Mausumi Bhattacharjee vs Jumbo Chemicals & Allied Industries Pvt ...

Comp. App. (AT) (Ins) No. 886 of 2024 & I.A. No. 3196 of 2024

(Arising out of the Order dated 22.02.2024 passed by the National Company Law Tribunal, New Delhi Bench (Court- II) in IB-79/ND/2022)

IN THE MATTER OF:

Ms. Mausumi Bhattacharjee Promoter of Arjun Industries Limited Address: C -- 9/9366, Vasant Kunj, New Delhi 110070 Email: mbvk.67@gail.com ...Appellant Versus

1. Jumbo Chemicals And Allied Industries Private Limited Address: D-42, First Floor, Part --I, South Extension, New Delhi--110049 , Email: prakharsinghal@yahoo.co.in ...Respondent No. 1

2. Mr. Vikram Bajaj Resolution Professional of Arjun Industries Ltd. Address: 214, Second Floor, Tower A, Spaze Edge, Tower A, Sector 47, Gurgaon Haryana-- 122018. Email: bajaj.vikram@gmail.com ...Respondent No. 2

Present

For Appellant: Mr. Ritin Rai, Sr. Adv. Divyanshu Sahay, Arsh Khan, D. Singla, Akshay Sahay, Shradha Narayan, Adv.

For Respondent : Mr. Ramji Srinivasan, Sr. Adv. with Mr. Nipun Gautam, Namrata Saraogi, Adv. for -R1 Mr. Aditya Gauri, Amar Vivek, Dhananjaya Sud, Adv. for RP/R2 -2- Comp. App. (AT) (Ins.) No. 886 of 2024

JUDGEMENT

(02.07.2024)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present Appeal has been filed by Ms. Mausumi Bhattacharjee the

Promoter of Arjun Industries Limited (in short Appellant) Ms. Mausumi

Bhattacharjee who is the Shareholder and Suspended Board of Director of Arjun

Industries Limited (in short Corporate Debtor) under Section 61(1) of the

Insolvency & Bankruptcy Code, 2016 (in short 'Code') in Company Appeal (AT)

(Insolvency) No. 886 of 2024 against the Impugned Order dated 22.02.2024

passed by the National Company Law Tribunal, New Delhi Bench (Court - II) (in

short 'Adjudicating Authority') in IB-79/ND/2022, whereby an application was

filed under Section 7 of the Code by the Respondent No. 1 was considered and

Corporate Insolvency Resolution Process (in short CIRP) of the Corporate

Debtor was initiated. Jumbo Chemicals and Allied Industries Private Limited is

the Respondent No. 1 here who is Financial Creditor of the Corporate Debtor.

2. Heard the Counsel for the Parties and perused the records made available

including the cited judgements.

3. It has been brought out that the Corporate Debtor availed a loan from

Industrial Development Bank of India (in short IDBI) of Rs. 3.67 Crores and

further entered into agreement for foreign currency loan for Rs. 1.83 Crores. It

has been alleged by the Appellant that the entire problem of the Corporate Debtor -3- Comp. App. (AT) (Ins.) No. 886 of 2024

began since the IDBI release only Rs. 3.29 Crores against sanction loan of Rs.

3.67 Crores and similarly release only Rs. 1.25 Crores (Foreign Currency Loan)

against Rs. 1.83 Crores.

4. The Appellant could not service the debt and repay the loan and IDBI

issued legal notice on 10.06.1998. The IDBI also filed OA No. 445/1998 before

Debt Recovery Tribunal (in short DRT) for recovery of outstanding amount of

Rs. 6,19,87,815/- and the Corporate Debtor, during pendency of such proceedings

before DRT, approached IDBI for One Time Settlement (in short OTS) and

agreed to settle the outstanding at Rs. 2.50 Crores.

5. It has been submitted that the Appellant could not pay even the OTS

amount and thus OTS failed. The IDBI assigned its outstanding debts to Kotak

Mahindra Bank Ltd. on 31.06.2006 and Kotak Mahindra Bank Ltd. further

assigned the debt to the Respondent No. 1 on 16.04.2008 by registered deed of

assignment. Thus, the Respondent No. 1 became the Financial Creditor of the

Corporate Debtor.

6. It was brought out that the Corporate Debtor filed a Writ Petition before

the Hon'ble Delhi High Court for restraining the assignment of loan which was

dismissed.

7. We note that the Respondent No. 1 filed a petition before the Hon'ble Delhi

High Court for winding up of the Corporate Debtor under Section 433 (e) and 433

(f) and Section 434 r/w Section 439 of Companies Act, 1956 before Single Judge -4- Comp. App. (AT) (Ins.) No. 886 of 2024

Bench. From the judgement delivered by the Hon'ble Delhi High Court dated

22.05.2014, it is observed that at one time the Delhi High Court asked the

Appellant to deposit Rs. 2.5 Crores with the Registry, however, while dismissing

the petition for winding up of the Corporate Debtor, the said amount of Rs. 2.5

Crores was ordered to be refunded. The Respondent No. 1 challenged Single

Bench Judgement before the Division Bench of Delhi High Court for winding up

of the Corporate Debtor which was also dismissed on 02.03.2016.

At this stage, it would be worth noting that these proceedings happened

prior to Code came into force.

8. It has been brought out that a meeting was held between the Appellant and

the Respondent No. 1 on 12.10.2018 for agreement on disinvestment of

mortgaged properties of the Corporate Debtor and based on this meeting, the

Appellant and the Respondent No. 1 entered into a settlement agreement on

27.08.2019, whereby it was agreed between the parties to sale the mortgaged

properties and divide the proceed of the sale between them.

9. At this stage, we would like to take into account the settlement deed dated

27.08.2019 which reads as under :-

-5-

Comp. App. (AT) (Ins.) No. 886 of 2024 -6- Comp. App. (AT) (Ins.) No. 886 of 2024 -7- Comp. App. (AT) (Ins.) No. 886 of 2024 -8- Comp. App. (AT) (Ins.) No. 886 of 2024

10. From above settlement agreement, it is seen that parties accepted that the

Appellant defaulted repayment of both rupee as well as foreign currency loan.

The settlement agreement also note that the original loan of IDBI was assigned

through Kotak Mahindra Bank Ltd. vide assignment deed dated 31.03.2006 who

in turn further assigned the loan to the Respondent No. 1 vide assignment deed

dated 16.04.2008.

11. The Settlement Agreement dated 27.08.2019 also stated that the parties

have seen several rounds of litigations at different fora and substantial period has

elapsed and therefore in order to settle the issues and disputes, it was agreed to

sell the property bearing No. SP3-11(B) 1 & 2, Khuskhera Industrial Area,

Khuskhera, District Alwar, Rajasthan by executing proposed tripartite agreement

with proposed buyers at mutually decided price and subsequently distribute the

sale proceeds into equal proportion between the Appellant of the Respondent

No. 1.

12. It has been alleged that the Appellant sent an e-mail on 26.07.2021

cancelling the settlement agreement which was replied by the Respondent No. 1

on 04.08.2021 alleging that the Appellant is trying to escape his liabilities to repay

the loan to the Respondent No. 1 by way of unilateral suo-moto cancellation of

the settlement agreement dated 27.08.2019 which was not permissible. -9-

Comp. App. (AT) (Ins.) No. 886 of 2024

13. The Respondent No. 1 filed an application under Section 7 of the Code

before the Adjudicating Authority, which was allowed and the Corporate Debtor

came into CIRP w.e.f. 22.02.2024.

14. The Appellant submitted that Section 62 of the Contract Act, 1872 provides

that if parties to a contract agree to substitute a new contract for it, the original

contract need not be performed. The Appellant stated that there was novation of

contract and the old contract, therefore, ceased to exist between the Corporate

Debtor and the Respondent No. 1. The Appellant also argued that in the present

case, the Settlement Agreement dated 27.08.2019 did not mention any 'financial

debt', which the Corporate Debtor allegedly 'defaulted' and remained payable

and therefore at best the settlement agreement dated 27.08.2019 was a simpliciter

agreement to sell the mortgaged properties. It is the case of the Appellant that

reciprocal promises, alleged breach thereof, on account of its cancellation cannot

constitute default under section 3(12) of the Code and therefore no application

under Section 7 of the Code could have been filed for enforcement/ specific

performance of such agreement to sell.

15. It is the case of the Appellant that in absence of any agreement or contract,

there is no question of any debt or default on the part of the Corporate Debtor. It

is further the case of the Appellant that the Impugned Order is perverse and need

to be set aside.

-10-

Comp. App. (AT) (Ins.) No. 886 of 2024

16. The Appellant alleged that the Respondent No. 1 fraudulently concealed

from Corporate Debtor that Respondent No. 1 was not an existing company as

it's name had been struck off from the Register of Companies under Section 248

(5), Companies Act, 2013 by Notification dated 08.08.2018. The Appellant

further alleged that the Respondent No. 1 preferred Section 7 of the Code

application without being in existence and therefore the whole exercise is abuse

of process of law.

17. The Appellant submitted that the Adjudicating Authority erred in passing

the Impugned Order since the Respondent No. 1 did not have any legal existence.

18. The Appellant elaborated that the Respondent No. 1 i.e., Jumbo Chemicals

and Allied Industries Private Limited's name got struck off on 08.08.2018 by the

Ministry of Corporate Affair. The Appellant submitted that subsequently an

alleged agreement was executed between the Corporate Debtor and the

Respondent No. 1 on 27.08.2019 which was void. The Appellant stated that the

Corporate Debtor vide email dated 26.07.2021 cancelled the said agreement on

account of the non existence of legal entity of the Respondent No. 1, being struck

off its name and not remaining as a legal entity in the eyes of law at the time of

execution of agreement

19. The Respondent No. 1 submitted that on 18.09.2023, this Appellate

Tribunal in the earlier round of litigation between the parties had held that the

acknowledgment of debt in the balance sheets from 1998-99 is continuous and -11- Comp. App. (AT) (Ins.) No. 886 of 2024

dismissed the argument of the Corporate Debtor based on the judgment rendered

by the single judge of the Hon'ble Delhi High Court dated 22.05.2015 wherein it

was held that the Financial Creditor has confined its claim only to a sum of Rs.

250 Lacs and interest thereon. The relevant part of this Appellate Tribunal's

earlier order dated 18.09.2023 reads as follows:

"21. When the Company Petition was dismissed with the observation as observed, we fail to see that how the Respondent can contend that claim of the Appellant is limited to only Rs. 250 Lakhs."

20. It is the case of the Respondent No. 1 that this Appellate Tribunal while

allowing the Appeal filed by the Respondent No. 1 had held that the Adjudicating

Authority committed error in rejecting Section 7 Application filed by the

Respondent No. 1 as barred by time.

21. The Respondent No. 1 alleged that the Appellant failed to bring out all

relevant facts including the balance sheets relevant for the disposal of the Appeal

and is trying to mislead this Appellate Tribunal in the present appeal.

22. The Respondent No. 1 refuted the plea of the Appellant about novation of

contract and also refuted the plea of the Appellant that the Settlement Agreement

dated 27.08.2019 modified the earlier contracts between the parties and was in

supersession to all earlier contracts. The Respondent No. 1 submitted that the

Settlement Agreement dated 27.08.2019 is not any modification or a novation of -12- Comp. App. (AT) (Ins.) No. 886 of 2024

earlier Agreements i.e. Rupee Term Loan and Foreign Currency Loan. The

Respondent No. 1 clarified that the Settlement Agreement was arrived at between

the parties after long pending multiple cases filed by the Financial Creditor for

realization of the loan amount and it was agreed that the mortgaged properties of

the Corporate Debtor would be sold to settle the loan amount in full. The

Respondent No. 1 also stated that the Settlement Agreement nowhere stated that

the Settlement Agreement shall supersede or modify the loan agreements.

23. The Respondent No. 1 pleaded that the original loan/ assignment deed

remain valid and continues and the Settlement Agreement dated 27.08.2019 is

merely a mechanism to find a way to settle outstanding dues of the Respondent

No. 1 and therefore it is not novation of existing legal contracts.

24. The Respondent No. 1 argued that the Section 62 of the Indian Contract

Act, 1872 relied by the Appellant is not relevant here as the pre-requisite is

substitution of the earlier contract which is not reflected in the contents of the

Settlement Agreement. The Respondent No. 1 further stated that no intention on

the part of the Appellant and the Respondent No. 1 for any novation resulting into

modification/substitution of earlier loan agreement or assignment deed can be

seen in the settlement agreement dated 27.08.2019.

25. We note that the requisites of a novation may include elements like an

agreement of all the parties to a new contract, the extinguishment of the old

obligations, and the validity in supersession of old contract by the new contract, -13- Comp. App. (AT) (Ins.) No. 886 of 2024

however, in the present case no such specific clauses exist. We also note that the

Settlement Agreement dated 27.08.2019 was only with regard to disposal of the

mortgaged properties of the Corporate Debtor.

26. We will examine the pleading of the Appellant that since name of the

Respondent No. 1 was struck off on the relevant date of signing of settlement

agreement dated 27.08.2019, therefore there was no valid settlement agreement.

We note that the name of Respondent no. 1 was struck off since the Respondent

No. 1 could not furnish the financial statements to relevant authority on time,

however, the same was restored by the National Company Law Tribunal, Bench-

IV, New Delhi (in short 'Tribunal') vide its order dated 24.03.2021 passed in

Appeal No. 533/252/ND/2019. The relevant portion of the order is reproduced

as under :-

"10. ***The name of the petitioner company shall then stand restored in the Register of the Registrar of Companies (RoC) as if its name of the company had not been struck off."

(Emphasis Supplied)

27. It is significant to note that the Tribunal specifically mentioned the name

of the Respondent No. 1 is restored as if its name had not been struck off. We

note that the legal implication of this would be that all action taken by the

Respondent No. 1 would remain valid including signing of the settlement -14- Comp. App. (AT) (Ins.) No. 886 of 2024

agreement dated 27.08.2019 and therefore the pleadings of the Appellant on this

ground stand rejected.

28. We understand that if the contract is altered in material particulars to

change its essential character, the modified contract must be read as doing away

with the original contract but if the modified contract has no independent

contractual force, no new contract comes into play. We do not find any such

wording in settlement agreement dated 27.08.2019

29. The question whether a subsequent agreement is an additional to the main

agreement or not; as well as the fact whether new contract supercede old contract

would depend on the facts and circumstances of each case. In the present case

based on fact and circumstances brought out on record before us, we do not find

that old loan agreements or assignment deeds ceased to exist by signing settlement

agreement dated 27.08.2019 and therefore we are unable to accept the pleadings

of the Appellant that Section 62 of the Indian Contract Act, 1872 will come into

play in the present appeal.

30. We find that in case of Manohur Koyal vs. Thakur Das Naskar [(1888)

15 Cal 319], the plaintiff sued the defendant to recover Rs. 1100 due on a bond

and after the due date of the bond, the plaintiff agreed to accept from the

defendant, in satisfaction of the bond, Rs. 400/- in cash and a fresh bond for

Rs. 700/-. The defendant failed to pay the Rs. 400 and to give the fresh bond of

Rs. 700/-. In a suit by the plaintiff to recover the amount of original bond, the -15- Comp. App. (AT) (Ins.) No. 886 of 2024

defendant contended that the subsequent agreement was a novation. It was held

that Section 62 did not apply, as the subsequent agreement was made after the

breach of the original contract, and that the defendant having failed to perform

satisfactorily which he had promised to give, remained liable on the original,

contract. This case is similar to facts of the present appeal and is found to be

applicable.

31. We find that the existing rupee term loan as well as foreign currency loan

assigned by registered assignment deeds remain valid which are relevant

documents to establish debt and default. We also note that the amount of default

was more than Rs. 1 Crore, thus it fulfils, all the criteria laid down by the Code

as well as covered under several judgments of this Appellate Tribunal as well as

the Hon'ble Supreme Court of India. The argument of the Appellant that there is

no debt and default, is found not sustainable. We also note that this Appellate

Tribunal in its earlier order dated 24.03.2021 has already noted the fact that there

has been continuous acknowledgements of the debt by the Corporate Debtor in

its various balance sheets.

32. As regard, the subject regarding the settlement agreement stand valid or not

in view of the issue raised by the Appellant regarding struck off name of the

Respondent No. 1 on the relevant date, we reiterate that since the Tribunal gave

clear specific verdict that the restoration would have effect as if the name was

never struck off would enable the Respondent No. 1 to enforce the agreements. -16-

Comp. App. (AT) (Ins.) No. 886 of 2024

33. The pleadings of the Appellant that the original term loan/ foreign currency

loan agreement which was later assigned by the registered deed in favour of the

Respondent No. 1 ceased to exist after signing the settlement agreement dated

27.08.2019 and which the Appellant choose to unilaterally terminate on

26.07.2021, by sending an e-mail to Respondent No. 1 on the plea that the name

of the Respondent No 1 was struck off by the Ministry of Corporate Affairs and

therefore there is no debt and default and the application filed under Section 7 of

the Code could not have been allowed. We wonder, if such types of pleadings of

the Appellant are to be accepted then whether any agreement would ever be

honoured. Such submissions are legally not tenable and stand rejected.

34. Incidentally we note that the loan was sanctioned by the IDBI somewhere

in 1996 and even OTS was approved by the IDBI way back in the year 2006. We

also note that IDBI assigned its outstanding debts to Kotak Mahindra Bank

Limited on 31.06.2006 and Kotak Mahindra further assigned the debts to

Respondent No. 1 on 16.04.2008 by registered assignment deeds.

Thus, we find that the loans were sanctioned somewhere in 1996 i.e.,

almost 28 years back and the last assignment deed was signed in favour of the

Respondent No. 1 on 16.04.2008 i.e., 16 years back and even after decades, the

litigation has been continuing and no recovery could be affected by the original

financial creditors or the present Respondent No. 1 in whose favour the -17- Comp. App. (AT) (Ins.) No. 886 of 2024

assignment deed was signed almost 16 years back. This state of affair is found to

be unusual and alarming.

35. In view of above detailed discussions, we find no merit in the appeal. The

appeal deserved to be dismissed and stand dismissed. No Costs. Interlocutory

Application(s), if any, are Closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

[Mr. Indevar Pandey] Member (Technical)

Sim