

Without having a locus, the Appellant has been interfering with the process

of liquidation and thwarting the liquidation process which ultimately will have

deleterious effect on the rights of those who are found entitled to the benefit

of the distribution of sale proceeds of liquidation proceedings. The role played

by the Appellant, as the chequered history of the case unfurls, is

unwarranted. Re-agitating the same matter time and again in different

rounds and lately under self-assumed status of being an 'operational creditor'

Company Appeal (AT) (Insolvency) No. 1347 of 2019 8

clearly at variance with the Appellant's admitted status as tenant of 'Nicco

House'. We are convinced that the appeal is frivolous and devoid of any merit.

9. For the forgoing reasons, we are of the considered opinion that the view

taken by the Tribunal does not suffer from any legal infirmity or factual frailty.

We accordingly decline to interfere with the same. However, the costs slapped

on the Appellant are dispensed with, regard being had to it being a victim of

incident of fire gutting 'Nicco House'.

10. The appeal is dismissed with the aforesaid observations. While we

uphold the impugned order passed by the Tribunal on merits of the case, in

the circumstance of the case, we set aside the direction in regard to slapping

of the cost to the tune of Rupees One Lakh upon the Appellant.

The Appeal is accordingly disposed off. Interim direction, if any, stands

vacated.

[ Justice Bansi Lal Bhat ] Member (Judicial)

[Justice Venugopal M.] Member (Judicial)

New Delhi

3rd March, 2020

/ns/

Company Appeal (AT) (Insolvency) No. 1347 of 2019