Kotak Mahindra Investment Ltd vs Bijay Murmuria & Ors

M/s. Kotak Mahindra Prime Ltd. ...Appellant

Versus

Mr. Bijay Murmuria & Ors. ...Respondents

Company Appeal (AT) (Insolvency) No. 48 of 2019

IN THE MATTER OF:

M/s. Kotak Mahindra Investment Ltd. ...Appellant

Versus

Mr. Bijay Murmuria & Ors. ...Respondents

Company Appeal (AT) (Insolvency) No. 49 of 2019

IN THE MATTER OF:

M/s. Kotak Mahindra Prime Ltd. ...Appellant

Versus

Mr. Bijay Murmuria & Ors. ...Respondents

Company Appeal (AT) (Insolvency) No. 50 of 2019

IN THE MATTER OF:

M/s. Kotak Mahindra Investment Ltd. ...Appellant

Versus

Mr. Bijay Murmuria & Ors. ...Respondents 2

Present:

For Appellant(s) : Mr. P. Nagesh, Mr. Dhruv Gupta, Mr. Mahip Datta, Advocates.

For Respondents: Mr. Abhijeet Sinha, Mr. Sanjay Bhatt and Ms. Niharika Sharma, Advocates for R-3. Mr. K. Dutta, Ms. Srishti Kapoor, Mr. Akshit Kapoor, Advocates for R-1.

SUDHANSU JYOTI MUKHOPADHAYA, J.

In all these appeals as common impugned order dated 7th December,

2018 is under challenge and common question of law involved, they were

heard together and are being disposed of by this common judgment.

2. The brief case of the Appellant(s) is that Appellant(s) entered into

'Term Loan Agreement(s)' on 8th March, 2008 with the 'M/s. Kitply

Industries Limited' ('Corporate Debtor') for a sum of Rs. 6.03 Crore whereby

the Appellant(s) advanced the said sum of Rs. 6.03 Crore to the 'Corporate

Debtor' which was to be repaid by 13th December, 2009 along with interest

@ 12% per annum and 24% (penal) and Liquidated Damages @ 24%. On

19th February, 2010, upon the failure of the 'Corporate Debtor' to pay back

the loan amount to the Appellant(s), the Appellant(s) sent Demand Notice

against the 'Corporate Debtor' for the outstanding financial debt of Rs.

8,13,37,961/- along with interest and liquidation damages.

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 3

3. The 'Corporate Debtor' sent a reply dated 31st March, 2010 denying

the liability to pay the outstanding debts as claimed by the Appellant(s)

Company. Upon failure of the 'Corporate Debtor' to pay back the loan

amount to the Appellant(s), the Appellant(s) sent Statutory Notice against

the 'Corporate Debtor' on 30th April, 2010 for the outstanding financial debt

under Sections 433 and 434 of the Companies Act, 1956 demanding their

respective debt amounts with interest and liquidation damages.

4. Based on the notice dated 30th April, 2010, the 'Corporate Debtor' filed

a suit before the Hon'ble High Court of Kolkata seeking direction to convert

the entire amount outstanding into equity shares. According to the

Appellant(s), the main contention of the 'Corporate Debtor' was that the

Appellant(s) and the 'Corporate Debtor' had an oral Agreement that the

entire Term Loan would be converted into equity shares, after sanction of

the scheme of Arrangement, pending, on the file of the Hon'ble Guwahati

High Court.

5. With reference to the Arbitration Clause No. 11.3 of the 'Term Loan

Agreement' between the parties, the Appellant(s) Company filed an

application before the Hon'ble Calcutta High Court under Section 8 of the

Arbitration & Conciliation Act, 1996. The Application under Section 8 was

dismissed by the Hon'ble High Court vide its order dated 10th September,

2010. The Appellant(s) Company filed an appeal against the order dated 10th

September, 2010 which was dismissed by the Hon'ble High Court of

Calcutta vide its order dated 17th August, 2011. The Appellant(s) Company

filed a Special Leave Petition bearing No. 21492/2012 before the Hon'ble

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 4

Supreme Court against the order dated 17th August, 2011 passed by the

Hon'ble High Court of Calcutta. The SLP bearing No. 21492/2012 later got

converted into a Civil Appeal bearing No. 165 of 2014 and vide its Order

dated 7th January, 2014, the Hon'ble Supreme Court set aside the order

dated 10th September, 2010 and further remanded back the matter to the

Hon'ble High Court of Calcutta for fresh consideration of the Application

filed under Section 8 of the Arbitration & Conciliation Act, 1996. Thereafter,

the Hon'ble High Court of Calcutta vide its order dated 13th June, 2016

referred the Appellant(s) Company and the 'Corporate Debtor' to Arbitration

in terms of the 'Term Loan Agreement' dated 8th March, 2008.

6. It is stated that while Arbitration Proceeding is pending, in November,

2017, the Application under Section 7 of the Insolvency and Bankruptcy

Code, 2016 was preferred by the 'IDBI Bank' for initiation of the 'Corporate

Insolvency Resolution Process' against the 'Corporate Debtor', which was

admitted on 1st May, 2018. For the said reason, Learned Arbitrator by order

dated 11th August, 2018 adjourned the Arbitration Proceedings sine die.

7. According to the Appellant(s), they have no knowledge of the order of

admission dated 1st May, 2018 passed by the Adjudicating Authority

(National Company Law Tribunal), Guwahati Bench, but subsequently they

having come to know on 27th August, 2018 and filed their respective claims

in Form C before the 'Resolution Professional' claiming their respective

amounts.

8. The 'Resolution Professional' refused to entertain their claim by order

dated 1st September, 2018 as the claims were not filed within time as per

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 5

the Regulation 12(2) of the Insolvency and Bankruptcy Board of India

(Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

The Appellant(s) filed an Interlocutory Application No. 88 of 2018 under

Section 60(5) of the 'I&B Code' for directing the 'Resolution Professional' to

take into consideration the claim with proof filed by the Appellant(s) in Form

C.

9. The 'Resolution Plan' submitted by 'SREI Multiple Asset Investment

Trust (Vision India Fund)' was approved by the 'Committee of Creditors' on

20th October, 2018 with 92.74% voting shares. The Adjudicating Authority

thereafter by impugned order dated 7th December, 2018 approved the

'Resolution Plan' under Section 31 of the 'I&B Code'.

10. The Interlocutory Application No. 88 of 2018 which was preferred by

the Appellant(s) was rejected by the Adjudicating Authority on 21st

December, 2019. However, none of the aforesaid order of rejection has been

challenged in these appeals.

11. Learned counsel for the Appellant(s) while contended that the

'Resolution Plan' is against the provisions of Section 30(2) of the 'I&B Code',

it was contended that the 'Resolution Plan' does not take care of the claims

filed by the Appellant(s)- ('Financial Creditor(s)').

12. In the alternative, it was submitted that the Appellant(s) may also

pursue the Arbitration Proceeding in terms of sub-section (6) of Section 60

of the 'I&B Code'.

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 6

13. On 3rd September, 2019, the 3rd Respondent ('Successful Resolution

Applicant') provided revised offer to the Appellant(s) which was taken into

consideration by this Appellate Tribunal and observed that the offer appears

to be justified. The Appellant(s) were given opportunity to accept the same,

failing which the appeal may be determined on merit.

14. On 19th September, 2019, when the matter was taken up, learned

counsel appearing on behalf of 3rd Respondent- 'SREI Multiple Asset

Investment Trust (Vision India Fund)' submitted that that 3rd Respondent

will take into consideration the claim filed by the Appellant(s) and provide

the same treatment as has been given to the similarly situated 'Financial

Creditors'.

15. Learned counsel for the Appellant(s) suggested that they should be

allowed to continue with the Arbitration Proceeding. However, the

'Resolution Applicant' wants to get the matter finally settled at the stage of

Resolution itself.

16. This Appellate Tribunal allowed the 3rd Respondent to file an Affidavit

enclosing a copy of distribution chart showing the distribution as made in

favour of the 'Financial Creditors'.

17. Learned counsel for the 3rd Respondent ('Successful Resolution

Applicant') submitted that earlier 3rd Respondent paid a sum of

Rs.3,02,000/- to the Appellants which they returned and now 3rd

Respondent is ready to provide more than Rs.31,87,829/- on the basis of

the claim made by the Appellants.

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 7

18. It was in this background, this Appellate Tribunal decided to look into

the plan including the revised offer given by the 3rd Respondent ('Successful

Resolution Applicant').

19. The revised offer given by the 3rd Respondent ('Successful Resolution

Applicant') is based on the amount as distributed among other situated

'Financial Creditors'. In this circumstance, we are of the view that the

Appellant(s) should have accepted the same instead of agitating to litigate

the matter by allowing them to continue with the Arbitration Proceeding.

20. Sub-section (6) of Section 60 reads as follows:

"60. Adjudicating Authority for corporate

persons.─ .........(6) Notwithstanding anything contained

in the Limitation Act, 1963 or in any other law for the

time being in force, in computing the period of limitation

specified for any suit or application by or against a

corporate debtor for which an order of moratorium has

been made under this Part, the period during which such

moratorium is in place shall be excluded."

21. As per the aforesaid provision, it is always open to a Creditor to

proceed with the suit or arbitration proceeding, if pending, on completion of

the Moratorium. However, once a Creditor/'Financial Creditor' or

'Operational Creditor' files its claim before the 'Resolution Professional' and

the same is taken into consideration by the 'Successful Resolution

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 8

Applicant' and while submitting the plan or the revised plan providing them

same treatment as has been given to the other similarly situated 'Financial

Creditors'/ 'Operational Creditors', the 'Financial Creditors'/ 'Operational

Creditors', thereafter cannot take the benefit of sub-section (6) of Section 60

of the 'I&B Code' nor they can pray to pursue the suit or arbitration

proceeding or to file a fresh suit or arbitration proceeding for the same

claim.

22. Section 31 of the 'I&B Code' reads as follows:

"31. Approval of resolution plan.- (1) If the

Adjudicating Authority is satisfied that the resolution

plan as approved by the committee of creditors under

sub-section (4) of section 30 meets the requirements as

referred to in sub-section (2) of section 30, it shall by

order approve the resolution plan which shall be binding

on the corporate debtor and its employees, members,

creditors, [including the Central Government, any State

Government or any local authority to whom a debt in

respect of the payment of dues arising under any law for

the time being in force, such as authorities to whom

statutory dues are owed,] guarantors and other

stakeholders involved in the resolution plan.

[PROVIDED that the Adjudicating Authority, before

passing an order for approval of resolution plan under

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 9

this sub-section, satisfy that the resolution plan has

provisions for its effective implementation.]

(2) Where the Adjudicating Authority is satisfied that the

resolution plan does not confirm to the requirements

referred to in sub-section (1), it may, by an order, reject

the resolution plan.

(3) After the order of approval under sub-section (1),--

(a) the moratorium order passed by the Adjudicating

Authority under section 14 shall cease to have effect;

and

(b) the resolution professional shall forward all records

relating to the conduct of the corporate insolvency

resolution process and the resolution plan to the Board

to be recorded on its database.

(4) The resolution applicant shall, pursuant to the

resolution plan approved under sub-section (1), obtain the

necessary approval required under any law for the time

being in force within a period of one year from the date of

approval of the resolution plan by the Adjudicating

Authority under sub-section (1) or within such period as

provided for in such law, whichever is later:

PROVIDED that where the resolution plan

contains a provision for combination as referred to in

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 10 section 5 of the Competition Act, 2002 (12 of 2003), the

resolution applicant shall obtain the approval of the

Competition Commission of India under that Act prior to

the approval of such resolution plan by the Committee of

Creditors."

23. In terms of Section 31, once the 'Resolution Plan' is found to be in

accordance with Section 30(2) and is duly approved by the Adjudicating

Authority, it is binding on all the stakeholders including the 'Financial

Creditor'/ 'Operational Creditor' and the 'Corporate Debtor' etc. The

approved 'Resolution Plan' including the revised 'Resolution Plan', as per

offer as inconsonance with Section 30(2) of the 'I&B Code', the Appellants

cannot be allowed to pursue the alternative remedy of suit or arbitration

proceeding even if it is pending.

24. In this background, we direct the 3rd Respondent ('Successful

Resolution Applicant') to provide Appellant(s) with the same treatment as

has been given to the other similarly situated 'Financial Creditors' and pay

pro-rata amount i.e., same percentage of claim amount, as made available to

other similarly situated 'Financial Creditors'.

25. In view of the aforesaid findings and directions given above, no further

relief can be granted.

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019 11

All these appeals stand disposed of with aforesaid observations and

directions. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

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

[ Kanthi Narahari ] Member (Technical)

NEW DELHI 13th November, 2019

/AR/

Company Appeal (AT) (Insolvency) Nos. 47-50 of 2019