Harish Chander Arora vs National Company Law Tribunal ...

IN THE MATTER OF: Mr. Harish Chander Arora ....Appellant

Vs. National Company Law Tribunal ....Respondent Principal Bench, New Delhi

Present: For Appellant: Ms. Jasmeet Singh and Mr. Pushpendra S. Bhadoriya, Advocates For Respondent: Mr. Sougat Sinha, Advocate for R1 to 5, 7 to 10

ORDER

(Hybrid Mode)

14.11.2024 - This Appeal is against an impugned Order passed in I.A.

No.4234 of 2023 by the learned NCLT as follows:-

"As we can see from the provisions of Section 43, 45, 50 and 66 of IBC, 2016, the PUFE (avoidance applications) shall be pursued either by IRP or RP or Liquidator. There is no provision in IBC providing that such applications can be pursued by any other person except the authority referred to herein above. In terms of the provision of Regulation 37A of the IBBI (Liquidation) Regulation, 2016, only the crystallized amount arrived at after the determination of the PUFE applications can be assigned by the Liquidator /RP to the assignee. On such an assignment, the remedy available to the assignee would be elsewhere and not to pursue the PUFE applications. In the wake, we were of the view that the captioned application preferred by the Liquidator is liable to be dismissed and is accordingly rejected."

2 2. Admittedly the said Order was passed in I.A. No.4234 of 2023 wherein the

Appellant has requested for appropriate Orders under Section 60(5) of the IBC

Code read with Rule 11 of the NCLT Rules for assignment as noted in its para -

7 before passing an Order for closure of liquidation process of the Corporate

Debtor.

3. It is submitted by the learned Counsel for the Appellant the closure

application I.A. No.1126 of 2023 was filed by the liquidator before the learned

Tribunal due to sale of the Corporate Debtor, disclosing the intention to assign,

transfer and set over to the financial creditors Bank of Baroda and successful

auction purchaser Jindal Stainless Ltd. all rights, obligations , duties and trust

held by the liquidator on behalf of the corporate debtor in various interlocutory

applications pending before the learned NCLT, Principal Bench, CP (IB) No.1446

of 2018 as was decided by the SCC in 40th, 41st and 42nd SCC meeting of the

corporate Debtor.

4. The learned Counsel for the Appellant has referred to Regulation 37(A) of

the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations,

2016. The said Regulation is as under:-

"37A Assignment of not readily realizable assets.

(1) A liquidator may assign or transfer a not readily realizable asset through a transparent process, in consultation with the stakeholders' consultation committee in accordance with Regulation 31A, for consideration to any person, who

Comp. App. (AT) (Ins) No.307 of 2024 3

is eligible to submit a resolution plan for insolvency resolution of the corporate debtor.

Explanation-For the purposes of this sub-regulation, 'not readily realizable asset' means any asset included in the liquidation estate which could not be sold through available options and includes contingent or disputed assets and assets underlying proceedings for preferential, undervalued extortionate credit and fraudulent transactions referred to in sections 43 to 51 and section 66 of the code."

5. The learned Counsel for the Appellant has also referred to Regulation 44A

of the Insolvency and Bankruptcy Board of India (Liquidation Process)

Regulations, 2016 as under:-

"Regulation 44A: Treatment of avoidance of transaction.

The liquidator shall, on the advice of the consultation committee, provide in the application along with the final report filed under regulation 45 for the manner in which proceedings in respect of avoidance transactions, if any, under Chapter III or fraudulent or wrongful trading under Chapter VI of Part II of the Code, will be pursued after the dissolution or closure of liquidation process and the manner in which the proceeds, if any, from such proceedings shall be distributed."

6. It is the submission of the learned Counsel for the Appellant, right to

realize certain not readily realizable/disputed assets were agreed to be assigned

in favour of the secured financial creditors of the Corporate debtor in accordance

Comp. App. (AT) (Ins) No.307 of 2024 4

with Regulation 37A of the Liquidation Regulations as per the details stated in

40th, 41st and 42nd meeting of the SCC. Such pending applications are as under:-

"

S. Details of I.A. Purpose of Proposed Assignee No. Application

a. I.A. No.2341 of 2022 Filed by the Liquidator Secured Financial against Thermax Creditors of the Limited for not lifting Corporate Debtor the goods from the factory premises of the Corporate Debtor

b. I.A. No.2349 of 2021 Filed by the Liquidator Secured Financial for return of 98 Creditors of the cylinders against the Corporate Debtor Tehsildar, Ghaziabad.

c. C.A. No.2588/2019 Filed by the Resolution Secured Financial Professional under Creditors of the Section 43 of the Corporate Debtor Code - Avoidance Transaction Application.

d. I.A. No.1523 of 2020 Filed by the Resolution Successful Auction Professional against the Purchaser i.e. Debtors of the Jindal Stainless Corporate Debtor for Limited recovery of certain amounts.

e. I.A. No.267 of 2020 Filed by the Resolution Successful Auction Professional against Purchaser i.e. Federal Bank, Jindal Stainless Tamilnadu Mercantile Limited Bannk and Karnataka Bank for remitting the FDR in the account of the Corporate Debtor, return the custody and control of the assets of the Corporate Debtor.

Comp. App. (AT) (Ins) No.307 of 2024 5

f. I.A. No.4457 of 2021 Filed by the Liquidator Successful Auction against the Income Tax Purchaser i.e. Department for Jindal Stainless recovery of Rs.20.50 Limited. Lakh.

"

These applications were filed by the Resolution Professional under Section

43 of the Code viz the avoidance transaction application. Proposed assignees in

the said applications are the secured financial creditors or the successful auction

purchaser of the corporate debtor.

The present appeal mainly concerns with application at (C) relating to

application under Section 43 of IBC, 2016.

7. The learned Counsel for the Appellant has also referred to the

recommendation of the SCC in its 40th meeting of the Stakeholders' Consultation

Committee of the Corporate Debtor held on 9th November, 2022 as under:-

"It was discussed in detail by the SCC and it was decided by the members of SCC present in the meeting that in the item no. 1 CA-2588/2019 (Application for preferential transactions under section 43 of IBC 2016), Item no 2 IA2349/2021 Returning of 98 empty oxygen cylinders taken by Tehsildar, Ghazibad Administration during 2nd wave of Covid-19 and claimed by Goyal MG Gases Ltd, Item 3 the application filed by Resolution Professional of CD against Thermax Enterprises Ltd, Item no.4 - application filed by Thermax Enterprises Ltd against Resolution Professional of CD and Item no. 5 Appeal filed by Bank of Baroda against the Thermax Enterprises Ltd against the order of DRT-II, New Delhi---the ultimate beneficiaries are Secured Financial Creditors. Hence all the

Comp. App. (AT) (Ins) No.307 of 2024 6

said applications after the approval of closure of the liquidation process will be contested by Secured Financial Creditors at their own cost and the remaining matter pending or initiated with respect to any matter other than the matters related to PUFE, Thermax and Cylinders in future in any court, Tribunal etc. will be contested by Jindal Stainless Ltd-the successful bidder."

8. Thereafter the learned Counsel for the Appellant has also taken us to the

Final Report filed by the Liquidator which read as under:-

4. Development if any material litigation, by or against the Corporate Debtor:

i. Rights to realize certain not readily realizable/disputed assets were agreed to be assigned in favour of secured financial creditors of the Corporate Debtor in accordance with Regulation 37A of the Liquidation Regulations as per the details provided below and minutized in the 40 th 41st and 42nd meeting of the SCC. The Applications filed before this Hon'ble Adjudicating Authority in respect of such assets shall also stand assigned accordingly.

• I.A. 2431 of 2022- Application filed by the Liquidator against Thermax for not lifting of goods; (assigned to secured financial creditors)

• I.A. 2349 of 2021- Application filed by the Liquidator for return of 98 empty cylinders against Tehsildar Ghaziabad; (assigned to secured financial creditors).

• I.A. 1523 of 2020- Application filed by the Resolution Professional against for recovery of certain

Comp. App. (AT) (Ins) No.307 of 2024 7

amounts from Debtors of Corporate Debtor; (assigned to JSL)

• I.A. 267 of 2020- Application filed the Resolution Professional against Federal Bank, Tamilnad Mercantile Bank and Karnataka Bank for remitting the FDR in the account of the Corporate Debtor and return the custody and control of the assets of the Corporate Debtor; (assigned to JSL)

• I.A. 4457 of 2021- Application filed by the Liquidator against Income Tax Department for recovery of Rs.20.50 lacs; (assigned to JSL)

• I.A. 825 of 2022 -Application filed by the Liquidator against GAIL for restraining from lifting the Skid material; (assigned to JSL)

ii. Regulation 37A read with Regulation 44A of the Liquidation Regulations authorizes the Liquidator to assign any assets underlying proceedings for preferential, undervalued, extortionate credit and fraudulent transactions referred to in sections 43 to 51 and section 66 of the code. The Resolution Professional filed I.A. 2588 of 2019 for avoidance of certain transactions valued at Rs.3,21,35,000/- in favour of secured financial creditors. The said Application has been pursued by the Liquidator. The proceeds of the Avoidance Application have been assigned in the favour of secured financial creditors, in the 40th, 41st and 42nd meeting of SCC. Necessary documentation for assignment and prosecution of the avoidance application shall be carried out by the Liquidator in accordance with law."

Comp. App. (AT) (Ins) No.307 of 2024 8

9. It is submitted the Liquidator may be allowed to assign the application

under Section 43 of IBC, 2016 regarding preferential transactions to the secured

financial creditors as recommended by the SCC. The learned NCLT in its

impugned Order has stated there is no provision in IBC providing that such

application could be pursued by any person except the authority referred to in

these sections. We have perused the provisions of IBC, 2016 and the regulations

framed thereunder, which are reproduced in paras - 4 and 5 (supra), and we

find that these provisions/regulations though provide for filing of application(s)

by the authorities mentioned therein but the right to assign is clearly provided

in Regulation 37A and 44A of the Regulations stated above. Thus, there exist no

impediment to assign such applications to the secured creditors as is prayed for

in I.A. No.4234 of 2023.

10. The impugned Order to this extent is set aside. The Appeal is thus allowed

to such extent. Pending applications are also disposed of.

[Justice Yogesh Khanna] Member (Judicial)

[Ajai Das Mehrotra] Member (Technical) rs/km

Comp. App. (AT) (Ins) No.307 of 2024