Damont Developers Pvt Ltd vs Bank Of Baroda & Anr

Damont Developers Pvt. Ltd. ...Appellant

Vs

Bank of Baroda & Anr. ....Respondents

Present: For Appellant: Mr. Vierendra Ganda, Sr. Advocate with Mr. Kapil Kher, Ms. Deepali Kittal, Mr. Ayandeb Mitra and Mr. Rahul Bhardwaj, Advocates. For Respondents: Mr. Brijesh Kr. Tamber, Advocate for R-1.

ORDER

24.04.2019: Having heard learned counsel for the Appellant and learned

counsel for 'Bank of Baroda' and being satisfied of the grounds, delay of 7 days

in preferring the appeal is condoned. I. A. No. 1415 of 2019 stands disposed of.

2. The Appellant claim to have purchased 'Hotel Brys Fort, Jaisalmer', one of

the chain hotel of the Corporate Debtor - 'M/s Brys Hotel Pvt. Ltd.' and is in

possession of the said hotel for last three years. It was in this background, the

Appellant intended to get impleaded before the Adjudicating Authority (National

Company Law Tribunal), Principal Bench, New Delhi when the petition under

Section 7 of the I&B code was filed by the 'Bank of Baroda'. The grievance of the

Appellant is that the Adjudicating Authority by impugned order dated 4th

February, 2019 rejected the Impleadment Application filed by the Appellant and

by subsequent order dated 18th March, 2019 admitted the application under

Section 7. Both the aforesaid orders are under challenge in this appeal. -2-

3. We have heard learned counsel appearing on behalf of the Appellant and

learned counsel appearing on behalf of 'Bank of Baroda', the Hon'ble Supreme

Court in "Innoventive Industries Ltd. Vs. ICICI Bank and Ors. reported in (2018)1

SCC 407", observed and held as follows:-

"27. The scheme of the Code is to ensure that when a default

takes place, in the sense that a debt becomes due and is

not paid, the insolvency resolution process begins.

Default is defined in Section 3(12) in very wide terms as

meaning non-payment of a debt once it becomes due and

payable, which includes non-payment of even part

thereof or an instalment amount. For the meaning of

"debt", we have to go to Section 3(11), which in turn tells

us that a debt means a liability of obligation in respect of

a "claim" and for the meaning of "claim", we have to go

back to Section 3(6) which defines "claim" to mean a right

to payment even if it is disputed. The Code gets triggered

the moment default is of rupees one lakh or more (Section

4). The corporate insolvency resolution process may be

triggered by the corporate debtor itself or a financial

creditor or operational creditor. A distinction is made by

Company Appeal (AT) (Insolvency) No. 436-437 of 2019 -3-

the Code between debts owed to financial creditors and

operational creditors. A financial creditor has been

defined under Section 5(7) as a person to whom a

financial debt is owed and a financial debt is defined in

Section 5(8) to mean a debt which is disbursed against

consideration for the time value of money. As opposed to

this, an operational creditor means a person to whom an

operational debt is owed and an operational debt under

Section 5(21) means a claim in respect of provision of

goods or services.

28. When it comes to a financial creditor triggering the

process, Section 7 becomes relevant. Under the

explanation to Section 7(1), a default is in respect of a

financial debt owed to any financial creditor of the

corporate debtor - it need not be a debt owed to the

applicant financial creditor. Under Section 7(2), an

application is to be made under sub-section (1) in such

form and manner as is prescribed, which takes us to the

Insolvency and Bankruptcy (Application to Adjudicating

Authority) Rules, 2016. Under Rule 4, the application is

Company Appeal (AT) (Insolvency) No. 436-437 of 2019 -4-

made by a financial creditor in Form 1 accompanied by

documents and records required therein. Form 1 is a

detailed form in 5 parts, which requires particulars of the

applicant in Part I, particulars of the corporate debtor in

Part II, particulars of the proposed interim resolution

professional in part III, particulars of the financial debt in

part IV and documents, records and evidence of default

in part V. Under Rule 4(3), the applicant is to dispatch a

copy of the application filed with the adjudicating

authority by registered post or speed post to the

registered office of the corporate debtor. The speed,

within which the adjudicating authority is to ascertain

the existence of a default from the records of the

information utility or on the basis of evidence furnished

by the financial creditor, is important. This it must do

within 14 days of the receipt of the application. It is at the

stage of Section 7(5), where the adjudicating authority is

to be satisfied that a default has occurred, that the

corporate debtor is entitled to point out that a default has

not occurred in the sense that the "debt", which may also

Company Appeal (AT) (Insolvency) No. 436-437 of 2019 -5-

include a disputed claim, is not due. A debt may not be

due if it is not payable in law or in fact. The moment the

adjudicating authority is satisfied that a default has

occurred, the application must be admitted unless it is

incomplete, in which case it may give notice to the

applicant to rectify the defect within 7 days of receipt of

a notice from the adjudicating authority. Under sub-

section (7), the adjudicating authority shall then

communicate the order passed to the financial creditor

and corporate debtor within 7 days of admission or

rejection of such application, as the case may be.

...x...x...x...

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

Company Appeal (AT) (Insolvency) No. 436-437 of 2019 -6-

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."

4. From the aforesaid decision it is clear that the Adjudicating Authority is

required to go through the record to find if there is a debt and default and while

doing so it was open for the Corporate Debtor to show that there is no debt

payable and no default, at the stage of admission of the petition. Except the

Corporate Debtor, no other party has right to intervene at the stage of admission

of a petition under Section 7 or 9. However, an aggrieved party may prefer an

appeal if the order of admission affects the person.

5. In the present case, we find that the order of admission dated 18th March,

2019 in no manner has cast any impact on the case of the Appellant. It is merely

an order of admission of the application under Section 7 against the Corporate

Debtor. In view of the provisions of the I&B Code, in case, the Interim Resolution

Professional or Resolution Professional wants to take possession of the Hotel

namely 'Hotel Brys Fort, Jaisalmer', the Appellant may bring facts regarding its

claim to the notice of the Interim Resolution Professional/ Resolution

Professional. Thereafter, the Interim Resolution Professional/ Resolution

Company Appeal (AT) (Insolvency) No. 436-437 of 2019 -7-

Professional will consider it in the light of explanation to Section 18(f) of the I&B

Code. Even if, after that the Appellant has some grievance he can move before

the Adjudicating Authority under Sub-Section 5 of Section 60 and thereafter, if

his grievance is not resolved, he may prefer an appeal under Section 61 before

this Appellate Tribunal.

6. In view of the aforesaid, the appeal is not maintainable. No infirmity has

been found in order dated 4th February, 2019 and 18th March, 2019. The appeal

stands disposed of with aforesaid observations. No costs.

7. We make it clear that we have not expressed any opinion with regard to

the claim of the Appellant, which is required to be considered initially by the

Interim Resolution Professional/Resolution Professional, if he intends to take

possession of 'Hotel Brys Fort, Jaisalmer' and thereafter, if so necessary to be

decided by the Adjudicating Authority, uninfluenced by the observations made

in this appeal.

[Justice S. J. Mukhopadhaya] Chairperson

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

(Kanthi Narahari) Member (Technical) am/gc

Company Appeal (AT) (Insolvency) No. 436-437 of 2019