K.L. Jute Products Pvt. Ltd vs Tirupati Jute Industries Ltd. & Ors

(Arising out of Order dated (13.02.2019) passed by the (National Company Law Tribunal) Kolkata Bench in C.P(IB) No 508/KB/2018 along with CA(IB) Nos. 972/KB/2018, 974/KB/2018, 1013/KB/2018, 08/KB/2019, 24/KB/2019 and 83/KB/2019)

IN THE MATTER OF:

K.L.Jute Products Private Limited. Through Director Shri Kanhaiya Lal Agarwal S/o Shri Ram Kishan Agarwal, C/o 205, Rabindra Sarani, 3rd Floor, Kolkata - 700007 R/o 31/2G, Ram Krishan Samadhi Road, Kolkata- 700 054 ...Appellant

Versus

1.Tirupti Jute Industries Ltd. (Through Mr. Chhedi Rajbhar - Liquidator appointed by NCLT) No. 10, Dr. Rajendra Prasad Sarani, 2nd Floor, Kolkata - 700 001

2.Daaksh Jute LLP No. 545, G.T.Road (South) Howrah, West Bengal - 711 101

3.Pinaki Sircar 31/7, N.C.Chowdhury Road, Kolkata - 700042

4. Small Industries Development Bank of India 11 Dr. U.N.Brahmachari Street, Constantia Building, 8th Floor Kolkata - 700 017

5.Federal Bank Ltd Kolkata Asset Recovery Branch, Olisa House, 4 Government Place (North), Kolkata - 700 001

6.Abinandan Holdings Pvt. Ltd. 3B, Darpanaryan Tagore Street, Kolkata - 700 006

1 7.Everbright Vinimay Pvt. Ltd 64, Bentinck street, 3rd Floor, Kolkata - 700 069

8.Madan Mohan Mall DL - 41, Salt Lake, Sector II, Kolkata - 700 091

9.Prashant Damani 32, Ballygunge Place, Kolkata - 700 019

10.National Fedration of Jute Workers (Tirupati Jute Mill Committee) A/18F/1, Sahanagar Road, Kolkata - 700 026

11.Bangal Chatkal Mazdur Union, Unit: Tiruptai Jute Industries Limited. 91, Naskarpara Road, Ghusuri, Howrah - 711 107 ...Respondents

Present:

For the Appellant: Mr. Saurabh Kalia, Mr. Rajiv Malik and Ms. Saloni Purohit, Advocates. For the Respondents : Mr. Ramji Srinivasan, Sr. Advocate with Mr. Abjijeet Sinha, Mr. Anup Kumar, Mr. Magan Seth, Mr. Varun Narang, Mr. Rishab Kapoor, Advocates for Respondent No.2 Mr. Brijesh Kumar, Mr. Vinay Singh Bist and Ms. Khyati Bhardwaj, Advocates for R-3. Mr. Piyush Singh and Mr. D.N.Sharma, Advocates For R-8. Mr. Abhinav Gupta, Advocate for R-6. Mr. Abhishek Anand, Advocate for R-4, 5. Ms. Shreya Singh, Advocate for R-7. Notice served for R-9 (No Appearance) Mr. Amritesh Raj, Advocate for R10 & 11.

JUDGMENT

VENUGOPAL M.J.

2

1. The Appellant being dissatisfied with the impugned order dated 13.02.2019

passed by the Adjudicating Authority ('National Company Law Tribunal')

Kolkata Bench has preferred the instant appeal before this Tribunal.

2. The Adjudicating Authority ('National Company Law Tribunal') Kolkata Bench

while passing the impugned order dated 13.02.2019 at para 24 to 28 had

observed the following:

" 24 By inviting public advertisement on 06.05.2018, RP

called upon the prospective application to submit

EoI/Resolution Plan by 23.05.2018. It was made clear

that such applicants to submit EoI/Plans AS IS WHERE

IS AND AS IS WHAT IS basis as regards to the status of

the Corporate Debtor. It is not in dispute that on

01.08.2016 i.e. almost one year prior to filing of

application under section 7 of I&B Code by the financial

creditor, the corporate debtor executed lease deed in

favour of one M/s. Daakh Jute LLP and handed over the

jute mill for running. It is also not in dispute that lease

agreement in between the Corporate debtor and Daakh

Jute LLP is still subsisting. It is submitted by the Ld.

Counsel for the RP that lease deed is void as it was

executed by the corporate debtor after the receipt of notice

under section 13(2) of SARFAESI At. He pointed out that

Resolution Professional has filed application under

Section 45 of the I&B Code bearing No. CA (IB) No.

36/KB/2019 for cancellation of that lease deed. I fail to

3 understand how that application is maintainable which is

filed beyond CIRP period of 270 days and more

particularly when lease agreement was executed one

year prior to the date of commencement of admission of

the application of the finance creditor against the

corporate debtor. In my considered opinion such

application may not be maintainable under section 46 of

I&B Code. Apart from that, real question is having

published the notice calling for the EoI/Plan AS IS WHERE

IS AND AS IS WHAT IS basis, whether the RP/CoC were

in position to waive that condition while accepting the plan

of M/s. K.L.Jute, I found that RP/CoC exactly did the

same thing when they approved the plan submitted by

M/s. K.L.Jute. I examined the plan of K.L.Jute products

private Limited. M/s. K.L.Jute has made it clear in the

resolution plan that the plan is subject to extinguishment

of all claims (except criminal proceeding) against the

corporate debtor upon approval of their plan by this

authority. They gave list of such conditions precedent in

the plan itself and stated that the plan is submitted

subject to compliance of those conditions. Those

conditions, were relating to exemption of all taxes/dues

by the government/local authorities, disposal of all

proceedings pending against the corporate debtor relating

to such dues. How having submitted the plan after

4 considering the invitation of plan on the basis of AS IS

WHERE IS AND AS IS WHAT IS basis, it was not proper

on the part of K.L.Jute to put all above conditions in the

plan. In my considered opinion, such plan ought not to

have been approved by the CoC.

25. One can understand that the resolution application

seeks some exemption from paying some past dues, taxes

payable by the Corporate Debtor. Unless such exemptions

are granted, none will be in a position to submit the plan.

But in this case, it is seen that the Successful Resolution

Applicant submitted the plan ignoring basic conditions

about the status of corporate debtor, i.e. AS IS WHERE IS

AND AS IS WHAT IS basis". It is brought to the notice that

M/s. Daaksh Jute LLP is the lease holder in possession of

the jute mill of corporate debtor. Resolution Professional

requested K.L.Jute to modify their plan accordingly. Upon

this, M/s.K.L.Jute sent email dated 03.10.2018 to the

Resolution professional making it very clear that, "if the

resolution plan (as submitted by them) being approved

subject to modifications, which is not acceptable to the

resolution applicant, in that case the resolution applicant

will have absolute right to make withdrawal of bid

without any notice to CoC as well as Resolution

Professional". This mail was sent by them almost on the

5 last date when the CoC was to hold its meeting to approve

the plan. Despite this CoC approved K.L.Jute's plan. In

my considered opinion, such plan which was subject to so

many conditions and the conditions which cannot be

complied within reasonable period of time, ought not to

have approved by the CoC.

26. This takes me to consider one more crucial aspect due

to which I feel that the resolution plan submitted for my

approval, cannot be approved. Section 30(2)(e) of I&B

Code states that the resolution plan should not contravene

any provisions of law by the time being in force.

Successful Resolution Applicant, M/s. K.L.Jute clearly

stated in their plan that this authority while approving

their plan has to pass the order cancelling the lease deed

dated 01.08.2016 executed in between the Corporate

Debtor and Daaksh Jute LLP. To my mind, this condition

in the plan is contrary to the established procedure of law.

Hon'ble NCLAT in case of Raj Builders vs. Raj oil Mills ltd.

(Company Appeal No. 304 of 2018) clearly stated the

position of law in this aspect. It was appeal against the

order of NCLT, Mumbai bench, in that case, the Corporate

Debtor was tenant holding over in the premises which

was to go in possession of Successful Resolution

Applicant. NCLT, Mumbai bench noted this fact while

approving the plan but did not pass order of eviction of the

6 corporate debtor/tenant. Successful Resolution

Application filed appeal against the order refusing to evict

the tenant. The Hon'ble NCLAT considering that facts held

that, "Adjudicating Authority is not competent to pass any

order for eviction". In this case M/s. Daaksh Jute LLP is

lessee in possession of Jute Mill owned by the Corporate

Debtor. The Lease period is yet to over. It may be true that

lease deed was executed by the corporate debtor after

receipt of notice under Section 13(2) of SARFAESI Act. Real

question is whether this authority has jurisdiction to hold

that the lease is bad in law a pass order of eviction of the

Daaksh Jute LLP from possession of the premises of the

corporate debtor, as per the condition laid down in the

resolution plan of Successful Resolution Applicant?

27. My answer to this question is that this Authority does

not have such jurisdiction. M/s. K.L.Jute has submitted

plan to the CoC stating the above conditions i.e. eviction

of Daaksh Jute LLP. The CoC having issued public notice

of invitation of EoI/Plan as AS IS WHERE IIS AND AS IS

WHAT IS basis, the CoC made exception to the above

condition and approved the plan. The plan as approved

by them cannot be effectively implemented because

resolution applicant made it very clear that his plan is

subject to fulfilment of conditions i.e. eviction of Daaksh

Jute LLP. To evict Daaksh Jute LLP, one has to approach

7 proper forum. One does not know as to what time will

require to get such eviction order. In such a situation, CoC

ought not have approved the plan. I do not question

commercial wisdom of CoC herein but it appears to me

that the CoC did not consider the legal implications while

approving the plan. They approved the plan ignoring the

provisions of Section 30(2)(e) of I&B Code. I hold that

resolution plan submitted for my approval is in a

contravention of above provision of law. It cannot be

approved by this authority. I reject the resolution plan of

M/s.K.L. Jute Products Private Limited for the above

reasons.

28.CIRP period of 270 days already expired two months

ago. Hence, it is of no use of refer other two plans - one

by Mr. Madan Mohan Mal and the other by Mr.Prashant

Damani back to CoC's consideration. It cannot be done

now. I am not entering into controversy whether both of

them are related party of the corporate debtor or not

whether the provisions of section 29A are not applicable

to the corporate debtor, in view of section 240A of I&B

Code. Such questions are irrelevant. CoC has approved

the only one plan i.e. M/s.K.L.Jute Private Limited.

However, in my considered opinion that plan does not

comply all provisions stated in section 30(2) of I&B Code.

I have to reject that plan. Now alternative left for me to

8 pass the order of liquidation of the Corporate Debtor. Lr.

Sr. counsel while arguing for the workmen submitted that

if such occasion arises, the corporate debtor may be

liquidated as a going concern. I accept the request. It is

seen from the record that RP did not give correct advise

when he submitted K.L.Jute's Plan for approval of CoC. In

my considered opinion, in such a situation it would not be

proper to appoint the present RP as the Liquidator. Hence,

I replace the liquidator, in view of provision of Section

33(6) of I&B Code."

and finally passed an order of liquidating the 1st

Respondent/Corporate Debtor- Tirupati Jute Industries

Limited as a going concern under Regulation 32(c) of the

IBBI(Liquidation Process), Regulation 2016. Further, the

Adjudicating Authority appointed Mr. Chhedi Rajbhar as a

Liquidator etc.

3. Assailing the correctness, validity and legality of the impugned order dated

13.02.2019 passed by the 'Adjudicating Authority' ('National Company Law

Tribunal, Kolkata Bench'), the Learned counsel for the Appellant/Resolution

Applicant submits that the 4th Respondent/Small Industries Development

Bank of India, ('an unsecured Financial Creditor having 22.40% voting share

in the Committee of Creditor formed later') projected an Application under

Section 7 of the 'Insolvency and Bankruptcy Code, 2016' against the 1 st

Respondent - ('Tirupati Jute Industries Ltd - a closely held public limited

Company') to initiate 'Corporate Insolvency Resolution Process' against the

9 Corporate Debtor, in respect of a default of Rs. 7,18,21,128/- ('Rupees Seven

Crore Eighteen Lakh Twenty-One Thousand One Hundred and Twenty-Eight

Only'), which was admitted by the 'Adjudicating Authority' on 12.01.2018.

4. The Learned Counsel for the Appellant contends that the 5th

Respondent/Federal Bank Ltd had earlier declared the 1st

Respondent/Corporate Debtor's 'Non-performing Asset' on 31.10.2015, and

in fact a notice under Section 13(2) of the 'Securitization and Reconstruction

of Financial Assets and Enforcement of Security Interest Act, 2002'

('SARFAESI ACT') was issued by the 5th Respondent addressed to the 1st

Respondent/Corporate Debtor on 01.04.2016 and that the 1st

Respondent/Corporate Debtor was directed not to deal with secured assets

without prior permission of 5th Respondent/ Federal Bank.

5. It is represented on behalf of the Appellant that the 5th Respondent/Corporate

Debtor had executed an unregistered lease deed dated 01.08.2016 in respect

of the 'Immovable Fixed Assets' (including plant and machinery embedded to

the earth) with the 2nd Respondent - 'Daaksh Jute LLP ('incorporated only on

28.07.2016) by the relatives of the 'Directors' of the 1st Respondent only after

the issuance of notice U/s 13(2) of 'SARFAESI' Act for a period of 9(nine) years.

6. On the behalf of the Appellant, it is brought to the notice of the Tribunal that

on 12.01.2018, one Mr. Pinaki Sircar was appointed as 'Interim Resolution

Professional' and claims were called for from the 'Creditors' of the 1st

Respondent/Corporate Debtor by making public announcement of the

'Corporate Insolvency Resolution Process' to which numerous creditors

(Financial Creditors, Operational Creditors and Workmen & Employees) filed

their claims. Further, the 'Interim Resolution Professional' formed the

10 'Committee of Creditors' which comprise of the following (along with voting

share):

i. Federal Bank/5th Respondent - 74.8% (recorded in the impugned order

as 75.18%)

ii. SIDBI/1st Respondent -22.4% (recorded in the impugned order as

22.51%)

iii. Abinandan Holding Pvt. Ltd/ 6th Respondent - 2.30% (recorded in the

impugned order as 2.31%)

iv. Everbright Vinimay Pvt. Ltd/7th Respondent - 0.50%

7. That apart, it is stand of the Appellant that the 1st meeting of 'Committee of

Creditor' on 02.03.2018 confirmed the 'Interim Resolution Professional' Mr.

Pinaki Sircar as 'Resolution Professional' (3rd Respondent) and that the said

'Resolution Professional' filed an application u/S 45 and 46 of the 'Insolvency

and Bankruptcy Code, 2016' for cancellation of the 'Lease Agreement dated

01.08.2016 (after the expiry of the 270 days period), which was dismissed by

the 'Adjudicating Authority'. Moreover, based on the instructions of the

'Committee of Creditor' a public notice was published in the 'Indian Express'

Newspaper on 06.05.2018 calling for 'Expression of Interest' and 'Resolution

Plans' on the basis of the status of the 1st Respondent/Corporate Debtor on

"AS IS WHERE IS AND AS IS WHAT IS BASIS" in regard to the status of assets

and documents thereof, pursuant to which the 'Resolution Professional/3 rd

Respondent' received three Resolution Plans on different dates prior

15.06.2018 and the same were discussed in the meeting of 'Committee of

Creditors' that took place on 09.08.2018. The three resolution plans related

to:

11

i. K.L.Jute Products Pvt. Ltd/Appellant,

ii. Madan Mohan Mal ("Objector No.1/8th Respondent") (a related party to

the Corporate Debtor/1st Respondent).

iii. Prashant Damani ("Objector No.2/9th Respondent") (Director of

Abinandan Holdings Pvt. Ltd/6th Respondent).

8. The learned counsel for the Appellant proceeds to point out that the

'Resolution Plan' submitted by the 'Resolution Applicant/Appellant - K.L.Jute

Products Pvt. Ltd sought waivers with respect to past direct and indirect tax

dues and extinguishment of pending litigations, etc., also that the Appellant

prayed for the termination of the Lease Deed dated 01.08.2016 which granted

management and operational rights to the 2nd Respondent(Daaksh Jute LLP)

with a view to gain complete management and operating rights of the 1 st

Respondent/Corporate Debtor.

9. As a matter of fact, the Appellant (with total bid value highest among all plans)

was approved by the 'Committee of Creditors' with 97.20% voting in its favour

(recorded as 97.25% in the impugned order) on 03.10.2018. After approval of

the 'Resolution Plan' by the 'Committee of Creditor', the Resolution

Professional / 3rd Respondent filed an Application u/S 31 of the 'I&B Code'

for approval of 'Resolution Plan' before the 'Adjudicating Authority', within a

period of 270 days and objections were submitted by the 8 th Respondent to

10th Respondent.

10. The Learned counsel for the Appellant comes out with the plea that the

'Committee of Creditor' had approved the 'Resolution Plan' submitted by the

Appellant/Resolution Applicant (which required cancellation of unregistered

Lease Agreement dated 01.08.2016 as part of its plan) with 97.20% vote share

12 and in January, 2019 an Application C.A No. 36/KB/2019 filed by the

'Resolution Professional' before the 'Adjudicating Authority' seeking

cancellation of unregistered Lease Agreement dated 01.08.2016, executed

between the 1st Respondent/Corporate Debtor and the 2nd Respondent.

11. The Learned counsel for the Appellant contends that the Lease Agreement

dated 01.08.2016 executed by the 1st Respondent/Corporate Debtor after the

issuance of notice under Section 13(2) of the 'SARFAESI Act' against the 1 st

Respondent/Corporate Debtor is not void ab initio. Further, the 'Adjudicating

Authority' had failed to consider the relevant period for a preferential

transaction as 'one year' as opposed to 'two years' prescribed under Section

46 of the I&B Code.

12. The Learned counsel for the Appellant submits that an 'Adjudicating

Authority' cannot reconsider the decision of the CoC in its commercial wisdom

as per decision K.Sasidharan V. Indian overseas Bank & ors., C.A No.

10673/18 and Committee of Creditors of Essar Steel India Ltd. V. Satish

Kumar Gupta & ors. C.A No. 8766-67/2019. In this regard, the learned

counsel for the Appellant submits that 'Unregistered Lease' confers no rights

on a 'Lessee' as per Section 17 & 49 of the Indian Registration Act 1908 and

Section 107 of the Transfer of Property Act, 1882. Moreover, on the side of the

Appellant, it is projected that a 'Lease' for a period exceeding one year can

only be made by way of a registered instrument and cites the decisions of

Hon'ble Supreme Court (a) Anthony V. KC Itoop and Sons 7 ors. (2000) 6 SCC

394 (b) Park Street Properties (Pvt.) Ltd. V. Dipak Kumar Singh & Ors. AIR

2016 SC 4038.

13

13. The Learned counsel for the Appellant contends that the 'Adjudicating

Authority had failed to take into account that C.A 36/KB/19 praying for

cancellation of the 'Unregistered Lease Agreement' dated 01.08.2016 was

already pending prior to the date of passing of the impugned order. It is

version of the Appellant that the 'Adjudicating Authority had passed an

impugned order in rejecting the 'Resolution Plan' of the Appellant without

considering the Application C.A 36/KB/219 filed by the 'Resolution

Professional' to declare the undervalued / preferential transaction (lease

agreement dated 01.08.2016) entered into between the 2nd Respondent /

Corporate Debtor ( who is a related party of the Corporate Debtor) void (as

only Rupees Eleven Lakhs p.m lease rend paid/ payable to the 1 st

Respondent/ Corporate Debtor in lieu of land & building, plant & machinery,

office, etc., and the turnover of 2nd Respondent is more than Rupees Fifty

Crores from this plant).

14. The Learned counsel for the Appellant submits that based on the facts and

circumstances of the present case, the judgment of this Tribunal Raj Builders

V. Raj Oil Mills Ltd. Company Appeal (NCLAT) No. 304/2018 is inapplicable

because of the reason that in the aforesaid Appeal, the Corporate Debtor was

the Lessee and the 'Moratorium' under Section 14(1)(4) of 'I&B Code' was

declared. However, in the instant case, the Corporate Debtor is a 'Lessee' and

hence, the judgment in Raj Builders case will not apply.

15. The Learned counsel for the Appellant contends that the 'Adjudicating

Authority' had overlooked the time period for a 'Related party' transaction is

two years without even deciding CA 36/2018. Besides this it is the contention

of the Appellant that the 2nd Respondent was incorporated with five partners

14 (three of which were sons of shareholders of the 1st Respondent/Corporate

Debtor and two were related to the Directors of the 1st Respondent/ Corporate

Debtor.

16. The Learned counsel for the Appellant takes a plea that the 'Resolution Plan'

of the Appellant had made provisions of payments under the Resolution Plan

to all shareholders as per the Information Memorandum provided by the

'Resolution Professional' and in reality, the Appellant had made provisions by

the Resolution Plan in respect of the following:

i. 100% dues of Workmen & Employees of the Corporate Debtor -amount

to Rs. 76, 39, 184/- (rupees Seventy-Six Lac Thirty-nine Thousand One

Hundred Eighty-Four Only).

ii. 100% Statutory dues of provident Fund to the Workmen & Employees

of the Corporate Debtor - amounting to Rs. 1, 34, 84,014/- (Rupees

One Crore Thirty-Four lac Eighty Four thousand Fourteen Only).

iii. 100% Statutory dues of provident Fund to the Workmen & Employees

of the Corporate Debtor up till 31.07.2016 - amounting to Rs.

7,65,30,745/- (Rupees Seven Crore Sixty Five lac thirty Thousand

Seven Hundred Forty Five Only). Thereafter, i.e., from 01.08.2016, the

unit is being run by M/s. Daaksh Jute L.L.P. (Respondent No.2) as and

when payable.

iv. Claim of Respondent No.2 - M/s. Daaksh Jute L.L.P's claim to the

extent of Rs. 19,45,855/- (Rupees Nineteen Lac Forty-Five Thousand

Eight Hundred Fifty-Five Only), as provided to the Operational

Creditors of the Corporate Debtor. Therefore, even the claim of

Respondent No.2 was accepted in the Resolution Plan which shows

15 that the plan is a complete plan and considered all the aspects as per

approval of Resolution Plan as provided under the Code.

17. The Learned counsel for the Appellant submits that as per Regulation 35A of

the IBBI (Insolvency Resolution process for Corporate Persons) Regulations,

2016 a 'Resolution Professional' is perforced to investigate the affairs of 1st

Respondent/Corporate Debtor as per Sections 43, 45, 50 and 66 of the 'I&B

Code'. Added further, the 'Resolution Professional' had failed in its dues, and

he has filed an Application for cancellation of the 'Lease Deed' dated

01.08.2016 only after the expiry of 270 days' period.

18. The Learned counsel for the Appellant seeks in aid of the decision of Hon'ble

Supreme Court of the judgment dated 03.12.2019 in C.A No. 9170-92 of 2019

M/s. Embassy Property Developments Pvt. Ltd V. State of Karnataka 7 ors.

Wherein at para 39 to 41 it is observed as under:

" 39 - if NCLT has been conferred with jurisdiction to decide all

types of claims of property, of the Corporate Debtor, section

18(f) (vi) would not have made the task of the interim

resolution professional in taking control and custody of an

asset over which the Corporate Debtor has ownership rights,

subject to the determination of ownership by a court or other

authority. In fact an asset owned by a third party, but which

is in the possession of the Corporate Debtor under

contractual arrangements, is specifically kept out of the

definition of the term "assets" under the Explanation of

Section 18. This assumes significance in view of the

16 language used in Sections 18 and 25 in contrast to the

language employed in Section 20. Section 18 speaks about

the dues of the Interim Resolution professional and Section

25 speaks about the duties of Resolution professional.

These two provisions use the word "Assets", while section

20(1) uses the word "property" together with the word

"value". Section 18 and 25 do not use the expression

"property". Another important aspect is that under Section

25(2) (b) of IBC, 2016, the Resolution professional is obliged

to represent and act on behalf of the Corporate Debtor with

third parties and exercise rights for the benefit of the

corporate Debtor in judicial, quasi-judicial and arbitration

proceedings. Section 25(1) and 25(2) (b) reads as follows:

"25. Duties of Resolution professional-

(1) It shall be the duty of the resolution professional to preserve

and protect the assets of the corporate debtor, including the

continued business operations of the corporate debtor.

(2) For the purpose of sub-section (1), the resolution

professional shall undertake the following actions:-

(a)......

(b) represent and act on behalf of the corporate debtor with third

parties, exercise rights for the benefit of the corporate debtor

in judicial, quasi judicial and arbitration proceedings."

17

This shows that wherever the corporate debtor has to exercise

rights in judicial, quasi-judicial proceedings, the resolution

professional cannot short-circuit the same and bring a claim

before NCLT taking advantage of Section 60(5).

40 - Therefore, in the light of the statutory scheme as culled out

from various provisions of the IBC, 2016 it is clear that

wherever the corporate debtor has to exercise a right that

falls outside the purview of the IBC, 2016 especially in the

realm of the public law, they cannot, through the resolution

professional, take a bypass and go before NCLT for the

enforcement of such a right.

41- In fact the Resolution Professional in this case appears to

have understood this legal position correctly, in the initial

stages. This is why when the Government of Karnataka did

not grant the benefit of deemed extension, even after the

expiry of the lease on 25.05.2018, the Resolution

Professional moved the High Court by way of a writ Petition

in WP No. 23075 of 2018. The prayer made in WP No. 23075

of 2018 was for a declaration that the mining lease should

be deemed to be valid upto 31.03.2020. if the NCLT was

omnipotent, the Resolution Professional would have moved

the NCLT itself for such a declaration. But he did not, as he

understood the legal position correctly.

18

19. Also in the aforesaid judgment at para 45 to 48, it is observed as

follows:

"45- Therefore, in fine, our answer to the first question

would be that NCLT did not have jurisdiction to

entertain an application against the Government of

Karnataka for a direction to execute Supplemental

Lease Deeds for the extension of the mining lease. Since

NCLT chose to exercise a jurisdiction not vested in it in

law, the High Court of Karnataka was justified in

entertaining the writ Petition, on the basis that NCLT

was coram non judice.

46- The second question that arises for our

consideration is as to whether NCLT is competent to

enquire into allegations of fraud, especially in the

matter of the very initiation of CIRP.

47- This question has arisen, in view of the stand taken

by the Government of Karnataka before the High Court

that they chose to challenge the order of the NCLT

before the High Court, instead of before NCLAT, due to

the fraudulent and collusive manner in which the CIRP

was initiated by one of the related parties of the

Corporate Debtor themselves. In the writ petition filed

by the Government of Karnataka before the High Court,

19 it was specifically pleaded (i) that the Managing

Director of the Corporate Debtor entered into an

agreement on 06.02.2011 with one M/s.D.P.Exports,

for carrying out mining operations on behalf of the

Corporate Debtor and also for managing its affairs and

selling 100% of the extracted iron ore; (ii) that the said

M/s. D.P. Exports was a partnership firm of which one

Mr.M.Poobalan and his wife were partners; (iii) that

another agreement dated 11.12.2012 was entered into

between the Corporate Debtor and a proprietary

concern by name M/s. P. & D. Enterprises, of which the

very same person namely, Mr. M.Poobalan was the sole

proprietor; (iv) that the said agreement was for hiring of

machinery and equipment; (v) that a finance agreement

was also entered into on 12.12.2012 between the

Corporate Debtor and a Company by name

M/s.Udhyaman Investments Pvt. Ltd., represented by

its authorized signatory Mr. M.Poobalan; (vi) that there

were a few communications sent by the said Mr.

Poobalan to various authorities, claiming himself to be

the authorized signatory of the Corporate Debtor; (vii)

that an MOU was entered into on 16.04.2016 between

the Corporate Debtor and M/s. Udhyaman Investments

20 Pvt. Ltd., represented by the said Mr. Poobalan,

whereby the Corporate Debtor agreed to pay Rs. 11.5

crores; (viii) that the said agreement was purportedly

executed at Florida, but witnessed at Chennai; (ix) that

Mr. Poobalan even communicated to the Director;

Department of Mines & Geology as well as the

Monitoring Committee, taking up the cause of the

Corporate Debtor as its authorized signatory; (x) that

the CIRP was initiated by M/s. Udhyaman Investments

Pvt. Ltd. Represented by its authorized signatory, Mr.

Poobalan; (xi) that the Resolution Applicant namely,

M/s. Embassy Property Development pvt. Ltd. As well

as the Financial Creditor who initiated CIRP namely,

M/s. Udhyaman investments Pvt. Ltd are all related

parties and (xii) that Mr. Poobalan had not only acted

on behalf of the Corporate Debtor before the statutory

authorities, but also happened to be the authorized

signatory of the Financial Creditor who initiated the

CIRP, eventually for the benefit of the Resolution

Applicant which is a related party of the Financial

Creditors.

48- In the light of the above averments, the Government

of Karnataka thought fit to invoke the jurisdiction of the

21 High Court under Article 226 without taking recourse to

the statutory alternative remedy of appeal before the

NCLAT. But the contention of the Appellants herein that

allegations of fraud and collusion can also be inquired

into by NCLT and NCLAT and that therefore the

Government could not have bypassed the statutory

remedy."

20. The Learned counsel for the Appellant contends that Section 238 of the

I&B Code, has an overriding effect over other Laws and that the 2nd

Respondent was incorporated only on 28.07.2016 (after issuance of

notice under Section 13(2) SARFAESI Act, 2002) only with an intention

to defraud the 'Creditors' of the 1st Respondent/Corporate Debtor.

21. The Learned counsel for the 2nd Respondent (Daaksh Jute LLP)

contends that the 'Jute Mill' of the 1st Respondent/Corporate Debtor

was closed from 2015 and to restart the closed jute mill of 1st

Respondent/Corporate Debtor, steps were taken to incorporate the 2nd

Respondent at least two months prior to the execution of the formal

operating lease agreement dated 01.08.2016 and that the necessary

application was filed before the 'Registrar of Companies', Kolkata much

before the Lease Agreement was entered into between the parties.

22. In this connection, it is pointed out on the side of the 2nd Respondent

that since the 'Registrar of Companies' had not formally issued a

'certificate of incorporation', the Lease Agreement was not to be

22 executed. Furthermore, the need for entering into a 'Lease Agreement'

was to commence the closed unit and to provide an employment and

wages to one thousand two hundred workers who were jobless for

nearly two years.

23. The Learned counsel for the 2nd Respondent takes a stand that the

'Lease Agreement' in question does not visualise any 'sale', transfer or

encumbrance over the 'Fixed Asset', land and properties of the 1st

Respondent/Corporate Debtor. At this stage, the Learned counsel for

the 2nd Respondent brings to the notice of this Tribunal that the 2nd

Respondent is regularly paying the Lease 'Rentals' of Rupees Eleven

lakhs per month (subject to the adjustment as per the said agreement)

and that the tenure of the said Agreement is for nine years period and

that term of the 'Lease Agreement' enjoins that there are no permanent

transfers of any 'Asset' or 'Land' or property of the 1st

Respondent/Corporate Debtor to the 2nd Respondent.

24. The Learned counsel for the 2nd Respondent contends that the

'Resolution Plan' of the Appellant is a conditional one and for

cancellation of the 'Lease Agreement' of 2nd Respondent, only a 'Civil

Court' has jurisdiction and that the Adjudicating Authority has no

jurisdiction to cancel the said 'Agreement'.

25. The other plea taken on behalf of the 2nd Respondent is that the

'Resolution Plan' of the Appellant was contrary to the 'Expression of

Interest' and the 'Information Memorandum' as such the same was

23 rightly rejected by the 'Adjudicating Authority', although, the said plan

was approved by the 'Committee of Creditor'.

26. The Learned counsel for the 2nd Respondent submits that the

provisions under Section 13(13) of the SARFAESI Act, 2002 is not

applicable to the Lease Agreement dated 01.08.2016 and the said bar

is only under those situations when the borrower after receiving of

notice under Section 13(2) of the SARFAESI Act, 2002 transfers by

means of 'Sale', 'Lease' any of its secured assets without prior written

consent of the secured creditor and being not in the usual course of

business.

27. The Learned counsel for the 2nd Respondent strenuously contends that

the 'Lease Agreement' in question was entered into between the parties

in the usual and ordinary course of business and not with any intention

to transfer any 'Right', 'Title' or interest upon the asset of Corporate

Debtor, in terms of Section 43 r/w Section 45 of the 'I&B Code' only the

Liquidator or the Resolution Professional has only the right to question

any 'Agreement' entered into by the 1st Respondent/Corporate Debtor.

28. It comes to be known that the CA(IB) No. 36/KB/2019 filed by the

'Resolution Professional' was disposed by the 'Adjudicating Authority'

as 'Infructuous' on 14.03.2019. In this connection, the Learned counsel

for the 2nd Respondent contends that prior to the passing of liquidation

order as on 13.02.2019, the 'Adjudicating Authority' came to a

conclusion that such an application by the 'Resolution Professional'

24 Under Section 46 of the Code was not maintainable on numerous

grounds (including the ground that during the period of CIRP, the

'Resolution Professional' and the 'Committee of Creditors') had

remained silent and had not taken steps to challenge the validity of the

'Lease Agreement'.

29. The Learned counsel for the 2nd Respondent points out that the 'Federal

Bank' during the entire 'Corporate Insolvency Resolution Process'

accepted the rent from the 2nd Respondent in a continuously fashion

and the said Bank had waived its right, if any, after issuance of Section

13(2) notice under the SARFAESI Act, 2002 to the Corporate Debtor on

01.04.2016.

30. The Learned counsel for the 2nd Respondent submits that the

ownership of the Jute Mill is not vested with the 2nd Respondent and in

fact the 'Federal Bank' was informed of the execution of the 'Lease

Agreement' by the 1st Respondent/Corporate Debtor through its letter

dated 21.02.2017 after all negotiations with the Labour unions were

undertaken and formally signed.

31. The Learned counsel for the 2nd Respondent brings to the force that the

'Federal Bank' which issued under Section 13(2) of the SARFAESI Act,

2002 on the Corporate Debtor on 01.04.2016 and 'Possession Notice'

on 06.05.2017 and that actual physical possession of the property of

the 1st Respondent/Corporate Debtor was not taken by the said Bank.

25

32. The Learned counsel for the 2nd Respondent contends that since

21.02.2017 the 'Federal Bank' had not taken any step to enforce or

relied upon the notice under Section 13(2) of the SARFAESI Act and the

said bank, as one of the 'Financial Creditors' had submitted Form 'C'

before the Applicant, which was not disclosed and also that the bar

under Section 13(13) of the SARFAESI Act, 2002 will not impede the

validity of the 'Lease Agreement' read with 'Addendum' dated

20.01.2016 because of the fact that the 'Federal Bank' had waived its

right under Section 13(2) of the SARFAESI Act, 2002 by not enforcing

the same, because of the fact that no litigant can accept and reject the

same transactions.

33. The Learned counsel for the 2nd Respondent contends that the

'Resolution Professional' had acknowledged the claim of the 2nd

Respondent of a sum of Rs. 79,05,224/- on 20.06.2018 and in fact that

the 'Resolution Professional had knowledge of the purported 'Lease'

between the 2nd Respondent and the Corporate Debtor much earlier to

filing of the Application and, therefore, the 'Expression of Interest' in a

clearly cut manner mentions the 2nd Respondent name as one operating

the 'Lease' and viewed in that perspective the 'Resolution Professional'

has not authority to refer to the SARFAESI Act, 2002 notices issue by

the 'Federal Bank', when the said 'Bank' was aware of the agreement

made with the Respondent had remained silent and had waived its

right, if any.

26

34. The Learned Counsel for the 2nd Respondent submits that the

'Resolution Professional' and 'Committee of Creditor' had included

presence of 2nd Respondent in the 'Information of Memorandum' and

the 'Expression of Interest' only on being satisfied with the validity of

the Lease Agreement dated 01.08.2016 and the 'Resolution

Professional' and the Committee of creditors had not found the issue of

2nd Respondent purported to be a 'related party' to the 1st Respondent

and as such the Appellant has no 'Locus standi' to raise this issue,

during oral hearing, and after the 'Resolution Plan' was voted and

placed for 'Approval'.

35. The Learned Counsel for the 2nd Respondent contends that the 2nd

Respondent filed a Civil Suit in T.S. No. 467 of 2019 before the 3rd Civil

Judge (Junior Division) at Howrah, wherein the Respondent Nos. 4, 5,

10 and 11 are party defendants. The 'Status Quo order' in respect of

nature, character and possession of the suit property was passed on

18.04.2019 by directing the defendants, including 'Federal Bank' and

SIDBI (4th Respondent) and the Interim order was lastly extended till

17.01.2020.

36. The plea taken on behalf of the 3rd Respondent in the present case, the

'Lease' created in favour of the 2nd Respondent is void ab initio and,

therefore, the eviction of 2nd Respondent does not make a Resolution

plan conditionally or in violation of any law for the time being in force

and also that the 'CoC' in their commercial wisdom had accepted the

27 requirement of eviction of the 'Lessee' in unlawful possession of the

Corporate Debtor. Besides, this, it is the contention of the 3rd

Respondent that since the proceedings were pending before the

'Adjudicating Authority', the rejection of application on the ground that

270 days had already expired is an incorrect one and in fact the said

period of litigation is to be excluded for the period of calculation of CIRP

period.

37. It is represented on behalf of the 3rd Respondent that the relief of

eviction sought for by the Appellant was not violation of any Law

because of the fact that the possession of 2nd Respondent is 'void ab

initio'.

38. The Learned Counsel for the 8th Respondent submits that after the

impugned order dated 13.02.2019 passed by the 'Adjudicating

Authority' (NCLT, Kolkata bench), the 8th Respondent, as an Applicant

before the 'Adjudicating Authority' filed in C.A(IB) No. 974/KB/2018.

Further, it is represented on behalf of the 8th Respondent, the 8th

Respondent one of the 'Resolution Applicant' took part in 'CIRP of the

1st Respondent/Corporate Debtor also that on 12.01.2018, the

Application filed by the 4th Respondent/ Small Industries Development

Bank of India (Applicant/Financial Creditor) under Section 7 of the I&B

Code was admitted on 12.01.2018. The 3rd Respondent (Mr. Pinaki

Sircar) was appointed as an 'Interim Resolution Professional' and later

28 the said Professional was appointed as 'Resolution Professional' to

conduct the CIRP of the 1st Respondent.

39. The stand of the 8th Respondent is that as one of the 'Resolution

Applicants', he submitted a 'Resolution Plan' for revival of the Corporate

Debtor after the 'Information Memorandum' which was published by

the 3rd Respondent on 23.05.2018. Later, the plan was further revised

and submitted on15.06.2018, 21.08.2018 and 15.09.2018 respectively.

40. According to the Learned Counsel for the 8th Respondent after the

'Resolution Plan' submitted by the 8th Respondent (as a Resolution

Applicant on 15.09.2018). The 3rd Respondent ('Resolution

Professional') informed the 8th Respondent that no plan could be

submitted by any Resolution Applicant which would contain a clause

for cancellation of the 'Lease Deed' and hence the 8th Respondent was

advised to submit an 'Addendum' to the 'Resolution Plan' dated

15.09.2018.

41. The 3rd Respondent communicated that 'EOI' was issued on 'as is

whereas and as is what is basis' and only those plans which would be

submitted as per invitation would be considered, which was prior notice

to the 8th Respondent in the meeting of 'CoC' that took place on

27.09.2018. Hence, the 'Addendum' of the Resolution Plan dated

15.09.2018 was submitted by the 8th Respondent before the 3rd

Respondent/RP in a 'sealed envelope' under a covering letter dated

30.09.2018, which was duly received.

29

42. The Learned Counsel for the 8th Respondent points out that the

'Addendum' to the Plan of the 8th Respondent dated 15.09.2018 was

submitted in a sealed cover 01.10.2018 before the 'Resolution

Professional'/ 3rd Respondent and the same was subject to the

directives given by the Resolution Professional/3rd Respondent that the

'Successful Resolution Applicant' would deal with the 'Operational

Lease' between the Corporate Debtor and the 2nd Respondent

separately after being selected as the 'Successful Resolution Applicant'

by virtue of the Lease Deed between the parties.

43. At this stage, the Learned Counsel for the 8th Respondent contends that

the Resolution Professional/3rd Respondent confirmed that it was a

separate contractual agreement and could not be cancelled as part of

the plan under the pretext of a Resolution etc.

44. It is represented on behalf of the 8th Respondent that in the 'CoC'

meeting that took place on 03.10.2018, the 8th Respondent had

requested the Resolution Professional to confirm and state on record

whether the last directive issued by him on 27.09.2018 to the effect

that the resolution plans to be submitted by the Resolution Applicant

would not contain any clause/condition for Termination and/or

cancellation of the Lease deed etc;

45. The Learned Counsel for the 8th Respondent submits that the 3rd

Respondent in the CoC meeting that took place on 03.10.2018 had

informed the 8th Respondent that the Resolution Plan submitted by the

30 Resolution Applicant in a sealed cover on 01.10.2018 was rejected and

the 8th Respondent was required to leave the meeting under this

circumstances.

46. The Learned Counsel for the 8th Respondent refers to C.A(IB)

No.974/KB/2018 filed by him seeking among other things to assail the

rejection of its resolution plan by the Resolution Professional and the

CoC of the 1st Respondent/Corporate Debtor and also the wrongful

acceptance of the plan submitted by the Appellant as a successful

Resolution Applicant. In fact, the Resolution Professional (3rd

Respondent) and the 4th, 5th, Respondents (members of the CoC) 6th

and 9th Respondents had filed the replies to the aforesaid applications

and that the Adjudicating Authority had not referred to the two plans

of the 8th and 9th Respondents to the consideration of the 'CoC' because

of the reason that the CIRP period of 270 days had lapsed two months

before and eschewed the same for rumination.

47. It appears that the 9th Respondent's plan (One of the 'Unsuccessful

Resolution Applicants') (one of the Directors of the 6th Respondent) was

rejected by the 'Committee of Creditors' and the Resolution

Professional' of the 1st Respondent/Corporate Debtor.

48. As a matter of fact, the 7th Respondent(one of the Financial Creditor of

the 1st Respondent/Corporate Debtor) had applied before the

'Adjudicating Authority' in highlighting the irregularities and illegalities

noticed during the 'Corporate Insolvency Resolution Process' which was

31 conducted at the instructions of the major stake holders in the CoC viz;

3rd Respondent and 4th Respondent and sought declaration that the

'Resolution Plan' submitted by the Appellant is an illegal and void one.

49. The Learned Counsel for the 8th Respondents contends that the

Adjudicating Authority had rightly rejected the 'Resolution plan' of the

Appellant, since the same is in 'breach of Law' and further that the I&B

Code has no provision for eviction of a 'Lessee' or Tenant.

50. The Learned Counsel for the 8th Respondent submits that the

Resolution Plan of the Appellant could not have been approved by

placing reliance on the ingredient of Regulation 39(3) of the 'Corporate

Persons Regulations' and further that Regulation 39(3) has no

application in respect of any Resolution Process commenced before

03.07.2018. In the instant case the Resolution process commenced on

12.01.2018.

51. The Learned Counsel for the Respondents No. 10th & 11th submits that

the 'Resolution Plan' of the Appellant was 'vague' in respect of the

workers claim and in fact, the Appellant's 'Resolution Plan' provided

for the payment of workers dues. However, the exact quantum of

workers' claim/dues was not mentioned in the 'Resolution Plan' by the

Appellant and also that the 'Resolution Plan' of the Appellant spoke of

continuation of "Wiling Workers" in short 'Resolution Professional' had

not admitted the workers of 'whole claim' and that he functioned in a

manner to benefit the cause of the Appellant. It is the stand of the

32 Respondent No.10 & 11 that the 'Resolution Plan' of the Appellant was

contrary to Law.

52. It is to be pointed out that Section 5(24) of the I&B Code, 2016 defines

"Related party" in relation to a Corporate Debtor. Section 5(24) (A) of

the I&B Code, 2016 defines "Related party" in relation to means an

individual as defined in the Code. Section 5(25) of the Code, defines

"Resolution Applicant". Section 5(26) of the Code defines "Resolution

Plan". Section 5(27) of the Code, defines "Resolution Professional".

53. Indeed Section 5(25) of the Code, relating to "Resolution Applicant" is

to be read in consonance with the duties of Resolution Professional to

invite certain categories of individuals to furnish the Resolution plan(s).

54. One of the pivotal functions of a Resolution Professional is to prepare a

'Information Memorandum' which will enable him to submit a

Resolution plan. The Resolution Applicant is to submit a 'Resolution

Plan' to the 'Resolution Professional', based on 'Information

Memorandum' mentioning relevant information, as may be specified by

the Board (including the Information relating to a Corporate Debtor's

financial position). Further, information related to disputes by or

against the Corporate Debtor and any other matter pertaining to the

Corporate Debtor may also be furnished.

55. It must be borne in mind that a Resolution Plan submitted by the

Resolution Professional must satisfy the ingredients mentioned under

Section 30(2) of the Code. It is pertinent to point out that a 'Resolution

33 Plan' is not a 'Recovery/ Sale/Liquidation/ auction'. A 'Resolution Plan'

is to be perused by a Resolution Professional with utmost care and

caution and if the said plan when approved by the Committee of

Creditors on being placed before an 'Adjudicating Authority' the said

Authority is to apply its mind before giving a green signal or even

rejecting the same.

56. Insofar as the 'Preferential transactions' and 'relevant time' that as per

Section 43 of the Code, it is to be pointed out that this provision can be

pressed into service by a 'Resolution Professional' or a Liquidator before

an 'Adjudicating Authority' under section 44 of the Code and that the

said Authority is to pass an appropriate order, as he deems fit and

proper. The aim of Section 43 of the Code is to protect the 'body of

interest' over whom an undue preference was given in favour of other

'creditors' and 'transactions' can be called as a preferential ones entered

into by a Corporate Debtor, wherein a Corporate Debtor gave undue

preference at a relevant time to any person. The 'transfer of property'

or any interest of property ought to be of a 'Corporate Debtor' and such

transfer was made with a view to give 'undue preference' to the

'Transferee'. In a case of 'Fraudulent Preference' the dominant motive

of a 'Debtor' in effecting transfer to a certain creditor or other is to be

seen by an 'Adjudicating Authority'.

57. In this connection, it may not be out of place for this Tribunal to make

a significant mention that the definition of 'preferential transactions' as

34 per Section 43 of the Code refers to an opinion of a 'Liquidator' or a

'Resolution Professional', that was reached during the 'Resolution

stage'. An action under Section 43 of the I&B Code can lie only when

the 'Liquidator' or 'Resolution Professional' arrived an opinion that an

'undue preference' was given to a particular 'Creditor' or 'Guarantor' or

'Surety' with a view to place a beneficiary in a profitable pedestal in

regard to other creditors position in regard to other 'Creditors' when

the Corporate Debtor entered into transaction with any individual.

Section 43 of the Code speaks of 'avoidance of preference' given by a

Corporate Debtor in the run up to 'Insolvency'. Section 43 (2) of I&B

Code mentions the circumstances when a Transactions entered into

by a Corporate Debtor shall be treated as a deemed preference on a

fiction of Law. The 'Term', 'Transfer' includes 'sale', 'Relinquishment',

'Exchange', and an Adjudicating Authority under Section 49 of the Code

can restore a status quo ante in a given matter by protecting a person's

interest. Section 49 of the I&B Code prescribes no time limit for

securing an order in respect of a transaction entered into which were

meant for defrauding the 'creditors'.

58. Section 53 of the Code will come into operative play, if the transfer of

property by a Corporate Debtor affects the priority order of a 'Creditor'

or a 'Surety' or 'Guarantor' and place him at a higher altitude, owing

to the change in 'Priority order'

35

59. Coming to the aspect of 'Civil Court's Jurisdiction' being barred, it is to

be pointed out that Section 63 of the I&B Code bars the jurisdiction of

'Civil Court' or an Authority to entertain any suit or proceedings in

respect of any matter over which the 'NCLT' or 'NCLAT' has necessary

jurisdiction under the Code. A cumulative reading of Section 63 of the

Code and section 430 of the Companies Act, 2013 makes it clear that

the 'NCLT' or 'NCLAT' have sole jurisdiction to determine all issues

pertaining to the I&B C. Also, Section 64(2) Code speaks 'no order'

injunction can be granted by any Court, Tribunal or Authorities in

respect of any action taken or to be pursuant to the power of confer of

NCLT as well as NCLAT under this Code. An injunction to stay the

proceedings before the 'National Company Law Tribunal' cannot be

issued by a 'Civil Court' as per decision Jotun India Pvt. Ltd Vs. PSL

Limited (2018) Company cases OL page 224 and confirmed in the

decision reported in 2018 95 Taxmann . com 311.

60. If an Adjudicating Authority is dissatisfied with a 'Resolution

Professional', he may appoint another 'Resolution Professional' as a

'Liquidator'. Needless, to make an emphasis that it is the duty of

Corporate Debtor to cooperate with a Liquidator. Section 35 of the

Code, confers powers and duties of a Liquidator to ensure an orderly

completion of the 'Liquidation Proceedings'. Even an Adjudicating

Authority may assign certain duties, to be discharged by him.

Undoubtedly a 'Liquidator' is to act under the supervision of an

36 'Adjudicating Authority'. A Liquidator is to establish a 'connivance'

between a 'Company' and the 'Transferee' as per decision Monark

Enterprises V. Kishan Tulpule & Ors. reported in 1991 Company L.J.

288(Bom).

61. In the instant case, on hand, the Appellant/Resolution Applicant

initially had firstly submitted a 'Resolution Plan' containing necessary

details etc, and later submitted an 'Addendum' to the Resolution Plan

by it specifying certain details. Suffice it for this Tribunal to point out

that the said 'Addendum' to the 'Resolution Plan' in unequivocal terms

mentioned that acceptability of 'Resolution plan' by the 'Resolution

Applicant shall be subject to and directly related to termination of all

erstwhile 'agreement entered into by the old management of the

Corporate Debtor, including but not limited to agreement with M/s.

Daaksh Jute LLP, agreement with M/s. Stylish interlocking Pavers (P)

Ltd., etc., peaceful and satisfactory handover of the entire unit of the

Corporate Debtor with all its movable and immovable properties free

from all encumbrances, complete management and operation rights of

the entire unit of the Corporate Debtor and waivers/reliefs sought from

Hon'ble NCLT.

62. A year before filing of an application under Section 7 of the I&B Code

by the Financial Creditor, the 1st Respondent/Corporate Debtor had

executed an unregistered Lease Deed dated 01.08.2016 to and in

favour of the 2nd Respondent and handed over the jute mill for running

37 it. The tenure of lease was for Nine years beginning from 01.08.2016

and ending with 31.07.2025. The Appellant /'Resolution Applicant'

laid down certain conditions in the plan and also addressed email

dated 03.10.2018 had clearly mentioning that "if the Resolution Plan

being approved subject to modification which is not acceptable to it",

in that case the Resolution Applicant will have absolute right to make

withdrawal of bid without any notice to CoC as well as RP and also

stating that the fact the email was sent by the Appellant on the final

day, when the CoC was to conducts its meeting to approve the plan, in

spite of the same the CoC approved the Appellant's plan which cannot

be countenanced in the eye of Law.

63. It is well settled that the Resolution Professional is required to examine

and confirm the Resolution Plan subject to the same being in

conformity with the ingredient of Section 30(2) of the Code. A Resolution

Professional can submit his ex facie opinion to the 'Committee of

Creditors' that the law was or was not violated. It is true that the Section

30(2)(e) of the Code does not authorise the Resolution Professional to

determine whether the Resolution Plan does or does not violate the

relevant provisions of Law.

64. In reality, ascribing conditions in the 'Resolution Plan' by the

Appellant/Resolution Applicant is an unacceptable one, in the

considered opinion of this Tribunal. Therefore, the Adjudicating

38 Authority in the impugned order came to the right conclusion that the

plan of the Resolution Applicant/Appellant was in negation of Law.

65. Insofar as, the eviction of 2nd Respondent is concerned, the

Adjudicating Authority is not empowered to pass an order of eviction

and it is for an 'Aggrieved party' to move the appropriate forum for

redressal of its grievances in accordance with Law. In short, the

Committee of Creditors had approved the Resolution Plan in utter

disregard regard to the ingredient of Section 30(2)(e) of the I&B Code

and as hence the same was rejected by the Adjudicating Authority.

Moreover, the Adjudicating Authority had appointed a 'Liquidator' other

than the 'Existing Resolution Professional'.

66. In regard to the issues framed by this Tribunal on 30.08.2019 (i)

whether at the stage of Liquidation, the question of preferential

transactions under Section 43 of I&B Code can be decided by an

Adjudicating Authority? and (ii) Whether the Liquidator has jurisdiction

to decide such issued?, this Tribunal is of the considered opinion that

Section 43 of the Code can be invoked during the pendency of

Resolution Process or Liquidation proceedings, if there are genuine,

reasonable grievances relating to 'preferential transactions' at a

relevant time and in fact a Liquidator by filing an 'Application' can seek

one or other order from the Adjudicating Authority as per tenor and

spirit of Section 44 of the I&B Code. Section 35 of the Code showers

'powers and duties' of a Liquidator' and that he must act under the

39 supervision of an Adjudicating Authority. Section 35 of the I&B Code is

like Section 290 of the Companies Act, 2013 a Transfer must be made

by a 'Debtor' in lieu of an operational 'Debt' or an antecedent financial

'Debt' or other liabilities saddled on him. As per Section 35(b) of the

Code, a 'Liquidator' is to take into his custody or control all assets,

property, effects and actionable claims of the Corporate Debtor. Section

35(L) of the Code enjoins upon the 'Liquidator' to investigate the

Financial affairs of the 'Corporate Debtor' to determine undervalued or

preferential transactions. One cannot remain oblivious that a

'Liquidator' keeps the 'Liquidation Assets' in fiduciary capacity for the

benefit of the all creditors. Therefore, it can be safely and securely

concluded that section 43 of the Code can be invoked during the

pendency of 'Resolution Process' by a 'Resolution Professional' or

'Liquidator' for seeking necessary relief pertaining to a preferential

transaction by filing an Application and that the Adjudicating

Authority can pass orders under Section 44 of the Code. Further a

Liquidator as per Section 35 of the I&B Code, a Liquidator has

jurisdiction to investigate the financial affairs of the Corporate Debtor

to determine undervalued or 'preferential transactions' subject to the

supervisory jurisdiction of an Adjudicating Authority and these issues

also answered As regards the ingredients of Section 240A of the Code

it is to be pointed out that a Financial Creditor or an Operational

Creditor of MSME may take it to Insolvency Proceedings before an

40 'Adjudicating Authority'. But the fact of the matter is that the MSME

may not be pushed into liquidation thereby affecting the employees and

workers of MSME and therefore, Section 240A (2) of the Code specifies

that the Central Government may, in public interest by notification

direct that any of the provisions of the IBC shall not apply to Micro,

Small and Medium Enterprises or apply to them with such

modifications as may be mentioned. The learned Adjudicating Authority

in the impugned order had not entered into the aspect of whether 8th

and 9th Respondent are related to 1st Respondent/ corporate Debtor or

otherwise or whether the ingredient of section 29A of the Code applies

or not because of the fact the said authority thought it fit that these

aspects are irrelevant and while rejecting the plan ordered the

liquidation of the 1st Respondent. The Adjudicating Authority in the

impugned order, had also disposed of the Applications filed by the

respective parties to the proceedings.

67. In regard to I.A No. 2976 of 2019 filed by the Intervener/Applicant (City

Union Bank, to intervene in the main appeal i.e. CA(AT)(INS) No. 277 of

2019, on the basis that the Liquidator on 15.03.2019 had admitted its

claim under the category of Secured Financial Creditor and since the

Resolution Plan had not provided anything to the Applicant's claim was

considered under the category of other creditor, it is to be pointed out

that the plan of Resolution Applicant was rejected by the Adjudicating

Authority and in the main case an order of liquidation was passed by

41 the Adjudicating Authority on 13.02.2019, and as such it is open to the

Applicant/Intervener Bank to stake its claim before the Liquidator for

redressal of its grievance(s), in accordance with law if it so

desires/advised. Accordingly, the said Interlocutory Application stands

disposed of.

68. I.A No. 4285 of 2019 filed by the Applicant seeking Leave to place the

judgment of Hon'ble Supreme Court dated 03.12.2019 in CA No. 9170-

72 of 2019 M/s. Embassy Property Developments Pvt. Ltd V. State of

Karnataka & ors., is taken on record.

69. For the foregoing detailed discussions, and also this Tribunal taking

note of the attendant facts and circumstances of the present case, in a

conspectus fashion, comes to an irresistible consequent conclusion

that the impugned order dated 13.02.2019 passed by the Adjudicating

Authority in rejecting the Resolution Plan and appointing a Liquidator

in respect of the 1st Respondent is free from any legal flaws.

70. Looking at from any angle the present Appeal sans merits and the same

is dismissed. There shall be no order as to costs. IA No. 11009 of 2019

stands closed.

[Justice Venugopal M.] Member (Judicial)

[V. P. Singh] Member (Technical) 20th February, 2020 RK

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